By: Sean F. Darke, Esq.
As Illinois businesses are returning to the office while COVID restrictions continue to be lifted throughout the state of Illinois, businesses are struggling to find workers. In an attempt to incentivize individuals to return to work, businesses are offering pre-hire bonuses, monthly bonuses, health stipends, increased hourly wages, premium time, or other monetary incentives. As Illinois businesses attempt to attract workers, it must also recognize the wage and hour issues that arise when offering such incentives. For example, when offering a monthly bonus does that bonus need to be calculated in the individual’s regular rate of pay for overtime. The business will have numerous other questions when implementing incentives that should be analyzed for compliance by its employment and labor lawyer. More importantly, Illinois businesses were reminded a few weeks ago that wage and hour issues in the State of Illinois must be complied with in order to avoid huge penalties under the Illinois Wage Payment and Collection Act (“IWPCA”) and the Illinois Minimum Wage Law (“IMWL”).
On May 25, 2021, the General Assembly amended the IWPCA by increasing the current 2% per month interest rate on underpayments to an alarming 5%. This is the same increase the General Assembly amended under the IMWL that began last year. In addition to the 5% increase under the IMWL, the damages involve treble amounts, attorney fees, and costs. The 3% increase may not seem to be a large increase, but the ramifications could be devastating for businesses that incorrectly calculate an employee’s incentive bonus, overtime, or commissions in an attempt to incentivize individuals to return to work. Not to mention, the damages available under the federal Fair Labor Standards Act, which also include liquidated damages. As a result, businesses must be 100% accurate in its calculations or risk violating the IWPCA or the IMWL, which could result in huge fines.
To put this into perspective, I recently had a conversation with an Illinois business who wanted to provide an incentive to its nonexempt employees to return to the office by providing an additional $5 an hour stipend for childcare. The idea seems harmless enough, where you have an Illinois business trying to fix its problem where workers do not want to come back to work, but also the employees’ issue of needing assistance with childcare in order to return to the office. However, the Illinois business innocently failed to recognize that the $5 an hour stipend would need to be calculated into the employees’ regular rate of pay for overtime purposes, where overtime hours would need to be calculated with the $5 an /hour stipend included.
As Illinois businesses contemplate incentive bonuses to bring back and keep workers, it must keep in mind the wage and hour laws in the State of Illinois. The increase in fines and penalties should have Illinois businesses think twice before trying providing its employees wage incentives. Although, in today’s work environment, it is easier said then done.
Sean Darke is a Partner at Litchfield Cavo’s Chicago office. Sean focuses on employment law and commercial class action litigation throughout the United States, where he successfully defends businesses. Sean continues to be named a Leading Lawyer in the area of Employment Law Management Side by Leading Lawyers magazine.
Sean can be contacted at Darke@LitchfieldCavo.com or 312.781.6554.