On Feb. 19, 2019, Illinois joined several other states by amending its minimum wage law to gradually increase workers' minimum wage to $15 per hour by 2025. The law, signed by Governor Pritzker, increases the minimum wage on the following schedule:
|Jan. 1, 2020
|July 1, 2020
|Jan. 1, 2021
|Jan. 1, 2022
|Jan. 1, 2023
|Jan. 1, 2024
|Jan. 1, 2025
Other states—California, Massachusetts, New Jersey and New York—have enacted laws that mandate a $15 per hour minimum wage within the next few years. The current federal minimum wage is $7.25 per hour. Illinois's recent amendment is the highest minimum wage in the Midwest.
Exceptions and Credits
To curtail the rise in costs to some businesses, the amendment provides a tax credit for businesses with 50 or less full-time employees. That credit allows those employers to claim a 25 percent credit against the difference between the compensation paid to employees on the new minimum wage and what was paid to minimum wage employees in the previous year. However, the credit decreases each year by 4 percent—eventually ending completely after 2026 for employers with more than five employees.
The law also allows employers to take a tip credit of up to 40 percent of the minimum wage for tipped workers, if tips will cover the difference. Moreover, the amendment includes a separate wage for workers under 18 years of age who work 650 hours or less in a calendar year. This exception allows employers to pay those employees between 50 cents to $2.75 less than the regular minimum wage—depending on the year—over the amendment's six-year rollout. By 2025, employers must pay $13 per hour to workers under 18 years of age who work 650 hours or less in a calendar year.
Employers in Chicago or Cook County may not feel the direct effect of the amendment for a few years, although all employers would be wise to modify financial forecasts to account for the anticipated increase in wages. Chicago's minimum wage is set to increase from $12 to $13 in July 2019 by virtue of municipal ordinance. Cook County's minimum wage will increase from $11 to $12 this July. Because many municipalities outside of Chicago have opted out of the Cook County minimum wage law, employers in Cook County with questions or concerns about a specific municipality should consult experienced employment counsel. Employers should also audit their pay policies to verify that they are paying the appropriate overtime rates for certain employees affected by these changes to the minimum wage and to ensure that the use of any tip credit is compliant with Illinois and federal law.
Taft’s Labor and Employment attorneys are ready to help existing and future clients navigate these legal issues and follow best practices. Feel free to call us with any questions about the amendment, or other specific state and local laws, and how they may impact your business.