Authored by Abad Lopez

Starting July 1, 2015, the minimum wage in the City of Chicago is $10 per hour. The Chicago City Council approved an ordinance that also increases the city’s minimum wage in successive increments through July 1, 2019. By enacting this ordinance, Chicago becomes one of the largest U.S. cities to adopt such a measure—following a trend that threatens to sweep the nation. This substantial wage increase adds to an already complex and burdensome landscape for employers in the Chicagoland area, which includes a recently enacted Cook County Wage Theft Ordinance that can strip employers of their business license for violating any wage laws.

In the Chicago Ordinance, the coverage for employees is broad—including all individuals and business entities that maintain a business within the city limits and/or are subject to license requirements of Chicago. What’s more, the ordinance applies to employers employing as few as one covered employee, which is defined as any person who spends two or more hours working in the City of Chicago in any two-week period. And with respect to “working,” travel time to sales calls and for deliveries is compensated time if done within Chicago’s city limits.

Going forward, the City minimum wage will increase all the way up to $13 per hour by July 1, 2019. Tipped employees also get a raise—the ordinance increased their new rate based on the state or federal minimum wage—whichever is greater—plus $.50. This increases to an additional $1 per hour starting July 1, 2016. Starting each July 1 from 2017 and onward, tipped employees are entitled to the highest of federal, state, or city minimum wage for tipped workers from the year prior. Practically, the tipped minimum wage, which is currently $4.95 at the state level, will increase to $5.95 by 2016. The Ordinance also mandates that employers post a notice of these changes at their business facility. A copy of that notice can be found here. Employers face civil fines of between $500 to $1,000 for each offense. Employees can also file civil lawsuits under this Ordinance, in which they can recover up to three times the amount of underpayment, in addition to attorney fees and costs. What’s more, the City can deny a business license to any employer for committing three violations of this Ordinance within the last 24 months.

This adds to the pitfalls in the Cook County Wage Theft Ordinance, which threatens stiff sanctions for any wage law violations. Under this ordinance, effective since May 1, 2015, any employer who has violated state and federal wage laws, including the Illinois Minimum Wage Law or other federal or state laws (including from other states) will be ineligible to hold a Cook County business license. There is a five-year look back period, so any violations in the preceding five years carry the same consequences. What does this mean? According to the Cook County Ordinance, if there was a wage violation outside of Cook County or even in another state, employers could lose their Cook County business license, among other potential consequences.

To avoid liability and harsh penalties, employers should determine which employees will be affected by both ordinances, revise pay ranges for any covered employees, and comply with the notice requirements. Employers should also take heed—and generally be wary of local wage ordinances—which are likely to be enacted throughout the U.S. with greater frequency and, like the Chicagoland ordinances, may include traps for the unwary with potentially drastic consequences.