Recent Amendments to Wage Payment and Collection Act Regulations Require Employers to Track Hours Worked by Exempt Employees, Among Other Changes

In perhaps the most under-the-radar amendments ever to regulations governing the enforcement of a major state statute, the Illinois Department of Labor (“IDOL”) adopted new regulations which significantly broaden the IDOL’s reach under the Illinois Wage Payment and Collection Act (“IWPCA”). The IDOL’s amendments, which went into effect in August 2014 without a press release, implement new requirements which directly impact Illinois’ employers’ day-to-day interactions with employees.

Written Notice of Rate of Pay Required

The new regulations require employers to give all employees notification of their rate of pay when they are hired and “whenever possible” this must be in writing. Any time employees’ pay rate changes, the employer must also give the affected employees notice in writing “unless impossible.” The amendments do not address whether publication of employees’ rates of pay in a collective bargaining agreement or ordinance meets the notice requirement.

Records Must Be Kept of Hours Worked By Exempt Employees

Another new regulation that could affect employers’ record keeping practices requires employers to track every employee’s hours worked each day. This requirement applies “regardless of an employee’s status as . . . an exempt administrative, executive or professional.” Prior to this regulation, neither Illinois nor federal law required employers to keep records of hours worked by exempt staff. Now Illinois employers must now create these records and keep them for all employees for at least 3 years. Neither the IWPCA nor the new regulations specify a penalty for violating this directive. The regulations state that the failure to maintain the records may impede an employer’s ability to defend IWPCA claims brought by exempt employees asserting they are misclassified, perform nonexempt jobs, and are entitled to overtime. While the regulations are new, the IDOL’s position in such cases has long been that, if the employer does not have records of the hours worked, the employee’s statement about his or her hours prevails. The new regulations put this position into writing. This will likely have the greatest impact on positions for which the exempt classification is susceptible to challenge such as mid-level managerial jobs.

Employers Cannot Require Electronic Wage Payments

The amendments also put to rest the issue of whether employers can require employees to accept payment via direct deposit or a payroll card. The new regulations clearly state that employers cannot do so, and moreover, give employees the right to demand wages via check or cash. Regardless of the payment method, the employer must provide employees with a written receipt each pay period showing hours worked, pay rate, overtime rate, overtime wages, gross wages, an itemization of deductions, and wages and deductions year to date. If wages are delivered in cash, employees must sign a receipt acknowledging that.

New Enforcement of Employment “Agreements”

The largest broadening of the IDOL’s jurisdiction may be in provisions advising that IDOL will now enforce claims based on “agreements” between employers and employees, regardless of whether these agreements are in writing. “Agreements” will be construed widely as “broader than a contract.” Moreover, “an exchange of promises or any exchange is not required for an agreement to be in effect,” and one can exist without formalities and accompanying legal protections, such as past practice. The regulations state that “agreements” may be found in policies and handbooks in circumstances where mutual consent exists, regardless of the presence of a disclaimer.

The new regulations give the IDOL authority to enforce these regulations by, among other things, “assisting” a class of employees alleging a violation of the IWPCA or retaliation for asserting such rights. Moreover, an employer’s failure to respond within 20 days to a wage claim now means that, on the 21st day, all of the employees’ allegations are “deemed admitted as true.” The regulations signal IDOL’s intent to aggressively enforce IWPCA claims. Employers should assess whether they need to adopt new recordkeeping practices and respond promptly to any IDOL claims they receive.

Should you have any specific questions on how these changes affect you, please contact your Robbins Schwartz attorney.

Rachel E. Lutner of the firm’s Chicago office and Susan W. Glover of the firm’s Mokena officeprepared this Law Alert.