Illinois Wage Payment Act Doesn’t Apply to Future Payments – Ill. 1st Dist.

moneyIt’s likely a sign of the economic times that there seems to be an uptick* in published cases involving the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 (IWPCA).

The IWPCA offers a powerful remedy for unpaid wages allowing a separated employee to recover money damages from his ex-employer.  Specifically, the IWPCA plaintiff can recover unpaid wages, plus monthly interest at 2%  and attorneys’ fees incurred in enforcing his employment contract rights.

Majmudar v. House of Spices (India), Inc., 2013 IL App (1st) 130292 examines whether a Wage Act claim applies to unpaid future payments under a multi-year employment contract.  The answer? No, it doesn’t.

In Majmudar, the plaintiff and defendant entered into a five-year written employment contract totaling about $625K plus some additional benefits.  The defendant fired the plaintiff just 15 months into the 60-month term and plaintiff sued under the IWPCA.

After a bench trial, the trial court entered judgment for the plaintiff on his breach of contract count but found for the defendant employer on the Wage Act claim.

On the breach of contract count, the court found that the employer defendant prematurely breached the 5-year contract by firing the plaintiff with 45 months left on the contract. But the court only awarded the plaintiff $173K, less than two years’ worth of payments.

The court found the plaintiff failed to make reasonable efforts to find substitute employment and so didn’t mitigate his damages.

On the IWPCA count, the trial court sided with the defendant on the basis that the statute doesn’t allow recovery for future payments.  Plaintiff appealed.

Affirming the trial court, the First District focused on the IWPCA language allowing a plaintiff to recover earned wages or final compensation.  Wages” are broadly defined as any compensation owed by an employer to an employee pursuant to an employment contract.

  “Final compensation” means wages, salaries, commissions, bonuses, and the monetary equivalent of unused vacation pay, holiday pay and any other contractual compensation owed to a separated (as opposed to current) employee  ¶¶ 11-12, 820 ILCS 115/2. 

The IWPCA requires an employer to pay final compensation to the separated employee by the next scheduled payday and to pay current employees (bi-weekly or semi-monthly) no later than 13 days after the end of the last pay period.  820 ILCS 115/4, 5.

In rejecting plaintiff’s claim for 45 months of future payments, the Court looked to dictionary (Black’s and Merriam-Webster’s) definitions of “compensation” (payment received in return for service rendered) and “owe” (to be obligated to pay for something received) for guidance.

Applying these definitions, the Court held that once the defendant terminated the employment contract, the defendant no longer received anything of value from the plaintiff.

This led the Court to squarely hold that unpaid future wages under a terminated contract are not “final compensation” and cannot be recovered under the Wage Act.  ¶ 15.

Comments: For such a high-dollar contract, the details were surprisingly sparse.

The plaintiff could have pressed for a contract term that said if the employer untimely terminated the contract, plaintiff could accelerate the remaining payments under thr contract.

Majmudar gives the IWPCA a narrow reading – applying it to wages previously earned by a separated employee; not to future payments owed on a terminated contract.

 

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PaulP

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