The Northern District of Illinois recently found that statements in an employee handbook can form an "agreement" between an employer and employee that are sufficient to support a claim pursuant to the Illinois Wage Payment and Collection Act (IWPCA).
In Wharton v. Comcast Corp., No. 12 C 1157 (N.D. Ill. 2012), several employees sued claiming the employer violated the federal Fair Labor Standards Act (FLSA), Illinois Minimum Wage Law (IMWL) and IWPCA by failing to properly compensate employees for overtime at a rate of 1.5 times the hourly rate when they worked more than 40 hours per week. The time-and-a-half rate is a basic requirement of both federal (FLSA) and state (IMWL) law. However, the IWPCA does not create an independent right to payment of wages and benefits. Instead, the IWPCA enforces the terms of an existing contract or agreement for the payment of wages. Accordingly, an employee must have a contract or agreement with the employer designating how wages or final compensation is due to him to bring a suit under the statute. In the Wharton case, the employees alleged that the employee handbook was the necessary contract or agreement. The employer brought a motion to dismiss the employees' claims that the employer violated the IWPCA. The employer claimed that it did not have a contract or agreement for payment of overtime wages with the employees.
The Court disagreed with the employer. The handbook included an overtime policy that stated the employer would provide overtime pay at a rate of 1.5 times the normal rate. Despite the handbook's contractual disclaimers, the court found that the overtime policy language was sufficient to form an agreement. Under Illinois law, an agreement requires only a mutual assent to terms, and unlike a contract, an agreement does not require an exchange of promises with consideration. The court concluded that employment handbooks can create an agreement, even if they do not create a contract.
Even though this decision only applies to claims brought pursuant to the IWPCA, the potential exists for the ruling to be extended to other statutes and claims. Regardless, future suits based on handbook provisions may be more difficult to dismiss. Employers can no longer assume that handbook disclaimers and "at will" statements are sufficient to protect the employer from claims that a handbook is an agreement.