Chicago City Council Adopts Higher Minimum Wage for Chicago Employers
An amendment to the Chicago Municipal Code establishes a minimum wage for employees of businesses operating facilities located within the City of Chicago that is higher than the Illinois minimum wage.
The current minimum wage established by the Illinois Minimum Wage Law (“IMWL”) is $8.25 per hour. The Chicago Minimum Wage Ordinance, adopted by the Chicago City Council on December 2, 2014, raises the Chicago minimum wage as follows:
to $10.00 per hour on July 1, 2015,
to $10.50 per hour on July 1, 2016,
to $11.00 per hour on July 1, 2017,
to $12.00 per hour on July 1, 2018, and
to $13.00 per hour on July 1, 2019.
Further, starting on July 1, 2020, and every July 1st after that, the Chicago minimum wage will increase in relation to increases in the Consumer Price Index (“CPI”). Any increases would be capped at 2.5 percent per year and would not occur in years when the Illinois Department of Employment Security reports that the unemployment rate in Chicago is equal to or greater than 8.5 percent.
The Ordinance assumes that the Chicago minimum wage will be higher than the state or federal minimum wages, but provides that if the state or federal minimum wage rates are higher, those rates will be used to compute the Chicago minimum wage.
The Ordinance adopts many recommendations made in a report by the Minimum Wage Working Group convened by Mayor Rahm Emanuel on May 20, 2014. The working group’s report, “A Fair Deal for Chicago’s Working Families,” issued on July 8, 2014, emphasized the importance of a Chicago minimum wage above the Illinois minimum wage to account for the City’s high costs of living and larger concentrations of low-wage workers.
The Ordinance also increases the Chicago minimum wage for tipped employees. The IMWL permits employers to take a tip-credit not greater than 40 percent of the Illinois minimum wage. That maximum tip-credit amount is $3.30 per hour, or 40 percent of $8.25 per hour. An Illinois employer paying the Illinois minimum wage to tipped employees today is required to pay them at least $4.95 per hour.
The Ordinance increases the minimum regular hourly rate for tipped employees in Chicago by $.50 per hour on July 1, 2015 (to $5.45 per hour) and an additional $.50 per hour on July 1, 2016 (to $5.95 per hour). Starting on July 1, 2017, and on every July 1st after that, the tip-credit minimum wage increase will use the same CPI-based formula established for increasing the regular Chicago minimum wage.
The Ordinance does not specifically establish increases in the tip-credit overtime rate, but generally provides that the Chicago minimum wage is subject to the overtime compensation provisions in the IMWL. This issue likely will be addressed in regulations drafted by the Commissioner of the City’s Department of Business Affairs and Consumer Protection, but a plain reading of the Ordinance suggests that if there are no changes in the IMWL, the tip-credit overtime rate in Chicago on July 1, 2015, would be $11.70 per hour based on a minimum wage of $10.00 per hour and a maximum tip-credit of $3.30 per hour. By comparison, the current minimum tip-credit overtime rate for employees who are paid the Illinois minimum wage is $9.08 per hour.
The Commissioner of the City’s Department of Business Affairs and Consumer Protection is responsible for issuing a bulletin to employers that announces the CPI-based increases in the Chicago regular and tip-credit minimum wages and is charged with drafting regulations to enforce the Ordinance.
Covered Employers and Employees
The Ordinance applies to employers who employ at least one covered employee and who maintain a business facility within the boundaries of the City of Chicago or are otherwise subject to the City’s business licensing rules.
Covered employees are employees who work at least two hours in a two-week period. Compensated travel time in the City is included, but non-compensated commuting time in the City is not included.
The Ordinance exempts from the Chicago minimum wage most of the employees who are exempt under Section 4(a)(2) of the IMWL, except for the categories of employees described in Section (a)(2)(A) (i.e., certain salespersons or mechanics primarily engaged in the selling or servicing of automobiles, trucks or farm implements, if employed by a nonmanufacturing establishment) and Section (a)(2)(B) (i.e., certain salespersons primarily engaged in selling trailers, boats, or aircraft, if employed by a nonmanufacturing establishment) of the IMWL.
The Ordinance also exempts subsidized temporary youth employment programs, subsidized transitional employment programs, and local governmental or sister agencies other than the City of Chicago.
The Ordinance prohibits retaliation against employees who exercise their rights under the Ordinance, creates a private right of action for violations of the Ordinance, and permits successful private litigants to recover treble damages and attorney’s fees.
The commissioner is authorized to impose fines of $500-$1,000 per violation of the Ordinance. The commissioner also is authorized to deny City business licenses to employers who admit to violations of or are found guilty of violating the Ordinance within the preceding 24 months.
The Ordinance also modifies existing provisions that authorize denial of business licenses to employers who violate the Illinois Wage Payment and Collection Act, the Illinois Collection Agency Act, or the Fair Debt Collection Practice Act.
State Increase Postponed
At the same time the Chicago City Council was considering an increase in the Chicago minimum wage, the Illinois General Assembly was considering legislation that would amend the IMWL and increase the state minimum wage to $9.00 per hour on July 1, 2015, with increases of $.50 per hour each July 1st until the state minimum wage reaches $11.00 per hour on July 1, 2019.
After the City’s ordinance was adopted, the Illinois Senate approved an amendment to House Bill 4733 that would establish the proposed increases in the state minimum wage and would limit the City’s home rule authority to increase the Chicago minimum wage after July 1, 2019. That amendment was not considered by the Illinois House before the General Assembly adjourned. Unless a special legislative session is called, proposed legislation increasing the Illinois minimum wage or restricting Chicago’s home rule authority to increase the Chicago minimum wage is not likely to be considered until the new General Assembly convenes in January 2015.