On July 28, 2023, Governor J.B. Pritzker signed into law House Bill No. 2068, “Transportation Benefits Program Act” (“Illinois Transit Law”), which requires employers to offer pre-tax transportation fringe benefits (“Transit Benefits”) to employees.
The Illinois Transit Law joins the growing trend of similar local and state pre-tax transportation fringe benefit laws already in effect in various cities and states, including New Jersey, New York City, Washington DC, San Francisco, and Seattle (See our previous blog post here and here).
Who is Subject to the Illinois Transit Law?
The Illinois Transit Law applies to employers[1] with at least 50 full-time employees who work an average of at least 35 hours per week, in a geographic area specified below at an address located within one mile of a fixed-route transit service location in all of the City of Chicago, as well as most of its suburbs, including those in Cook County, and 37 surrounding townships.[2]
Notably, the Illinois Transit Law does not change the terms of any existing collective bargaining agreement (CBA) in effect before January 1, 2024. The Transit Law also states that it is not intended to diminish the ability of unions to bargain a benefit more than the minimum benefits established under the Act, and that parties bargaining a new CBA after January 1, 2024, can waive the minimum benefit under the Act as long as such waiver is explicitly set forth in the agreement and the language is clear and unambiguous. It is, however, unclear whether the Act applies when the existing CBA is silent with respect to transit benefits.
What Transit Benefits Must Employers Offer?
Employers must allow employees to use pre-tax dollars, via payroll deduction, for the purchase of a transit pass, which includes any pass, token, fare card, voucher or similar item allowing someone to use public transit. Employers can also comply with the Illinois Transit Law by participating in a program offered by the Chicago Transit Authority or the Regional Transportation Authority.
The Illinois Transit Law also requires that the Transit Benefit be provided “at the maximum amount permitted by federal tax law.” For 2023, the maximum benefit levels allowable are $300 a month for transit passes. This number is adjusted for inflation each year and will increase by the time the Illinois Transit Law goes into effect. The 2024 contribution limit is expected to be published in October or November of 2023.
What Is the Deadline to Comply with the Illinois Transit Law?
The Law goes into effect January 1, 2024. Employees hired after January 1, 2024, will be eligible to participate in the Transit Benefit after 120 days of employment.
What are the Penalties for Noncompliance with the Illinois Transit Law?
Notably, as currently drafted, the Law does not provide a private cause of action against noncompliant employers or contain penalty provisions associated with employer noncompliance. Because the Law requires employers to provide some type of benefit, however, noncompliant employers may be subject to the enforcement mechanisms of other employment-related statutes such as the Illinois Wage Payment and Collection Act, IL ST CH 820 §115/1, et seq., which provides both public and private enforcement avenues against employers that improperly withhold wages under certain circumstances. Similarly, while the Law does not provide remedy for employees who have been discharged in retaliation for invoking the Law, such employees might attempt to point to the public policies underlying the Law to argue that a public-policy exception to the at-will employment doctrine. Accordingly, while the Law lacks a self-enforcing mechanisms, employers should be aware that employees attempt to borrow enforcement mechanisms from other avenues.
What Employers Should Do Now?
Employers that are subject to the Illinois Transit Law should consider taking preemptive steps to prepare for January 1, 2024 compliance. However, employers should consider the following:
- Take steps to establish a Transit Benefit program (such as exploring options with third-party vendors), and consider adopting a Transit Benefit program as soon as possible (rather than waiting until January 1, 2024);
- Update applicable employee benefit documentation to prepare for 2024 open enrollment;
- Prepare to respond to employee inquiries about the Illinois Transit Law;
- Communicate the Transit Benefit to all employees;
- Monitor for implementing rules and regulations on the administration and enforcement of the Illinois Transit Law; and
- Monitor for any potential noncompliance penalties associated with the Illinois Transit Law.
[1] Defined as any individual, partnership, association, corporation, limited liability company, government, non-profit organization, or business trust that directly or indirectly, or through an agent or any other person, employs or exercises control over wages, hours, or working conditions of an employee.
[2] Warren Township in Lake County; Grant Township in Lake County; Frankfort Township in Will County; Wheatland Township in Will County; Addison Township; Bloomingdale Township; York Township; Milton Township; Winfield Township; Downers Grove Township; Lisle Township; Naperville Township; Dundee Township; Elgin Township; St. Charles Township; Geneva Township; Batavia Township; Aurora Township; Zion Township; Benton Township; Waukegan Township; Avon Township; Libertyville Township; Shields Township; Vernon Township; West Deerfield Township; Deerfield Township; McHenry Township; Nunda Township; Algonquin Township; DuPage Township; Homer Township; Lockport Township; Plainfield Township; New Lenox Township; Joliet Township; and Troy Township
Blog Editors
Authors
Associate
Associate
Associate
Member of the Firm
