If statutory damages, attorneys’ fees, and recently enacted criminal penalties were not incentives enough for Chicago employers to follow wage and hour laws, consider this: the City of Chicago has now enacted an ordinance that allows the city to deny or revoke business licenses for companies failing to properly pay overtime or minimum wage. The Windy City is now the largest municipality in the United States to adopt so-called “wage theft” laws, following a nationwide trend of imposing additional penalties on employers that violate wage and hour laws. It is also worth noting that, although it is no longer unusual to see another locality adopt such a measure, Chicago’s approach is unusually harsh because it subjects violating establishments to potential revocation or denial of a business license.

Under current federal and state law, it is illegal to withhold an employee's wages, fail to pay overtime, or pay below minimum wage. On January 17, 2013, the Chicago City Council took a step further and unanimously passed measure SO2012-8533, an ordinance that amends the business license suspension and revocation provisions of the Municipal Code of Chicago. The law, which becomes effective on July 1, 2013, authorizes the City’s Commissioner of Business Affairs and Consumer Protection to penalize businesses that are found to have violated any other federal or state law regulating the payment of wages.

The Commissioner is empowered to deny a license to a business if the applicant has willfully violated wage and hour laws or committed two or more non-willful violations. The Commissioner may also suspend or revoke the license of any existing business that admits or is found liable for wage violations in a judicial or administrative proceeding. In other words, any business in Chicago is now subject to having its license revoked upon any finding or admission of a wage and hour violation.

As a consequence of the city's expansive powers, businesses with operations in Chicago need to monitor, more closely than ever before, any proceeding where they might be found liable for a wage and hour violation. For instance, any company contemplating settling such proceedings, whether administrative or judicial, should carefully consider admitting liability as part of settlement, as this admission could jeopardize its ability to conduct business in the city. In the end, even if the risk of revocation is minimal, companies may nevertheless face another protracted legal proceeding (i.e., a license hearing) after having already gone through an initial—and equally lengthy—wage and hour proceeding.