Illinois Governor Pat Quinn recently signed into law several amendments to the Illinois Wage Payment and Collection Act (IWPCA) that give employees more relief when employers fail to properly pay all wages owed. The amendments, which go into effect on January 1, 2011, also give employees a new avenue for adjudicating most wage claims and also make employers (and responsible managers) subject to more severe criminal penalties and sanctions.

New Adjudicative Small Claims Powers

Adding to the Illinois Department of Labor’s (IDOL) current investigative powers, the amendments to the IWPCA will allow the IDOL to directly adjudicate claims for unpaid wages of up to $3,000 per individual employee. The IDOL is also empowered to establish rules and regulations for such small claims adjudications. Currently, once the IDOL completes its investigation and issues a finding that an employer owes wages to the complainant, that finding can only be enforced in state court by the filing of a wage action by the Attorney General’s office. Such claims can take long periods to reach completion. Once the small claims powers of the IDOL become effective, it will be able to issue an enforceable ruling against the employer (or finding in its favor), which is binding on the parties, but which may be appealed to state court under the provisions of the Illinois Administrative Review Law (which provides for a streamlined review of the administrative order, and where, generally, no new evidence or testimony is allowed).

Alternatively, aggrieved employees may still take their wage claims directly to state court, regardless of the amount claimed. The amendments also make explicitly clear that class actions under the IWPCA are permissible.

Increased Damages/Penalties and Mandatory Attorneys’ Fees

The amendments also add new levels of damages that employees may recover in wage claims. First, aggrieved employees may recover not only the full amount of wages that were unpaid, but they also will be awarded a penalty of 2% of those wages for each month following the date of the violation until the wages are paid. Moreover, if the IDOL or a court awards unpaid wages to the employee, the employer will be subject to a $250 “administrative fee,” payable to the IDOL.

The amendments also remove the maximum penalty that an employer may be forced to pay if it fails to comply with a demand or order of the IDOL or a court to pay wages due (or to timely file an appropriate appeal). Currently, in such situations, the employer will become liable to pay a penalty to the IDOL of 20% of the wages owed and a penalty of 1% of the outstanding wages per calendar day to the employee, up to a maximum of double the wages owed. The amendments remove the language capping the penalty owed. Theoretically, if an employer refuses to pay the wages ordered, and fails to timely appeal the order, its liability will continue to mount as long as the wages remain unpaid.

Perhaps most importantly, from a practical and litigation standpoint, prevailing plaintiffs in civil actions for unpaid wages will be awarded mandatory “costs and all reasonable attorneys’ fees.” Previously, in order to obtain attorneys’ fees in a wage action, the plaintiff must have complied with the demanding provisions of the separate Attorneys’ Fees in Wage Actions Act, which mandated that, in order to obtain attorneys’ fees in an action for unpaid wages, the plaintiff must have made a written demand of a definite amount of wages owed from the employer at least 3 days prior to filing suit—and then must recover at least as much as demanded in the written demand before attorneys’ fees could be awarded. Under the amendments, attorneys’ fees for prevailing plaintiffs will be a mandatory. Attorneys’ fees also will be recoverable for employees who bring a claim that they were retaliated against for exercising their rights under the IWPCA.

Increased Criminal Provisions

The amendments also increase in severity the criminal provisions of the IWPCA. Specifically, employers (including officers or agents of the employer who knowingly permitted the violations to occur), who willfully refuse to pay wages due or falsely deny the amount or validity of a wage claim will be found guilty of:

  1. for unpaid wages in the amount of $5,000 or less, a Class B misdemeanor; or
  2. for unpaid wages in the amount of $5,000 or more, a Class A misdemeanor.

Persons who violate the criminal provisions of the act a second time in a 2-year period will be guilty of a Class 4 felony.

Conclusion

The amendments to the IWPCA provide more avenues for relief—and increased measures of relief—for employees who file claims for unpaid wages in Illinois. The number of wage claims, especially class action claims, has skyrocketed in recent years and these amendments, which go into effect January 1, 2011, only add more incentive for employees (and plaintiffs’ attorneys) to bring claims against employers for unpaid wages. Employers must be more conscientious than ever in making sure that their pay practices, including taking only proper and lawful withholdings and properly paying final compensation to departing employees, are carried out correctly. Penalties for mistakes in your pay practices—even small mistakes, if allowed to perpetuate—are about to become much more severe.