Before you hire your first employee or independent contractor, you should know Illinois state law and federal law as it pertains to the two classes of workers. Each have rules as to how they are treated for wage and tax purposes. Not knowing the law is not an excuse for not treating your employees or independent contractors fairly and could lead you to lose valued employees or contractors at the least, or at the worst, an expensive lawsuit.
Employees and Independent Contractors
Misclassifying an employee only leads to legal trouble for the employer, and the employer will be penalized with fines. While Illinois does not have a specific definition of an employee, it does for independent contractors:
- An independent contractor is not subject to any control or direction over how the contractor does his or her job, whether via contract or in fact.
- The contractor has an independently established business, occupation, profession, or trade.
- The contractor's service is not in the usual course of business for the business that the contractor provides such services, or the contractor performs services outside of the business that hired him or her for services.
Illinois has consequences of misclassifying employees for any reason, including the avoidance of paying into the unemployment insurance trust and other employee-related taxes and contributions. These consequences include:
- having to pay interest on any delinquent unemployment trust contributions (the interest rate as of late 2017 is 24 percent);
- incurring fines for not reporting the wages paid to employees;
- incurring fines for purposely avoiding contributions to the unemployment trust fund; and
- for any officer or employee who purposely causes a business to not pay into the unemployment insurance trust, they may be held personally liable for any payments that are due from the business.
Businesses that fail to obtain unemployment insurance could be fined up to $500 per day that they do not have the insurance. The minimum fine is $10,000. If the company does not pay the fine, the corporate officers could be held personally liable for payment of the fines. Additionally, any corporate officer who does not obtain unemployment insurance for the business could be found guilty of a Class A misdemeanor or Class 4 felony, depending on the circumstances.
While the federal minimum wage is set at $7.25 per hour, Illinois state law sets the state's minimum wage at $8.25 per hour. Illinois also has several definitions of minimum wage for certain classes of workers. All must be at the higher end of the minimum wage or the federal minimum wage.
- Tipped minimum wage – Tipped employees may be paid $4.95 per hour as long as their tips are at least $20 per month. An employer must also pay tipped employees enough so that the tips and the tipped minimum wage is equal to or more than the state minimum wage. The state law does not address tip sharing or tip pooling.
- Sub-minimum wage – If an employee has a disability, the state allows an employer to pay the disabled employee a sub-minimum wage. The business must be approved for a license to pay a sub-minimum wage, and the license must be renewed every year.
- Additional sub-minimum wage workers – Trainees and apprentices must be paid the regular minimum wage or higher. However, learners, student learners, and students may be paid a minimum wage that is no lower than 70 percent of the state's standard minimum wage.
Labor laws for the state of Illinois require employers to pay overtime at 1.5 times the regular rate when an employee works over 40 hours per week unless that employee is exempt from receiving overtime pay. Several industries have employees that are exempt from receiving overtime pay.
Breaks, Vacation, and Leave
- Work week – The labor laws for Illinois require employers to ensure that each employee has a minimum of 24 hours of rest every week. Thus, if your week starts on a Wednesday, then prior to the next Wednesday each employee should have had at least one 24-hour day off. However, employees may volunteer to work seven days per week as long as the employer has a permit allowing the same.
- Meals and daily breaks – By law, an employer must give employees that work more than 7.5 continuous hours a lunch break of at least 20 minutes. The lunch break does not have to be paid, but must be no later than five hours from the beginning of the shift. Additionally, for every additional 7.5 hours the employee works, the employer must allow a 20-minute lunch break. For employees under 16 years of age, Illinois law states that an employer must provide a 30-minute break if the employee is scheduled to work more than five hours. Since the state does not have laws for additional breaks, the federal law goes into effect. However, federal law does not require that an employer allow lunch or other breaks. If an employer chooses to allow shorter breaks throughout the day, they must be paid.
- Vacation – While Illinois law does not mandate vacation leave, it does state that an employer is required to pay such benefits if the vacation is policy, contracted, or promised to an employee. Any accrued or earned vacation pay must be paid to the employee when the employee separates from employment. However, the employer may implement rules that state an employee must use vacation time or lose it. If such a rule is in place, the employer must give employees a reasonable opportunity to use the vacation time.
- Holiday leave/pay – The Illinois Department of Labor does not require employers to pay employees extra for working on holidays; nor does it require the employer to pay holiday pay if the employee is off. The employer must pay time-and-a-half if working the holiday causes an employee to work more than 40 hours for the work week.
- Sick leave – Employers are not required to provide sick leave, whether paid or unpaid. However, Illinois is bound by the Family and Medical Leave Act and other federal laws that provide for sick leave or maternity leave.
- Jury duty – While an employer must allow an employee to take time off for jury duty, the employer is not obligated to pay the employee for the missed time. Employers may not penalize, coerce, intimidate, or threaten to discharge any employee who is responding to a jury summons.
- Voting leave – If an employee's workday begins less than two hours after the polls open and ends less than two hours before the polls close, an employer must allow up to two hours off work so the employee may vote. However, the employee must give the employer prior notice of the time needed to vote.
- Bereavement leave – While Illinois does not require an employer to pay bereavement leave, any employer that promises this leave via a policy must abide by the policy in place.
Work Privacy Social Media
Public Act 99-0610 (HB4999) became effective Jan. 1, 2017. This bill dictates the actions of employers regarding employees' social media accounts. The Act amends Section 10 of the Right to Privacy in the Workplace Act:
- Employers may not coerce, request, or require an employee to access or authenticate an account in the presence of the employer.
- Employers may not coerce or require an invite to the employer to join any online group that is associated with the employee's personal account.
- Employers may not coerce or require the employee to add the employer to the employee's list of contacts for the employee's personal account.
- Employers may not create an online account and then require or coerce an employee to join with that account.
Additionally, employers are not allowed to discipline, discharge, retaliate, or not hire an employee who refuses to give any type of access to his or her personal account or an employee who refuses to join a group or account created by the employer.
However, the Act does allow the employer to require or request that the employee, or an applicant, share any content that has been reported to the employer, but cannot ask the employee for his or her log-in information. Employers may still access an account that the employer set up for the use of the employee if the reported information is in compliance with regulatory requirements or laws, or if the allegation is that the employee is transferring confidential or proprietary information that belongs to the employer.
An employer may not deduct certain items from an employee's paycheck.
- An employer cannot withhold an employee's last check pending the return of tools, pagers, phones, uniforms, and other work property.
- The employer cannot deduct cash register shortages or damages to the employer's property or equipment from an employee's paycheck. However, if the employee agrees to such a deduction at the time of the deduction in writing, then the employer may take that deduction.
- An employer cannot make an employee pay for uniforms without a written agreement at the time of the deduction.
Legal deductions include taxes or other deductions required by law, health insurance premiums, and other deductions that benefit the employee, child support, or other valid wage deduction order, or any deduction agreed to in writing by the employee.
Cash Advances and Overpayments
In Illinois, if an employee takes a cash advance, an employer cannot take more than 15 percent of each paycheck for repayment. If the employee leaves an employer's employ and owes more than 15 percent of his or her gross wages, the total amount may be withheld from the final paycheck as long as that arrangement was in the agreement signed by the employee when the cash advance was first taken.
If an employer overpays an employee and the employee agrees that there was an overpayment, the whole sum of the overpayment may be deducted from the employee's first paycheck after the overpayment. If the overpayment was not discovered until one or more paydays later, the employer and employee will need to agree on a repayment schedule. If the two cannot come to an agreement, then the employer must comply with Section 9 of the Administrative Code.
Finally, if an employee believes that he or she was not properly paid or that an employer made a deduction that should not have been made, the employee is entitled to file a claim with the Illinois Department of Labor, or the employee may file his or her own claim with the Circuit Court of Illinois.
All employers must post the posters required for their industry. The posters must be in a place where all employees have access to them. The poster, “Your Rights Under Illinois Employment Laws,” must be posted by all employers. This poster contains information about several Illinois employment laws including the minimum wage law and the Wage Payment and Collection Act. Additional posters include the following:
- Employee Classification Act of 2008 – This poster is required for all construction contractors who use independent contractors.
- Occupational Safety and Health Act – This poster is required for all employers regardless of industry.
- Day and Temporary Labor Services Act – This poster is required for all temporary labor services or day services agencies.
- Public Act 98-1050 Pregnancy Right Notice – All employers must post this notice. The English version must be posted; the Spanish version is optional. However, an employer many not post the Spanish version in lieu of the English version.
- Unemployment Insurance Benefits Notice – All employers must post this notice.
- Emergency Care for Choking – All employers must post this notice.
- Smoke Free Illinois Act – All employers must post this notice.
Additionally, the employer must post the following federal postings:
- Equal Employment Opportunity
- Minimum Wage, Overtime, and Child Labor
- Employee Polygraph Protection Act
- Family Medical Leave Act
- Federal Government Contracts
- Federally Financed Construction
- Occupational Safety and Health Act
- Veterans' Employment and Training Services
If an employer has any questions about which posters apply to their industry, the employer should contact the office where the poster is available.
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