New Developments Update


No. 114    Perspectives on Developments in the Law from The Sharp Law Firm, P.C.     May 2014

Employee Classification Act Amended, Sustained

            The Employee Classification Act (820 ILCS 185) has been amended to address the defects found in Bartlow v. Shannon, 399 Ill.App.3d 560 (5th Dist. 2010), and, as amended, has been sustained by the Illinois Supreme Court.  Bartlow v. Costigan, 2014 IL 115152.

            Effective January 1, this act was amended to require the Department of Labor to provide notice and to conduct formal investigative hearings (Pub. Act 98-106), steps that were not required in the original act.  See Sharp Thinking No. 11 (Aug. 2008); No. 38 (Oct. 2010).  See also No. 77 (Nov. 2012); No. 84 (Feb. 2013). 

            Reasoning that proceedings in Bartlow had not progressed beyond the investigative stage and that the amended act would apply to any further proceedings, the Supreme Court found that the plaintiffs were not challenging the act “as applied” to them, but were making only facial challenges to its constitutionality.  It found the procedural due process problems with the statute cured and rejected an argument that the act was impermissibly vague.  The special-legislation issue which we thought meritorious (see No. 11 (Aug. 2008)) was declared forfeited due to plaintiffs’ failure to brief it properly.

            The act sets considerably tougher standards for classification of workers as independent contractors in the construction industry than in other fields.

Future Compensation May Not Be “Final Compensation”

            Unpaid future compensation for the remainder of a terminated employment contract is not “final compensation” which must be promptly paid under the Illinois Wage Payment & Collection Act (820 ILCS 115) (“IWPCA”) where there is a question as to whether the employee was terminated for cause, a panel in the Appellate Court’s First District has held.

            Moreover, the panel came to that conclusion in Majmudar v. House of Spices (India), Inc., 2013 IL App (1st) 130292, even though the trial court had found that the plaintiff had been terminated without cause – a finding which was not reversed on appeal.  The court seemed to think that the terminated employee’s claim for breach of contract was a sufficient remedy, as it said the additional remedies under the IWPCA “would create an unfair burden on employers that may have a reasonable employment dispute with separated employees”.  

            The trial court had limited the contract remedy to two years of compensation, finding that plaintiff had not mitigated his damages by adequately seeking other work.  It appeared to think that this setoff would not have been available if it found the full contractual period of compensation due and owing by the 13th day after the end of the last active pay period, as required by the IWPCA.

            While Majmudar thus perhaps effected rough justice in the case before it, its standing as good law for other cases seems dubious.  It repeatedly distinguishes and rejects Illinois precedent – including Elsener v. Brown, 2013 IL App (2d) 120209, discussed in Sharp Thinking No. 103 (Nov. 2013) – on doubtful grounds, while selectively relying on foreign authority.

Income Withholding Act Strictly Construed

       The Income Withholding for Support Act, 750 ILCS 28, has again gone to the Illinois Supreme Court, but this time the results were more sympathetic for Illinois employers.

            Noting the “stiff statutory penalties” that the act imposes (we called them “Draconian” in Sharp Thinking No. 3 (Jan. 2008)), the Supreme Court held that a withholding notice under the act must include the employee’s Social Security number in order to compel a withholding duty.  In dicta, it went on to say that of the 12 requirements set forth in the act for a withholding notice, only the requirement of a signature could be missing if the notice were to be deemed “regular on its face” and entitled to enforcement.  Schultz v. Performance Lighting, Inc., 2013 IL 115738.

Dunning Letters On Time-Barred Debts Violate FDCPA

       The Fair Debt Collection Practices Act (15 U.S.C. §§ 1692 et seq.) (see Sharp Thinking Nos. 62-64 (April-May 2012) prohibits debt collectors from sending dunning letters on debts the enforcement of which is barred by statutes of limitations, the Seventh Circuit Court of Appeals has held.

            Ruling in McMahon v. LVNV Funding, LLC, 744 F.3d 1010 (7th Cir. 2014), the court said its rule applied regardless of whether the letter actually threatens litigation.  Noting that the test is the impact on an unsophisticated consumer, the court said “a debt collector violates the FDCPA when it misleads an unsophisticated consumer to believe a time-barred debt is legally enforceable, regardless of whether litigation is threatened.”  It rejected decisions in other circuits holding that a threat to sue is necessary to make the dunning letter actionable. 

Appellate Panel Discounts LVNV v. Trice

       LVNV Funding, LLC v. Trice, 2011 IL App (1st) 092773, holding that a judgment obtained by a collection agency in its own name without registering under the Collection Agency Act (225 ILCS 425) is void (see Sharp Thinking No. 65 (June 2012)), “as it currently stands does not sufficiently support” a claim that a law firm engaged inactionable activity by pursuing a claim on behalf of such an unregistered firm, a panel in the Appellate Court’s First District has ruled. 

       Gibbs v. Blitt & Gaines, P.C., 2014 IL App (1st) 123681, appears to rely both on the fact attorneys are statutorily exempt under the act and on subsequent proceedings in Trice which it thought deprived the original decision of considerable force.  (A later decision in Trice is currently on appeal to the Supreme Court.  No. 116128.)  The panel also rejected a claim that the law firm violated the FDCPA. 

                                                 -John T. Hundley,, 618-242-0246