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Watch for heftier fines with new minimum wage law

‘Nobody is paying attention to the penalty portion’

By this time next year, Illinois workers will make at least $10 an hour. By 2025, it will be up to $15.

That’s the easy part to figure out.

But local employers have a little more to keep their eye on than just the minimum wage. And a Chicago attorney spelled out the reasons why at a breakfast seminar Wednesday morning in Peru.

Around 70 members of the business community attended the Illinois Valley Area Chamber of Commerce and Economic Development seminar to hear Chicago attorney Jeffrey Risch discuss the coming changes in the minimum wage law.

“I’m going to scare the hell out of you,” he warned the group. “You are in the crossfire here now more than ever because of individual liability.”

Yes, Illinois’ current $8.25 minimum wage is set to increase in increments over the next five years. It will first increase to $9.25 on Jan. 1 and then again to $10 on July 1, 2020. Then every January it will increase $1 until it reaches $15 per hour in 2025.

“Everyone is talking about the amount per hour but that’s the easy part,” Risch said. “Nobody is paying attention to the penalty portion of it. It should be called the Illinois minimum wage and overtime law.”

Much bigger penalties

Risch said there is no avoiding paying the set increases, which were signed into law last February by Gov. J.B. Pritzker. But local employers have to be very mindful of the changes when calculating payroll because there are penalty components if they get it wrong.

“Anybody want to know what the penalty components are if you get them wrong?” Risch asked.

It starts with triple back pay. An employee is not only entitled to recover the wages they are owed, but triple that amount. Plus employers owe a statuary penalty of 5% of the amount of the underpayment per month that amount goes unpaid. And that is increased from 2%.

For example

Under the old law if an employee was underpaid $100 a month for one year they would be owed $1,200 in back pay plus damages ($1,200 x 2% x 12 months) for a total of $1,488.

Under the new law if an employee is underpaid $100 a month for a year they would be owed $3,600 in back pay plus damages ($1,200 x 5% x 12 months) for a total of $4,320. There is a statute of limitations of three years on unpaid wages.

What are the pitfalls to watch for?

Risch said there are two major pitfalls to watch for that could result in employers having to dole out the back pay and penalties spelled out above.

1. The first is misclassifying employees. The minimum wage law has exempt and non-exempt employees for overtime benefits.

Who’s exempt? Illinois’ Fair Labor Standards Act defines exempt employees as executive, administrative, professional, computer and outside sales. Those are positions such as managers, human resources, lawyers, teachers and doctors who may not adhere to a 40 hour work week due to their responsibilities.

Who’s not exempt? Everyone else. Pay them the minimum wage and required overtime benefits for the hours they work.

2. The second major pitfall, Risch said, is not paying employees for every single minute they work. Risch said too often an employer may override an employee’s time record to make budget. And that is a big no-no from a legal standpoint if an employee is tracking their hours properly.

“The employee should be tracking their time,” he said. “These time records are Gospel. These are iron-clad.”

Everyone track their time

A doctor may work well over 40 hours a week, but Risch emphasized that all employees, exempt or non-exempt, need to be tracking their hours.

Risch said in 2014, the Gov. Pat Quinn administration added an administrative rule for the Illinois Department of Labor that required a record of hours worked for all employees. Before February, there wasn’t much reason to enforce it though because there was no penalty. Now there is.

The Illinois Department of Labor can assess a $100 penalty per impacted employee per workday that the records are not kept. And those fines go directly to the Department of Labor’s Wage Theft Enforcement Fund.

Risch said the best way to avoid penalties is to make each employee aware of their responsibilities to track their hours and update policies in the employee handbook.

Brett Herrmann can be reached at (815) 220-6933 or bherrmann@shawmedia.com. Follow him on Twitter @NT_SpringValley.

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