The Illinois Wage Payment and Collection Act (IWPCA) fundamentally requires employers to pay wages to employees in accordance with the agreement or arrangement between the parties. A recent decision illustrates that it can’t be used as a cure-all in every situation in which a worker claims underpayment of wages.

Hail of a claim

If you’ve ever hailed a cab in Chicago, you’re familiar with paying the cabbie a fair based on the meter, plus a customary tip. You also may have noticed that each cab carries a “medallion,” which is the city-issued permit to operate the taxi.

Recently, a class of Chicago taxi drivers—who are classified as independent contractors by the cab companies—filed suit in federal court, claiming they were denied overtime and other pay in violation of the IWPCA.

According to the drivers, they must pay fees to the cab companies on a weekly or daily basis for the privilege of operating the taxis. These fees allegedly range from $500 to $800 per week. According to the suit, the taxi drivers receive no wages for their work.

Instead, they receive revenue in fares and tips from customers. The suit alleges that in addition to the fees owed to cab companies, the drivers must pay out-of-pocket expenses such as fuel, insurance, upkeep, and airport taxes. As a result of all those expenses, say the drivers, they often receive less than the minimum wage from what remains of their fares and tips.

Wrong way

According to the suit, taxi drivers in Chicago historically were classified as employees. But over the past decade, the cab companies have moved to an independent contractor model. The drivers contend, however, that the companies continue to exercise control over their working conditions.

Further—say the cabbies—they are entirely dependent on the cab companies because without a medallion, they can’t operate a taxi. In other words, the cab drivers claim they are actually employees.

The IWPCA allows for a claim by employees for wrongfully held compensation under a contract of employment or other agreement. For purposes of the Act, a worker need not establish a formal contract; a mere mutual assent will suffice.

Unlike the state minimum wage law and the federal Fair Labor Standards Act (FLSA), the IWPCA doesn’t provide for any independent right to payment of wages or benefits. Instead, it simply enforces the terms of an existing contract or agreement. In addition, the IWPCA prohibits many deductions from wages paid by employers.

Dead end

According to the suit, the agreement between the drivers and cab companies was that the drivers would pay the owners for the right to drive their cabs and bear all operating expenses while accepting only fares and tips paid by customers as compensation. The cab drivers alleged that the cab companies violated the IWPCA by improperly requiring them to pay fees and all operating expenses, which they say resulted in substandard wages.

The problem for the cabbies was that the agreement in question didn’t provide for payment of any sort by the cab companies to the drivers. Accordingly, the cab companies asked the judge to dismiss the IWPCA claim on the grounds that the Act wasn’t implicated because the agreement didn’t provide for the payment of any wages.

To attempt to salvage the IWPCA claim, the drivers countered that the fares and tips they collected from customers constituted wages under the Act. Not so, said the court. Although the Act defines “wages” broadly to include virtually any compensation, it must be compensation owed “by an employer” under the agreement between the two parties.

Because the agreement in question called for no payments by the owners to the drivers and the drivers’ only compensation would be fares and tips from customers, no “wages” were owed under the IWPCA. Thus, even if the drivers could be deemed employees, they had no viable claim under the Act. Enger v. Chicago Carriage Cab Co., No. 14-cv-2117 (N.D. Ill., Dec. 29, 2014).

Traffic jam

This case illustrates that while the IWPCA broadly defines wages, it simply requires employers to pay employees the wages agreed on by the parties. It doesn’t require any minimum level of pay (that is addressed by the state minimum wage law and the FLSA).

Moreover, it doesn’t apply to true independent contractor relationships—an issue that wasn’t squarely addressed in this case. Since this decision, the cab drivers have filed an appeal to the U.S. 7th Circuit Court of Appeals—which covers Illinois, Indiana and Wisconsin. We’ll keep an eye on the case to see if the appeal provides the drivers a route to their desired destination.

This article was written by Steven L. Brenneman of Fox, Swibel, Levin & Carroll, LLP, and an editor of the Illinois Employment Law Letter. He can be reached at sbrenneman@fslc.com