Ill. Wage Payment and Collection Act Doesn’t Apply to NY and Cal. Corps. With Only Random Ill. Contacts

As worker mobility increases and employees working in one state and living in another almost an afterthought, questions of court jurisdiction over intrastate workplace relationships come to the fore.  Another issue triggered by a geographically nimble workforce is whether a non-resident can invoke the protections of another state’s laws.

Illinois provides a powerful remedial scheme for employees who are stiffed by their employers in the form of the Wage Payment and Collection Act, 820 ILCS 115/1 (“Wage Act”).  See (here).  The Wage Act allows an employee to sue an employer for unpaid wages, bonuses or commissions where an employer breaches a written or oral employment contract.

The focal point of Cohan v. Medline Industries, Inc., 2016 WL 1086514 (N.D.Ill. 2016) is whether non-residents of Illinois can invoke the Wage Act against an Illinois-based employer for unpaid sales commissions.  The plaintiffs there, New York and California residents, sued their Illinois employer, for breach of various employment contract commission schedules involving the sale of medical devices.

The Northern District of Illinois held that the salespeople plaintiffs could not sue under Illinois’ Wage Act where their in-person contacts with Illinois were scarce.  The plaintiffs only entered Illinois for a few days a year as part of their employer’s mandatory sales training protocol.  All of the plaintiffs’ sales work was performed in their respective home states.

Highlights from the Court’s opinion include:

  •  The Wage Act doesn’t have “extraterritorial reach;” It’s purpose is to protect Illinois employees from being shorted compensation by their employers;
  • The Wage Act does protect non-Illinois residents who perform work in Illinois for an Illinois employer;
  • A plaintiff must perform “sufficient” work in Illinois to merit Wage Act protection;
  • There is no mechanical test to decide what is considered “sufficient” Illinois work to trigger the Wage Act protections;
  • The Wage Act only applies where there is an agreement – however informal – between an employer and employee;
  • The agreement required to trigger the Wage Act’s application doesn’t have to be formal or in writing. So long as there is a meeting of the minds, the Court will enforce the agreement;
  • The Wage Act does not cover employee claims to compensation outside of a written or oral agreement

Based on the plaintiffs’ episodic (at best) contacts with Illinois, the Court found that the Wage Act didn’t cover the plaintiffs’ unpaid commission claims.
Substantively, the Court found the Wage Act inapplicable as there was nothing in the various written employment agreements that supported the plaintiff’s damage calculations.  The plaintiffs’ relationship with the Illinois employer was set forth in multiple contracts that contained elaborate commission schedules.  Since the plaintiff’s claims sought damages beyond the scope of the written schedules, the Wage Act didn’t govern.
Take-aways:

1/ The Illinois Wage Act will apply to a non-resident of Illinois if he/she performs a sufficient quantum of work in Illinois;

2/ Scattered contacts with Illinois that are unrelated to a plaintiff’s job are not sufficient enough to qualify for a viable Wage Act lawsuit;

3/ While an agreement supporting a Wage Act claim doesn’t have to be in writing, there must be some agreement – no matter how unstructured or loose – for a plaintiff to have standing to sue for a Wage Act violation.

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PaulP

Litigation attorney at Fisher Kanaris, P.C. representing businesses and individuals in all types of commercial disputes.