Pay Up or Pay Out: New Penalties for Record-Keeping and Compensation Violations in Illinois

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For several years now, employers have been required by the Illinois Minimum Wage Act (“IMWA”) to keep records related to employee hours worked and their compensation. The Act was recently amended to stiffen penalties when employers do not maintain proper records or fail to adequately pay their workers.

The IMWA has long required employers to maintain various records for all employees for a period of at least three years, including accurate records of the name and address of each employee, the hours worked each day in each work week by each employee, their rates of pay, the amount paid during each pay period to each employee, and all deductions made from employee wages. Additionally, any employer that provides paid vacation to its employees must preserve, for at least three years, accurate records of the number of vacation days earned for each year and the dates on which vacation days were taken and compensated.

The IMWA has never made a distinction between “exempt” and “non-exempt” employees, terms borrowed from federal law that determine whether employees are entitled to overtime pay. Even though “exempt” employees are not entitled to overtime pay, because they are salaried and usually play some role in a business’ management, the IMWA does not create an exception for them to its time-keeping requirements. Moreover, the Illinois Department of Labor’s regulations under the Illinois Wage Payment and Collection Act expressly state that employers are required to keep daily time records for all employees “regardless of an employee’s status as an exempt administrative employee, executive or professional.” See 56 Ill. Admin. Code 300.630(a). Thus, employers should be maintaining records for all of its employees.

While the format of such records is generally left up to the employer, they should be easily accessible to employees or state officials. If an employee attempts to recover past wages or final compensation, for example, an employer should be able to produce the employee’s relevant time and pay records. An employer’s inability to produce the necessary records does not mean it doesn’t have to pay. In fact, since the state places the burden on the employer to properly maintain accurate records that demonstrate compliance, the records an employee produces will be considered accurate if the employer fails to provide proper documentation. Furthermore, if the employer’s records demonstrate inconsistencies with regard to time worked and wages paid, the IDOL might deny their accuracy and presume the employer has not paid the proper amounts.

The recent amendment to the IMWA increases the minimum wage in Illinois to $15 per hour by 2025. It also gives new teeth to the Act’s record-keeping provisions. Until now, the IMWA did not provide monetary penalties for failure to keep required records. As of February 2019, an employer that fails to maintain records required by the IMWA is subject to a penalty of $100 for each impacted employee, payable to the Department of Labor’s Wage Theft Enforcement Fund. If an employee is underpaid, the employee can recover in a civil suit three times the amount they were underpaid, and may be granted damages equivalent to 5% of the total amount they were underpaid per each month following underpayment.

In light of the new law, Illinois employers should take steps to keep a daily record of hours worked by both exempt and non-exempt employees, and should maintain accurate records of employee compensation. An experienced employment attorney can help employers abide by their record-keeping duties and maintain full compliance with the IMWA and related laws.

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