What Every Employer Must Know

Many employers are unaware of specific rules and guidelines that dictate their responsibilities to their employees. This unawareness often leads to liability to an employee and severe monetary penalties.

The Illinois Wage Payment and Collection Act is the law that governs the payment of wages to employees and the deductions that an employer can make from an employee’s paycheck. This act does not cover independent contractors. Whether a worker is an employee or an independent contractor depends on a variety of factors. Please refer to the Hurley Stanners Blog article titled “Have You Classified Your Workers Correctly?” for a more detailed discussion of this issue. While every employer should take the time to read this Act in its entirety, it is rather detailed and so below are some of the Acts basic rules that every employer must be aware of in order to best protect themselves.

How Often Must You Pay Employees

Generally speaking every employer is required to pay employees semi-monthly except in the case of executive, administrative and professional employees who may be paid once per month.

The amount of time which an employer is given to pay an employee is directly related to the frequency which the employee is paid. If the employee is paid twice a month (i.e. semi-monthly or bi-weekly) then they shall be paid not later than 13 days after the pay period in which that money was earned. If the employee is paid weekly, then the employer has 7 days after the end of the weekly pay period in which the money was earned to pay. For employees paid daily, the wages shall be paid on the same day as they are earned, but not later than 24 hours after the day on which they were earned. For executive, administrative, and professional employees, employers are given 21 calendar days after the period during which such wages were earned.

Payment after Termination

Regardless of whether any employee is terminated or quits, all “final compensation” must be paid to that employee on the next regularly scheduled payday. The amount of final compensation includes wages, salaries, earned commissions, earned bonuses, the monetary equivalent of earned (but unused) vacation and holidays, and any other compensation that is owed to the employee. Payment shall be made in full at the time of termination or resignation, and if that is not possible then it must be paid no later than the next regularly scheduled payday.

Deductions from Employee Pay

Often employers will deduct money from an employee’s paycheck for things such as damages caused by the employee or a loan that was given to the employee. Generally, employers are prohibited by law from making deductions from an employee’s wages or final compensation unless the deductions fall into one of the few recognized exceptions. Common situations where deductions are allowed include, but are not limited to, when the deduction is:

  1. required by law (i.e. tax withholdings)
  2. to the benefit of the employee (i.e. insurance or pension payments);
  3. in response to a valid wage assignment or wage deduction order; (i.e. wage garnishment, order for child or spousal support); or
  4. made with the express written consent of the employee, given freely at the time the deduction is made. (i.e. when paid).***

***Many employers make mistakes in this area and fail to get written consent by the employee        each pay day that a deduction is taken.

Consequences for Violation of the Illinois Wage Payment and Collection Act

Recently, the Illinois Wage Payment and Collection Act has been amended resulting in much stiffer penalties and improved enforcement procedures thereby making it easier for employees to hold employers responsible.

If an employee feels that their employer has violated this Act, they are afforded several remedies. They are entitled to file a claim either with the Department of Labor or in a civil action. Filing a claim with the Department of Labor is free which makes employees much more willing and likely to file a claim. If an employer is found liable, they will be responsible for paying the amount of any underpayment as well as a 2% penalty of the underpayment for each month since the employee was supposed to be paid. In a civil action, the employer can also be required to reimburse the employee for reasonable costs and attorney’s fees.

Moreover, in circumstances where an employer refuses to pay, a criminal action may be brought which can result in the following penalties.

Unpaid Amount                          Penalty                                           Maximum Jail/Fine

$5000 or less                             Class B Misdemeanor                     6 months/$1500

More than $5000                    Class A Misdemeanor                     1 year/$2500

If an employer is convicted of a second criminal offense under this Act within two years of a previous conviction, then they can also be charged with a Class 4 felony which can bring jail time of between 1 to 3 years along with a fine of up to $25,000.

If you are an employer who is concerned whether you are subject to the Illinois Wage Payment and Collection Act, whether you have violated the Act, or have any other related questions, Hurley Stanners & Matsko LLC can be of assistance. We can answer your questions, review employment contracts and policies to ensure compliance, and help minimize your exposure to liability.