Seventh Circuit Court Of Appeals Explains That Only An “Agreement” Is Needed For A Wage Claim, Not A Contract

The Seventh Circuit U.S. Court of Appeals (which includes jurisdiction over Illinois) recently ruled in favor of a former executive sales leader who filed a lawsuit against his employer for $330,000 in unpaid incentive pay. This case, Das v. Tata Consultancy Services, has significant implications for employee rights in Illinois under the Illinois Wage Payment and Collection Act (Wage Act), which protects workers’ rights to receive earned wages.

The employer argued it wasn’t obligated to pay the bonus, citing that the incentive plan stated payments were “at the sole discretion of the Corporate Vice President” and thus did not create a binding contract. However, the Seventh Circuit disagreed, allowing the employee’s claim to proceed based on Illinois law.

The Wage Act broadly defines “wages” to include “any compensation owed an employee by an employer,” covering everything from wages to bonuses, whether earned on a time or task basis. For former employees, the Act includes “final compensation” such as salaries, bonuses, or other earned compensation, owed through any “employment contract or agreement.”

Illinois law doesn’t require a formal contract for an employee to pursue wages under the Wage Act—an “agreement,” as interpreted by the courts, is enough. In Illinois an “agreement” under the Wage Act only requires mutual understanding or assent, not a traditional contract with formalities. This distinction is critical because Illinois courts have found that even informal arrangements or company handbooks can constitute “agreements” regarding compensation, as long as both parties have shown mutual consent.

The Seventh Circuit Court in Das also referenced Illinois Department of Labor guidelines that include a broad definition of “agreement.” These guidelines explain that company policies, past practices, and handbooks—even with disclaimers about contracts—can establish binding agreements if they set expectations about pay.

Ultimately, the Seventh Circuit’s decision means that even when a company retains discretion over payments and disclaims and actual contract, it must still act in good faith and follow fair dealing principles. Because of this ruling, Das will now be able to bring his claim back to district court, where he can pursue the incentive compensation he argues was wrongfully withheld. This case underscores the strength of the Wage Act in protecting employee rights to earned compensation and limiting employer discretion in payment matters.

For plaintiffs pursuing wage claims, Das provides another avenue of Wage Act recovery, even if your employer disclaims an actual contract. If you are an employee in Illinois and have questions about your rights under the law, it is important to speak with an experienced employment law attorney who can help you understand your options and advocate on your behalf. Emery Law’s Ethan White is an employment attorney who regularly files charges and lawsuits for employees who have been treated illegally at work, including for unpaid or underpaid wage claims. Ethan has more over 15 years of pure litigation experience, primarily focusing on employee-side employment disputes, including discrimination, wage and hour, and retaliation.  If you are dealing with workplace issues, you need an employment lawyer who will fight for you. Reach out today for a free initial consultation.