Human Resource Blog

Insufficient Funds to Cover Paycheck in Illinois

Illinois Paychecks have bounced 3 times in a row. It has caused workers to be late with payments causing late fees and increased interest rates for some to go to 20-30% (credit cards). The small company owner says the employees just have to wait. Now he’s threatening a month layoff for everyone.

Under both federal and Illinois law, paying employees with a check that bounces, is the same as not paying employees. It’s a violation of the federal FLSA, the Fair Labor Standards Act or minimum wage law. That’s because paying an employee nothing, is paying less than the minimum wage.

Illinois also has a minimum wage law, which the employer is violating.

Put another way, the employer is not responsible for writing a paycheck. The employer is responsible for getting the money to the employee.  This includes actually having the funds in the bank to pay the employee.

Under the Illinois Payday Law, employers must by law pay workers on payday. An employer who issues worthless paychecks is not paying workers.

The employer is probably not responsible for employee’s bank fees or higher credit card interest, although a responsible employer would reimburse workers for them. However, a responsible employer wouldn’t write bad checks in the first place.

The best recommendation is for this employee to take two steps. The first step would be to report the employer to the Wage and Hour Division of the U.S. Department of Labor at   866-487-9243, or file an online claim for unpaid wages with IDOL, the Illinois Department of Labor.  If anyone can force this employer to meet payroll obligations, they can.

The second step would be for the employee to look for a new job, even if that involves quitting this job. This employee should ask herself, “Why do I want to work for someone who is not paying me?”

Continuing to work for the employer doesn’t make payment for past wages more likely. By law, the employer is already required to pay those wages. On the other hand, if the employee continues to work, and the business closes, she may lose 12 week’s of back pay instead of the current 3 weeks of back pay.

It’s easy for an employee to get caught in the trap of working for nothing and accepting the employer’s promises of future payment, but it’s a sinkhole. Once an employer’s cash flow problems are so severe that he or she can’t pay employees, and can’t borrow the money to pay employees, the business seldom recovers.

A responsible employer will lay off workers temporarily rather than have them perform work that the employer can’t pay for. This employer’s actions suggest that he or she is irresponsible.

Laying workers off for a month in this situation would not be a “threat” – it would be a kindness. The employees would be able to collect unemployment, and have time to look for jobs where they actually get paid.

Under unemployment regulations in Illinois and most states, a worker who quits “for good cause” can collect unemployment benefits. Not being paid is definitely a “good cause” for quitting a job. 

The employee should be aware that the employer’s promises of future payment probably mean nothing. If the employer goes bankrupt, there is a chance that the worker will never be paid for the hours that he or she has already put in.