United States: Illinois Becomes Fifth State To Pass $15 Per Hour Minimum Wage Increase

Fulfilling one of his campaign promises only a month into his administration, on February 19, 2019, Governor J.B. Pritzker signed a bill that will raise the Illinois minimum wage rate to $15 per hour by 2025. A similar measure passed in 2017 before being vetoed by former Governor Bruce Rauner. Illinois follows California, Massachusetts, New York and New Jersey in passing a $15 per hour statewide minimum wage increase.

Under the law, the statewide minimum wage rate first increases from $8.25 per hour (which was the minimum wage established in 2010) to $9.25 per hour effective January 1, 2020. The hourly minimum wage rate for employees in Illinois will increase over a period of six years as follows (with scheduled increases for employees in Chicago and Cook County also noted):

The bill preserves the reduced scale permitted for employees who receive gratuities and also allows a lower minimum wage rate (peaking at $13.00 per hour in 2025) for employees younger than 18 who work fewer than 650 hours per year.

Groups representing business interests have raised concerns that rising costs associated with the wage increase (estimated at $1.1 billion for state government employees alone) will force additional businesses to close or move out of Illinois. In an attempt to ease that burden, the law creates a tax credit for businesses with 50 or fewer employees that offsets some of the out-of-pocket costs of the increase. Small employers will be able to claim a tax credit for up to 25 percent of the actual cost of the wage increase to their business in 2020. The tax credit reduces annually with the wage increases and eventually ends at 5 percent in 2025. The smallest employers (no more than five employees) can continue to claim the 5 percent tax credit through 2027.

What This Means for Employers

Employers with employees who will be impacted by the initial or subsequent minimum wage increases should start planning now for the increases, given the potentially significant impacts on labor costs and staffing. Furthermore, the minimum wage rate increase is likely the first of many employee-friendly changes to Illinois law that employers should anticipate in the coming months of Governor Pritzker's administration, such as a ban on salary history inquiries, which has been passed by the legislature twice in recent years only to be vetoed by Governor Rauner each time. In addition to ensuring employees are paid according to the required minimum wage increase, employers should be alert for coming changes and review their policies and practices to ensure compliance.

For Further Information

If you have any questions about this Alert, please contact Jennifer Long, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.