White Castle May Be on Hook for over $17 Billion as Employer in Illinois

White Castle May Be on Hook for over $17 Billion as Employer in Illinois

Tom Stilp JD, MBA/MM, LLM, MSC
In our article last month about Wage and Hour Compliance (In the Loop, Apr. 5, 2023), we outlined important employment record keeping rules under state and federal law.  The failure to have proof of accurate time records leads to big liability.

To address record keeping rules, many companies have turned to biometric time clocks.  For this edition of In the Loop, we will discuss a potentially devastating law that is catching many companies by surprise.

The Illinois Biometric Information Privacy Act (BIPA), 740 ILCS 14/1 et. seq., has taken center stage in massive employer liability lawsuits.  Despite its enactment 15 years ago, BIPA saw little litigation and was largely unknown.

All that has changed.  Under BIPA, Illinois is unique by allowing a right of a private attorney general, meaning that private attorneys, rather than the government, can file class action lawsuits on behalf of employees with huge class action claims.

In short, biometric information is simply a fancy term for retinal scans, fingerprints or facial recognition data. Used with employee time clocks to improve accurate record keeping, biometric information reflects use of technology in practice.

The problem is that many companies are unaware of the requirements of BIPA.  The Act provides for damages of $1,000 to $5,000 per violation, regardless of any actual damages.  740 ILCS 14/20.

A big question has been whether a violation occurs the very first time, and only time, there is biometric information taken from an employee, or whether there is a violation each and every time an employee logs in and out using a biometric time clock.

In Cothron v. White Castle, 2023 IL 128004, the Illinois Supreme Court recently decided a violation occurs each time a scan is taken from an employee.   Attorneys for White Castle argued that with a class of almost 10,000 employees,  damages could exceed $17 billion, an amount grossly disproportionate to any real harm. Although a majority of the Court believed trial judges would use discretion to fashion appropriate remedies to deter violations while not “destroying” a business (White Castle, at ¶42), three Justices noted in the dissenting opinion that the majority’s construction of BIPA will lead to absurd results.  White Castle, at ¶59.

Given the massive potential liability, the buzz in the insurance industry is that the Employment Practices Liability (EPL) will not provide coverage for violations of BIPA.  The insurance coverage issues have yet to be litigated.

Although there are ways to protect a company from BIPA violations, some companies are opting to scrap biometric time clocks all together, unfortunate in that biometric time clocks have been shown to provide accurate recordkeeping.

If your company has any questions about the use of biometric time clocks, and appropriate policies to implement protection against class action lawsuits, experienced counsel is recommended.  We have successfully litigated dozens of employment cases in state and federal courts.