Everything You Need To Know About Illinois Payroll and Employment Laws

Both state labor and employment laws are there to protect workers from unfair treatment or unsafe working conditions. The federal government provides a base level of employee protection, but states have their own laws that either strengthen these protections or address other, state-specific needs. 

As an employer, it is your responsibility to ensure you comply with all your state's payroll and employment laws. Illinois employment law ranks among the most thorough in the U.S. With so much for employers to monitor, it makes sense to brush up on possible compliance issues in Illinois. 

From meal breaks and minimum wage to workers' compensation and overtime, this blog post will cover the major employment and payroll law matters all employers should keep an eye on. So, let's get started!

Contents:

• Wage Payment and Collection Act
• Illinois Minimum Wage Law
• Illinois Equal Pay Act
• Overtime Laws in Illinois
• One Day Rest in Seven Act (ODRISA)
• Paid Time Off (PTO) in Illinois
• Illinois Family and Medical Leave Act
• Illinois Sick Leave Act
• Illinois Worker Adjustment and Retraining Notification Act
• Illinois Wage Garnishment Law
• Illinois Unemployment Insurance Tax

Wage Payment and Collection Act

First, let's discuss the Wage Payment and Collection Act (WPCA) and why it is important. WPCA is a state law that requires employers to pay employees for their work and prohibits deductions from wages or final compensation without the employee's consent. The law also sets deadlines for when you must pay your employees and establishes penalties if you do not comply.

The WPCA applies to all employers in Illinois, regardless of size. Under the WPCA, employers must pay employees at least twice per month on regular paydays that are agreed upon in advance. Employees must be paid for all hours worked, and they must be paid on time.

If you do not comply with the WPCA, you are liable not only for the amount of unpaid wages but also for damages equal to 5% of the underpayment per month. Also, a $250 non-waivable administrative fee to The Illinois Department of Labor (IDOL). ​This fee increases to $500 if the amount ordered by the Department is more than $3,000, and $1,000 for orders of $10,000 or more.

Furthermore, any employer who fails to timely comply with a final order issued by IDOL will also be liable for a penalty, payable to IDOL, equal to 20% of the underpayment, and a penalty payable to the employee, equal to 1% per day of the underpayment. That may not sound like a lot, but it adds up fast!

Illinois Minimum Wage Law

The Illinois Minimum Wage Law requires employers to pay employees a minimum wage for all hours worked. The current minimum wage in Illinois is $12.00 per hour for non-tipped employees and $7.20 for employees claiming the tip credit. The law applies to all employees in Illinois, regardless of whether they are exempt from the overtime provisions of the Fair Labor Standards Act (FLSA).

However, employers should also take note of Chicago and Cook County, both of which have their own minimum wage rates. As of July 1, 2022, the minimum wage in Chicago is $15.40 per hour for large employers, $14.50 for small employers, and $12.00 for youth workers. The minimum wage in Cook County is $13.35 per hour.

To learn more about the state's minimum wage laws and exceptions, visit our Illinois Payroll Tax Guide for 2022. It includes topics such as minimum wage, tip minimum wage, local minimum wage and state pay stub laws, and other state regulations.

Illinois Equal Pay Act

The Illinois Equal Pay Act requires employers to pay employees of the opposite sex equally for work of equal value. The Illinois Equal Pay Act prohibits employers from paying men and women differently for work of equal value. To be considered work of equal value, the jobs must be comparable in skill, effort, and responsibility and must be performed under similar working conditions.

Illinois law also prohibits employers from basing pay decisions on factors other than sex, such as race, color, religion, ancestry, national origin, age, disability, military status, sexual orientation, or pregnancy.

Besides, Illinois law requires private businesses with 100 or more employees in the State of Illinois to submit an application to obtain an Equal Pay Registration Certificate (EPRC) by providing particular pay, demographic, and other data to the Illinois Department of Labor (IDOL) by March 24, 2024, and to recertify every two years after the first submission.

To access the online portal businesses must use to submit their contact information and required data to IDOL, please visit IDOL's Equal Pay Registration Certificate page.

Overtime Laws in Illinois

Overtime pay is compensation paid to employees for working more than 40 hours in a workweek. Under the Illinois Overtime Law, non-exempt employees must be paid time and one-half their regular rate of pay for all hours worked over 40 in a workweek. While some states have a daily overtime limit that entitles any employee who works for more than a certain number of hours in a single day to be paid overtime, Illinois does not specify a daily overtime limit.

Overtime pay, also called "time and a half pay," is calculated by multiplying an employee's regular rate by 1.5. The Illinois Overtime Law does not require that overtime be paid for hours worked on weekends or holidays unless the employee works more than 40 hours in a workweek.

The Illinois Overtime Law generally applies to all private-sector employers with four or more employees. However, the Fair Labor Standards Act (FLSA) automatically qualifies certain types of workers for overtime pay, regardless of the employer's number of employees. If your company requires manual labor (such as construction work, factory attendants, cashiers, etc.), your employees are probably protected under overtime law and require overtime pay. The same goes for all first-responders, including police, paramedics, and firefighters. 

To learn more about overtime regulations, exemptions, and requirements, you can visit the Illinois Department of Labor.

One Day Rest in Seven Act (ODRISA)

The Illinois One Day Rest in Seven Act (ODRISA) requires employers to give employees one day of rest (at least twenty-four consecutive hours) every seven days.

ODRISA also requires a mandatory unpaid twenty-minute meal break for every 7.5-hour shift, which must be provided within the first five hours of work. Employees must be completely relieved from duty during this break and are free to leave the work premises. After the first 7.5 hours of work, employees are entitled to an additional 20-minute unpaid meal break for each additional 4.5 hours worked. This means that employees who work 12 hours (7.5 hours plus 4.5 hours) will be entitled to two 20-minute meal periods.

Illinois employers who violate ODRISA may be subject to penalties of up to $250 per offense for employers with less than 25 employees and up to $500 per offense for employers with 25 employees or more. That said, make sure to revisit your scheduling and meal policies to ensure compliance with ODRISA and avoid any penalties!

Paid Time Off (PTO) in Illinois

Illinois has no state laws mandating employees' paid time off (PTO). However, employers are free to offer PTO as a benefit. If you choose to provide PTO, it must comply with any applicable federal laws.

According to the Illinois Wage Payment and Collection Act, if you provide paid vacation to your employees, you must pay them for any unused portion they have earned by the end of their employment. You are required to give them their final paycheck on their last day of work, if possible, and certainly no later than the next scheduled payday. This final check should include any vacation pay they are owed.

Some employers assume they don't owe accrued vacation pay to employees who quit or are fired. However, Illinois law says otherwise. If an employee is fired, they are still entitled to any vacation pay they have accrued. The same is true if an employee resigns. 

If you do not have a PTO policy in place, we recommend you develop one as soon as possible and make it clear in your employment contract. In the end, having a written policy to rely on is always your best bet.

Our HR portal comes with a simple solution that helps you request, approve, schedule, and track paid leave, as well as policies and laws you can use for your business. To learn more about it, visit our HR solutions page. 

Illinois Family and Medical Leave Act

The Illinois Family and Medical Leave Act (FMLA) is a state law that requires employers to provide up to twelve weeks of unpaid, job-protected leave per year for qualified employees. It is designed to help employees balance their work and family responsibilities by allowing them to take leave for the birth or adoption of a child, their own serious health condition, or to care for a sick family member.

To be eligible for Illinois FMLA leave, an employee must have worked for their employer for at least 12 months and have logged at least 1,250 hours during those 12 months. In addition, the employer must have 50 or more employees within a 75-mile radius of the worksite.

If you are an Illinois employer that falls under these guidelines, you must provide your employees with up to 12 weeks of unpaid, job-protected leave per year. This leave can be taken at once or in smaller increments as needed. Once the leave is over, the employee must be reinstated to their original job or an equivalent position, with the same pay and benefits.

If you need help determining whether you are required to provide Illinois FMLA leave, or have any other questions about Illinois employment law, check out our Illinois Payroll Tax Guide for 2022.

Illinois Sick Leave Act

The Illinois Sick Leave Act (ISLA) requires employers to provide up to 5 days of paid sick leave per year for employees working in Illinois. Employees can use this leave to care for themselves or an ill family member. In addition, employees can use sick leave if they are seeking medical attention, such as going to the doctor or getting a flu shot.

 An employee benefit plan or paid-time-off policy does not include long-term disability, short-term disability, an insurance policy, or other comparable benefit plan or policy. 

ISLA applies to all employers in Illinois, regardless of size. However, there are a few exceptions. For example, if an employee is covered by a collective bargaining agreement that expressly provides for paid sick leave, they are not entitled to paid sick leave under the ISLA.

If you are an employer with employees in Illinois, you should review your sick leave policies and ensure compliance with these requirements. Further, if your employees work in Chicago or Cook County, you should consider the impact ISLA has on their paid sick leave policies under the Chicago Paid Sick Leave Ordinance and the Cook County Earned Sick Leave Ordinance.

Illinois Worker Adjustment and Retraining Notification Act

The Illinois Worker Adjustment and Retraining Notification Act (WARN) requires employers with 75 or more full-time employees to provide 60 days advance notice of a plant closing or mass layoff.

A "plant closing" is defined as the permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment, resulting in an employment loss for 50 or more full-time employees during any 30-day period.

A "mass layoff" under Illinois WARN is defined as a reduction in the workforce that is not the result of a plant closing, and that:

• Results in an employment loss at a single site of employment during any 30-day period of 25 or more full-time employees if they constitute one-third or more of full-time employees at the site, or
• Affects more than 250 full-time employees (excluding part-time employees).

If an employer fails to provide the required 60 days' notice, they may be liable to each affected employee for back pay and benefits for up to 60 days. Illinois employers with 100 or more employees should be aware of these requirements and plan accordingly in the event of a plant closing or mass layoff.

Illinois Wage Garnishment Law

A wage garnishment sometimes called a "wage attachment" or “earnings withholding order” is a legal process where a portion of an employee's wages are withheld by their employer and paid to creditors.

In Illinois, any creditor can usually garnish your wages if the creditor has a Wage Deduction Order against you. To get a signed Wage Deduction Order, most creditors must first file a lawsuit against you for the money you owe. Once the creditor has a judgment against you, they can ask the court to issue a Wage Deduction Order.

Illinois wage garnishment law allows creditors to:

• Garnish up to 15% of your gross wages (before subtracting taxes and other deductions) for that week, or 
• Garnish your disposable earnings (the take-home amount after taxes and deductions are subtracted) minus Illinois' hourly minimum wage multiplied by 45 - whichever is less.

The government or creditor can garnish your wages without getting a court judgment if you owe child support, federal student loans, or taxes. The amount that can be garnished is different than it is for judgment creditors, too. Illinois law also allows these types of creditors to garnish more than 15% of your wages.

If your employees face wage garnishment in Illinois, you should be aware of the Illinois wage garnishment law and your obligations as an employer.

Illinois Unemployment Insurance Tax

Every employer in the state of Illinois must register with the Illinois Department of Employment Security (IDES), as well as pay and file for unemployment insurance.

Illinois unemployment insurance is a state-sponsored program that provides temporary financial assistance to unemployed Illinois workers. Employers in Illinois are required to pay unemployment taxes, which fund the unemployment insurance program.

The Illinois Unemployment Insurance Tax is an employer tax, meaning that the employer is responsible for paying the tax, not the employee. The tax rate for Illinois unemployment insurance ranges from 0.725% to 7.1%, with a maximum taxable wage base of $12,960. While this year's guidelines saw a modest increase from 2021, the taxable wage base did not change from 2021 to 2022.

Final Thoughts

Illinois has unique laws when it comes to payroll and employment. As an employer, it's important to be aware of these laws and how they may impact your business. Illinois employers should also be sure to stay up-to-date on any changes to these laws, as they can change from year to year. Failure to comply with them can result in significant penalties, including fines and back pay.

The complexity of payroll management poses a challenge for many Illinois employers, especially growing companies with more than ten employees. For this reason, many Illinois employers outsource their payroll to a professional payroll service. A good payroll service will have a deep understanding of IL payroll laws and can help you ensure compliance. This can save you time, money, and hassle in the long run.

For information about how we help growing companies manage their payroll, please visit the payroll overview. Illinois payroll services at it's best.

DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting, or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.