The Illinois Wage Payment and Collection Act, 820 ILCS § 115/1, et. seq. (the “Wage Act” or “Act”) “levels the playing field” in employer-employee disputes over nonpayment of compensation by providing for recovery of attorney’s fees by a prevailing employee, and by imposing a monthly penalty of 2% on late payments.
By providing for fee-shifting and penalties, the Act tends to discourage relatively well-heeled employers from using their superior financial httpss to engage in protracted litigation in order thereby to deprive employees of the full value of compensation promised to them.
The Act applies to “final compensation,” which is broadly defined to include “wages, salaries, earned commissions, earned bonuses, and the monetary equivalent of earned vacation and earned holidays, and any other compensation owed the employee by the employer pursuant to an employment contract or agreement between the 2 parties.”
Section 5 of the Act states that “[e]very employer shall pay the final compensation of separated employees in full, at the time of separation, if possible, but in no case later than the next regularly scheduled payday for such employee.”
In the usual case, “final compensation” includes whatever the employer owes to the employee as of the date of separation for work performed by the employee. In addition, the Act has been broadly construed to include the monetary equivalent of any unused vacation days as of separation.
The Section 5 deadline imposed on employers for payment of “final compensation” seems clear enough. Employers are required promptly to pay to employees the full value of any compensation owed to them shortly after their separation from employment.
But what happens when part of the compensation owed by an employer to an employee as of the date of separation consists of a monthly annuity, payable indefinitely subject to a condition subsequent?
More to the point, does Section 5 impliedly limit the scope of the Act to exclude promised monthly payments that, because they are of indefinite duration, cannot easily be reduced to a lump sum monetary equivalent as of the date of separation?
In the usual case, monthly annuities that employers promise to pay employees after the termination of their employment are pensions; and pension benefits are governed by ERISA. But ERISA only governs annuities that are promised as part of a “plan,” as defined therein.
What happens when an Illinois employer promises to pay to an employee an open-ended monthly annuity for work completed by the employee during the employee’s term of employment?
Is the employee relegated to a common law breach of contract action, wherein his ultimate recovery will be diminished by attorney fees and delayed payment, or is the employer’s promise subject to the Wage Act?
In a case pending in the Circuit Court of Cook County, the Court recently found that an employer’s contractual obligation indefinitely to make monthly annuity payments post-separation was outside the scope of the Wage Act because the value of that annuity could not be reduced to a lump sum at the time of separation.
Under this theory, Section 5 seems impliedly to narrow the scope of the Act by modifying the definition of “final compensation,” as follows:
‘final compensation’ . . . shall be defined as wages, salaries, earned commissions, earned bonuses, and the monetary equivalent of earned vacation and earned holidays, and any other compensation owed the employee by the employer pursuant to an employment contract or agreement between the 2 parties; provided, however, that, ‘final compensation’ shall not include any claim for any compensation that may not be reduced to a lump-sum monetary equivalent on the date for payment of “final compensation” contemplated by Section 5 of this Act, by means of a calculation applying facts then in existence.
The applicability, vel non, of the Wage Act to promised post-separation monthly annuities appears to be a question of first impression in Illinois.
We respectfully moved for reconsideration, supported by a brief that can be viewed here.
Update: Our motion to reconsider was denied. Thereafter, the parties filed cross-motions for summary judgment on plaintiff’s breach of contract claim. Plaintiff’s motion was granted by an Order entered on the eve of trial.