By: Jessica Jackler
On February 19, Gov. Pritzker signed the “Lifting Up Illinois Working Families Act” into law, incrementally raising the state’s minimum wage to $15 per hour by 2025.
The minimum wage is scheduled to increase with a series of hourly rate adjustments over the next five years until it reaches the $15 hourly rate. Beginning January 1, 2020, the hourly rates will increase from $8.25 to $9.25 per hour. After six months, the hourly minimum will increase to $10 per hour through the end of 2020. Thereafter, the minimum wage will go up one dollar per hour the first day of each year until it reaches $15 per hour on January 1, 2025.
For employees under the age of 18 working more than 650 hours in a calendar year, the bill mandates a lower rate of hourly wage increases.
The law also creates a tax credit to help businesses with 50 or fewer employees offset some of the cost of the wage increases. Employers will be able to claim a tax credit for 25% of the cost in 2020; and the credit will then scale back annually until eventually phased out. It will reduce to 21% of the increased cost of wages in 2021, down to 17% in 2022, to 13% in 2023, then to 9% in 2024, and finally to 5% in 2025. The 5% credit will still be available for the year 2026, but only for those employers with more than five employees. It will be available through 2027 for employers with five employees or less.
This bill is in conjunction with the 2014 Chicago ordinance which raised the minimum wage to $13 per hour by July 1, 2019. Beginning July 1, 2020, the yearly increase in Chicago’s minimum wage will be tied to the rate of inflation, but not to exceed 2.5%.
There are significant penalties for violations of the state minimum wage law, including treble damages in addition to attorney’s fees and costs. The bill also imposes fines for employers that recklessly, willfully or repeatedly disregard the wage requirements. Additionally, the law calls for fines against employers who do not keep proper payroll records.
Practice Pointer: Illinois employers should start reviewing their payroll practices now to ensure compliance with the new law. Employers in Chicago must further reconcile the local ordinance requirements with the new state law. Because there are significant penalties and fines available to employees who prevail under the law, employers should be careful to comply with the new minimum wage requirements, including recordkeeping obligations.