Illinois Prevailing Wage Act - Extended Coverage???

October 2014
By: Walter J. Liszka, Esq.

With the recent amendments of the Illinois Prevailing Wage Act (IPWA) and the decision of the Third District of the Illinois Appellate Court in the case of Department of Labor v. Sackville Construction Inc., 402 Ill.App.3d 195 (3 rd District 2010), all companies who are receiving public funds, and not just those in the construction industry, need to be cognizant of how the Illinois Department of Labor (IDOL) is proceeding to enforce the IPWA.
 

The IPWA was initially enacted more than seventy (70) years ago and has mainly been applied in the construction trades to establish that no one working in the construction trades is paid less than the "general prevailing rate of wages" (including hourly cash wages and fringe benefits) for construction work in a designated county where that construction work is being performed for public bodies on public projects. In point of fact, the IPWA pay provisions are established by the IDOL on a county-by-county basis and on a monthly basis. The IDOL provides the "rates to be paid" that are primarily set based on "union contracts" in that county for similar work. This law has again primarily been applied for construction work done directly for public bodies on public projects. However, as a result of the various amendments to the IPWA and recent court decisions, the IDOL is significantly extending the reach of the IPWA in a way that can affect private companies working on private projects.

As previously stated, the IPWA requires that "public bodies" (such as the State of Illinois, city governments, school districts, county governments, etc.) pay the prevailing wage rate to all laborers, workers, and mechanics who are engaged in "public works." The term "public body" is defined to include "any institution supported in whole or in part by public funds," and the term "public works" is defined as "all projects financed in whole or in part through bonds, grants, loans, or other funds that may be made available by or through the state or any of its political subdivisions." While many companies assume that the term "public bodies" and "public works" only applies to projects that are for the benefit of the public and performed only on behalf of a government entity, this is an incorrect assumption.

In the case of Department of Labor v. Sackville Construction Inc., 402 Ill.App.3d 195 (3 rd District 2010), the Appellate Court reversed a trial court decision in favor of the construction company, Sackville Construction Inc., and held that, when looking at the language of the statute, the phrase "an institution supported in whole or in part by public funds" was broad enough to cover a private developer as a "public body" under the statute. In that case, a private developer (Rock Island Industrial Partners) entered into a contract with a general contractor (Hy-Brand Contractors) to construct a 45,000 square foot industrial complex on a vacant lot in Rock Island, IL. After entering into the contract, the developer (Rock Island Industrial Partners) entered into an agreement with the City of Rock Island to construct the building. As part of that agreement, the developer (Rock Island Industrial Partners) agreed to invest $1.5 million into the project and the City of Rock Island conveyed the property via title to the developer for $1.00 and also agreed to contribute $150,000 for "use in the project" and also agreed to pay up to $57,000 for "site clearance and demolition." The general contractor (Hy-Brand Contractors) entered into a contract with Sackville Construction Inc. to provide laborers on the project and the laborers were not paid the prevailing wage.

Also, Hy-Brand Contractors did not inform Sackville Construction Inc. that the City of Rock Island had contributed funds to the project or that the project was covered by the IWPA. After receiving a complaint, the IDOL filed suit against Sackville Construction Inc. for violations of the IPWA. Rock Island Industrial Partners was found to be a "public body" and the private development project was found to be a "public works" because the developer had, in fact, received public funds for the development from the City of Rock Island. Remember, the $150,000 contributed by the City of Rock Island for the site construction and the $57,000 for "site work"!

While the general contractor (Hy-Brand Contractors) was not sued by the IDOL for violations of the IPWA in the Sackville case, this does not mean that the general contractor would not potentially be liable as well. Under the IPWA, any contract that is issued on a public works project must state and inform the subcontractor that the provisions of the IPWA apply to the construction at hand. If this notice is not given, it is possible under the IPWA that the general contractor or, in fact, the public body issuing a contract, would be liable for any interest, penalties, or fines but not wage differential, that might be owed by the subcontractor to the employees if the notice that the project is subject to the IPWA was not in the contract. Simply stated, the subcontractor could "sue the general contractor" and potentially collect the "interest, fines, and penalties" but the subcontractor must pay the "wage differential." How this would affect the "subcontractor" getting future work from the "general contractor" would be the subject of another article - probably a very short one!

Because of these developments and the new approach by the IDOL in aggressively pursuing matters arising under the IPWA, every contractor and/or subcontractor on a project must clearly ask the question, "Is this project funded in whole or in part by 'public funds'? And if it is funded in part by 'public funds,' is it subject to the IPWA?"

 
Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman's Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com .

Who Is That Knocking On My Door???

December 2013
By: Walter J. Liszka, Esq. 

For those of us over 50, "Who's that knocking on my door?" reminds us of the three little pigs and the wolf who would huff and puff and blow your house down. Unfortunately, the child-like tale of the three little pigs and the wolf has had a difficult time transferring to the Internet, but is now being replaced - you guessed it - by our big brother, the United States Government. There are more and more investigations being conducted on a daily basis by the various agencies of the United States Government and one of the most active is the United States Department of Labor (USDOL).

Over the last few years, investigations by the USDOL primarily dealing with enforcement of Wage and Hour Laws have greatly increased due to "enhanced budgets" ($117 billion allocation in 2011/2012) and adding 250 additional investigators. It should be very clear to any employer that has been the recipient of a USDOL investigation that this has become a very protracted process and usually results in serious financial issues. The author suggests five (5) tips for dealing with a USDOL investigation.

1. Never underestimate the possible breadth of an investigation and understand that there may be problems with payroll practices. In today's complicated economy, problems have developed dealing with various facets of Wage and Hour Law (failure to pay overtime pay; tip credits; failure to pay an intern; failure to keep competent records). The findings of a Wage and Hour investigation may often result in a requirement that an employer pay additional wages to its employees, interest and/or liquidated damages, and, if serious enough, the potential of possible criminal liability. If an employer has the possibility of violating Wage and Hour Laws, it should engage in straightforward and honest discussions to resolve the investigation before it heads for an administrative hearing or court proceeding. Administrative Law Judges and the Courts will generally give deference to the USDOL findings against an employer with regard to any "alleged violation" unless there is actual proof of arbitrary behavior/investigative techniques; capriciousness; or lack of proof to substantiate the USDOL findings. An employer can achieve a much better and less costly result by working with the investigator directly and not letting the matter proceed to litigation. If a problem is found, work with the investigator to solve it, not fight about it!
2.  Cooperate fully. USDOL investigators have a great amount of discretion as to how they proceed through the investigative process. An employer who is uncooperative or attempts to aggravate and forestall the investigation will find itself in a costly nightmare if the investigator feels that the business is failing or refusing to cooperate. Consequences may be severe - subpoenas may be issued requiring the production of documents or subpoenas for actual questioning; court action may occur which will cost the employer substantially, and, as a last alternative, if an employer is truly refusing to cooperate, the USDOL may just accept the Complainant's allegations at their face value and assess costs to the employer. Be cooperative, not just on liability issues, but also on a willingness to provide to the USDOL information that may lead to limiting the scope of the investigation and documents required.
3. Have competent counsel. I am suggesting that an employer retain competent and able counsel to represent their interests in an investigation. Competent counsel can help in clarifying the investigation and in limiting the extent of the investigation. Competent counsel may be able to "short circuit" the process and get it over quickly. Competent counsel may also provide an ability to substantiate Tip No. 2: cooperation in the investigation. Please make absolutely certain that counsel has the right to speak to and get accurate information from accountants and/or other individuals who are typically entrusted with preparing or maintaining payroll records in the first place. This may help in providing counsel a basis to control or limit the investigation.
4. Make the investigation a positive - an opportunity to come to compliance. Rather than resisting the investigation or continuing to deny that there is a problem, employers may use the efforts of the investigator to come into compliance and mitigate their damages - the day that an investigator concludes that an employer is in compliance, the liability is cut off. From a practical standpoint, using the investigation to come into compliance will condition the USDOL personnel to establish that the employer is trying to work with them rather than against them.
5. Control the process.  If an employer can gain control over an investigation, it will have the ability to limit the scope of records that will be provided and, therefore, limit its potential exposure. Treating the investigator with respect and dignity will help the employer gain control. Also, dependent on the case at hand, a self-assessment of the employer predicated on the initial scope of the investigation submitted to the USDOL based on its payroll records may not only limit the extent of the investigation, but the financial penalty.

Following the aforementioned five (5) tips may position the employer to have "no reason to be concerned as to who is knocking on the door."

Questions? Contact Managing Shareholder Walter J. Liszka at (312) 629-9300 or by email at waliszka@wesselssherman.com .

Unpaid Intern - The Next Growth of Wage Litigation?

July 2013
By: Walter J. Liszka, Esq.

Recently, there have been three (3) separate and distinct lawsuits filed in New York dealing with unpaid interns and a company's obligation to "pay them for their work" (Eric Glatt, et al. v. Fox Searchlight Pictures, Inc., et al.; Lauren Ballinger, et al. v. Conde Nast; Xuedan Wang, et al. v. Hearst Corp.). In all of these cases, interns are claiming that they are entitled to compensation from their employer because the employer "suffered and/or permitted the intern to work," and perform duties that were performed by "other regular employees" (i.e. doing office work; delivering documents to customers; reconciling purchase orders and invoices; etc.). In essence, the "interns" did not work in a "learning environment" but were merely "manual labor."

In 1947, the United States Supreme Court in the case of Walling v. Portland Terminal Company, 330 U.S. 148, established the fact that "trainees" are not employees under the Fair Labor Standards Act (FLSA) and established certain required standards to meet the trainee definition (i.e. the trainees did not displace any regular employees; the trainee's work did not provide an immediate advantage to the employer; the trainee's work was not primarily "manual labor"; and the work performed was for the benefit of the trainee, not the employer). After the Supreme Court Decision, the United States Department of Labor (DOL) put together a list of six (6) criteria for determining whether a trainee or intern may be unpaid:

• The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment; and
• The internship experience is for the benefit of the intern, not the employer; and
• The intern does not displace regular employees, but may work under the close supervision of existing staff; and
• The employer that provides the training (internship) derives no immediate advantage from the activities of the intern and, on occasion, its (employer's) operations may be impeded; and
• Intern is not necessarily entitled to a job at the conclusion of the internship; and
• The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Based on DOL rules and regulations, all six (6) of the above standards must be met.

Any company that is employing an intern should clearly establish the "rules of the road" with regard to the internship and make absolutely certain that the primary purpose of the internship is the fulfillment of an educational opportunity. The closer the intern gets to working like an employee (i.e. doing manual office tasks; delivering employer product to customers; doing photocopying or addressing envelopes to customers; etc.), the more probable is the fact that the individual is no longer acting as an intern but is merely acting as an employee and thereby is entitled under the provisions of the FLSA and in almost every state's Wage Payment Act, at least pay on the basis of the minimum wage for hours worked.

There is little doubt that because of the state of the economy and the rapid growth of "internships," these types of cases will greatly expand. Plaintiffs' attorneys get their fees paid by employers if they can win a portion of their case. "Put your house in order now" based on the DOL standards; do not wait for a court or the DOL to do it! As an aside, maybe providing an internship is not a good idea unless it is sanctioned by a college/university with a well-defined program.

Questions? Call Managing Shareholder Walter J. Liszka of Wessels Sherman's Chicago, IL office at (312) 629-9300 or email him at waliszka@wesselssherman.com.

Payment Cards as Wage Payments?

June 2014
By: Walter J. Liszka, Esq. 

The brilliant Illinois legislature has recently recognized payroll cards as an approved method of wage payment in the State of Illinois. This measure has passed the House (House Bill 5622) after receiving prior approval from the Senate and now awaits Governor Pat Quinn's signature. The author believes that this group is the reincarnation of Nero "who fiddled while Rome burned." As presently written, the Illinois Wage Payment and Collection Act expressly provides only for the payment of wages via Cash or via Check or via Direct Deposit and makes no mention whatsoever of payroll payment cards. Obviously, this dichotomy as to what the Illinois Wage Payment and Collection Act states and what the Illinois legislature has recently done, creates a quandary.

Based on recent guidance from the Illinois Department of Labor as of last year, the DOL attempted to clarify this confusion by establishing certain "rules and regulations" for the use of payment of wages by payroll cards, one of which clearly established that the employee must voluntarily agree to the payment of wages via a payroll card and, furthermore, that the full balance of an employee's compensation must be able to be withdrawn without the payment of any fee.

Once Governor Quinn signs House Bill 5622 into law, the recognition of payroll cards as wage payment will no longer be subject to interpretation. The Bill amends the Illinois Wage Payment and Collection Act by expressly providing for the payment of wages via payroll cards and also establishes, under Section 14.5, very specific requirements that must be met in order to pay wages via

1. Employers must not make payment of wages via a payroll card as a condition of employment of any employee. The employee must be able to voluntarily choose this resource.
2. Employers must offer employees the option of receiving their wages via Cash and/or via Check and/or via Direct Deposit and if the employee voluntarily consents, wages can be paid via the payroll card.
3. Employers must provide disclosure of terms and conditions of the payroll card option prior to initiating payment of wages via a payroll card.
4. Employees must be able to receive at least one (1) full withdrawal of their wages every two (2) weeks without incurring any fee.
5. Employees must be able to receive their transaction history once a month as well as access their balance without a fee.

There are other additional provisions that are incumbent upon an Employer who wishes to pay wages via a payroll card. It should be noted that this law, once signed by Governor Quinn, will become effective on January 1, 2015.

Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman's Chicago, IL office at (312) 629-9300 or by email at waliszka@wesselssherman.com.

Employee Wage Deductions

November 2014
By: Walter J. Liszka, Esq.

In a rare and somewhat unexpected action, the Illinois Department of Labor, which is not perceived as an “employer-friendly agency,” recently amended the requirements that are imposed on employers when making deductions from employee wages.

Under the prior requirements of the Illinois Wage Payment and Collection Act, there were extremely limited circumstances under which unilateral deductions from employee wages or final compensation could be made. Under the provisions of Section 9 of that Act (820 ILCS 115/9), employers were permitted to deduct from wages or final compensation only the following:

1. As required by law (i.e., Federal and/or State Taxes or Medicare/Medicaid requirements).
2. Deductions for the benefit of an employee (i.e., 401(k) contributions or healthcare contributions).
3. Deductions made in response to a valid wage assignment or wage deduction order.
4. Deductions made from an employee’s check with written consent by the employee given freely at the time a deduction is made.

Simply stated, under the above requirements, if the employer and employee had agreed to a payroll advance, the employer was legally entitled to make a deduction from the employee’s pay only if the employee gave their written consent at the time of each and every deduction even if these were to reoccur over several pay periods.

 Under the new rule, which became effective August 22, 2014, employee consent requirements have been modified to recognize that employers and employees may enter into a written agreement in advance of making the deduction, permitting that deductions will occur over a period of time.

To take advantage of this new rule, the following must be followed:

1. The employer and employee must be entered into a written agreement authorizing the deduction over a recurring series of deductions over time.
2. The written document must provide, over the period of time during which the deductions will be made, very specific dates (time frame in which the deductions will occur).
3. The periodic deduction must be for the same amount for each pay period.
4. The written authorization must contain a statement that the individual employee may voluntarily withdraw his or her authorization to make the deduction and that this withdrawal should be in writing.

Although not required, it is the suggestion of the author that this written agreement authorizing the deductions be executed in duplicate original copies with one (1) original to be retained by the employer and the other original to be retained by the individual employee.

Employers should also take note that even with this new rule authorizing a written document permitting this type of deduction, no deduction can take place if the deduction would allow an employee’s actual received wages to be less than the minimum wage for a particular pay period and, in addition, employers should ensure that deductions do not exceed fifteen percent (15%) of the employee’s gross wages for the pay period or final compensation because this would create a potential conflict with the Federal Consumer Credit Protection Act.

Surprising as it may seem, the Illinois Department of Labor has finally “scored one” on behalf of the employer!

Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman’s Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com.

Avoid Paying Excessive Plaintiff Legal Fees

July 2014
By: Walter J. Liskza, Esq.

Over the last five (5) years, there has been a drastic increase in the number of lawsuits filed alleging violation of the Fair Labor Standards Act (FLSA) in an attempt to procure back wages and liquidated damages for affected employees. A vast number of these lawsuits have turned into large class action litigations. Any employer who has been involved in this type of scenario is well aware that the "actual bottom line cost" of these cases is not just the alleged back wages and liquidated damages due to the affected employees, but by statute, will include substantial payments to Plaintiff's counsel for "reasonable attorneys' fees incurred by the successful Plaintiff in pursing their claim."

It should be noted that the "reasonable attorneys' fees" may have no relationship whatsoever to the recovery of "actual damages to the affected employees." The writer is well aware of a case where the recovery of "actual Plaintiff's damages" totaled $7,000.00 yet the demand for "reasonable attorneys' fees" was in the range of $175,000.00. How should an employer faced with this type of litigation deal with this scenario? There are three (3) steps or courses of action which may help the employer:

• Make a reasonable and fair settlement offer. The Plaintiff's counsel has clearly evaluated their case prior to institution of the lawsuit and they have evaluated the potential recovery both in actual damages and "reasonable attorneys' fees." The employer must make an honest and fair judgment in assessing the extent of its liability. The FLSA provides compensation for all minimum wage and overtime violations. The employer must assess its exposure to "actual damages" and, as well, make a fair assessment of what would be the potential of "reasonable attorneys' fees" to which Plaintiff's counsel may be entitled. Any "reasonable settlement offer" must take cognizance of both the actual damages and the potential of attorneys' fees.
  
• Make an Offer of Judgment. If settlement talks are not successful, the Defendant employer should consider making an "Offer of Judgment." The Federal Rules of Civil Procedure establish the fact that a Defendant may make a Rule 68 Offer of Judgment at least fourteen (14) days before the date set for trial. The Offer of Judgment must allow the judgment on specific terms with payment of costs that are then accrued. If the Offer of Judgment is rejected and the judgment obtained by the Plaintiff through litigation is not more than the Offer of Judgment, the Plaintiff must then pay to the Defendant all costs incurred after that offer was made. In essence, the Offer of Judgment defines the benchmark that the Plaintiff must meet at trial to avoid payment of costs. It is the hope that the Offer of Judgment may discourage the Plaintiff from unnecessarily prolonging the case and thereby freeing up the court's calendar.
  
• Question the reasonableness of fees. It is extremely important for the Defendant employers to communicate to Plaintiff's counsel that they will not pay a "hostage fee" to Plaintiff's counsel to resolve a case. While the Defendant employer must fairly assess what are "reasonable attorneys' fees," the Defendant employer is not required to roll over and play dead. If the employer has honestly assessed the case, it can point to potentially unsuccessful portions of the claim or claims filed by the Plaintiff that will be defeated through litigation and may impact the attorneys' fees. It should clearly be understood that the success of Plaintiff's counsel in litigation is a direct correlation to attorneys' fees - there are no rights to recover attorneys' fees for unsuccessful portions of a claim.

Through the use of the above three (3) steps of assessment of a case, the Defendant employer may be in a much better position to avoid costly and prolonged litigation and, as well, paying not only its own fees for legal counsel, but the Plaintiff's fees as well.

Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman's Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com .

Unions Still on the Prowl

February 2015

By: Walter J. Liszka, Esq.

While it has not been a topic for a great amount of discussion, unions won more representational elections in NLRB monitored elections in the first half of calendar 2014 when compared to the same period in 2013. Unions have won a little over eight (8%) percent more elections in the first half of calendar 2014 when compared to the same period for 2013 (465 wins in 2014 versus 428 wins in 2013) and have also improved their “win rate” at approximately three point seven (3.7%) percent (428 wins out of 653 total elections in the first half of 2013 versus 465 wins out of a total of 671 elections in the first half of 2014).

While the unions have “improved” their number of representational election wins and their win rates, they have not drastically increased the number of new members unions have added to “union polls” through these elections. In fact, in the first half of 2013, approximately 65,860 new workers were added to the union roles arising out of these elections, but in the first half of 2014 only 25,750 new workers were unionized or a rather substantial decrease in “new members (i.e. a decrease of over sixty (60%) percent). This small number of organized employees, in the opinion of the author, is directly related to the increase in the number of “micro unions” sought by unions (i.e. small numbers of employees contained within a larger unit of employees employed by the same employer at the same locations). It is obvious that micro units are much easier to organize because there are a fewer number of employees from whom the unions need authorization cards and the peer group pressure that is excreted within “micro units” seems to be greater. All is not lost for the employer!

Unions have also substantially lost a greater number of decertification elections (elections in which employees voted on whether to remove the union as their representative) in the first half of 2014 when compared to the same period in 2013. In the first half of 2013, unions lost fifty nine point six (59.6%) percent of the decertification elections while in the first half of 2014, unions lost seventy point one (70.1%) percent of the elections.

Employers who are concerned about unionization must realize that over the next few years, the National Labor Relations Board, heavily staffed in appointed positions by the extremely liberal Obama administration (read this as very liberal Democrats) has made it easier for unions to organize a workforce. Regardless of this fact, every employer who wishes to remain union-free must take action to protect its employment venue. Here are a few suggestions: 

1. Know who you want to be the supervisors and make absolutely certain that the supervisors know they are supervisors and meet the new board tests;
2. Have legal no solicitation, no distribution, no access rules posted and enforced;
3. Train your supervisors, not just lecture, on what you expect of them because they are the most important persons in winning a union election;
4. Have and publish a clear union-free statement establishing that in your day to day operations unions are unnecessary;
5. Clearly explain to employees your “union-free policy” and the use and meaning of union authorization cards;
6. Have a credible dispute resolution system in effect and make sure that it works – you might want to make sure that the “employee gossip time” is aware of successful employee wins; and
7. Have and pay competitive wages and benefits for your business!

While the demise of unions in the private sector has been talked about extensively (in calendar 2013, less than seven (7%) percent of the total private sector workforce was unionized), this does not mean that you, as an employer, are protected from unionization in the future. The wise employer prepares for the fight well prior to when union organizing is under way!  

Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman's Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com .