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Two New Laws Up the Ante for Illinois Employers

Date

April 1, 2010

Read Time

6 minutes

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SUMMARY

Two laws recently signed by Governor Quinn change the landscape for Illinois employers. The first is an amendment to the Illinois Wage Payment and Collection Act (IWPCA), establishing significant penalties and fees for employers who fail to pay employees the wages they are due. It also increases criminal penalties for violations of the IWPCA, makes it easier for employees to bring private lawsuits under the IWPCA, and gives the Illinois Department of Labor the authority to set up a system for resolving wage claims of up to $3,000. The second, the Employee Credit Privacy Act (“ECPA”), limits an employer’s ability to conduct applicant or employee credit checks. Both laws will be effective January 1, 2011.

ACTION ITEMS

  • Review pay practices – including practices for payments made at termination of employment – to ensure that your company is complying with the Illinois Wage Payment and Collection Act.
  • Train managers and payroll/accounting employees on how to respond to employee inquiries regarding wage payments.
  • Revisit how your company is using applicant and employee credit checks to make sure that both the company’s business goals and new legal requirements are met.
  • If your company conducts background checks (including, but not limited to, credit checks), make sure that you are complying with the Fair Credit Reporting Act and related state laws.

 

DISCUSSION

While many have been enjoying a summer vacation, the Illinois legislature has been busy. Two recently enacted, pro-employee, laws should give Illinois employers pause.

Amendments to Illinois Wage Payment and Collection Act: Under recently enacted amendments to the Illinois Wage Payment and Collection Act (IWPCA), employers will face significant increases in civil penalties and fees and escalated criminal penalties for violations. The amendments also make it easier for employees to bring claims under the IWPCA either individually or as a class action, give employees the right to bring a claim for retaliation, and give the Illinois Department of Labor (IDOL) the right to establish a system to resolve wage claims under $3,000 in an administrative proceeding.

Perhaps most significantly, the amendments will make it much easier for employees to bring claims under the IWPCA and, as a result, such claims will likely be more attractive to plaintiff-side class action attorneys. The amendments provide that employees may file suit either individually or as a class action. Employees may file suit in either the county where the violation allegedly occurred, or in any county where an employee who is a party to the suit resides. In addition, the amendments provide that employees who prevail receive their costs and attorneys fees. These changes, taken together, mean that even if the damage to an employee is slight, an attorney may still have an incentive to take the case. Also, and unlike before the amendments, employees are not required to request payment or advise their employer of their claims prior to filing suit.

The fees and penalties established in the amendments are also noteworthy. Employers who violate the IWPCA will face a penalty of 2% per month that wages remain unpaid, plus an administrative fee to be paid to the IDOL. In addition, if an employer fails to make payment or file an appeal within 15 calendar days after a demand from the IDOL or within 35 days after an order from a court or the IDOL, the employer will face a penalty of 20% of the amount that was found to be owing (to be paid to the IDOL) as well as a penalty of 1% per calendar day of the amount found owing (to be paid to the employee).

The criminal penalties are also increased. For example, the criminal penalty for repeat offenders is increased to a felony and non-repeat offender penalties range from a Class B misdemeanor for cases of $5,000 or less to a Class A misdemeanor for cases over $5,000. It is important to note that it isn’t just the company that faces these penalties — officers and agents of an employer who knowingly permit a violation also face personal liability. Criminal penalties have been largely unused in the past, but it remains to be seen whether the increase in criminal penalties will be accompanied by an increase in criminal prosecutions under the IWPCA.

Finally, the amendments give employees the right to bring a claim for retaliation. With this provision, employers should view employees who have complained or raised concerns about unpaid wages or pay practices as they view employees who have complained about harassment or discrimination.

In all, the amendments up the stakes for employers who fail to comply with the IWPCA. Even if the non-compliance is unintentional or involves a very small dollar amount, the resulting liability can be significant.

Employee Credit Privacy Act: On August 10, 2010, Governor Quinn signed the Employee Credit Privacy Act (ECPA), which prohibits employers from either inquiring into the credit history of an applicant or employee or obtaining a credit report, except in limited circumstances. This legislation follows the prevailing trend of restricting the use of consumer credit information by employers. The ECPA will go into effect on January 1, 2011.

The ECPA essentially prohibits employers from conducting credit checks absent a showing that the information sought is reasonably related to the essential functions of the employee’s job. In the words of Governor Quinn, the law is intended to “stop employers from denying a job or promotion based on information that is not an indicator of a person’s character or ability to do a job well.” Echoing this broad remedial purpose, the law applies not only to traditional employment relationships and joint employment situations, but also may apply to independent contractor and other non-employment agency relationships.

It is important to note, though, that the ECPA contains industry and position-specific exemptions. The ECPA does not apply to employers in banking, finance and insurance, or to state or local agencies where the use of credit reports is required. Nor does it apply to candidates for or employees employed in certain types of positions. For example, a credit check is permitted if it is conducted pursuant to a state or federal bonding or security requirement, where the employee or applicant has access to confidential information or trade secrets, and where the position is a management position with true decision making authority. These exemptions may appear to give a fair amount of leeway, but employers should be wary of reading them too broadly.

This is not all bad news, however. The ECPA only applies to credit checks, and not to background or reference checks more broadly – in fact, the Act expressly states that employers may continue to conduct non-credit background checks, so long as such checks comply with the federal Fair Credit Reporting Act.


Filed under: Employment & Executive Compensation

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