Employers could face massive legal bills under new Illinois minimum wage law

By Jonathan Bilyk | Feb 14, 2019

formulanone from Huntsville, United States [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

Illinois workers who earn less than $15 an hour are about to get a raise.

But the new law also includes provisions which may leave many Illinois employers in a legal lurch and facing potentially crippling legal bills and court orders, should they find themselves sued by employees who claim they were shorted pay.

On Thursday, the Democratic supermajority in the Illinois House easily passed a new minimum wage law. The bill, which will boost the state’s minimum wage from $8.25 to $15 an hour over the next six years, is expected to be signed with fanfare by Democratic Illinois Gov. JB Pritzker, who championed the $15 minimum wage during his successful gubernatorial run in 2018.

The new statewide bill largely mirrors minimum wage ordinances passed in Cook County and Chicago.


Pritzker  

Businesses and their lobby groups had pushed for changes to the law, including provisions which could help relieve the burden on downstate businesses, noting the cost of living and wages are typically lower in central and southern Illinois than in the Chicago area.

The Democrats who dominate Illinois government refused to negotiate on any requests from business owners or their advocates, pushing the bill through rapidly since it was introduced following Pritzker’s inauguration in early February.

After the bill was passed by the Illinois state Senate, the state House enacted the measure on Feb. 14, sending it on to the governor.

Business owners predicted they would need to raise prices, reduce their workforces or cut costs elsewhere to make up for the sharply higher payroll costs.

But business owners may have more to fear than simply finding ways to maintain profitability and keep their doors open while paying workers considerably more, two lawyers who often represent business owners noted.

Tucked within the law are provisions which sharply increase the penalties for failing to comply with the law.

“It’s another reason for business owners to ask why they’re starting a business in Illinois,” said Sara Zorich, an attorney with the firm of SmithAmundsen in suburban St. Charles.

Under the state’s current minimum wage law, workers who sue their employer for paying less than the minimum wage could stand to collect the unpaid wages, plus 2 percent interest on the underpayment for each month after the date the wages began to be shorted. They can also collect attorney’s fees.

However, under the new law, employers could be on the hook for triple the amount of the underpayment, plus 5 percent interest for each month after the wages were underpaid and attorney’s fees.

Further, employers could now face penalties payable to the state of $1,500 for each violation of the state minimum wage law, and $100 for each employee for which an employer fails to maintain “true and accurate” payroll records.

In real dollars, Zorich and her colleague, Michael Wong, also an attorney at SmithAmundsen, said the ultimate impact of even a minor violation could be devastating on any small or mid-sized employer.

As an example, they said an employer who shorted an employee $10 a month for three years – which is as far back as the minimum wage law allows an employee to sue – could owe nearly $850 to that employee, when the provisions of the previous state and federal wage laws are assessed in court. For 100 employees, each shorted $10 a month for three years, that would become a cost of $85,000.

Under the new law, however, that total burden could jump to nearly $285,000, before attorney’s fees are added to the cost, which could add hundreds of thousands more to the tab.

Further, in Illinois, Zorich and Wong said, employers cannot escape liability, even if they can prove the pay was shorted by mistake or unintentionally.

“It would be very, very difficult for any small or mid-sized business to absorb this and keep going,” said Zorich. “And all for what could be a $360 mistake.”

Zorich and Wong said they have read or heard no explanation for why the penalty provisions were altered in the new bill. Zorich said she believed it was to mirror the provisions in the Cook County and Chicago minimum wage ordinances.

A Pritzker spokesman did not respond to an email sent Thursday morning asking specifically if the governor supports the penalty provisions.

However, the governor had earlier urged the Illinois House to pass the new law without any changes from the version approved by the state Senate, which had included the penalties.

Wong said the law provides almost perverse incentives for employees and their lawyers to not act in good faith with employers, should an employee believe their pay has been shorted.

“We will see more cases where employees will go to litigation, when they would’ve resolved it outside the courts before,” said Wong. “We will see more employers get scrutinized under this law than ever before.”

Wong and Zorich said business owners should be aware of these provisions now, and prepare for them by conducting regular audits of their entire payroll system.

Audits should include “looking at how they pay their workers,” the payroll services they use, employee timesheets, supervisors, and how they compute payable hours for non-salaried employees who work outside the office, Zorich said.

“This will be a huge impact on small and mid-sized employers, who won’t be expecting this sort of penalty,” said Wong. “No one thinks about these things until they get sued.”

 

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City of Chicago Cook County Illinois General Assembly Illinois Governor J.B. Pritzker Illinois House of Representatives SmithAmundsen LLC

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