Wage & Hourly Employees

Whatever aspirational answers they give in an interview, most workers work because they want to make money. Perhaps the biggest steps you can take to retain your workforce is simple on its face, but far more nuanced in practice: paying your workers appropriately. In this article, we’ll explain some concrete action steps to take to keep your payroll straight and provide some guidance for tricky edge cases.

Concrete Action Steps

1) Pay Proper Wages

Pay minimum wage (including overtime for non-exempt employees – read more here). Federal, state, and city governments often have their own minimum wage requirements. Make sure you comply with the highest minimum wage in your jurisdiction.

Reimburse employees for necessary expenses. Illinois law requires employers to reimburse employees for any expenses necessary to the job. This includes, for example, paying for cell phone usage if the employee must use their own cell phone.

2) Keep Track of Employees’ Time

Some laws (like the FLSA) require employers to keep records of how many hours an employee worked and what they were paid. Even when it isn’t required, it’s good practice to keep records in case an employee claims they worked more hours than they did.

3) Schedule Rest Days and Breaks

Make sure you provide at least one full 24-hour period off per week for each employee and give them breaks – at least one 20-minute lunch break for employees working 7 ½ hours or more. All breaks that are 20 minutes or less should be “on the clock”.

4) Don’t Deduct from Employees’ Paychecks

Except in a few cases, employees need to agree specifically in writing to a paycheck deduction, even if it’s for something like the employee breaking the employer’s equipment.

Best Practices

1) Accurate Timekeeping

In order to avoid Department of Labor claims from employees in the future, businesses should have established procedures for accurate timekeeping. There are many online systems that automate the process and allow employees to log their hours remotely.

2) Worker Classification

Ensure your workers are classified appropriately as either employees or independent contractors. See our article on Employees vs. Independent Contractors for more detail on the differences between the two. Misclassifying employees can negatively impact your company’s tax burden and violate provisions of the FLSA.

3) Employee Schedules

Enact policies regulating your employees’ schedules. Employees should:

  • Not work “off the clock”;
  • Take their lunch (and other) breaks; and
  • Get at least one full day off per week. This ensures that you, as the employer, adhere to the laws surrounding hourly employees.

Note that the Chicago Fair Workweek Ordinance requires employers to post employee work schedules at least 14 days in advance for the following industries: building services, healthcare, hotel, manufacturing, restaurant, retail, and warehouse services for employees earning less than $29.35/hour or $56.381.85/year.

4) Look Out for Minimum Wage Violations

Businesses often pay less than minimum wage without knowing it. This often happens when employees pay out-of-pocket to cover work-related expenses. If an employee’s effective hourly rate falls below minimum wage after these expenses are deducted from their paycheck, the employer must reimburse the employee for those expenses. If they do not, the employer is violating the FLSA.

5) Required Posters

All employers should post in their workplace the FLSA poster. This poster is provided for free on the DOL’s website.

Note: This is not the only required poster for employers; there are MANY more that must be posted in every workplace, depending on the number of employees and the type of work performed. See our article on Required Posters for a complete list.

Wage Laws

1) Minimum Wage

Minimum wage is a hot-button issue and is likely to continue changing over the coming years. Because of this, we have not included the current rate in this toolkit. The appropriate wage is governed by where a particular employee works, not where the employer is located. You can find current minimum wages here:

Minimum Wage and Tipped Employees

Employers may pay tipped employees less than the minimum wage, as long as they earn enough in tips to make up the difference. However, if this lower wage plus the employee’s earned tips don’t equal or exceed the full minimum wage, the employer must make up the difference.

Tips

While tip pooling is permitted, employers are prohibited from keeping employee tips (Wage Payment and Collection Act, 820 ILCS 115/4.1).

2) Expenses

Employers are required to reimburse employees for any necessary expenses that an employee incurs in doing their job (See the Wage Payment and Collection Act January 2019 amendment here). For example, if the employee needs to use their personal phone for work, the employer needs to reimburse the employee for their cell phone usage.

3) Paychecks

Withholding Money

Can an employer withhold money from an employee’s paycheck for failure to return employer’s property (uniforms, keys, etc.)? No. Not unless the employee agrees in writing at the time the deduction is made.

Can an employer withhold money for other reasons? Only under specific circumstances. Employers can only deduct from employee paychecks when:

  • Required by law; or
  • It is to the benefit of the employer; or
  • Given a valid wage deduction/assignment order; or
  • The employee agrees in writing.

And even when deductions are allowed, the legal limit varies based on the situation and employee, so we recommend talking to a lawyer if you are deducting significant amounts.

Wage Deductions by Demand or Order: Employers must comply with a validly served demand by a creditor or wage deduction order and make the necessary wage deductions from an employee’s paycheck. This applies to child support, student loans in default, unpaid taxes, and any other valid money judgment from a court of law.

There are strict limits on the amount creditors can garnish from someone’s wages. Employer deductions cannot exceed the lesser of the following:

  • Up to 15% of employee’s gross wages; or
  • The amount of disposable income that remains after deducting the IL minimum wage multiplied by 45.

These are all governed by the Wage Payment and Collection Act and the related administrative codes (see here and here).

Paycheck Schedules

When/how often do employees have to be paid? Employees must be paid at least semimonthly, except for FLSA-exempt employees, who may be paid on or before 21 calendar days after the earning period ends.

Separated employees must receive their final compensation no later than their next scheduled payday.

Paying Vacation

Do employers have to pay out vacation days when an employee leaves? Yes. Except as provided in a collective-bargaining agreement, employees who resign or are terminated must receive the monetary equivalent of all unused vacation.

Employment contracts or policies cannot mandate the forfeiture of earned vacation upon separation.

Employers do not have to pay out sick days when an employee leaves, unless the employer doesn’t separate between sick and vacation days (i.e. they have a general “paid time off” policy that governs both). Employers also do not have to pay out “paid leave” provided under Chicago’s Paid Leave Ordinance.

We generally recommend that employers have vacation days accrue throughout the year and keep track of sick days and vacation days separately.

Equal Pay Act of 2003

This law prohibits discrimination by any employer with 4+ employees on the basis of sex (for employees doing the same or substantially similar work on jobs requiring equal skill, effort, and responsibility that are performed under similar working conditions). Illinois has also amended the act to prohibit:

  • Using wage or salary history to screen applicants,
  • Requiring that an applicant’s prior wages satisfy minimum or maximum criteria,
  • Requesting or requiring that an applicant disclose prior wages or salary to be considered for an interview or employment, and
  • Seeking information about salary, salary history, benefits, or other compensation from any of the applicant’s current or former employers.

Day and Temporary Labor Services Act

This law institutes requirements for temporary workers & temp agencies:

  • Temporary workers assigned to a third-party client for at least 90 calendar days must be paid no less than the client’s lowest paid directly hired employee in a comparable position. In the absence of a comparable employee, the temporary worker must be paid no less than the client’s lowest paid directly hired employee.
  • Temp agencies may pay the worker the hourly cash equivalent of benefits in lieu of benefits.
  • Third-party clients must provide the temp agency with information about job duties, training, pay, and employee benefits if temporary workers are assigned to them for more than 90 calendar days.

The Illinois Department of Labor also has a list of Frequently Asked Questions on their website.

Miscellaneous Acts Regulating Wages

There are many, many laws that regulate wages (Trusts for Employees Act, Preference of Claims for Wages Act, Employee Medical Contribution Act, Employee Benefit Contribution Act, Sales Representative Act, Wages of Women and Minors Act, Earned Income Tax Credit Information Act, Equal Wage Act., etc.). We recommend you review these acts to ensure your compliance with them, though many of them probably won’t impact the day-to-day operations of your company.

Employee Scheduling: The One Day Rest in Seven Act

Per Illinois law, employees must receive at least 24 consecutive hours of rest in every calendar week. Employees who are exempt from this law include:

  • Part-time employees;
  • Watchmen or security guards;
  • Crew members of towing vessels;
  • Agricultural or coal mining employees;
  • Certain employees employed in the canning and processing of perishable agricultural products;
  • Employees who are employed in bona fide executive, administrative, or professional positions or as “outside salesmen” as defined in the Fair Labor Standards Act;
  • Employees who are employed as “supervisors” as defined in the National Labor Relations Act (NLRA); and
  • Employees required to perform work in an emergency.

Employees who will work 7.5 continuous hours or longer shall be permitted a meal period of at least 20 minutes after 5 hours of work.

  • This provision “does not apply to employees for whom meal periods are established through the collective bargaining process.”
  • Employees who must be on call during an entire 8-hour work period to monitor individuals with developmental disabilities or mental illness need only be allowed to eat during their shift.

Employers must:

  • Maintain a time book showing the names and addresses of all employees and the hours worked by each employee for each day; and
  • On the first day of the week, post a schedule designating the employee’s day of rest during the workweek.

Illinois Secure Choice

As of November 1st, 2023, Illinois employers who have been in business for at least two years and have five or more employees must offer a retirement plan (Illinois Secure Choice Savings Program Act). The State provides a public option, called Illinois Secure Choice, if the employer can’t afford one. It’s also available to self-employed individuals. Illinois Secure Choice features:

  • No employer fees
  • No employer contributions required
  • Employers are not responsible for administration
  • Employees can transfer their account if they change jobs

Pension Plans: The Employee Retirement and Income Security Act (ERISA)

This is a technical and complex statute that regulates employee welfare and pension plans. Under the ERISA, pension plans are subject to a variety of substantive requirements governing participation, funding, and vesting. The ERISA also establishes uniform standards for reporting, disclosure, and fiduciary responsibilities for pension and welfare plans.

A Note on Child Labor

Child Labor Law

This regulates the employment of minors who are less than 16 years of age.

  • A minor must be at least 14 years old to be employed.
    • Exceptions: minors employed by their parents, minors employed in agriculture, minors who are at least 13 years old and employed as golf course caddies, and minors employed as newspaper carriers. In addition, minors employed in theater, radio, television, or motion pictures are exempt under certain circumstances.
  • Minors who are 14 or 15 years old may not perform factory work; work in a pool hall, bowling alley, garage, skating rink, or a place that sells or serves alcoholic beverages; work as bellboys; or operate hazardous machinery, among other restrictions. Minors under 16 years old must obtain employment certificates.
  • In addition, minors under 16 years of age are prohibited from working:
    • More than six consecutive days in a calendar week or more than 48 hours in any week;
    • More than 8 hours in a day;
    • More than 3 hours a day while school is in session, with the sum of school and work hours not to exceed 8 hours in a day and the work hours not to exceed 24 in any one week;
    • Between 7:00 pm and 7:00 am from Labor Day until June 1, or between 9:00 pm and 7:00 am from June 1 until Labor Day; and
    • More than 5 continuous hours without a 30-minute meal period.

As you can tell, paying proper wages is a lot of work! We’ve helped many businesses create employment policies that fit their workflow and workforce. You can read more about our suite of Employment Solutions, or get in touch to see how we can help you.

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