Tag: wages

Cab Passenger Fares Aren’t “Wages” Under IL Wage Payment and Collection Act – 7th Circuit

The salient question considered by the Seventh Circuit in Enger v. Chicago Carriage Cab Corp., 2016 WL 106878 (7th Cir. 2016) was whether “wages” under the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq. (the “Act”) encompasses “indirect wages” – monies paid an employee by third parties (i.e. as opposed to money paid directly from an employer).

The answer: No, it does not.

The plaintiffs, current and former Chicago cab drivers over a ten-year time frame sued various cab companies alleging Wage Act violations and unjust enrichment.

The plaintiffs alleged the companies violated the Act by misclassifying them as independent contractors instead of employees. The plaintiffs argued that the cab companies requirement that the driver plaintiffs pay daily or weekly shift fees (basically, a lease payment giving the drivers the right to operate the cabs) and other operating expenses, the companies violated the Act.

Affirming the district court’s motion to dismiss, the Seventh Circuit gave a cramped construction to the term wages under the Act examined the content and reach of the Act as applied to claims that

The Act gives employees a cause of action for payment of earned wages. “Wages” is defined by the Act as compensation owed an employee by an employer pursuant to an employment contract.

While the Seventh Circuit agreed with the drivers that there was at least an implied contract between them and the cab companies, those companies did not pay wages to the drivers as the term is defined by the Act.

This was because there was no obligation for the cab company to pay anything to the driver. The cab driver-cab company relationship was a reciprocal one: the driver paid a license fee to the company and then collected fares and tips from passengers.  No money was paid directly from the company to the driver.

The Court found that for the Act to apply to the drivers claims, it would have to expand the statutory definition of wages to include “indirect compensation:” compensation from someone other than the employer. Since there was no published case law on this issue, the Seventh Circuit refused to expand the Act’s definition of wages to include non-employer payments.

For support, the Court noted that Illinois’ Minimum Wage Law specifically defines wages to include gratuities in addition to compensation owed a plaintiff by reason of his employment. Since the legislature could have broadened the Act’s wages definition to include indirect compensation (like tips, etc.) but chose not to, the Court limited wages under the Act to payments directly from an employer to employee.

The Court also rejected the drivers’ argument that they received wages under the Act since drivers are often paid by the cab company when a passenger pays a fare via credit card. In this credit card scenario, the court found that the cab company simply acted as an intermediary that facilitated the credit card transaction. The company did not assume role of wage paying employer just because its credit card processor was used to handle some passenger credit card payments.

The driver’s unjust enrichment claim – that the cab companies were unjustly enriched by the drivers’ shift fees – also fell short.  Since there was an implied contract between the drivers and cab companies, unjust enrichment didn’t apply since an express or implied contract negates an unjust enrichment claim.

Afterwords:

This case clarifies that recoverable wages under Illinois’ Wage Act must flow directly from an employer to an employee.  Payments from third-party sources (like cab passengers) aren’t covered by the Wage Act.

Enger also serves as latest in a long line of cases that emphasize that an unjust enrichment can’t co-exist with an express or implied (as was the case here) contract governs the parties’ relationship.

 

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.