A new law will make it much more costly for Illinois employers that fail to pay employees their earned wages, including final compensation such as accrued but unused vacation pay.  The Illinois Wage Theft Enforcement Act, S.B. 3568 (the "Act"), signed into law July 30, 2010, increases both civil and criminal penalties for violating the state’s wage payment law, imposes new risks for employers who ignore or unsuccessfully challenge employees’ wage claims, and creates a new cause of action for employees who face retaliation for having complained about unpaid wages.  The Act will take effect January 1, 2011.

Illinois Wage Payment and Collection Act

The Illinois Wage Payment and Collection Act (the "Wage Payment Act") requires employers to pay employees their earned wages no later than a specified period following the date on which the wages are earned, and to pay employees who resign or are terminated all wages they earned through their last day of employment, no later than the first regular payroll date thereafter.  The law applies to every employee in Illinois, exempt or non-exempt, regardless of the employer’s size or location.  "Earned wages" includes not only an employee’s salary or hourly pay, but also any earned bonuses or vacation pay.  With some limited exceptions such as tax withholdings and authorized deductions for benefits, the Wage Payment Act also prohibits employers from deducting anything from an employee’s wages, unless the employee signs an authorization at the time of the deduction.  The law also allows employees to recover damages from any corporate officer or agent of an employer who knowingly permits the employer to violate the Wage Payment Act.

New Enforcement Methods and Civil Penalties

Employees may file claims under the Wage Payment Act with the Illinois Department of Labor ("IDOL") or by bringing suit in state court.  The Wage Theft Enforcement Act makes clear that employees may bypass the IDOL and proceed directly to court, and that such suits may be brought as individual or class actions.  In addition, while current IDOL hearings are relatively informal conferences, the IDOL has now been given the power to establish a formal procedure to adjudicate claims, in final and binding administrative decisions, where the amount sought is no more than $3,000 per employee, including cases where an employer fails to respond to a claim within the short 10-day deadline set by IDOL rules.

The new law also provides additional fees and penalties for employers who lose before the IDOL or in court.  If an employee prevails before the IDOL, then the employer, in addition to any wages that it owes, must pay a $250 administrative fee to the IDOL.  If the IDOL demands or orders that an employer pay any wages, and the employer fails to comply or appeal within 15 days, it must also pay the IDOL a penalty of 20 percent of the total amount owed regardless of the length of the delay, and pay the employee 1 percent of the amount owed for each day it delays payment past the 15th day.  The IDOL may sue the employer to recover any such amounts.

If an employee chooses to proceed in court and prevails, the employer will be required to pay the employee not only his or her wages, but also damages equal to 2 percent of the amount of underpayments for each month past the date on which the wages were due, as well as the employee’s court costs and reasonable attorney’s fees.  Finally, if the employer fails to comply with or appeal the court order within 35 days, it must pay the IDOL a penalty of 20 percent of the total amount owed, and also pay the employee 1 percent of the amount owed for each day it delays payment.

Enhanced Criminal Penalties

Under the new law, any employer or agent of an employer who willfully refuses to pay wages when due, has committed a Class B Misdemeanor if the amount due is $5,000 or less, and a Class A Misdemeanor for larger amounts, with each day during which any violation continues treated as a separate offense.  If within two years of being convicted of such a crime an employer or agent of an employer again violates that part of the law, it is guilty of a Class 4 felony.  The penalties for such crimes are significant:  each Class A misdemeanor offense is punishable by one year in jail plus a $2,500 fine, while each Class 4 felony offense is punishable by three years in prison plus a $25,000 fine.

New Remedies for Retaliation

The Wage Payment Act now provides that it is a Class C misdemeanor for an employer or agent of an employer to knowingly discharge or discriminate against an employee because the employee complains about unpaid wages to the employer or the IDOL; because an employee has brought a claim seeking to recover such amounts; or because an employee has testified or plans to testify in such a proceeding.  The new law removes the "knowingly" requirement, expands coverage to protect employees who complain in a public hearing or to a community organization, and – most importantly – adds a civil remedy, allowing employees to file retaliation claims with the IDOL or in court to recover "all legal and equitable relief as may be appropriate," as well as costs and reasonable attorney’s fees.


If you have any questions about your obligations with respect to the payment of wages, salaries, bonuses, or vacation pay to any Illinois employees, or how to deal with any such employee who has complained about not being paid all amounts he or she believes are due, please contact the author of this alert or any Reed Smith attorney with whom you regularly work.