City of Chicago Increases Minimum Wage

Effective July 1, 2015, the City of Chicago increased the minimum wage within its city limits to $10.00 per hour worked for non-tipped employees and to $5.45 per hour worked for tipped employees. The previous minimum wage was $8.25 per hour and $4.95 per hour, respectively.  The minimum wage in Chicago will continue to increase every July 1, through 2019, according to the following schedule:

Beginning on July 1, 2020, and every July 1 thereafter, the minimum wage will increase at the rate of inflation, not to exceed 2.5 percent but will not increase in years when the unemployment rate in Chicago in the previous year was 8.5percent or more.

Covered Employers and Employees

The amended Minimum Wage Ordinance affects nearly every employer that maintains a business facility within Chicago and/or is required to obtain a business license to operate in the city. Most Chicago employees are covered under the ordinance, as it applies to all employees who work at least two hours in the city within a two-week period, as well as domestic employees, day laborers, and home health care workers.

Exemptions

The ordinance includes a number of exemptions, codified at Chicago Municipal Code § 1-24-050, such as government employees, employees in subsidized youth and transitional employment programs, and employees working at a business with three or fewer employees. In addition, a union may waive its members’ rights to receive the minimum wage as part of a collective bargaining agreement.

The ordinance also recognizes many of the same overtime exemptions currently contained in the Illinois Minimum Wage Law, including exemptions for agricultural workers, employees in bona fide executive, administrative, or professional positions, and commissioned employees under section 7(i) of the federal Fair Labor Standards Act.

Posting, Notification, and Record Keeping

Employers must post a notice—available on the City of Chicago’s official website—summarizing the ordinance at every business facility in Chicago and must also provide the notice with each covered employee’s first paycheck after the annual wage increases go into effect. Employers without a business facility within the City as well as households that serve as the worksite for domestic workers and home healthcare workers are exempt from the ordinance’s posting requirement. Employers must also provide the notice with the first paycheck of  new employees who were hired after the minimum wage increase went into effect. In addition, as required by the Illinois Wage Payment and Collection Act, employers must also maintain records that support all wages paid to employees.

Tipped Employees

The ordinance has the same definition of “tipped employee” as the federal Fair Labor Standards Act, so it does not change employers’ existing classifications of tipped and non-tipped employees. Employers that pay wages to tipped employees who are covered under the ordinance, must make available, at the request of the City’s Commissioner of Business Affairs and Consumer Protection, substantial evidence that establishes:

1. the amount the employee received in gratuities during the relevant pay period, and
2. that no part of that amount was returned to the employer.

City Fines and Employees’ Private Right of Action

Employers may be fined $500 to $1,000 per violation of the ordinance, in addition to facing license suspension or revocation and orders to pay restitution to underpaid employees.  Each day that a violation continues constitutes a separate and distinct violation.

Employers may not discriminate or retaliate against any employee for exercising his or her rights under the ordinance. In addition, the ordinance provides employees with the right to file a private civil action against an employer for violations of the ordinance within one year from the most recent underpayment. Awards for such claims may amount to three times the amount of underpayments plus costs and reasonable attorneys’ fees.

Practical Impact of the Ordinance

As a result of the new law, labor costs will increase for many Chicago employers—which must now account for annual minimum wage increases occurring every July 1 per the ordinance’s schedule. Given the increased labor costs, the fines made available by the ordinance, the possibility of private civil actions, and civil awards, employers should ensure that they comply with all of the ordinance’s requirements, including its new posting and notification requirements.

Other Resources

The City of Chicago’s official site answers frequently asked questions on the minimum wage ordinance.