Are You Ready for the New Minimum Wage Requirements?

Wage earners in Illinois, and in particular those working within the City of Chicago, will soon see an increased minimum wage. For employers, this means deadlines are approaching to come into compliance with the new requirements.

Governor Pritzker signed the “Lifting Up Illinois Working Families Act” into law on February 19, 2019. The Act raises the state’s minimum wage in increments, beginning with a raise to $9.25 per hour effective January 1, 2020, up to $15 per hour by 2025. The Act also creates a tax credit for employers with less than 50 employees, and strengthens enforcement and regulatory provisions. The City of Chicago’s minimum wage increase is coming even sooner. Chicago’s Minimum Wage Ordinance (codified at Chapter 1-24 of the Municipal Code of Chicago) mandates a raise of the minimum wage for Chicago workers to $13 per hour beginning July 1, 2019.

Although the minimum amounts due to wage earners will increase, neither the Illinois act nor the Chicago ordinance alters which employees are covered, and which are exempt from the minimum wage. Under Section 4a(2) of the Illinois act, that determination follows the guidelines found in the Federal Fair Labor Standards Act and related regulations. Thus, bona fide executive, administrative, or professional employees, as defined by the FLSA § 213(a) and related regulations, remain exempt. Similarly, the Chicago ordinance specifically excludes executive, administrative, professional and commissioned employees as defined in the Illinois act.

Employers could find themselves in violation of the new minimum wage laws if salaried employees are not bona fide executive, administrative, or professional employees, and their salaries are not equivalent to the minimum wage, plus applicable overtime, for all hours actually worked. Extra consideration must also be given for workers who are paid, in whole or in part, on a piecework or commission basis. Under Section 776.5 of the Code of Federal Regulations, “whatever the basis on which the workers are paid, whether it be monthly, weekly, or on a piecework basis, they must receive at least the equivalent of the minimum hourly rate.” For such workers, it is advisable to provide a guaranteed minimum amount per pay period in order to ensure compliance in the event that an employee’s commissions or other incentive pay do not bring the total compensation over the minimum required.

In addition to existing civil liability, which includes treble damages and attorney’s fees to aggrieved workers, the Illinois act includes increased penalties payable to the Department’s Wage Theft Enforcement Fund of $1,500 if an employer pays less than the minimum wage, and $100 per impacted employee for failure to keep required payroll records. Employers would be wise to review their payrolls to ensure not only that wage earners are being paid at least the minimum, but also that salaried, piecework, and commission based employees who are not bona fide executive, administrative, or professional employees are receiving at least the minimum amount for all hours worked during each pay period.

Mark L. Evans; Partner