The Basics of Illinois Employment Law that Every Small Business Should Know

 Posted on January 19, 2026 in Business Law

Running a small business in Chicago means juggling countless responsibilities, and employment law might not always be at the top of your mind. However, understanding Illinois employment regulations is essential for protecting your business from lawsuits. It also helps create a workplace where employees feel respected and valued.

Even unintentional violations can result in significant penalties, damaged reputation, and employee turnover. Whether you are hiring your first employee or managing a growing team, our Chicago employment law attorney can help you make informed decisions and avoid common pitfalls in 2026.

What Are the Minimum Wage and Overtime Requirements in Illinois?

Illinois minimum wage is higher than the federal minimum wage and continues to increase on a scheduled path. In January 2026, the Chicago minimum wage is $16.60 per hour for most workers.

Overtime rules require most employees to receive time-and-a-half pay for any hours worked beyond 40 in a single workweek. Under the Illinois Minimum Wage Law, certain employees are exempt from overtime requirements, including executive, administrative, and professional workers who meet specific salary and duty tests.

However, simply giving someone a manager title does not automatically make them exempt. The position must genuinely involve management responsibilities and independent judgment.

Many small businesses make the mistake of misclassifying employees as exempt when they do not meet the legal requirements. This can lead to back pay claims for unpaid overtime covering several years. Before classifying any position as exempt, you should review the duties and salary level carefully or consult with an attorney.

What Types of Workplace Discrimination Are Prohibited in Illinois?

The Illinois Human Rights Act provides broad protections against workplace discrimination. Employers cannot discriminate based on:

• Race

• Color

• Religion

• Sex

• National origin

• Ancestry

• Age

• Marital status

• Disability

• Military status

• Sexual orientation

• Gender identity

• Pregnancy

• Unfavorable discharge from military service

These protections apply to all aspects of employment, including hiring, firing, promotions, pay, job assignments, training, benefits, and any other terms or conditions of employment. Sexual harassment and creating a hostile work environment based on protected characteristics are also prohibited.

Is Illinois an At-Will Employment State?

Illinois follows the at-will employment doctrine. This means employers can generally terminate employees for any reason or no reason at all, as long as the reason is not illegal. Similarly, employees can quit at any time without providing advance notice or explaining their reasons.

However, at-will employment has important limitations. You cannot fire someone for discriminatory reasons, in retaliation for reporting illegal activity, or in violation of an employment contract. If you have an employee handbook or offer letter that promises specific procedures before termination, you may have created contractual obligations that limit at-will employment.

Many employers accidentally create implied contracts by making statements like "we only fire people for good cause" or "your job is secure as long as you meet expectations." Be careful about the language you use in employee communications to preserve at-will status while still maintaining positive relationships with your team.

What Employee Leave Laws Apply to Illinois Small Businesses?

Illinois requires employers to provide various types of leave, and the requirements depend on your business size and location. Chicago has its own paid sick leave ordinance requiring most employers to provide paid time off for illness.

Under Illinois law, employers must provide unpaid leave for employees serving on jury duty and cannot retaliate against employees who take time off for jury service. Employers must also provide reasonable break time and a private location for nursing mothers to express breast milk.

The federal Family and Medical Leave Act requires employers with 50 or more employees to provide up to 12 weeks of unpaid leave for serious health conditions, childbirth, and certain family care situations. While this does not apply to many small businesses, some employees may still have leave rights under other laws or local ordinances.

What Records Do Illinois Employers Need to Keep?

Illinois law requires employers to keep detailed employment records for each employee. You must keep records showing hours worked, wages paid, deductions, and dates of employment. These records must be kept for at least three years after the employment ends.

You should also keep job applications, performance evaluations, and documentation related to disciplinary actions or terminations. If an employee ever files a complaint or lawsuit, having thorough records can be your best defense. On the other hand, informal notes containing discriminatory comments or inconsistent documentation can become evidence against you.

Call a Lakeview, Chicago Business Law Attorney Today

Illinois employment law does not have to be overwhelming. A River North small business lawyer can help you create compliant policies, review employment contracts, and handle disputes before they escalate.

Our LGBTQ-friendly firm offers free consultations and provides legal services in German, Persian, and French to serve Chicago's diverse business community. Call Cameron Law Center, LLC at 312-489-8638 today to schedule your free consultation and protect your small business.