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Changes to state’s Minimum Wage Act mean more penalties for violations

November 18, 2010

Illinois legislation signed recently by Gov. Rod Blagojevich gives workers who allege they have not been paid their proper wages the right to pursue new penalties under the Illinois Minimum Wage Act. The law also grants the Illinois Department of Labor (IDOL) additional authority to investigate employers it suspects of violating state wage and hour laws.


The amendment to the Illinois Minimum Wage Act strengthens Illinois’ wage and hour laws in several ways. First, the law grants employees the right to collect a penalty of 2 percent of the amount they are underpaid per month for the length of the violation.


The penalty applies to employers who 1) fail to pay overtime; 2) pay less than minimum wage; or 3) otherwise fail to pay employees the wage to which they are entitled. Prior to the amendment, only the IDOL could pursue the penalty, and it seldom did.


Also, if an employee’s claim is successful, the employer must pay for the employee’s court costs and attorney fees, in addition to the amount of the underpayment. The IDOL also may assess a penalty of 20 percent of the total underpayment against employers for violations it finds to be "willful," "repeated," or done with "reckless disregard" for the law.


An employer who fails to follow the IDOL’s demand to pay wages due to an employee could be assessed a penalty by the IDOL of 1 percent of the amount of the underpayment per day.


The amendments greatly increase the incentives for employees to sue their employers for unpaid wages. In fact, wage-and-hour suits now outnumber discrimination lawsuits against employers.


Although a penalty of 2 percent might seem insignificant, the penalty begins to run the month after an employer fails to pay proper wages, not from the date that the IDOL finds an employer has violated the law.


Therefore, if an employer failed to pay an employee $3,000 in overtime pay in, say, January 2004, and the IDOL finds a violation in July 2006, the employer would owe an additional $1,800 in penalties.


Add that sum to the settlement of the $3,000 underpayment, plus employee court costs and attorney fees, and the matter could cost the employer nearly $10,000—and even more if the IDOL determines the violation was willful.


An employer’s best defense is to make sure his pay procedures comply with all Illinois wage and hour laws.


Particularly, make sure that all employees are paid on time, not permitted to work "off the clock," and checked to ensure that anyone who is classified as exempt actually meets the tests for exemption under Illinois law and the federal Fair Labor Standards Act.