Using the Illinois Wage Payment and Collection Act to protect your clients from the effects of unfair severance agreements

Post authored by Max Barack

Illinois employers have immense leeway to fire their workers without reason or cause because Illinois is an at-will employment state. However, it is illegal for employers to avoid paying their fired workers all earned compensation.

One scenario that plaintiff’s employment lawyers frequently encounter is when workers are fired or laid off and offered some form of severance. Consider a salesperson, who has thousands of dollars of unpaid commissions, but has not yet been paid. The worker made the sales, earned the commissions, and filed the paperwork to claim their earned commissions. The worker then learns they are being let go. Just after hearing this shocking news, the salesperson has a waiver shoved in their face by the same Human Resources representative who just fired them. The worker is told they are entitled to two weeks’ pay as severance, but only if they agree to waive their rights to any and all claims against the employer. The employer knows the salesperson has a claim for unpaid compensation. The employer also knows the worker has paid vacation days they have not used. Yet they are offered none of that compensation as severance. The worker has no good options: either sign the waiver, take the small severance, and forfeit the unpaid commissions and vacation pay; or refuse to sign the waiver and get nothing.

Luckily, for workers like that salesperson, Illinois law protects them from being forced to make these difficult choices. It allows workers to recover all of the compensation their employer agreed to pay them in exchange for their work. The Illinois Wage Payment and Collection Act (820 Ill. Comp. Stat. § 115 et seq.), known in shorthand as the Wage Act, prevents employers from shirking their responsibilities. Essentially, the Wage Act protects Illinois workers from being “stiffed.”

The Wage Act has a series of provisions enacting such protections that are better explained in a more detailed discussion. One relevant provision worth mentioning here requires employers to pay their workers “final compensation,” their final paycheck and any other payments they are entitled to when their employment ends. It does not matter whether the worker was fired or quit. Better still, this “final compensation” provision also applies to unused but accrued paid vacation days, so if the employer has a policy of offering paid vacation time when the worker’s employment ends, the employer must pay for all earned vacation time. See 820 ILCS 115/5. This means that fired workers have a right to their final earned compensation, including those accrued paid vacation days.

Most importantly, employers cannot force their workers to relinquish their rights under the Wage Act. The Act expressly prohibits employers from making deductions from workers’ wages or final compensation, unless the deductions are “(1) required by law; (2) to the benefit of the employee; (3) in response to a valid wage assignment or wage deduction order; (4) made with the express written consent of the employee, given freely at the time the deduction is made.” 820 Ill. Comp. Stat. Ann. 115/9. Courts that have interpreted this provision of the Wage Act have concluded that workers cannot lawfully be forced to waive their rights provided by the Act. Even better, the Wage Act provides that acceptance of a disputed paycheck by a worker “shall not constitute a release as to the balance of [their] claim and any release or restrictive endorsement required by an employer as a condition to payment shall be a violation of this Act and shall be void.” 820 Ill. Comp. Stat. Ann. 115/9.

Think back to that worker who was fired and given the choice of an inadequate severance or nothing. Both the worker and the employer know the offered severance does not include all earned compensation. The Wage Act, and courts that have interpreted the Act hold that, with few exceptions, workers cannot waive their rights under the Act. As a result, be wary of severance agreements requiring the worker to waive all claims against the company, because workers cannot waive their Wage Act rights by law. For example, in Schultze v. ABN AMRO, Inc., 83 N.E.3d 1053, 1062 (1st Dist. 2017), appeal denied, 93 N.E.3d 1080 (Ill. 2017), a bank vice president’s employment was terminated while he was seeking an unpaid but earned a bonus of $375,000 from the bank. Knowing the plaintiff was seeking additional unpaid wages, the bank offered him severance, but, the severance was conditioned on the plaintiff signing a release of all of his claims against his former employer and forfeiting his other unpaid compensation. In other words, the bank offered to let him have his severance, but only if he gave up the right to pursue his Wage Act claims. The plaintiff refused and was refused his severance. Under Illinois law, this refusal to pay severance was illegal. The Illinois Appellate Court held that conditioning the worker’s severance on waiving his right to recover wages that he lawfully earned violated the Wage Act.

The takeaway from cases such as Schultze is that plaintiffs’ employment lawyers should not be scared by draconian language in severance agreements requiring workers to relinquish all of their claims and accept less than they are truly owed. You must be aware of the relevant provisions of the Wage Act so you can be on the lookout when potential clients ask you to review severance agreements. If the potential client has other unpaid wages, like unpaid commissions, earned bonuses, and/or unpaid vacation days, and the severance agreement includes a complete waiver of all claims against the employer, consider whether that provision is enforceable. You should also consider whether it is legal for the employer to force the worker to choose between taking a meager severance or getting nothing when they believe they are owed more.

We often see this not only in severance agreements, but also with sales professionals, where, as a condition of employment, the employer forces the worker to sign an agreement allowing the employer to remove the sales worker’s commissions at its sole discretion and/or provide that commissions are not “earned” until the day they are paid. The applicable Illinois Department of Labor regulations, which are used to interpret the Wage Act, as well as courts, have held that if the commissions have been earned, they must be paid in a timely fashion: “The regulations entitle a ‘separated employee’ to ‘an earned commission when the conditions regarding entitlement to the commission have been satisfied, notwithstanding the fact that, due to the employee’s separation from employment, the sale or other transaction was consummated by the principal personally or through another agent.’” Sutula-Johnson v. Off. Depot, Inc., 893 F.3d 967, 978–79 (7th Cir. 2018) (quoting Ill. Admin. Code, tit. 56, § 300.510(a)). In general, if a person did the work to earn the agreed compensation, changing the contract or writing in language allowing the worker’s compensation to be deferred as the employer sees fit does not allow their employer to avoid paying the earned commissions.

At-will employment puts workers at an incredible disadvantage, particularly when they are faced with either the prospect of getting a small severance or being left with nothing to show for their hard work. But, as plaintiff’s employment lawyers, the Wage Act provides us with ways to ensure that, at a minimum, our clients are paid everything they lawfully earned and are owed.

About the Author:

Screenshot-4Max is a plaintiff-side civil rights employment lawyer. He has worked at Favaro & Gorman, Ltd. since January 2017. He represents victims of sexual, racial, national origin, age, and disability harassment, discrimination, retaliation, wage theft, unpaid wages, and whistleblowers. Max has given presentations on the difficulties and best practices for handling social media and other forms of electronic discovery in litigation, Illinois employees’ workplace privacy rights, and the tort of retaliatory discharge. He has extensive experience with electronic discovery in the context of civil rights cases. He has performed in-depth research on and helped write an article on the rights of public employees. He is a member of the Board of Directors for the National Employment Lawyers Association (NELA) Illinois Chapter, and a member of the Illinois State Bar Association, the Chicago Bar Association, and the Decalogue Society. Max speaks Spanish and represents Spanish-speaking plaintiffs in a variety of employment-related cases.

Max grew up in the Chicago area. He graduated from Chicago-Kent College of Law in 2013, where he was a member of the Moot Court Honor Society and served on student government. Previously, he attended the University of Michigan and graduated with honors and a bachelor’s degree in history. He still lives in Chicago.

Click here for Max’s full bio.


Leave a Reply