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.
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:
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:
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.
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.
An employer may not deduct certain items from an employee's paycheck.
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.
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:
Additionally, the employer must post the following federal postings:
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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