Wage Claims by Minority Business Owners

More often than not when a shareholder is locked out of a business they also are not paid their wages. Normally shareholders have agreements with the small business for regular pay in addition to the value of their ownership interest. When the business fails to pay the wages, this creates another potential claim for the oppressed shareholder or partner with stiff penalties that can be used to force an efficient resolution.

The Illinois Wage Payment and Collection Act requires that businesses promptly pay their employees earned wages and other compensation upon separation and provides employees, including executives, with enforcement tools to recover earned compensation from an employer.^[1] The Act covers all employees who perform work in Illinois for an Illinois employer.^[2] In order to establish a claim under the Wage Payment and Collection Act, an employee or ex-employee must prove that: (1) that the defendant was an “employer” under the Act; (2) that the parties entered into an “employment contract or agreement,” as defined in the Act; and (3) the employee is owed “final compensation” under the Act.^[3] The Act empowers a judge hearing the employee’s claim to award attorney fees and costs to the employee, to be paid for by the employer.^[4] The other owners of the business are personally liable because officers and directors are liable who knowingly aided or allowed a violation of the Act to occur.^[5] The added element of personal liability can create tremendous leverage as part of a larger shareholder, member, or partnership claim.

The Wage Payment and Collection Act defines wages as follows: “[A]ny compensation owed an employee by an employer pursuant to an employment contract or agreement between the 2 parties, whether the amount is determined on a time, task, piece, or any other basis of calculation. Payments to separated employees shall be termed “final compensation” and shall be defined as wages, salaries, earned commissions, earned bonuses, and the monetary equivalent of earned vacation and earned holidays, and any other compensation owed the employee by the employer pursuant to an employment contract or agreement between the 2 parties.”^[6] Plus severance pay is considered final compensation compensable under the Act.^[7]

The Wage Payment and Collection Act includes a stiff penalty of 2% monthly interest and attorney fees.^[8] The combination of personal liability for your former partners or majority shareholders and rapidly growing interest is another arrow in the quiver for an oppressed business partner.

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[1] See 820 ILCS 115/1.

[2] See §115/1; Khan v. Van Remmen, Inc., 325 Ill. App. 3d 49, 61 (2nd Dist. 2001).

[3] See Catania v. Local 4250/5050 of the Comm’ns. Workers of Amer., 359 Ill. App. 3d 718, 722 (1st Dist. 2005); 820 ILCS 115/1.

[4] 820 ILCS 115/14.

[5] 820 ILCS 115/13.

[6] 820 ILCS 115/4.

[7] Swift v. DeliverCareRx, Inc., 2015 U.S. Dist. LEXIS 80807, *19-20, 2015 WL 3897046 (N.D. Ill. June 23, 2015) ( “Swift’s Consulting Agreement provided for Termination Payments, which fit the definition of severance. That the Termination Payments are defined—that is calculated—by reference to unpaid future wages is irrelevant. Swift is not asking for his salary as salary itself, he is asking for a payment that DeliverCare became obligated to pay when it terminated Swift. That is a severance payment; it just so happens that the severance amount is calculated by referring to his salary. The Termination Payments do count as final compensation under the Act. So if Swift can fix the complaint to plead a claim of termination without cause, then this claim can also be fixed.”).

[8] 820 ILCS 115/14.