Illinois Wage Payment and Collection Act Violation

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7^th Circuit Court of Appeals

Case Name: Adriel Osorio v. The Tile Shop, LLC,

Case No.: 18-2609

Officials: SYKES, BARRETT, and ST. EVE, Circuit Judges.

Focus: Illinois Wage Payment and Collection Act Violation

Anyone who has worked in a commissioned sales position knows that earnings are unpredictable. Commissions often fluctuate from one pay period to the next. The Tile Shop, LLC, a specialty retailer of ceramic and stone tile, uses a compensation system designed to smooth the earnings of its commissioned sales staff. The Tile Shop pays a semimonthly “draw” of $1,000 ($24,000 annually) even if a sales associate earns less than that amount in commissions during the pay period. The Tile Shop reconciles and recovers any shortfall between actual earned commissions and the $1,000 draw in subsequent pay periods, but only from commissions in excess of $1,000.

For ten months Adriel Osorio sold tile and related products for The Tile Shop, first in Illinois and then in New Mexico. His earnings reflected the ebb and flow of sales. When business was slow and his commissions totaled less than $1,000 in a pay period, The Tile Shop paid him the guaranteed $1,000 and reconciled the difference in later pay periods when his commissions exceeded $1,000. He quit in July 2014.

Months later Osorio filed this class action alleging that The Tile Shop’s “recoverable draw” system violates the Illinois Wage Payment and Collection Act (“IWPCA” or “the Act”) and its implementing regulations. As relevant here, the regulatory scheme prohibits employers from deducting more than 15% from an employee’s wages per paycheck as repayment for previous cash advances. Osorio’s suit claimed that The Tile Shop’s compensation system functions as a series of cash advances and his former employer deducted more than 15% of his wages at various points to recoup previous draw payments.

Ruling on cross-motions for summary judgment, the district judge held that The Tile Shop’s compensation system does not involve “cash advances,” so no violation of Illinois law occurred. We affirm, though on a different rationale. The Act prohibits “deductions by employers from wages or final compensation” unless specified conditions are met. 820 ILL. COMP. STAT. 115/9 (2018). The rules for repayment of cash advances are found in the regulations, but the threshold question is whether The Tile Shop’s draw reconciliations are “deductions” from wages or final compensation. They are not. The reconciliations determine the employee’s gross wages before tax withholding and other deductions are made.

Affirmed

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Derek A Hawkins is trademark corporate counsel for Harley-Davidson. Hawkins oversees the prosecution and maintenance of the Harley-Davidson’s international trademark portfolio in emerging markets.