Tag: knowingly permit

Corporate Officer Liability Under The Illinois Wage Payment And Collection Act

The Illinois’ Wage Payment and Collection Act, 820 ILCS 115/1 et seq. (the “Act”) provides some strong recourse to an employee who isn’t paid by his employer.

Not only can a corporate employer be liable to the employee claimant, but so can individual corporate officers in some cases. See Act, ss. 2, 13.  In addition, Act Section 14 outlaws retaliation against an employee who makes a claims under the Act.

Section 5 of the Act requires an employer to pay a separated employee final compensation no later than the next regularly scheduled payday. 

The Act defines “employer” variously as (1) any individual or business entity that acts directly or indirectly in the interest of an employer in relation to an employee and (2) as an officer of a corporation or agents of an employer who knowingly permit the employer to violate the Act.   820 ILCS 115/2, 13.

Act Section 2 binds an employer not only for its own failure to pay employee wages but also for violations committed by its agents (i.e. supervisors).  

 Section 13 imposes personal liability on an officer or agent of an employer who knowingly permits an Act violation. 

Section 13 liability applies only to corporate “decision-makers” who occupy supervisory positions at a company and have a role in setting work policy and can dictate rate of pay and working conditions.

A corporate officer can defend a personal liability Act claim by asserting he relied on corporate financial documents in failing to pay or “shorting” an employee.

Section 14 is the Act’s anti-retaliation section.  It provides that an employee can recover damages where an employer “unlawfully retaliates” him. 820 ILCS 115/14(c). 

Unlawful retaliation means simply that an employer fired or discriminated against an employee who complained that he hasn’t been paid.

A claimant can show retaliation under the Act where he makes a demand for unpaid compensation and is fired in response. 

Afterwords: Collection and employment litigators should have a working knowledge of the various sections of the Act given its prevalence in the published case law.

 

 

Illinois Wage Payment Act Applies to Ohio Resident -IL 2d Dist.

Elsener v. Brown, 2013 IL App (2d) 120209 (Sept. 2013) examines when personal liability will attach to a corporate officer under Section 13 of the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq. (the “Wage Act”) where that corporate officer lives out-of-state.

Facts: After plaintiff sold the business journal he founded to an Ohio corporation, plaintiff signed a three-year employment contract the Ohio company’s Illinois subsidiary to stay on as the journal’s publisher.  The contract paid plaintiff an annual salary of $85,000 and provided that if he was terminated without cause, he was entitled to a severance payment equal to the amounts owed through the contract’s expiration.  Defendant signed the employment contract as president of the Illinois subsidiary that became plaintiff’s employer.

After plaintiff was fired just 14 months into the three-year term, he sued the Illinois entity and the company president under the Wage Act.  At trial, plaintiff was awarded over $200,000 against the corporate officer who then appealed.

Held: Affirmed

 Rules/Reasoning:

 The Court found that defendant, an Ohio resident, was subject to Illinois’ long-arm jurisdiction since he was a corporate officer of an Illinois business entity.  See 735 ILCS 5/2-209(12).  The court rejected defendant’s “fiduciary shield” doctrine, which immunizes an out-of-state defendant for taking actions in a state that are required by his employer.  The court found that the defendant purposely availed himself of Illinois courts by voluntarily agreeing to serve as corporate president of the Illinois publishing subsidiary.  ¶¶ 41-47.

Substantively, the Second District noted that Section 5 of the Wage Act requires an employer to pay final compensation to a separated employee no later than the next regularly scheduled payday.  820 ILCS 115/5,  ¶ 49-50.  Here, the plaintiff was fired in August 2009 and the next payday was in September 2009.  Under Section 5 of the Wage Act, plaintiff became entitled to the full amount of his salary through the contract expiration date (about 22 months worth of payments) on the next payday.  ¶ 70.

The Court also affirmed the defendant knowingly permitted a Wage Act violation and was personally liable under Wage Act Section 13.  Under Wage Act Section 13, personal liability attaches only if the corporate employer has the ability to pay.  So, if an employer goes out of business, the employee normally can’t sue the corporate officer under the Wage Act since there’s no willful violation by the corporate officer.  ¶¶ 66-67.

Here, though, the chronology was that plaintiff was fired in August, 2009 and the corporate employer didn’t file bankruptcy until several months later in March 2010.  At the next payday – September 2009 – the corporate employer had the ability to pay plaintiff’s contractual severance based on evidence submitted in the employer’s bankruptcy case.  Defendant’s intentional conduct was also established by the multiple emails from plaintiff to defendant requesting his severance payment and defendant’s refusal to pay.  ¶ 77.

Take-aways:  Elsener’s glaring unanswered question is whether a corporate officer can be liable where there is no underlying finding that the corporate employer violated the Wage Act.  Elsener, ¶ 54.  Here, plaintiff only went to trial against the individual officer and so there was no judgment entered against the corporate employer (due to its bankruptcy).  But since the defendant failed to raise this argument at trial, the Court held that the argument was waived.  The answer would seem to be “no” – an officer cannot be liable without a parallel liability finding against the corporate employer.

Other key holdings from the case include (1) a corporate employer’s agent can still be considered “in this state” under the Wage Act even if he lacks a physical presence in Illinois; (2) a corporate officer’s knowledge of a separated employee’s wage claim can be shown by plaintiff’s unanswered written requests for payment.