Classifying Employees Under the Illinois Minimum Wage Law

 

Recently, an uptick in cases filed by volunteers claiming violations under the Fair Labor Standards Act[i] (“FLSA”) has called attention to an active area of employment law. In the rapidly evolving domain of employment law, businesses and organizations alike need to exercise care in the classification of their support staff. In particular, it is essential to correctly determine whether individuals on your staff are employees or volunteers of your company. Noncompliance with current state and federal employment laws can expose employers to costly penalties[ii] and damaging litigation.

In 2012, the Northern District of Illinois confronted this issue in Emanuel v. Rolling in the Dough, Inc.[iii] Rolling in the Dough, Inc. is a corporation that operated several Domino’s Pizza franchises in the Chicago area. Plaintiff, Kim Emanuel, alleged that she worked at one of the locations for nearly two years. Ms. Emanuel claimed that she assisted her significant other with managing the operations of the store on a daily basis. She contended that she was a store employee and fit the definition of employee under FLSA,[iv]and as such, should be entitled to compensation under the Illinois Minimum Wage Law (“IMWL”). To determine whether she was an employee, the court looked at the totality of the circumstances when determining whether an individual is an “employee” under the FLSA. This is known as the “economic reality test” and consists of six (6) factors:[v]

  1. The nature and degree of the alleged employer’s control as to the manner in which the work is to be performed;

  2. The alleged employee’s opportunity for profit or loss depending upon his managerial skill;

  3. The alleged employee’s investment in equipment or materials required for his task, or his employment of workers;

  4. Whether the service rendered requires a special skill;

  5. The degree of permanency and duration of the working relationship; and

  6. The extent to which the service rendered is an integral part of the alleged employer’s business.

It was undisputed that Defendant, Kenneth Lindeman, informed Ms. Emanuel that her talents would be better used elsewhere and that Domino’s nepotism policy prevented him from hiring her. Further, she never completed any employment documents, such as IRS forms or direct deposit information. The lack of any compensation agreement, coupled with Lindeman’s unquestionable refusal to pay or bring Emanuel on as an employee allowed the court to determine that no employment relationship had been established between Emanuel and Rolling in the Dough, LLC. She was not entitled to compensation under the IMWL because she was not considered an employee for purposes of the FLSA. Rather, the court determined that she was a volunteer.

The Illinois Department of Labor follows precedent established by the FLSA and enacted the IMWL,[vi] which defines a volunteer as “a person who works for an employer under no contract of hire, expressed or implied, and with no promise of compensation, other than reimbursement for expenses as part of the conditions for work.”[vii] Further, a volunteer is not to be considered an employee for purposes under the IMWL.

Looking at the totality of the circumstances, it would be wise for an employer who is contemplating utilizing volunteer employees to expressly disclaim, in writing, that volunteers will not be promised compensation and they are under no contract for hire. Volunteers are valuable assets and cost-effective tools for organizations to employ. However, they can present serious financial headaches if misclassified as an employee.

 

[i] 29 U.S.C. §201.

[ii] Tom Starner, “EEOC, Labor Dept. raising non-compliance penalties later this year”, (2016) available at, http://www.hrdive.com/news/eeoc-labor-dept-raising-non-compliance-penalties-later-this-year/422329/.

[iii] Emanuel v. Rolling in the Dough, Inc., 2012 WL 5878385 (N.D. Ill. 2012).

[iv] 29 U.S.C. §203(e)(1).

[v] Sec'y of Labor, U.S. Dep't of Labor v. Lauritzen, 835 F.2d 1529, 1534 (7th Cir. 1987).

[vi] 820 ILCS §105/1.

[vii] 56 Ill. Adm. Code §210.110.