There 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.
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.