by John E. Motylinski (Winter 2016)
In August 2014, the Illinois Department of Labor (“IDOL”) adopted a set of regulations that impose several new restrictions and responsibilities on employers. These regulations were created by the IDOL to enforce the Illinois Wage Payment and Collection Act (“IWPCA”) (820 ILCS 115/ et seq.), which controls how employees are to be paid, prohibits unauthorized wage deductions, and imposes requirements on employers to keep certain records. Even though these changes were announced without much fanfare, they have far-reaching effects on the way all Illinois employers — public and private alike – conduct business.
Employers must track hours worked by all employees
The most significant change in the law is that employers must now track hours worked by all employees, regardless of whether the employees are exempt or non-exempt under the federal Fair Labor Standards Act. To that end, the new IDOL regulation states that:
Regardless of an employee’s status as either an exempt administrative employee, executive or professional, every employer shall make and maintain, for a period of not less than 3 years, the following true and accurate records for each employee: . . . the hours worked each day in each work week . . . . (56 Ill. Adm. Code § 300.630)
This new regulation marks an abrupt and surprising change, as no such tracking requirement had formerly been imposed by Illinois or federal law. While there is no expressly defined penalty for violating the tracking rule, the IDOL has asserted that the lack of tracking records will cause an employee to instantly prevail in a wage claim action. Therefore, employers must take steps to ensure that they are tracking the hours worked by all of their employees. One easy way to accomplish this is to require all employees to complete and submit timesheets.
A new IDOL regulation states “[a]n employer cannot effectuate a forfeiture of earned vacation by a written employment policy or practice of the employer.” (56 Ill. Adm. Code § 300.520(h)) A recent IDOL “Vacation FAQ” clarifies that the new rule applies when an individual’s employment ends. It does not impact an employer’s ability to have a “use it or lose it” policy whereby vacation must be used by a certain date or it is lost. Such a policy remains lawful. The new rule requires an employer to pay an employee for earned vacation time upon separation. It prevents employers from refusing to pay the monetary equivalent of all earned vacation to an employee who resigns or is dismissed without having taken all earned vacation time.
Employee handbooks are now enforceable “agreements”
In a surprising move, the IDOL will now generally enforce employee handbooks and other “agreements” despite the presence of disclaimers to the contrary. In Illinois, employers have traditionally included provisions in their employee handbooks disclaiming the formation of an enforceable contract. Following another new IDOL regulation, however, these disclaimers will be ineffective in preventing enforcement of employee handbook provisions. Now, all that is required for an enforceable “agreement” is “the manifestation of mutual assent on the part of two or more persons.” (56 Ill. Adm. Code § 300.450) As such, employee handbook disclaimers will not “preclude an agreement . . . relating to compensation” or other terms of employment. Consequently, employers cannot rely any longer on employee handbook disclaimers to defend against wage claims brought under the IWPCA.
Mandatory direct deposit / payroll card policies are now prohibited
Another new IDOL regulation restricts an employer’s ability to require that employees enroll in direct deposit or accept wages through payroll cards. (56 Ill. Adm. Code § 300.600(b)) Indeed, pursuant to the new rules, employers now cannot implement direct deposit unless the employee “voluntarily accepts this form of payment and voluntarily designates a bank or a financial institution.” Similarly, payroll cards cannot be used absent the employee’s “voluntary” written consent. Strikingly, the IDOL has also noted that conduct is not “voluntary” when the employee is led to believe they must accept these payment methods or face an adverse employment action. Thus, employers should strive to receive employees’ voluntary consent to use direct deposit or payroll cards in the future.
New wage notification requirements
Under the IWPCA, employers are required to give employees notice of their rate of pay at the time of hiring and whenever there is a “change in the arrangements” of employment. (820 ILCS 115/10) The IWPCA also requires employers to provide this notice in writing “whenever possible.” The new IDOL’s regulations give some guidance as to what the ambiguous phrase “whenever possible” means. Now, if an employer needs to change an employee’s rate of pay, it must “place the arrangement in writing at the time of the change and present the change to the employee unless impossible to do so.” (63 Ill. Adm. Code 300.630(d)) The practical effect is that employers that do not want to issue wage notices in writing must now show that such an act is actually impossible — a very high burden. Accordingly, employers should endeavor to notify employees of all wage rate changes in writing.
New penalties for untimely wage claim responses
Under the IWPCA, an employee may submit a claim alleging that an employer has not complied with the Act or the IDOL’s regulations. (63 Ill. Adm. Code § 300.940) The IDOL has implemented a new penalty for employers who fail to respond to such a claim. Under the new regulations, employers must respond to such a wage claim within twenty (20) days. (63 Ill. Adm. Code § 300.941(c)) If the employer fails to respond, all of the allegations listed in the employee’s complaint will be “deemed admitted to be true,” which generally results in an instant victory for the employee. As such, employers should be even more vigilant in responding to claims under the IWPCA.
The IDOL’s new regulations may require Illinois employers to amend longstanding policies and practices. Yet, the regulations are complex and riddled with exceptions. Accordingly, we recommend you consult with your attorneys if you have any questions concerning the impact of the new IDOL regulations.