Sep 03, 2015

Employees’ rights to extra pay: The Illinois Wage Payment Collection Act’s regulations on bonus and vacation pay

When separated employees seek the final compensation their former employers owe them under Illinois’ Wage Payment and Collection Act (IWPCA), questions may arise regarding how bonus and vacation pay are accounted for. Under the IWPCA, an employer is required to pay its former employees final compensation, which includes any wages, salaries, earned bonuses and commissions, the monetary equivalents to unused earned vacation time, and “any other compensation owed the employee by the employer pursuant to an employment contract or agreement between the two parties.” ¹

Thus, where employers’ contracts or agreements with employees provide the right-to-earn bonus or vacation pay, the IWPCA mandates payments to the extent the contracts or agreements require.2  However, the IWPCA does not mandate an employer to provide its employees with any statutory right to earn bonus or vacation pay, nor does it “confer rights to compensation that are absent from an employee’s contract or employment agreement.” 3 Rather, the IWPCA “merely demands that employers pay whatever wages were agreed to.” 4

The Seventh Circuit rejected an IWPCA claim for bonus pay where the separated employee had no language in an employment contract setting out the terms of his bonus.Further, courts have found an employer’s past bonus-award practices as insufficient evidence to demonstrate a separated employee had an agreement or contract with his/her former employee for bonuses when the former employee had no employment contract language setting out the terms of his/her individual bonus.6

Under the IWPCA, employers have authority to set the terms and rates for bonus and vacation pay of their employees in employment contracts and agreements. Employers are encouraged to seek counsel to assist in the development and drafting of such contracts and agreements to avoid any potential ambiguities and confusion.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such. 

Client Alert authored by: Michael Leifman, law clerk (DePaul University College of Law '16)

1: 820 ILCS 115/2; 820 ILCS 115/5.

2: Hoffman v. RoadLink Workforce Solutions, LLC, 2014 WL 3808938, at *4 (N.D. Ill. Aug. 1, 2014).

3: Gallardo v. Scott Byron & Co., 2014 WL 126085, at *14 (N.D. Ill. Jan. 14, 2014).

4: Jaramillo v. Garda, Inc., 2012 WL 1378667, at *2 (N.D.Ill. Apr. 20, 2012).

5: Stark v. PPM Am., Inc., 354 F.3d 666, 672 (7th Cir. 2004).

6: Id; Carroll v. Lynch, 2011 WL 1838563 at *17-18 (N.D. Ill. May 13, 2011).