Expanding the Wage Payment Collection Act – Shifting the Burden to Employers

January 18, 2016

In 2010, Illinois overhauled the Illinois Wage Payment and Collection Act (the “Act”) in an effort to aid employees in their attempts to seek compensation from employers. Unfortunately, that overhaul may have unforeseen, far reaching consequences that the General Assembly originally intended. In particular, the Illinois Department of Labor (the “Department”) has found itself with broad, newfound authority to promulgate rules stretching the WPA past its former limits.

The Act, in part, expands the liability of employers beyond the old definitions. In Section 2, an “employer” is now defined as to “include any individual, partnership, association…or any group…acting directly or indirectly in the interest of an employer in relation to an employee.” However, these employers do not solely consist of corporate entities. In Section 13, the WPA states that any officers or agents of an employer “who knowingly permit” the employer to violate the WPA are also exposed to personal liability as they become redefined as “employers” by virtue of their knowledge. The Department has subsequently used these broad sections to enforce the WPA on agents and officers, holding them personally responsible for instances of unpaid wages.

The Department has also been defining employers under the “economics realities test.”  This test was rejected by the Illinois Supreme Court in the case Andrews v. Kowa Printing. While this test was rejected the Department continues to use it. To be held liable under the economics realities test, an individual needs to only have knowledge of the underlying facts, not necessarily knowledge that a violation was taking place. In other words, constructive knowledge of WPA violations is enough to hold officers and agents personally liable, according to the Department. Even if the corporation is actually unable to pay the wages, the Department has held that the employer is still liable as they failed to prevent nonpayment. As a result, employers are now in a dilemma when attempting to weather an economic downturn. According to the Department, if the business is not viable, the employer must prevent his workers from reporting to work.

Finally, the Department has enacted to new burden shifting requirements on employers. According to Section 300.630(a) of the Labor Department Rules, employers must keep accurate records of all hours worked by employees. Under part (b), the Rules state that employees need not provide evidence of uncompensated work. Instead, they only need to allege that labor went uncompensated and provide evidence of the amount of work or time earned. While the difference seems minor, the employee does not have to show that he was uncompensated for his work. Rather, the employer now has the burden to show that it properly compensated the employee for all work performed.

Unfortunately, due to the relatively low costs of most cases and the publishing of opinions under Rule 23, which means the court opinion has little or no precedential value and can’t be cited, the Department has not been thoroughly challenged on its interpretations of the WPA. As a result, employers are stuck having to navigate a more difficult morass of regulation and laws.  The attorneys at Rock Fusco & Connelly can help you navigate these new regulations and help you better understand how your company may be impacted.