Chicago Gets Its Fair Workweek: City Council Unanimously Passes Ordinance

By Bill Pokorny and Caroline Kane - Franczek P.C.

July 25, 2019

City Council approved the Chicago Fair Workweek Ordinance by unanimous vote on July 24, 2019. This past May marked the third time such an ordinance was proposed in City Council, and the language ultimately approved by City Council changed substantially from the original proposal in order to garner support from both labor and business interests. The ordinance will take effect on July 1, 2020.

Covered Industries
The ordinance applies only to employers in the following seven Covered Industries as defined within the ordinance:

Building Services
The care and maintenance of property including, but not limited to, janitorial services, building maintenance services, and private security services, but excluding on-duty police officers or other governmental officials performing their official duties.

Healthcare
Health care services or long-term care services covered by the state licensing acts for hospitals, nursing homes, mental health rehabilitation facilities, assisted living and shared housing, life care facilities, ambulatory surgical treatment centers, or freestanding emergency centers, as well as dialysis facilities. 

Hotel
Includes inns, hotels, motels or other places, where sleeping or rooming accommodations are furnished and in which 7 or more sleeping rooms are used or maintained for the accommodation of guests. The term “hotel” does not include single-room occupancy buildings, bed-and-breakfast establishments, vacation rentals, or shared housing units.

Manufacturing
Production of tangible goods for use from raw or prepared materials by giving the materials new forms, qualities, properties, or combinations, whether by hand or by machines.

Restaurant
Any business licensed to serve food in the City that also has at least 30 locations globally and at least 250 employees in the aggregate. The term “restaurant” does not include businesses limited to 3 or fewer locations in the City that are owned by one employer and operating under a sole franchise.

Retail
Sale of tangible products to end users that are primarily for personal, household, or family purposes, including, but not limited to, appliances, clothing, electronics, groceries and household items.

Warehouse Services
The storage of goods, wares, or commodities for hire or compensation, and in connection with this operation, may include the loading, packing, sorting, stacking, wrapping, distribution, and delivery of those goods.

While the version of the ordinance proposed in May 2019 also included day and temporary labor service agencies, airports, and childcare in the list of covered industries, those were removed from the final version approved by City Council.

Other Employer Coverage Requirements
In order to be covered by the ordinance, an employer in a Covered Industry must also employ 100 or more employees globally, or in the case of not-for-profits and restaurants, 250 or more employees. The ordinance therefore does not apply to employers with fewer than 100 employees, or to non-profits or restaurants with fewer than 250 employees. Additionally, employers are covered only if they employ 50 or more “Covered Employees,” as defined below. This means that employers with fewer than 50 employees working in one or more of the Covered Industries in the City of Chicago will not be covered by the ordinance.

Covered Employees
The reach of the new ordinance is also limited to “Covered Employees.” An individual is a Covered Employee if:

    • The individual is either an employee, as opposed to an independent contractor, as defined by relevant IRS guidance, or a worker employed by day and temporary labor service agencies (as defined by state law) who has been assigned to an employer for at least 420 hours within an 18-month period;
    • The individual earns $50,000 per year or less as a salaried employee, or $26.00 or less per hour (adjusted annually based on the annual increase in CPI);
    • The individual spends the majority of their time working within the City of Chicago; and
    • The individual performs the majority of their work in a Covered Industry.

For hotels, the ordinance specifies that set service fees that an employee earns are included in the calculation of the hourly wage threshold for coverage under the act. Additionally, an employee who staffs a Banquet Event and receives a set gratuity for that work is not deemed a Covered Employee for purposes of that event. A “Banquet Event” is defined as a catered event staffed by employees dedicated to the event, held at a hotel, and scheduled at the time the customer provides a deposit in connection with a specific date.

Application to Collective Bargaining Agreements
The ordinance does not require any changes to the terms of any collective bargaining agreements currently in effect. Employers and unions may also waive the requirements of the ordinance in future collective bargaining agreements, but must do so “explicitly” in “clear and unambiguous terms.”  The final version of the ordinance omits language included in the original proposed version exempting union employees who work in the construction industry, for public utilities, telecommunications carriers or their affiliates, or for an employer that competes with the U.S. Postal Service in providing warehouse services.

Advance Notification of Schedules
The final version of the ordinance requires employers to provide newly hired Covered Employees with a good faith estimate of projected work schedules for the first 90 days of employment. Thereafter, as in the original proposal, employers must initially notify employees of their work schedules at least 10 days in advance.  Beginning July 1, 2022, the notice period will increase to 14 days. An employer may change a Covered Employee’s work schedule after it is posted without penalty before these deadlines. Employees may decline to work any additional hours that are scheduled with less than 10 days in advance or 14 days as of July 1, 2022.

Employees who self-schedule or work at a venue that regularly hosts ticketed events will not be subject to advance notification of schedules, and neither will their employers. “Ticketed Event” is defined within the ordinance to mean a sporting, entertainment, civil, charitable or other event held at a venue with a capacity of at least 5,000 people that requires a ticket for admission.

Predictability Pay for Schedule Changes
If an employer changes a Covered Employee’s schedule within the 10- or 14-day notice period, the employer will have to pay the worker one hour of predictability pay for each shift in which the employer changes at the employee’s “regular rate,” as defined by the Fair Labor Standards Act. If the employer cancels or reduces hours with less than 24 hours’ notice (including while the employee is working on a shift), the employer will have to pay the worker 50% of the Covered Employee’s regular rate of pay per hour for any hours not worked as a result.

These requirements do not apply under certain circumstances, such as if there is an act of nature that prevents operations from continuing, if there are unforeseen circumstances, or if employees mutually agree to trade shifts.  The employer can also avoid “predictability pay” when an employee agrees to a proposed schedule change in writing or if the employee requests the shift change.  The final version of the ordinance adds language excusing manufacturing and health care employers from providing predictability pay in certain circumstances, such as when production is delayed due to lack of materials or customer request, or when “patient care needs require specialized skills through the completion of a procedure.” The ordinance also provides an exemption for changes outside the control of an employer resulting from the cancellation, rescheduling, postponement, increase in attendance by 20% or more, or increase in duration of a “Ticketed Event.”

Offer of Additional Work to Existing Employees
The ordinance requires employers seeking to fill additional shifts to first offer those shifts to existing Covered Employees who are qualified to do the work. If the shifts are not filled, they must then be offered to temporary or seasonal workers who have worked on behalf of the Employer for two or more weeks. Employers are not required to offer additional shifts to employees when doing so would make them eligible for overtime pay.

In contrast to the version of the ordinance proposed in May, the final ordinance does away with language requiring employers to post additional shifts for at least 24 hours before hiring new workers or bringing in additional temporary labor. Further, the final ordinance does not include language from the prior version expressly prohibiting employers from distributing hours in a manner intended to avoid application of the Patient Protection and Affordable Care Act. However, the ordinance does provide that “whenever practicable, the Employer shall first offer those hours to part-time Covered Employees.” 

Right to Rest
The ordinance includes a “right to rest” provision, entitling Covered Employees to decline hours that occur within 10 hours of the end of a previous day’s shift. The version of the ordinance proposed in May would have required employers to pay employees who consent to work such shifts 1.5 times their regular hourly rate of pay, unless the employee consents in writing to waive the premium pay. The final ordinance provides for pay at 1.25 times the regular rate of pay for shifts beginning less than 10 hours after the end of a prior day’s shift, but does not permit employees to waive this premium pay.

Right to Request Schedule Changes and Flexible Work Arrangements
The ordinance requires employers to allow employees to request changes to their work schedules before starting employment or at any time thereafter. This includes asking for additional shifts or hours, changes in days of work, starting and ending times for work, permission to exchange shifts with other employees, limitations on availability, part-time employment, job-sharing arrangements, reductions or changes in work duties, or partial year employment. When a Covered Employee requests a schedule change before starting employment, the employer must consider the request and respond to it in writing within 3 days. The ordinance does not expressly require employers to consider or respond to requests made after the start of employment, nor does it require employers to grant requested schedule changes.

Recordkeeping
Employers are required to keep all records relating to the requirements of the ordinance, including payment records, schedules, written offers to change schedules, consent to work forms, and employee written responses for 3 years. The employer must provide employees with a copy of their records upon reasonable request. Employers will also be required to post a notice of employees’ rights under the ordinance, and to distribute the notice to employees.

Employee Notices
The ordinance requires all employers to post a notice, which will be published by the Commissioner of Business Affairs and Consumer Protection, in any workplace where a Covered Employee works. Additionally, employers will be required to provide “with the first paycheck subject to this Chapter” a notice advising each Covered Employee of their rights under the ordinance. This notice will also be published by the Commissioner.

Victims of Domestic Abuse and Sexual Violence
The ordinance allows employees who are victims of Domestic Violence or Sexual Violence (as defined by state law) to ask that their work schedules not be posted or transmitted to other employees. Such requests may be made orally, but employers may request a written statement from a Covered Employee to confirm their request. Such statements may be requested no more than once per calendar year.

Avoidance of Application
The ordinance now contains language stating that it is unlawful for an employer to avoid coverage under the ordinance by changing the regular rate of pay for employees, or interfering with, restraining, denying, or changing work schedules or hiring, rehiring, terminating or suspending employees. The scope and intent of this provision is not clear. For example, an employer might wish to increase an employee’s salary from $49,500 to $50,500 so that the employee would not be considered a Covered Employee under the ordinance. It remains to be seen whether such a change would be construed as a violation of this provision.

Potential Penalties for Violations
The Department of Business Affairs and Consumer Protection may investigate any possible violations and will have the authority to inspect workplaces. Employees will also maintain the right to bring a private action within 2 years from the date of the alleged violation.  The ordinance permits employees to file suit to enforce the ordinance. However, the final version of the ordinance now requires employees to file a complaint with the Department and exhaust their administrative remedies there before filing a lawsuit.

If an employer is not compliant with this ordinance, it will be subject to a fine of $1,000 for retaliatory action, and $300-$500 per employee whose rights were violated for each day that a violation occurred. If an employee pursues civil action and prevails, he or she will be entitled to compensation including lost predictability pay, litigation costs, expert witness fees, and reasonable attorneys’ fees.  The ordinance no longer contains language that would make an employer ineligible for City business as a result of noncompliance.

Moving Forward
Now that the ordinance has passed in City Council, employers must prepare for its implementation by July 1, 2020. (Safety net hospitals will have slightly longer, as the ordinance will take effect on January 1, 2021).  Specifically:

    • All employers operating in the City of Chicago should review the ordinance and consult with legal counsel to determine whether they may be Covered Employers.
    • Employers with fewer than 100 employees globally (not just in Chicago) will not be covered. However, employers should take care to determine whether any temporary employees or contractors should be included in their headcounts.
    • Covered Employers should start planning immediately to determine how they will implement the requirements of the ordinance for any Covered Employees in their organizations. This may require significant revisions to scheduling and employee communication procedures.
    • Covered Employers with union workforces should take account of the ordinance in their planning for any contract negotiations.
    • All employers should monitor additional guidance and developments, as the ordinance contains multiple terms and conditions that will require further analysis and clarification