The Illinois governor has signed an amendment to the state's Wage and Payment Collection Act that increases the penalty for underpaying employee wages from 2% of the amount of the underpayment per month to 5%.
A brief overview of how the Act operated prior to the passage of this amendment illustrates how great of an impact the amendment will have on Illinois employers.
The Illinois Wage and Payment Collection Act
Prior to the amendment, an employee who filed a claim under the Wage and Payment Collection Act was entitled to recover the original amount of unpaid wages plus 2% of the original amount for each month during which the wages remain underpaid. These damages were payable to the employee and continued to accrue, without limitation, until the full amount, plus statutory penalties, was paid.
Consider a situation where an employee files a claim alleging that their employer failed to pay them $5,000 in wages that were due to the employee. Assume that the claim is decided in the employee’s favor two years after it is filed. The employee would be entitled to recover $7,400 ($5,000 plus an additional $2,400 ((2% of 5,000 per month x 24 months)).
If this same situation were applied to the amended act, the employee would be entitled to $11,000 ($5,000 plus an additional $6,000 (5% of 5,000 per month x 24 months)). The employer would also have to pay the employee’s attorney’s fees in addition to its own defense costs. And because employees have up to 10 years to file such a claim, it will likely take longer than 24 months for the claim to resolve.
In addition to the statutory penalties described above, any employer that has been demanded or ordered by the Illinois Department of Labor (IDOL) or a court to pay wages or final compensation to an employee must also pay a $250 non-waivable administrative fee to IDOL. This fee increases to $500 if the amount ordered by the Department is more than $3,000, and $1,000 for orders of $10,000 or more.
Time is of the Essence
Additional penalties are imposed on employers who fail to “timely” comply with a demand or final order issued by IDOL. These employers are liable for: (1) a penalty, payable to IDOL, equal to 20% of the underpayment and (2) a penalty, payable to the employee, equal to 1% per day of the underpayment, for each day that payment is delayed. This penalty continues to accrue without limitation until the owed amount is paid.
Illinois’ amendment to its Wage and Payment Collection Act incentivizes employers to avoid underpaying employee wages. Employers wishing to avoid costly penalties are also encouraged to resolve wage and hour claims as quickly and efficiently as possible.