After nearly a decade of hovering just above the federal minimum wage, Illinois has joined California, New York, Massachusetts, and (most recently) New Jersey in scheduling a $15 minimum wage. The new law creates a series of smaller wage hikes starting in 2020, with the final $15 rate taking effect in 2025.
SB 1, or The Lifting Up Illinois’ Working Families Act, was fast-tracked through the Illinois General Assembly and signed into law by Governor J.B. Pritzker on February 19, 2019. Priztker won the 2018 gubernatorial election on a worker-friendly platform, including a $15 minimum wage. Some of his first public actions in office were to institute a series of pay increases for unionized state employees, a ban on salary history inquiries directed at applicants for state employment, and expanded reproductive health benefits for state employees.
In addition to the minimum wage increase, the Lifting Up Illinois’ Working Families Act also expands the audit power of the Illinois Department of Labor and imposes new financial penalties on employers who pay employees less than the minimum wage or fail to keep payroll records as required by law. For small businesses, the law provides a tax credit to balance the burden of increased wage payments.
Illinois Minimum Wage and Training Wage Rates: 2020 to 2025
Employers have close to a year to prepare for the first step in the series of minimum wage hikes. Through December 31, 2019, the general minimum wage for employees over the age of 18 will remain at the current rate of $8.25 per hour. Employers can also continue to pay employees under the age of 18 a training or youth wage of $7.75 per hour for the first 90 consecutive days of employment.
SB 1 amends the Illinois Minimum Wage Law to increase these rates, but it also changes the rules regarding which employees may be paid a training wage. Beginning on January 1, 2020, the general minimum wage will rise to $9.25 per hour, with a second increase quickly following in July of 2020. In subsequent years the minimum wage will only rise once a year on January 1 until it reaches a rate of $15.00 in 2025.
On January 1, 2020, the training wage will increase to $8.00 per hour. The new training wage is applicable only to employees under the age of 18 who have worked 650 hours or fewer for the employer during any calendar year. If an employee under the age of 18 has worked more than 650 hours for the employer, they must be paid the general minimum wage rate. The training wage will increase once a year on January 1 until it reaches a rate of $13.00 in 2025.
|Effective Date||General Minimum Wage||Training Wage|
|January 1, 2020||$9.25||$8.00|
|July 1, 2020||$10.00||[No change]|
|January 1, 2021||$11.00||$8.50|
|January 1, 2022||$12.00||$9.25|
|January 1, 2023||$13.00||$10.50|
|January 1, 2024||$14.00||$12.00|
|January 1, 2025||$15.00||$13.00|
Hospitality employers will be pleased to note that the SB 1 does not amend the portions of the Illinois Minimum Wage Law which relate to tipped employees. Employers of an employee who regularly receives tips can continue to use a tip credit of up to 40% of the general or training wage to fulfill their minimum wage obligations.
SB 1 also amends the Illinois Income Tax Law to allow small businesses (50 or fewer full-time employees) to claim a tax credit against their increased minimum wage obligations for each year that the wage rate increases. The tax credit can only be claimed for employees who were previously paid at the lower minimum wage rate and who are paid at the higher minimum wage rate during the reporting period.
Increased Inspections and Higher Penalties
The new law empowers the Director of the Illinois Department of Labor (IDOL) and authorized representatives to “make random audits of employers in any industry subject to the [Illinois Minimum Wage Law] to determine compliance” (SB1/Public Act 101-0001, Section 15 amending 820 ILCS 105/7). The Department may also enact emergency rules to implement the changes required by the Lifting Up Illinois’ Working Families Act.
In addition to heightened scrutiny from IDOL, SB 1 also increases the financial consequences for employers who violate the law. Under existing state law, employers are required to maintain specific payroll information, including the number of hours worked by each employee and the amount paid during each pay period, for a period of at least three years (820 ILCS 105/8). Failure to keep these records is a Class B misdemeanor, which in Illinois is punishable by up to 6 months imprisonment and a maximum fine of $1,500. The new law authorizes IDOL to charge employers who fail to keep payroll records with a penalty of $100 per affected employee, payable to the Wage Theft Enforcement Fund, in additional to any fines imposed by the court.
Employers who pay an employee less than the Illinois minimum wage rate or who fail to pay overtime compensation can be the subject of a civil action brought either by IDOL or by the individual employee. Previously, an employee could recover the full amount of any underpayments, as well as damages amounting to 2% of the amount of underpayment for each month that the underpayment remains unpaid. Under the new law, an employee can recover three times the amount of underpayment and damages amounting to 5% of the amount of underpayment for each month that the underpayment remains unpaid. In a civil action brought by IDOL for violations found to be willful, repeated, or with reckless regard for the law, employers will also be liable for a penalty of $1,500, payable to the Wage Theft Enforcement Fund.
What should employers do next?
Every employer subject to any provision of the Minimum Wage Law or any of its regulations are required to post a notice in the workplace, approved by the Director of IDOL, which provides a summary of the law (820 ILCS 105/8). IDOL provides the notice “Your Rights Under Illinois Employment Laws” to fulfill this posting requirement. CPC will begin monitoring the “Your Rights Under Illinois Employment Laws” notice and other mandatory postings included on the Illinois All-On-One™ Labor Law Poster in the months leading up to the minimum wage increase to ensure that employers are compliant with all posting requirements.
Employers should also expect more changes to come from the Illinois General Assembly and Governor Pritzker. The 101st session of the Illinois General Assembly will adjourn on January 07, 2020.
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