IDOL Finalizes Amended Regulations for Illinois Wage Payment and Collection Act

As we previously projected, the Illinois Department of Labor (IDOL) published its final amended regulations to the Illinois Wage Payment and Collection Act (IWPCA) on April 14, 2023 (the “Amended Regulations”).

The Amended Regulations, which largely follow the IDOL’s initial proposal published on November 18, 2022, are effective immediately and impact several aspects of the IWPCA.

Below, we highlight five key updates of which employers should be aware to ensure continued compliance with the law.

1. Statutory Damages for Nonpayment of Wages

In accordance with the IWPCA’s amendments from 2021, the Amended Regulations increase the allowable penalty assessment against employers that fail to provide employees with timely paid wages, final compensation, or wage supplements from two percent to five percent of amounts owed per month. Affected employees must still file a claim with the IDOL or bring a civil action, but not both, for any underpayments but can now plead for five percent in statutory damages. Importantly, employers remain obligated to pay any such ordered statutory damages within 15 days after the order becomes final.

Employers should remember that, in addition to wages and salaries, Illinois law broadly defines “final compensation” to include earned commissions, bonuses, vacation, holidays, and any other compensation owed pursuant to an employment contract or agreement.

2. Expense Reimbursements for the Primary Benefit to the Employer; Administration of Expense Reimbursement Policies

Under Illinois law, employees are entitled to expense reimbursement for necessary expenditures. The IWPCA defines “necessary expenditures” as (i) being required of the employee in the discharge of employment duties and (ii) being made for the primary benefit of the employer. Until now, neither the IWPCA nor the regulations have identified how to determine the “primary benefit” of an expense. The Amended Regulations now identify the following five factors to determine if an expense is to the employer’s primary benefit:

A) Whether the employee has any expectation of reimbursement;

B) Whether the expense is required or necessary to perform the employee’s job duties;

C) Whether the employee is receiving a value that it would otherwise need to pay for;

D) How long the employer is receiving the benefit; and

E) Whether the expense is required of the job.

No one factor is dispositive. Rather, the Amended Regulations provide that the analysis “should focus on the extent to which the expense benefits the employer and its business and business model.”

The Amended Regulations also outline several new employer obligations for administering expense reimbursement policies and programs. First, if an employer declines to reimburse an employee or fails to respond to a request for expense reimbursement, the Amended Regulations permit the affected employee to file a claim against the employer with the IDOL seeking reimbursement for expenses. If a former employee is the affected individual, the expenses must be included in the individual’s final compensation that is owed to the employee at the end of employment.

Second, employers must maintain expense reimbursement policies, employee requests for reimbursement, documentation approving or denying reimbursement, and documentation of actual reimbursement and supporting documents for three years. Finally, if an employer adopts a written expense reimbursement policy that caps the amount available for reimbursement, the Amended Regulations clarify that the employer will still be liable for the full reimbursement amount of the expenses if it authorizes or has a practice of reimbursing employees for more than the identified cap.

3. Deduction from Wages or Final Compensation

Deductions from an employee’s wages or final compensation are still permitted under the IWCPA if certain requirements are met. However, the Amended Regulations clarify that agreements to make deductions over a defined duration are limited to a maximum of six months.

4. Proceedings Before an Administrative Law Judge

If a matter under the IWCPA is set for a formal administrative hearing before an administrative law judge (ALJ), the Amended Regulations outline specific rules for establishing and accessing the administrative record. For instance, for in-person hearings, upon timely request to the ALJ or the ALJ’s supervisor, the Amended Regulations permit a party to review the case file during the IDOL’s regular business hours at the ALJ’s office. Alternatively, such party may request electronic access to the records pertaining to their case. Parties to telephone hearings may inspect the case file at the IDOL’s Springfield or Chicago office if a request is made at least two working days before the hearing. Then if granted, the party will be able to access the file at least 24 hours before the hearing.

5. Notice and Payment

The Amended Regulations also broaden the applicability of electronic notice and payment in IWPCA matters. For instance, the Amended Regulations permit:

the IDOL to issue written notice to the parties of a final order electronically,
employers to choose to electronically pay wages or other compensation owed using an IDOL-designed system,
parties to file a motion to reconsider or appeal a final order electronically, and
parties seeking judicial review of a final order or dismissal to pay for the IDOL’s actual cost of preparing the administrative record using the State Treasurer’s E-Pay program.

Additionally, the Amended Regulations establish a new process for the Office of the Treasurer to hold funds as unclaimed property when an employee who is owed wages or other compensation cannot be located for more than one year. Importantly, the IDOL must make a good faith effort to locate the employee and may seek the individual’s last known address or other contact information from the employer.

What Illinois Employers Should Do Now

Review and revise expense reimbursement policies and procedures to comply with the Amended Regulations, including by:
- adopting appropriate recordkeeping processes and retention periods,
- ensuring employees’ final paychecks include relevant expense reimbursements,
- considering whether to include certain expense reimbursement caps, and
- applying the “primary benefit” factors appropriately to assess reimbursement requests.
Audit expense reimbursement practices to ensure policies and procedures are consistently applied, including application of expense caps.
Review and revise wage deduction agreements as necessary to comply with the Amended Regulations’ limitations on defined duration agreements.
Train human resources, supervisors, and managers on updated expense reimbursement and wage deduction policies.
Review and be familiar with the Amended Regulations’ procedural updates for any pending IWPCA matters before the IDOL.