LGLJ recently participated in an Illinois Chamber of Commerce Employment Law & Litigation Committee meeting that included representatives from the Illinois Department of Labor (IDOL or “the Department”). New IDOL Director Hugo Chaviano and his staff fielded questions about recent changes to Illinois’ Wage Payment and Collection Act (“the Act”), which took effect before Governor Rauner was elected, and through which IDOL dramatically expanded its power and application of the Act. A list of some of the issues Illinois employers should be aware of with respect to the Act follows below. Many of these issues need further clarification from the Department with respect to how and what employers are required to do and prohibited from doing regarding payment of wages and fringe benefits:
Earned Vacation Policy
Illinois still has “use it or lose it” when it comes to workplace vacation policies. However, new language in the Act has caused confusion on this point – specifically, the addition of a provision that says, “an employer cannot effectuate a forfeiture of earned vacation by a written employment policy or practice of the employer.” When this language is read against other language in the Act which allows employers to have a “use it or lose it” policy, the interplay between the provisions is confusing. IDOL understands that this interplay needs clarification, but has not offered any clear guidance on how employers should approach this new earned vacation provision. As a result, employers should seek advice from counsel regarding any questions they may have about their earned vacation policies. Please contact Tom Weiler or Theresa Bresnahan-Coleman with any questions about this development.
Illinois employers must now keep track of hours worked by exempt employees, not just non-exempt. Although this regulation appears to be intended as an evidentiary standard, its plain language suggests that Illinois employers must comply with a new record-keeping burden which the federal Fair Labor Standards Act does not automatically require. The Department is reviewing this regulation, but has not yet offered any guidance for how employers should approach this requirement. Employers should consult with counsel about how to comply with this new record-keeping requirement.
Handbooks generally do not create an enforceable employment contract when they include appropriate disclaimers. However, a new definition of “agreement” under the Act muddies the issue. The definition states in one sentence that company policies and policies in a handbook do create an agreement even when there is a disclaimer. In the next sentence, however, the provision seems to contradict itself when it states that although a disclaimer may preclude a contract from being in effect, it does not preclude an agreement between two or more persons about terms in the handbook regarding compensation. This inconsistent language is not in keeping with Illinois law. It is possible that the language’s intent may have been to protect employees who are owed money from their employers, but the Department needs to clarify this. The Department’s staff admitted that the rule as it is currently written is not user-friendly.
Employers may be deemed to have promised severance pay to an employee if it can be shown that the severance payment is “an established practice” of the employer. But the rule does not define what “an established practice” is, which could create litigation risk for employers over what entitlements are due at time of severance. There could also be potential ERISA concerns, if the severance pay can be viewed as an employee benefit program under ERISA, especially if severance was given to certain employees holding certain positions. Without guidance from the Department, it remains unclear how employers should navigate this development.
A change in the Act’s provision about earned bonus pay provides that an earned bonus to a separating or former employee must be paid unless the employer and employee agreed that one of the conditions for the bonus is that the employee must be on the payroll at the time the bonus is paid out. The provision also does not define what an “earned” bonus is. The Department acknowledged that clarification may be needed in the future about what an “earned” bonus is, and when and how this bonus is communicated to an employee.
Deductions and Expenses
A new rule provides that expenses incurred related to services performed to the employer are due to a separating employee as part of final compensation paid. However, the Department has not provided any guidance or mechanism by which such expenses can be included in final compensation, and has not stated if the expenses can be deducted from a separated employee’s final paycheck if the employer and employee had a written agreement in place providing for this. The Department acknowledged that the Act’s language needs to be clarified further on this point.