Illinois law that was signed on February 19, 2019 and that will go into effect on January 1, 2020 amends the Illinois Minimum Wage Law and Illinois Income Tax Act. The law provides for an increase to the minimum wage in Illinois to $15.00 per hour by the year 2025.  Under this new law, the minimum wage will increase annually as follows: on January 1, 2020, the minimum wage will increase from $8.25 to $9.25 per hour and then to $10.00 per hour on July 1, 2020;  thereafter, it will increase by $1.00 per hour on January 1st of each year until it reaches $15.00 per hour on January 1, 2025.

The law will allow employers with 50 or fewer full-time equivalent employees to claim a credit against tax withheld for 25% of the cost of the increase beginning on January 1, 2020.  This credit will gradually be reduced over the next few years to 21% on January 1, 2021, 17% on January 1, 2022, 13% on January 1, 2023, 9% on January 1, 2024 and 5% on January 1, 2025. Employers may claim the credit amount in effect on January 1, 2025 until December 31, 2026 and employers with no more than 5 employees may claim that credit until December 31, 2027.

Additionally, this law also increases potential liability of employers for minimum wage and overtime violations.  Under the previous minimum wage law, the statutory penalty awarded to employees who sued to recover wages and overtime pay was 2% of the amount of the underpayment per month that the amount was unpaid.  The new law increases that statutory penalty to 5% per month.  In addition, the new law also allows employees to not only recover the amount of wages owed but up to three times that amount plus penalties.

Furthermore, the Illinois Department of Labor is authorized under the new law to perform random audits of employers to ensure compliance.  A penalty of $100.00 per employee can be charged to the employer if it fails to maintain required records. These records are required to  include hours worked in each day and in each work week by each employee regardless of an employee’s status as an exempt administrative employee, an executive or professional.  Should an underpayment of wages be found to be willful or repeated, the employer is held liable to the Illinois Department of Labor for a penalty of 20% of the amount of the underpayment.  In addition to this already existing penalty, the new law imposes an additional penalty in the amount of $1,500.00, payable to the Department of Labor.

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