The Illinois Department of Labor (“IDOL”) concerns itself with, among other things, making sure that employers are paying their employees the proper minimum wage as well as ensuring that employers are paying overtime to those employees whom are entitled to overtime compensation. The primary means by which the IDOL verifies this information is through informal audits.

Under Illinois law, employers are required to keep certain records for a minimum of three years. For purposes of an IDOL audit, the critical documents an employer must retain are the payroll records for its employees and records of any vacation time taken by employees. Payroll records are not limited to merely paychecks; the employer must be able to show if an employee is paid on an hourly basis and how many hours each employee worked on a daily, weekly, and per pay period basis. Vacation records must be kept both to reflect payment to employees while employed, and to verify that employees were paid any accrued vacation upon their termination or resignation.

Complying with paying employees the proper minimum wage is, for the most part, a fairly straight-forward piece of the audit. Here, the auditor is merely verifying the payroll records and making sure that no employees are being paid less than the minimum wage which was in effect during the relevant time periods of the audit. One issue that does arise in a minimum wage audit regards employees who are paid less than minimum wage but are also paid tips, such as bartenders, waitresses, etc. Under Illinois law, employees receiving tips do not have to receive the minimum wage, but this is an area at which the IDOL will take a close look. The critical thing that employers must recognize is that tips must be a recognized form of compensation for the employee, such as, for example, a waitress.

In terms of overtime, during an audit the IDOL is checking to make sure that if an employee worked over 40 hours a week, that the employee was paid time and a half for those hours over 40 worked by the employee. The primary issue usually involved in an overtime dispute is whether a given employee is exempt from receiving overtime compensation, particularly when a given employee is paid a salary as opposed to being paid on an hourly basis. Unfortunately, there is no hard and fast rule to determine which employees can be exempted from receiving overtime compensation – it is dealt with on a case by case basis. Therefore, it is critical that a given employee’s entitlement to overtime be determined prior to hiring them, as opposed to trying to later prove they are exempt when the IDOL performs an audit.