On August 22, 2014, regulations pertaining to the Illinois Wage Payment and Collection Act (the Statute) were materially amended. Although the changes will affect every Illinois employer, and despite their significance, very little fanfare accompanied their publication. In fact, the amendments seem to have gone into effect in the dark of night, without so much as a press release by their author, the Illinois Department of Labor (the Department).
Many of the changes are noteworthy, both for their potential effect on employers and for the Department’s attempt to dramatically extend the reach of its authority and, in essence, expand the scope of the Statute. Following are some of the changes that we expect will most significantly affect employers:
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The Statute provides that employers must notify employees, at the time of hiring, of the rate of pay and that, “whenever possible,” this notification is to be in writing. The Department has, in essence, modified the directive of the Illinois legislature by mandating that, in all circumstances, employers must give all employees written notice of their rate of pay at the beginning of employment and, “unless impossible,” any time the rate of pay changes. The consequences of the Department’s mandate may be far-reaching. For example, if an employer announces a company-wide pay rate change at a meeting attended by all employees, but does not confirm the change in writing, then under the Department’s modification of the Statute, the employer is prohibited from implementing the change.
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The Statute defines an employee’s “final compensation” as “wages, salaries, earned commissions, earned bonuses, and the monetary equivalent of earned vacation and earned holidays, and any other compensation owed the employee by the employer pursuant to an employment contract or agreement between the [two] parties.” The Department has expanded the scope of this definition to include expense reimbursement. Accordingly, any expenses incurred by an employee not yet reimbursed as of the employee’s separation date must be paid as part of the employee’s final compensation, i.e., upon separation or no later than the employer’s next regularly scheduled pay date following an employee’s separation.
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Although, under federal and state minimum wage and overtime laws, employers are not required to maintain records of hours worked by exempt employees, the Department is now mandating that “regardless of an employee’s status as either an exempt administrative employee, executive or professional,” employers must maintain accurate records for each employee of the hours worked each day in each work week. While neither the statute nor the regulations specify a penalty for violating this new directive, a failure to maintain such records may impede an employer’s ability to defend wage and hour claims involving allegations that non-exempt employees were misclassified as exempt.
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It has long been procedure that once the Department mails an employee’s filed wage claim to an employer, the employer has an opportunity (now 20 days, previously 15 days) to submit a written response. Employers should take care to meet the filing deadline and respond to each and every allegation in dispute, as the regulations now provide that “[i]f an employer fails to answer the claim. . .or fails to answer all material allegations contained in the claim, any unanswered allegations shall be deemed admitted to be true as of the 21st day following the notice of claim."
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Perhaps most significant, the Department has made clear that it intends to aggressively enforce “agreements” between employers and employees, regardless of whether the terms are set forth in a signed contract. Specifically, the amended regulations broadly define “agreement” and emphasize that:
“[A]n exchange of promises or any exchange is not required for an agreement to be in effect. An agreement may be reached by the parties without the formalities and accompanying legal protections of a contract and may be manifested by words or by any other conduct, such as past practice.”
This language seems to give the Department unprecedented power to deem an employee handbook, policy, or “any other conduct, such as past practice” to be an agreement subject to the requirements of the Statute. This suggests that, for example, an employer’s practice of paying severance to some employees may be precedent-setting, and an employer’s use of discretion to refrain from offering severance pay in circumstances the employer deems appropriate may be viewed under the Department’s new regime as a deviation from “past practice” and, therefore, a violation of the Statute.
While it remains to be seen exactly how these and other changes will be implemented, Illinois employers should consult an experienced employment law professional who can help assess how the Department’s amendments to the regulations may affect their specific policies and wage payment practices.
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