On February 19, 2019, Illinois Governor J.B. Pritzker officially signed a bill that will raise the minimum wage in Illinois to $15 by 2025. The state’s current minimum wage is $8.25, a level that has remained stagnant since July 2010.

The raise will be phased in over the next six years, as follows:

January 1, 2020:      $9.25
July 1, 2020:            $10.00
January 1, 2021:     $11.00
January 1, 2022:     $12.00
January 1, 2023:     $13.00
January 1, 2024:     $14.00
January 1, 2025:     $15.00

As currently scheduled, the new law will not directly affect employees within Chicago’s city limits until 2023, when the state’s minimum wage will match the city’s $13 minimum wage. Likewise, Cook County employers outside of Chicago will not be impacted until 2021, when the state reaches the County’s $11 mark.

While Illinois employer can still pay employees under 18 years old less than older employees, even younger workers will be getting raises. Beginning January 1, 2020, an employee under 18 years old who works 650 hours or less per year must be paid $8.00, which increases to $8.50 on January 1, 2021, $9.25 on January 1, 2022, $10.50 on January 1, 2023, $12.00 on January 1, 2024, and $13.00 on January 1, 2025.  Teenage employees who work more than 650 hours per year must be paid the same as adults.

The new law does provide some reprieve for smaller businesses, as it allows employers with 50 or fewer full-time employees to claim a tax credit for 25 percent of the additional wages in 2020. The tax credit then phases out over the next several years.

The law does not change the current “tip credit” provision, which permits employers to pay tipped employees, such as bartenders and waiters, only 40 percent of the minimum wage. While the percentage remains at 40 percent, employers – especially those in the restaurant industry – should be aware that the resulting “tip credit” pay will increase along with the minimum wage. Employers should also note that only the state “tip credit” sits at a set percentage, whereas both the Chicago and Cook County “tip credits” are tied to the Consumer Price Index. As such, Chicago and Cook County employers will need to continue monitoring compliance with their local rules.

The new legislature also beefs up the state’s enforcement provisions, as it authorizes the state to make random audits of employers to assess compliance, and it also increases the penalties for noncompliance.

Illinois employers must take steps now to analyze the legal and economic impact this minimum wage increase will have on their business.  Should you have any questions regarding this increase, please contact your designated Saul Ewing Arnstein & Lehr LLP attorney.