Important Change to the Illinois Equal Pay Act

California Fair Pay Act vs Equal Pay Act, What's the Difference?

An amendment to the Illinois Equal Pay Act (“Illinois EPA”) that took effect January 1, 2022 clarified that the Illinois EPA does not prohibit employers from discussing with job applicants the unvested equity or deferred compensation that the applicant would forfeit upon resigning from the applicant’s current employer.

While the Illinois EPA continues to restrict employers’ ability to ask applicants questions about their compensation, the amendment clarifies that employers may discuss unvested equity and deferred compensation, only if an applicant for employment voluntarily discloses that the applicant would forfeit unvested equity and/or deferred compensation by resigning from their current employer. If an applicant voluntarily discloses that they will forfeit unvested equity or deferred compensation, employers may request that the applicant verify the aggregate amount of such compensation.

Employers and employment recruiters should be cognizant of this important change to the Illinois EPA, particularly given the current labor market. Further, employers and employment recruiters should be careful to not violate the Illinois EPA if the applicant does not voluntarily disclose compensation from his or her prior employer.

Having an experienced employment attorney evaluate your employment issues is critical to avoiding problems resulting from failing to comply with state and federal law. For more information regarding these or similar issues, please contact Mitchell S. Chaban at mchaban@lgattorneys.com or (312) 368-0100.

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How Do You Know If Your Insurer Has Acted in Bad Faith?

Insurance Bad Faith Litigation - The Patterson Law Firm, LLC

Individuals and businesses procure insurance to protect against a variety of potential losses. For example, individuals insure their homes in case of property damage, and businesses insure for certain potential economic losses. When a loss occurs, often times the claim process seems simple: the insured submits a claim and the insurer pays the claim. However, things are not always so simple. The insurer may take the position that it is only required to pay some of the loss, or it may deny the claim altogether by contesting either the existence or the scope of coverage.

Contesting the scope of coverage or denying coverage outright is not necessarily bad faith. Bad faith is defined under Illinois law as conduct by an insurer that is “vexatious and unreasonable.” In an insurer is found to have committed bad faith, Section 155 of the Insurance Code allows the prevailing insured to recover reasonable attorneys’ fees, costs, and significant penalties.

Section 154.6 of the Illinois Insurance Code delineates certain improper claims practices that could constitute bad faith depending on the circumstances. Some examples include:

• Knowingly misrepresenting to claimants and insureds relevant facts or policy provisions relating to coverages at issue.
• Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under the insurer’s policies.
• Failing to adopt and implement reasonable standards for the prompt investigations and settlement of claims arising under its policies.
• Compelling policyholders to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them.
• Refusing to pay claims without conducting a reasonable investigation based on all available information.
• Failing to affirm or deny coverage of claims within a reasonable time after poof of loss statements have been completed.

While an insurance company who commits an improper claims practice under Section 154.6 of the Insurance Code is not per se engaged in bad faith, courts will review the totality of the circumstances in determining whether the insurer’s conduct was “vexatious and unreasonable” under Section 155. Such a finding would entitle the insured to recover fees and penalties.

Having an experienced attorney evaluate your individual or business insurance claims is critical for swift and effective resolution. For more information regarding these or similar issues, please contact Roenan Patt at rpatt@lgattorneys.com or (312) 368-0100.

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The Expanded Illinois Secure Choice Retirement Savings Program Will Soon Cover Small Employers

Illinois Secure Choice - Ascensus

The Illinois Secure Choice Retirement Savings Program (“SCRSP”) is a retirement savings instrument for private sector workers in Illinois who do not have access to an employer-sponsored plan. Recent legislation expands the SCRSP to cover employers with five or more employees. Previously, the SCRSP applied only to employers with 25 or more employees that had been operating in Illinois for at least two years and did not offer a qualified retirement plan.

The SCRSP requires covered employers to distribute information provided by the SCRSP, facilitate employee enrollment in the SCRSP, and remit contributions to the SCRSP via employee payroll deductions. The new legislation also includes annual automatic contribution increases up to 10% of wages (employees have the right to opt-out).

Employers will receive notifications of their obligations and applicable deadlines under the expanded SCRSP. The initial enrollment deadline will apply to employers with more than 15 employees and fewer than 25 employees and will occur no earlier than September 1, 2022. The second enrollment deadline will apply to employers with at least five but not more than 15 employees and will occur no earlier than September 1, 2023.

Smaller employers that will fall under the auspices of the expanded SCRSP should consult with experienced counsel to assure compliance with the SCRSP.

If you have any questions regarding the SCRSP, please contact Mitchell Chaban at mchaban@lgattorneys or (312) 368-0100.

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Estimates are Opinions, Not Fact and Not Actionable

The internet has unquestionably provided unparalleled access to information to the public, both consumers and businesses, not seen since Johannes Gutenberg invented the printing press.  One such benefit of the access the internet has provided is in real estate.  Several websites now allow users to get estimates on almost every property imaginable.  Zillow is one of these websites which provides “Zestimates.” Although this knowledge can be useful to potential purchasers, some owners may take issue with these valuations.  This exact situation occurred in Patel v. Zillow, Inc.

In Patel v. Zillow, Inc., the United States Court of Appeals for the Seventh Circuit reviewed the dismissal of a lawsuit brought by homeowners who took issue with Zillow’s “Zestimate” of their property that they were trying to sell.  Before the lawsuit was filed, they learned that Zillow’s “Zestimate” of their property was below their asking price.  Zillow’s “Zestimate” listed the property at approximately $160,000 less than Plaintiffs’ listing.  Plaintiffs contended that the “Zestimate” scared away potential buyers.  Plaintiffs asked Zillow to increase the “Zestimate” or to remove them from the database.  Zillow declined.  Plaintiffs filed their lawsuit.

Plaintiffs brought suit under the Illinois Real Estate Appraiser Licensing Act contending that Zillow was appraising real estate without a license.  Plaintiff also filed claims under the Illinois Uniform Deceptive Trade Practices Act and under the Illinois Consumer Fraud and Deceptive Business Practices Act.  Plaintiffs argued that Zillow’s “Zestimate” was unfair and misleading.  The District Court (the trial court) dismissed all of Plaintiffs’ claims.

The Seventh Circuit upheld the trial court’s decision.  The Seventh Circuit noted that the Illinois Real Estate Appraiser Licensing Act did not create a cause of action for a private citizen.  More importantly, as to Plaintiffs’ claims under the Deceptive Trade Practices and Consumer Fraud Acts, the Court stated that these acts deal with statements of fact and that Zestimates are opinions, not fact.  Accordingly, where a valuation is explicitly labeled as an estimate, there is no deception.

If your business has current litigation, including claims under the Illinois Uniform Deceptive Trade Practices Act or Illinois Consumer Fraud and Deceptive Business Practices Act, or your business would like a complimentary business “check-up” to help spot any potential liability under those acts, please contact Roenan Patt. (312) 368-010;  rpatt@lgattorneys.com or any of our business attorneys.

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Employee Owes Fiduciary Duty to Employer and Cannot Misappropriate a Corporate Opportunity

The Illinois Appellate Court has reiterated what the Illinois Supreme Court said a few years ago: Employees of a corporation owe a duty of loyalty to the company by which they are employed.  And that it is a breach of their fiduciary obligation to appropriate for their own gain an opportunity that rightfully belongs to the company.  Advantage Marketing Group, Inc. v. Keane, 2019 IL App (1st) 181126.

In this instance it was clear that the employee was far more than an ordinary employee and that it was not clear whether the company had considered the opportunity but had decided to take a pass on it.

Keane was one of the founders of Advantage Marketing Group (AMG) and, even at the time of his purported misconduct, owned 35% of AMG’s stock.  He had served AMG as an officer and director, but was simply an employee when he seized a potential corporate opportunity and made good use of it through another corporation, Keane, Inc. d/b/a The Mail House.

In addition to owning 35% of AMG, Keane performed or had performed the following for AMG:

  • Hired and fired employees
  • Had access to all of AMG’s books and records including client lists, employee records, tax documents, vendor information and billing data
  • Had a bonus equal to AMG’s majority stockholder
  • Had developed and maintained AMG’s financial records
  • Had explored potential strategic acquisitions in the letter-shop business

In the summer of 2013 Keane and AMG’s majority stockholder, Patty Herman, discussed the potential acquisition of The Mail House, a competitor of AMG.

Keane resigned from AMG on September 4, 2015.  Prior to his resignation he began making preparations for the acquisition of The Mail House.  He organized a new corporation named Keane, Inc. d/b/a The Mail House.   He told AMG’s clients and vendors AMG was in financial distress, and solicited his son, an AMG employee, to join him at the new corporation.  He also obtained samples of confidential client information and delayed in returning them after being demanded to do so by AMG’s counsel.  He registered an internet domain name “mailhousedm.com”.  After Keane left AMG, The Mail House was in direct competition with AMG.

AMG sued Keane charging breach of fiduciary duty and improperly appropriating a potential business opportunity (the acquisition of The Mail House) for himself.

Keane defended saying that as an employee he had no fiduciary duty to AMG and, furthermore, that he had discussed the potential acquisition with AMG’s majority stockholder but AMG had not moved forward with it.  The court ruled against Keane on both points.

The court said that it was settled Illinois law that an employee owes a duty of loyalty to his employer and prohibits an employee from taking advantage of a business opportunity that belongs to his employer, while still employed.

The court did say that an employee may plan, form and outfit a competing company while still working for his employer.  But that was as far as he can go.  He cannot commence competing with his employer.

What’s the point?  This was an easy decision for the court especially in view of the fact that Keane remained a 35% stockholder in AMG.  But the critical point was that an employee must be loyal to his employer while employed and not seize opportunities that would normally flow to his employer.  He can make preparations to leave, but cannot actively compete before doing so.

For more information and to raise any questions, please contact any of our business attorneys.

Michael Weissman

mweissman@lgattorneys.com

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Illinois Minimum Wage Law Update – Higher Wages and Stiffer Penalties

On February 19, 2019, newly elected Governor J.B. Pritzker fulfilled a campaign promise and signed legislation that will raise the Illinois Minimum Wage. The law made two major changes:

  • Raised the minimum wage to $15.00 per hour by 2025
  • Significantly increased the penalties for violations of the act – including misclassifying independent contractors

Minimum Wage

Under the new law, the minimum wage will increase annually for all employees over 18. For those employees that are under 18 and work no more than 650 hours in a calendar year, they will be subject to a lower minimum wage.

Businesses that have employees in Chicago or certain Cook County municipalities will need to continue to follow the local minimum wage ordinances which are higher than the Illinois state law. Both the local ordinances update on July 1 and the state law is tied to a Calendar year.

A breakdown of the relevant wage rates is below.

Significant Increase in Penalties for Violations

In addition to the increase in minimum wages across the state, the changes that went into effect on February 19, 2019, significantly increased the penalties for employers that fail to properly pay minimum wage or overtime. This is particularly important for employers that misclassify their workers as independent contractors and may be subject to significant liability as a result of that misclassification.

Under the new law, if an employee is underpaid, they can recover “treble” (three times) the amount of the underpayment. In addition to the treble damages, the statutory monthly damages penalty increases from 2 percent to 5 percent. Finally, there is now an additional penalty of $1,500.00 payable to the Department of Labor’s Wage Theft Enforcement Fund.

Example. If an employee is underpaid $7,500.00 and the employee receives a judgment two years later, the employer will have to pay $33,000 to the employee. The damages are broken down as follows:

  • $22,500 in treble damages for the $7,500.00 of unpaid wages
  • $9,000.00 (at least) in the 5 percent damage penalty
  • $1,500.00 to the Department of Labor

These damages do not include attorneys’ fees, as well as other potential damages under the Federal minimum wage law (FLSA) and the local ordinances.

What does this mean for employers?

Given the significant risk if you are underpaying employees you should evaluate your pay policies and ensure that your company is in compliance. It is important to annually conduct a wage and hour audit to proactively mitigate risk.

Please contact us if you need any assistance complying with the Illinois or Federal Minimum wage and overtime laws at 312-368-0100 or Walker R. Lawrence at wlawrence@lgattorneys.com

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“For the times they are a-changing’.” Illinois Supreme Court rules that the Implied Warranty of Habitability does not apply to subcontractors.

For over 30 years, since Minton v. Richards Group of Chicago, 116 Ill.App.3d 852 (1st Dist. 1983), subcontractors in Illinois have been potentially liable to homeowners for breach of the implied warranty of habitability even though there was no contract between the subcontractor and owner.  The implied warranty of habitability is a judicially created doctrine used to protect residential homeowners and buyers from construction latent defects that interfere with the habitability of their home.  Specifically, this implied warranty was created to protect an innocent homeowner’s expectations of a defect free property by holding a contractor or its subs accountable for latent defects that made the premises uninhabitable.

That all changed on December 28, 2018.  In Sienna Court Condominium Ass’n v. Champion Aluminum Corp., 2018 IL 122022, the Illinois Supreme Court set aside over thirty years of established law and held that the implied warranty of habitability does not apply to a subcontractor unless it has a direct contractual relationship with the homeowner or buyer.

Sienna Court was a dispute regarding the habitability of a two-building 111 residential unit development located in Evanston, Illinois.  The units and common areas in the building contained several latent defects that affected the habitability of the units and common areas.  The condominium association filed suit against several parties including subcontractors, for breach of the implied warranty of habitability.  The condominium association did not have a direct contractual relationship with the subcontractors.  The trial and appellate courts allowed the lawsuit to proceed on this theory of liability following Illinois law under the Minton case.

On appeal, the Illinois Supreme Court ruled that the implied warranty of habitability had its genesis in contract law as opposed to tort law.  Accordingly, for the condominium association to proceed on a theory of a breach of the implied warranty of habitability against a subcontractor, there would have to be a contractual relationship between the parties.  Because no such contractual relationship existed between the condominium association and the subcontractor, the claim for breach of the implied warranty of habitability was dismissed.

The times have now changed.  Subcontractors no longer need to be fearful of being sued by a homeowner or buyer under the implied warranty of habitability for latent defects to a property unless they have an actual contract with the party – something that is rare.

For more information regarding construction litigation, please contact:

Roenan Patt at: (312) 368-0100 or rpatt@lgattorneys.com.Facebooktwitterlinkedinmail

Predictive Scheduling Legislation: What You Need To Know To Avoid Costly Surprises

In approximately a dozen states and a number of smaller municipalities across the U.S., including Illinois and Chicago, initiatives have been introduced that would allow state and local governments to dictate how restaurants (and retailers) schedule their employees. Some view this approach as interfering with employers’ rights to control the workplace while others view it as a necessary tool to protect the rights of the food industry and other retail workers.  The impetus for the new rules – often referred to as predictive scheduling laws – emanates from the fact that workers often have very little ability to make adjustments to their work schedules in order to meet their responsibilities outside of work.  And unpredictable and unstable work schedules have been fairly well documented in the food service and preparation industries, as well as in retail and commercial building cleaning occupations.

Predictive scheduling laws and proposals generally include certain common provisions: (i) advance posting of schedules, (ii) employer penalties for unexpected schedule changes, (iii) record-keeping requirements, and (iv) prohibitions on requiring employees to find replacements for scheduled shifts if they are unable to work. In Congress, the pending Schedules That Work Act would require that schedules be provided in writing two weeks in advance with penalties for changes made with less than 24 hours’ notice.  As those changes are implemented, restaurant owners are finding that they must make significant adjustments to how they run their businesses in order to stay in business.

“On-call” or “predictive scheduling” activists argue that retail employers too often use scheduling practices that directly interfere with employees’ personal lives and ability to plan around their work hours, while others believe government intervention in the scheduling of employees through a one-size-fits-all approach intrudes on the employer-employee relationship and creates unnecessary mandates on how a business should operate.  Many in the food service industry are concerned that predictive scheduling legislation will impede employers’ need to adapt to changing conditions in a store, particularly small independently owned businesses that have limited staff and resources and may not be able to afford the penalties related to violations.  Some employees have also voiced concern that they could lose some of the flexibility that attracted them to the food service industry in the first place.

Following are a few common components of predictive scheduling legislation.

  • Employee Scheduling Requests.  Giving employees the right to make scheduling requests without employer retaliation.  Employers would be required to consider scheduling requests from all employees and provide a response. In some instances (for healthcare issues for example), the employer would be required to grant the request unless there is a bona fide business reason not to do so—e.g., an inability to reorganize work among existing staff or the insufficiency of work during the periods the employee proposes to work.
  • Shift Scheduling Changes.  Requiring employers to pay employees for a minimum of four hours of work or the minimum number of hours in the scheduled shifts, whichever is fewer, when an employee is sent home from work early without being permitted to work his or her scheduled shift.  In addition, if an employee is required to call in less than 24 hours before the start of a potential shift to learn whether he or she is scheduled to work, an employer could be required to pay the employee a premium, equivalent to one hour of pay.
  • Split shift pay. If an employee is required to work a shift with nonconsecutive hours with a break of more than one hour between work periods, an employer could be required to pay the employee a premium for that shift, equivalent to one hour of pay.
  • Advance notice of schedules. When an employee is hired, an employer could be required to disclose the minimum number of hours an employee will be scheduled to work. If, that minimum number changes, the employer could be required to give the employee two weeks’ notice of the new minimum hours before the change goes into effect. In addition, employers can be required to give employees their work schedules two weeks in advance and, if an employer makes changes to this work schedule with notice of only 24 hours or less, the employer could be required to pay the employee a premium, equivalent to one hour of pay.

In order to handle predictive scheduling mandates, business owners should explore software options and even retaining outside vendors that provide scheduling and labor management solutions.  A lack of training or understanding of predictive scheduling can be detrimental to a business’ bottom line since scheduling practices can have a dramatic impact on labor costs.

For further information regarding this topic, please contact:

Jonathan M. Weis at jweis@lgattorneys.com or 312-368-0100.Facebooktwitterlinkedinmail

Purchaser Collection of Pre-Closing Rent Deficiency

In the purchase and sale of real property which is leased to tenants, sellers and purchasers must pay particular attention to the allocation of rent collected both before and after the closing.  A typical purchase and sale agreement will include, among other things, language addressing the allocation of rent by the parties for the current period as well as the collection of delinquent rent after closing which is attributable to the seller’s period of ownership prior to closing.  In negotiating a contract, the parties will need to determine whether the purchaser is responsible for attempting to collect pre-closing delinquent rents and the rights of the seller to pursue tenants after closing for any such pre-closing delinquent rents.

Collection of pre-closing delinquent rent can be a complicated issue for purchasers and sellers to resolve.  On the one hand, the purchaser may be reluctant to allow the seller to undermine the financial condition of a tenant by pursuing lawsuits against a tenant that may be paying current rent to the new landlord.  On the other hand, a former owner does not have a full range of typical landlord remedies at its disposal to effectively induce tenants to pay delinquent rent as the former owner cannot assert an eviction action against a tenant and terminate the tenant’s right of occupancy.

The tension between purchasers and sellers with respect to pre-closing, delinquent rent is further complicated by a recently decided opinion issued by the Illinois Appellate Court in 1002 E. 87th Street LLC v. Midway Broadcasting Corporation (2018 IL.) App. 1st 171691, June 5, 2018).  In that case, the Court upheld a lower court ruling that Illinois law does not permit the purchaser of real estate to pursue claims against a tenant for pre-closing, unpaid rent under a lease assigned to the purchaser at closing.  The purchase and sale agreement between the purchaser and seller in that case contained standard provisions confirming that the “landlord” under the lease included any successors and assigns.  It also provided that all obligations and liabilities of the original landlord were binding on the purchaser, as successor landlord.  That would include any pre-closing landlord defaults that remained uncured.  Notwithstanding the successor landlord’s assumption of the lease, including, potential liability for pre-closing defaults of its predecessor, the Court ruled that the successor landlord did not have the right to recover pre-closing rent.  The Court specifically stated that the rule in Illinois is that rent in arrears is not assignable.

The lesson to be learned from the 1002 E. 87th Street case is that it is important to negotiate and set the expectations of the parties with respect to pre-closing delinquent rents at the time of contract.  Since a predecessor landlord may have little power other than initiating litigation (which is not desired by the successor landlord) against a tenant for delinquent rent and the successor landlord is unable to maintain an action for that delinquent rent, parties must give careful thought to the method of addressing the collection of pre-closing delinquent rent.  Fortunately, there are a number of different approaches that the parties may employ to coordinate and enhance the collection of pre-closing, delinquent rent.

For further information regarding the purchase and sale of commercial real estate as well as matters involving the rights of sellers, purchasers and tenants, please contact:

Jeffrey M. Galkin at:

jgalkin@lgattorneys.com or 312-368-0100.

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A Baseless Lawsuit Was Filed Against My Business. Can I Recover My Attorneys’ Fees?

Defending lawsuits is sometimes an unfortunate but necessary part of doing business. Whether the case was quickly dismissed by the court, or whether you won the case after a trial, you and your attorneys knew the case was unfounded from the beginning and yet you had to spend substantial time and money that you could have devoted to your business in order to successfully defeat the case.

Depending on the facts and circumstances and whether the suit was pending in state or federal court, your fees may be recoverable from other side as a sanction for filing a “frivolous” claim against you. However, absent a contract or statute providing otherwise, you will most likely be unable to recover your attorneys’ fees simply because you won your case.

Assuming the suit was filed in Illinois, sanctions may be available. Generally, to recover fees against a party or his or her attorney under either rule, it must be shown that the party and/or his attorney either: (1) failed to reasonably investigate the facts or the law before filing the offending complaint, (2) filed the complaint for the purpose of harassment, delay, or to increase the cost of litigation for the opposing party.  One principal difference between the federal rule and the Illinois rule is that under the federal rule, only an attorney can be monetarily sanctioned based on unwarranted legal contentions. Thus, if the complaint was filed in federal court, while both the attorney and client are responsible for ensuring that the facts contained in the complaints are accurate and complete, only the attorney may be sanctioned for a complaint based on a claim or argument that is not warranted by existing law.  By contrast, under certain circumstances, the Illinois rule permits the court to sanction both the party and his attorney—even if the complaint is found to have been legally (as opposed to factually) unwarranted.

It is important to note that not every meritless case is considered “frivolous” for purposes of recovering attorneys’ fees. The United States Supreme Court has held that an action or claim is frivolous if “it lacks an arguable basis either in law or in fact.” Similarly, the Seventh Circuit Court of Appeals has characterized a filing that is incoherent and lacks a legal basis as “frivolous.” Thus, “frivolous” does not necessarily mean “meritless,” but rather, a frivolous suit lacks a factual or legal basis, and as such, has very little chance of being won.  For this reason, it is recommended that a party wishing to seek sanctions do so at the end of the case, i.e., after the court makes a determination that the claim lacks legal and/or factual merit.

In addition, as the Seventh Circuit Court of Appeals recently determined, whether a case or claim is “frivolous” is not the end of the inquiry. A request for attorneys’ fees may nonetheless be denied where fees that were incurred were “self-inflicted” by, for example, pursuing one strategy over another, or briefing an appeal on the merits rather than filing a motion to dismiss for lack of jurisdiction.

Both the federal rule and the Illinois rule are discretionary and are strictly applied by the courts. As such, sanctions are infrequently granted. Regardless of how and when your litigation was resolved, you and your attorneys should evaluate whether it would be appropriate to seek sanctions, and if so, whether it would be worthwhile from a cost perspective.

If you have any questions regarding a litigation matter you find yourself involved in, please contact:

Katherine A. Grosh at:

(312) 368-0100 or kgrosh@lgattorneys.com


[1]  This article is the first of a three-part series: Part II will address the recovery of attorneys’ fees pursuant to various Illinois statutes, and Part III will address the recovery of attorneys’ fees pursuant to a contract where the dispute is resolved outside of the litigation context.

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