The Illinois Wage Payment and Collection Act: Some Basics

time clockThere seems to be an almost palpable out-of-sight, out-of-mind dynamic at play when an employee is either fired or quits.  This often results in the employer not compensating the departed employee for pre-departure/firing services. This post attempts to provide some basics on the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq. (the Wage Payment Act), a powerful tool for former employees who want to get paid.  For a more detailed treatment of the Wage Payment Act in the context of  departing corporate executives and managerial employees, please see the Novack and Macey firm’s excellent article at: http://www.novackmacey.com/departing-executives-and-the-wage-payment-act.

The Wage Payment Act requires every employer to pay full and “final compensation” to separated employees no later than the next regularly scheduled payday. 820 ILCS 115/5. “Final compensation” broadly includes wages, salaries, earned commissions and bonuses and the monetary equivalent of earned but unused vacation and any other compensation owed pursuant to an employment contract or agreement between the 2 parties. 820 ILCS 115/2.

To establish a Wage Payment Act claim, a plaintiff must show (1) that the defendant was an “employer” under the Act; (2) the parties entered into an “employment contract or agreement”; and (3) the plaintiff was due “final compensation”. Catania v. Local 4250/5050 of the Communications Workers of America, 359 Ill.App.3d 718 (1st Dist 2005).

The Wage Payment Act defines “employer” and “employee” broadly.  820 ILCS 115/2.  “Employer” includes any person or business entity, including employment placement agencies.  “Employee” means an individual “permitted to work by an employer in an occupation”.  Id.  Caselaw extends the Act’s coverage to executives and corporate management personnel.

 Independent contractors are generally not covered by the Wage Payment Act.  820 ILCS 115/2.  The Act specifically states that “employee” does not include an individual: (1) who is free from employer direction and control; (2) who physically works outside the confines of the employer’s office location(s) or performs work outside the usual course of employer’s business; and (3) who is in an independently established trade, occupation, profession or business.  Id. 

In Illinois, an independent contractor is defined by the level of control over the manner of work. Horwitz v. Holabird & Root, 212 Ill.2d 1, 11 (2004); Petrovich v. Share Health Plan of Illinois, Inc., 188 Ill.2d 17, 31 (1999)(independent contractor factors).

Both State and Federal Illinois cases have held that an “employment agreement” under the Wage Payment Act is broader than a formal contract.  Practically speaking, this means the contract or agreement being sued upon doesn’t have to be in writing or even have valid consideration: all that’s required is “mutual assent” between the parties.  See Landers-Scelfo v. Corporate Office Sys. Inc., 356 Ill.App.3d 1060, 1067 (2nd Dist. 2005); Wharton v. Comcast, N.D.Ill., 12 C 1157 (December 6, 2012).

In Wharton, a class action filed by Comcast employees, the Northern District denied Comcast’s 12(b)(6) motion to dismiss plaintiffs’ Wage Payment Act claims.  The plaintiffs alleged that Comcast failed to pay overtime and for pre-shift and post-shift work as required by Federal law and Comcast’s employee handbook.  The Court held that even though Comcast’s employee handbook had multiple disclaimers (to paraphrase: “this is not a contract”) and gave Comcast the unilateral right to discontinue or change the handbook at its pleasure, the plaintiffs still pled evidence of “mutual assent” to the handbook’s terms.  Wharton, p. 8.

As a consequence, the Northern District held that Comcast’s employee handbook – despite its disclaimers – vested the plaintiffs with enforceable Wage Payment Act rights (at least enough to survive a motion to dismiss).  Id.

Other key Wage Payment Act provisions include (1) corporate officers or agents who “knowingly permit” a violation of the Act, are subject to personal liability (820 ILCS 115/13); (2) employee damages include unpaid compensation plus 2% of unpaid amount per month and attorneys’ fees.  820 ILCS 115/14; and (3) the employee can – instead of filing suit – lodge a clam with the Illinois Dept. of Labor.  820 ILCS 115/11.  In the latter scenario, the claimant must file within one year after the wages or final compensation are due.  Id.  This does not preclude the employee from later pursuing a civil suit in the Circuit Court in the County where the Act violation occurred.

Other than the 1 year reference in Section 11 for asserting a Dept. of Labor Claim, the Wage Payment Act is silent on a limitations period.  Code Section 13-206 provides for a 10 year limitations period for claims based on the Act.  735 ILCS 5/13-206.

Conclusion

The Wage Payment Act is a powerful enforcement tool for departed employees who are owed money by their erstwhile employers.  The Act broadly applies to all types of compensation agreements and provides for recovery of the employee’s attorneys’ fees.  Commercial litigators should have a working knowledge of the Act’s contours, exceptions and key terms.

Recovering Litigation Costs in Illinois State Court – What About Westlaw Research?

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In a small dollar case, a plaintiff’s recoverable “costs” typically include filing fees and service fees. See Household Int’l v. Liberty Mutual, 195 Ill. 2d 578 (2001).  This amount is usually negligible (usually less than $500) and not worth fighting over. However, where a fee-shifting provision in a contract provides for prevailing party “litigation expenses” or “costs of collection” (as many commercial contracts do) and the case drags on one or more years, the litigation costs can be substantial.

In Illinois, “[c]osts are allowances in the nature of incidental damages awarded by law to reimburse the prevailing party, to some extent at least, for the expenses necessarily incurred in the assertion of his rights in court.” Galowich v. Beech Aircraft Corp., 92 Ill. 2d 157, 165-66 (1982).

Code sections 5-108 and 5-109 – allow the a winning party to recover costs. The First District, in  analyzing a Federal Truth in Lending claim, held that any expenses paid to a third party including expert witness expenses, special process server expenses, deposition expenses, filing and messenger fees and computerized legal research costs can all be recovered by the prevailing plaintiff. Johnson v. Thomas, 342 Ill.App.3d 382, 401-402 (1st Dist. 2003).

By contrast, “overhead expenses” – costs a lawyer incurs independent of a specific case – are generally not recoverable.  Overhead costs include: telephone charges, in-house delivery charges, in-house photocopying, check processing, newspaper subscriptions, and in-house paralegal and secretarial assistance. Id. at 401-402.

The reason: overhead costs, at least in theory, are already reflected in an attorney’s hourly rate. See Harris Trust & Savings Bank, 230 Ill. App. 3d 591, 599 (1st Dist. 1992).

Whether a prevailing party can recover for computerized legal research expenses will turn on the winning side’s billing method.  Where the attorney’s fee is contingent or fixed – computer research expenses are not allowed.  The theory being that the computer research benefitted the contingent fee lawyer by reducing his research time and increasing his efficiency.  Because of this, the contingent lawyer should not be able to shift the computer research costs to a losing party. 

In contrast, for an attorney charging by the hour, the saved time resulting from computer research actually works against him – he will bill for fewer hours than if he researched the “old fashioned way” (does anyone remember Shepardizing?). 

With hourly billing, “the attorney should not be required to absorb the additional expense engendered by computer research fees in light of the diminished billable hours that result from such computer assistance”. Id.

Johnson does caution that computer research expenses are properly denominated “fees”; not costs. This is because computer research is part of the attorney’s overall effort in prosecuting or defending his client’s case. Id. So, if the statute or contract allows for recovery of fees and costs, computerized research expenses will be recoverable.  Conversely, if the contract only provides for winning party “costs”, computer research charges can’t be recovered under Johnson‘s rationale.

The take-away: I’ve been involved in more than a few multi-year cases where the litigation expenses (aside from the attorneys’ fees) exceeded $10,000.  As a consequence, a working knowledge of what litigation expenses an Illinois court will and will not permit is essential for practitioners engaged in protracted commercial litigation.  

 

Recovering Litigation Costs in Federal Court (Northern District of Illinois)

Federal court litigants in Illinois should be versed in 28 U.S.C. §1920, FRCP 54 and Northern District Local Rule 54.1 – both of which govern recoverable costs and the procedures for recovering those costs in Federal court.  Broadly, the prevailing party has 30 days from date of judgment to file a Bill of Costs.  Failing that, all of his costs – except for “clerk” costs (28 U.S.C. § 1920) – are waived. LR 54.1(a).

FRCP 54 creates a strong presumption that the prevailing party may recover reasonable and necessary litigation costs from the losing party.  Huerta v. Village of Carol Stream, 2013 WL 427140 (N.D.Ill. 2013).  28 U.S.C. §1920 provides that a winning party can recover: (1) clerk and marshal fees [filing and service fees, e.g.]; (2) fees for transcripts necessarily obtained for use in a case; (3) printing and witness fees; (4) exemplification/certification costs for materials necessarily used in a case; (5) docket fees; and (6) court-appointed experts and interpreters’ fees.  Id.  The prevailing party has the burden of showing that the requested costs are necessary and reasonable and once that burden is met, the losing party must show that the costs are not appropriate.  Beamon v. Marshall & Isley Trust Co., 411 F.3d 854 (7th Cir. 2005). 

A prevailing Federal court party’s private process server fees are also recoverable, so long as they don’t exceed the applicable marshall’s fees ($55/hour pursuant to 28 C.F.R. § 0.0114(a)(3); see Huerta, 2013 WL 427140, *3.  As for deposition costs, whether transcript costs are allowed depends on whether it was reasonably and necessarily “related to an issue that was present in the case at the time the deposition was taken.”  Independence Tube Corp. v. Copperweld Corp., 543 F.Supp. 706, 718 (N.D.Ill. 1982).  If so, the victor gets the cost of the original transcript, one copy and an additional copy – so long as the additional copy is tendered to the court.  LR 54.1(b).  The prevailing party can recover up to $3.65 per deposition page.  Huerta, at *3; citing Maximum Transcript Rates, http://www.ilnd.uscourts.gov/home/clerksoffice/CLERKS_OFFICE/CrtReporter/trnscrpt.htm

 However, shipping and handling costs are “ordinary business expenses” and not recoverable.  Bogan v. City of Chi., 2010 U.S.Dist. LEXIS 64187 (N.D.Ill. 2010).

The take-away:  If litigating in Federal court, the recent Huerta case provides a lucid and detailed treatment of allowable and dis-allowable litigation costs.  If presenting or opposing a Bill of Costs, this case and the applicable rules it references should prove useful in supporting your arguments.  Also, effective, May 23, 2013, LR 54.1(b) was amended to provide that court reporter appearance fees may be awarded but those rates shall not exceed the rates published on the Court website.  

References:

Huerta opinion: http://www.abisoft.org/opinions/2013/1_09-cv-01492_20130204.pdf

Local Rule 54.1http://www.ilnd.uscourts.gov/legal/newrules/New00039.htm

Local Rule 54 (amendment May 23, 2013) http://www.ilnd.uscourts.gov/home/clerksoffice/rules/admin/pdf-orders/General%20Order%2013-0011%20-%20Local%20Rule%2054.1.pdf

FRCP 54: http://www.law.cornell.edu/rules/frcp/rule_54

28 U.S.C. §1920: http://www.law.cornell.edu/uscode/text/28/1920