Important Amendments to the Illinois Minimum Wage Law

On February 19, 2019, Illinois Governor J.B. Pritzker signed the Lifting Up Working Families Act, which amends the Illinois Minimum Wage Law (IMWL).  In doing so, Illinois became the fifth state to enact a state-wide $15 per hour minimum wage, following California, New Jersey, New York, and Massachusetts, as well as Washington D.C.  Given that there are approximately 1.4 million Illinois residents who earn less than $15 per hour, these amendments should have widespread impact.

The important changes include: (1) steady increases to the minimum wage until it reaches $15 per hour in 2025; (2) more significant damages available for prevailing employees for IMWL violations; and (3) the ability of the Illinois Department of Labor to conduct random audits.  The following is a brief summary of these amendments.

The Road to the $15 per Hour Minimum Wage.  Effective January 1, 2020, the minimum wage will increase from $8.25 to $9.25 per hour.  On July 1, 2020, the minimum wage will increase to $10 per hour. The minimum wage will then increase by $1 per hour effective January 1 of each year until the minimum wage reaches $15 per hour on January 1, 2025.

These minimum wage increases apply to all employees over the age of 18. They also apply to some employees under the age of 18 in limited circumstances where those employees have worked more than 650 hours in any calendar year.  If employees under the age of 18 do not meet this threshold, they will be entitled to a lower minimum wage ultimately topping out at $13 per hour on January 1, 2025.

These amendments do not change the permitted tip credits in Illinois, which remain based on a percentage of the minimum wage rate.  Both the new and old versions of the IMWL mandate that any reduction of the minimum wage for qualified jobs not exceed 40% of the applicable minimum wage, so long as tips will cover the remaining amount of the minimum wage.  Employers employing tipped employees should be mindful of the corresponding increases in the “tipped wage,” which will remain tied to the existing minimum wage rate.

More Significant Damages Available for Prevailing Employees for IMWL Violations. In addition to the minimum wage increase, the amendments also include noteworthy increases in damages available for prevailing employees for IMWL violations – for both minimum wage and overtime violations.  Before the amendments, a prevailing employee was entitled to the amount of any underpayment plus damages of 2% of the underpayment for each month that the underpayment persisted. Under the amended IMWL, a prevailing employee is entitled to triple the amount of the underpayment plus 5% of the underpayment for each month that the underpayment persists. (Note: under both the new and old versions of the IMWL, a prevailing employee may also recover attorneys’ fees and costs.)

An example underscores the significance of this amendment.  Assume an employee was misclassified as overtime exempt and failed to receive 10 hours of overtime per week, at an overtime rate of $15 per hour, for four weeks, and further assume that the overtime payment was due four years ago.  Under the previous IMWL, the employee would receive $1,176 ($600 [amount of the underpayment] plus damages of $576 [48 months x 2% x $600]).  Under the amended IMWL, that same employee would receive $3,240 ($1,800 [triple the amount of the underpayment] plus damages of $1,440 [48 months x 5% x $600]).

At first blush, the difference may not seem monumental, however when considering that IMWL claims are often pursued on a class-wide basis with numerous employees claiming wage-and-hour violations, these amendments are more than trivial.

Illinois Department of Labor (IDOL) May Conduct Random Audits. Previously not set forth the IMWL, the IDOL may now conduct random audits in any industry to ensure compliance with the IMWL. This change is effective immediately. The IDOL may also recover increased penalties, including for failure to pay proper minimum wage and overtime, as well as for failure to maintain proper payroll records.

Given these changes, it is as important as ever for Illinois employers to take proactive steps to ensure compliance and minimize risk.  Employers should consider a battery of strategic steps, including arbitration agreements, class action waivers, compliance audits, and comprehensive training.