Saturday, January 11, 2014

The Wage Act

The sales representative had this dilemma: He had an offer of new employment that would soon expire. But to collect commissions on sales made in the current year he had to remain with his current employer until April 1st of the next year.

The question was whether he had any tools available, other than his own powers of persuasion, to obtain the commission immediately.

Answer: Probably.

The Illinois Wage Payment and Collection Act ("Wage Act" or "Act"), 820 ILCS 115/1 et seq., classifies earned commission as final compensation for purposes of paying "separated" employees. The commission in this case was, in fact, earned. The sales had been closed. The goods had been received and paid for.

Section 5 of the Act states that the employer "shall pay" the final compensation of a separated employee at the time of separation if possible but in no case later than the next pay day. And there is no except-for language in case the agreement of the parties calls for payment on some other basis. Moreover, an agreement in Illinois incorporates and includes the law of Illinois in effect at the time when the agreement was made unless the agreement clearly excludes such incorporation. The agreement under examination here did not contain that exclusion. Hence, there was a conflict between the agreement that required presence on the payroll until April 1st of the year to come and the Act, and the agreement had to yield to the Act.

That would seem to put the employee in a solid position to accept the new offer of employment and demand his commissions. So why is the answer to the question posed above just "probably"? Because the Act applies only to "Illinois employers." It was far from clear whether there was an "Illinois employer" in this case.

The company was organized under the laws of a state other than Illinois. It had its principal place of business in a state other than Illinois. Its presence in Illinois was largely confined to the presence of its sales representative, an Illinois resident who conducted business from a location in Illinois. Most of the decisional law that bears upon this question is something less than "controlling legal authority." For it comes from the federal trial courts in Chicago and it analyzes the "Illinois employer" question on a case-by-case basis.

We recently made an inroad of sorts on this point before the Illinois Appellate Court. It began with a six-figure money judgment against an out-of-state business executive who was found personally liable for the severance pay of a former employee on the grounds that he had knowingly permitted the true employer to violate the Act by withholding the pay. (Under section 13 of the Act company officers who knowingly permit an employer to violate the Wage Act are deemed to be the employer and are personally liable for the pay.)

There was no question that the true employer in the case was an "Illinois employer": It was a limited liability company organized under Illinois law and it had its only business office in Illinois. The executive contended that he could not be personally liable unless he, too, was as an "Illinois employer," and he could not be an "Illinois employer" because he lived and worked outside Illinois and had virtually no physical contact with Illinois.

The Illinois Appellate Court rejected that contention and affirmed the judgment on the grounds, among others, that his duties as an officer of an Illinois company were sufficient to confer personal jurisdiction over him under our "long-arm" statute and bring him to trial on the question whether he knowingly permitted the true employer to violate the Wage Act.

The upshot is: In order for the Wage Act to apply at all, the true employer (or the employer-in-fact) must be an "Illinois employer," but only the employer-in-fact need be an "Illinois employer."

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