Employee Handbook May Create An Enforceable Obligation To Pay Overtime Under Illinois Law



The IWPCA generally requires an employer to pay any compensation owed to employees pursuant to a “contract or agreement” between the parties. 820 ILCS 115/2. Courts have consistently held that the IWPCA does not provide an independent right to payment of wages or benefits, or payment of overtime wages; instead it only enforces the terms of an existing contract or agreement.  In Wharton, Chief Judge James Holderman held that the language in Comcast’s written handbook could potentially create an enforceable “agreement” to payment of certain wages, despite the disclaimer language.

This decision broadens a pre-existing split among other judges within the Northern District of Illinois. As explained by the court in Wharton, at least five judges in the District have held that disclaimer language in a handbook precludes the formation of an enforceable agreement under the IWPCA. Two other judges have held that handbook disclaimers, although preventing the creation of an enforceable contract, may be evidence of an agreement enforceable under the IWPCA.

In its ruling, the Wharton court focused on the legal distinction between a “contract” and an “agreement.”  Under Illinois law, a “contract” generally requires the exchange of promises to be enforceable, and an “agreement” requires mere “mutual assent” to terms. The IWPCA provides for enforcement of either an “agreement” or a “contract.” The court reasoned that compensation policies described in the handbook could be sufficient to create an enforceable “agreement” under the IWPCA to pay overtime wages even though the disclaimer language prevented the handbook from becoming a binding “contract.” 

In so holding, the court rejected Comcast’s argument that its decision would create a dis-incentive for employers to describe compensation policies in employee handbooks, reasoning that employers were legally obligated to communicate compensation policies to employees in any event and employers could avoid liability by ensuring that all handbooks and policies were up to date and reflected current practice.  

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Topics:  Employee Handbooks, Employment Contract, Over-Time



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