Minimum Wage Forecast: Developments in Springfield and Chicago, and What It Means for Employers

by Franczek Radelet P.C.

Across the country, at the local, state, and federal levels, elected officials have considered increasing the minimum wage. Illinois and Chicago have been no different. Over the past year, the General Assembly and the Chicago City Council have raised the issue, studied the potential impact, and introduced legislation. At times, the process has been difficult to follow. This update will explain the pending legislation, and what employers can expect in the near future.

The Illinois General Assembly

Minimum wage increases have been introduced in both the House and Senate over the last year. Currently, the minimum wage in Illinois is $8.25, and has been since 2010. Illinois’s minimum wage is the seventh highest in the country, and $1.00 higher than the federal minimum wage.

In February 2013, Senator Kim Lightford introduced Senate Bill 68, which would increase the minimum wage over time using a cost-of-living adjustment (COLA) indexed to inflation. In October 2013, Representative Art Turner introduced House Bill 3718 to increase the minimum wage incrementally over three years without a COLA. The wage would increase as follows:

  • $9.25 per hour on October 1, 2014;
  • $10.00 per hour on July 1, 2015; and 
  • $10.65 per hour by July 1, 2016.

SB 68 was amended this year to remove its COLA provision and adopt the incremental steps of HB 3718. These bills will likely be vehicles for a future wage increase.

HB 3718 never received a full hearing before the Labor & Commerce Committee. Instead, House Speaker Michael Madigan introduced House Bill 3814, passed and signed by Governor Quinn as Public Act 98-0657. The Act places a non-binding referendum on the ballot this November, asking voters if the minimum wage in Illinois for employees over the age of 18 should be $10.00 per hour by January 1, 2015. Despite its language, the referendum is purely advisory. Some have speculated HB 3814 and other non-binding advisory questions on the ballot are mechanisms for increasing Democratic voter turnout. Regardless of Illinois voters’ answer, a minimum wage increase would not take effect absent further legislative action.

The General Assembly will reconvene shortly after the election for “veto session.” Veto session has historically been a time when leadership in the General Assembly asks members recently voted out of office to take difficult votes on controversial legislation before they leave. Last year, Speaker Madigan pushed through pension reform legislation and marriage equality during veto session. Both were successful, in part, thanks to votes from lame duck House members. This veto session, which begins on November 19, 2014, will likely be no different.

If Gov. Quinn loses, and Speaker Madigan and Senate President John Cullerton lose Democratic legislative seats, they will have every reason to work together and pass legislation they consider important while Democrats still control Springfield. If Quinn wins reelection, Democrats will want to deliver on a campaign promise that has taken center stage in the early phases of the election. On the other hand, other major pieces of legislation are waiting for a vote, including a bill to make the Illinois income tax increase permanent. House and Senate leaders may ask members, especially those who won narrowly, to vote on only one politically difficult bill.

The Chicago City Council

On July 30, 2014, Mayor Emanuel and several Chicago aldermen sponsored an ordinance to create a minimum wage in Chicago. Mayor Rahm Emanuel had considered creating a municipal minimum wage for some time. In May 2014, he created a Working Group to consider the issue. On July 8, the Group released its report recommending Chicago create a minimum wage of $13.00 per hour, a 45% increase over the current Illinois minimum wage. The Group suggested incrementally increasing the wage over four years, and then indexing it to inflation beginning in 2019. The Group also recommended Chicago not take action alone, and advised the City Council to wait until the General Assembly addresses the Illinois minimum wage.

Mayor Emanuel introduced an ordinance that would add a new minimum wage chapter to the Chicago Municipal Code. The minimum wage in Chicago would increase incrementally:

  • $9.50 by June 1, 2015; 
  • $10.75 by June 1, 2016;
  • $12.00 by June 1, 2017; and
  • $13.00 by June 1, 2018.

These wages are only a floor, and a higher Illinois or national minimum wage would control if either exceeds Chicago’s wage. Beginning in 2019, the wage will increase every year subject to inflation, as measured by the Consumer Price Index (CPI) for All Urban Consumers.

The ordinance also includes a minimum wage increase for tipped employees. Under the Illinois Minimum Wage Act, employers receive a “tipping credit” and can pay their tipped employees an hourly wage as low as $4.95, so long as those employees make at least $8.25 per hour including their tips. The Chicago ordinance increases the tipped employee minimum wage by $1.00 over the next two years. Beginning June 1, 2017, the minimum wage for tipped employees will be indexed to inflation using the same CPI measurement as regular wages.

The ordinance is broad in its scope, and applies to all employers with one or more “covered employee.” A covered employee is any individual who performs at least two hours of work in any particular two-week period while physically present within the geographic boundaries of the City. An employer is any individual, group or business that is subject to one of the City’s licensing requirements, and/or maintains a business facility within the City. The ordinance contains many of the same exceptions as state law. These exceptions allow employers to pay a subminimum wage to certain employees under 18 years old, employees undergoing training, and employees participating in transitional or youth employment programs.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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