July 2026; IL Appellate Court Clarifies Calculation of Litigation Costs in WC Lien Recovery; IL and Chicago Minimum Wage Increases Change Reserves on Wage Diff Claims and more

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Synopsis: Strong IL Appellate Court Ruling Outlining Appropriate Analysis of Recovery for IL WC Lien Claimants.

Editor’s comment: This is a strong and unanimous statement by this Appellate Court relating to IL WC lien recovery. It is a must-read for anyone handling such matters. From what I can tell, it appears to be an appellate-level fight over approximately $5,000!!

 

In Larsen v. Vaid, a police officer was injured in a 2017 on-duty automobile accident and received workers' compensation benefits totaling $399,930.16 from IRMA, the Intergovernmental Risk Management Association, her employer's workers' compensation administrator. Claimant Vaid later settled her civil action against the at-fault auto driver for $325,000.

 

IRMA intervened and politely refused to reduce their IL WC lien. After dismissal of the civil action, the trial court ordered IRMA to pay 100% of plaintiff's litigation costs or $21,344.88 plus the statutory 25% attorney fees equaling $81,250, leaving IRMA a net recovery of $222,405.12. IRMA appealed, arguing it should pay only 75% of costs because its mandatory 25% attorney fee obligation should first be netted out from the gross reimbursement before calculating its pro rata cost share.

 

The First District affirmed, applying de novo review to the question of statutory interpretation under section 5(b) of the Workers' Compensation Act. The court held the employer's obligation to pay a pro rata share of costs and its obligation to pay 25% attorney fees are two separate but independent obligations joined by the conjunctive 'and,' each operating independently. The phrase 'any reimbursement received by the employer' means the total reimbursement for compensation paid, without first subtracting attorney fees. The court relied heavily on the Illinois Supreme Court's analysis in Zuber v. Illinois Power Co. and declined to follow the Second District's contrary holding in Overlin v. Windmere Cove Partners, Inc., finding Overlin was non-binding and not supported by the IL WC Act’s plain language.

 

This ruling is critical for IL workers' compensation carriers and self-insured employers intervening in third-party tort actions. In short, when an IL employer recovers 100% of the third party settlement as reimbursement, it bears 100% of Plaintiff's litigation costs, regardless of its concurrent attorney fee obligation.

 

Things to note:

 

1. Illinois is a pro-plaintiff attorney State. IL Plaintiff attorneys don’t like to have to accept a 25% attorney fee and any reduction in their litigation costs. Someday soon that may be changed by our “Forever-Blue” Legislature and Governor.

 

2. Under section 5(b) of the Workers' Compensation Act, the phrase 'any reimbursement received by the employer' means the total reimbursement for compensation paid or to be paid, without subtracting the mandatory 25% attorney fee obligation before calculating the employer's pro rata share of litigation costs and expenses.

 

3. An employer's obligation to pay a pro rata share of litigation costs and its obligation to pay 25% attorney fees are two separate, independent obligations under section 5(b); the attorney fee obligation does not reduce the base amount used to calculate the cost-sharing obligation.

 

4. The use of 'gross amount' in the attorney fee clause of section 5(b) clarifies that the 25% fee must be calculated on total reimbursement before deducting litigation costs — it does not signal that costs must be calculated after first subtracting attorney fees.

 

5. The Second District's holding in Overlin v. Windmere Cove Partners, Inc., 325 Ill. App. 3d 75 (2001), which calculated costs based on net reimbursement after subtracting attorney fees, is neither binding on the First District nor supported by the plain language of section 5(b) of the IL WC Act or the Illinois Supreme Court's analysis in Zuber v. Illinois Power Co.

 

Under section 5(b) of the IL WC Act, an employer's pro rata cost share is based on gross reimbursement, not net after attorney fees are deducted. This Court rejects the argument that 'gross' modifier in attorney fee clause implicitly reduces the cost calculation base.

 

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Synopsis: IL and Chicago Statutory Minimum Wage(s) Continues their Inexorable Rise, Changing Reserves on Wage Loss Diff Claims

Editor’s comment: Please note the rising IL and Chicago minimum wage increase on July 1, 2026 dramatically changes the math on IL WC wage loss differential claims. The rising Illinois minimum wage can have a significant but nuanced effect on workers' compensation wage differential benefits under Section 8(d)(1) of the Illinois Workers' Compensation Act, particularly in light of recent appellate decisions such as Larsen v. Illinois Workers' Compensation Commission and Vaid v. Illinois Workers' Compensation Commission.

The basic IL WC wage differential formula

An employee who cannot return to their usual occupation because of a work injury may receive:

  • 66⅔% of the difference between:

  • What the worker would be earning in the pre-injury occupation; and

  • What the worker is earning—or is capable of earning—in suitable post-injury employment.

How increasing minimum wage changes the calculation

When Illinois raises the statutory minimum wage the wages available in many entry-level or restricted-duty jobs also rise. Therefore, the injured worker's post-injury earning capacity may increase, even if the worker has not actually received a raise.

For example:

  • Pre-injury earning capacity: $1,500/week

  • Current suitable employment at $15/hour: $600/week

  • Wage differential:

  • Difference = $900

  • Wage Diff Benefit @ 2/3 = $600/week

  • If the minimum wage rises and the same job now pays $17/hour:

  • Suitable earnings become approximately $680/week

  • Difference = $820

  • Wage differential at 2/3 = about $547/week

The increase in post-injury wages reduces the wage differential benefit.

Can the IL employer or its carrier automatically reduce benefits because minimum wage increased?

Not automatically. An insured or self-insured IL employer using a CRC—certified rehabilitation counselor--generally must show evidence that:

  • Suitable jobs actually exist;

  • Those jobs pay the higher wage being claimed; and

  • The injured worker is capable of performing them within permanent restrictions.

Simply pointing to a higher statutory minimum wage is usually insufficient by itself. Vocational testimony, labor market surveys, and evidence of actual available jobs are commonly used to establish earning capacity. Illinois courts consistently focus on the worker's realistic earning capacity, not hypothetical possibilities.

Practical implications

The effect varies depending on the worker's circumstances:

Low-wage workers: Most affected. A rising minimum wage can substantially reduce wage differential benefits because many suitable jobs are minimum-wage or near-minimum-wage positions.

Higher-wage workers: Usually less affected. If the worker earned $35–50 per hour before the injury, a $1 increase in the minimum wage has only a modest effect on the overall wage differential.

Workers already employed after the injury: If the worker actually receives wage increases due to minimum wage laws, those higher earnings generally reduce the ongoing wage differential because the benefit is based on the difference between pre-injury earning capacity and current earnings or earning capacity.

An unresolved legal issue

One of the emerging questions in Illinois workers' compensation law is whether statutory minimum wage increases alone justify modifying an existing wage differential award when the worker's physical condition has not changed.

Arguments include:

Employers: The worker's earning capacity has objectively increased because the labor market now pays more.

Employees: The increase reflects inflation and legislative policy, not an improvement in vocational capacity or physical ability.

Illinois appellate courts have not yet issued a definitive opinion holding that every statutory minimum wage increase automatically changes an existing wage differential award. Instead, the focus remains on the worker's actual earning capacity in suitable employment supported by the evidence.

Chicago Minimum Wage – Effective July 1, 2025

The City of Chicago adjusts its minimum wage every July 1, based on the Consumer Price Index or a 2.5% cap, per ordinance.

Starting on July 1, 2025, the new minimum wage rates in Chicago will be:

  • $16.60/hour for employers with 4 or more employees

  • The minimum wage in Chicago calculates to 40 hours times $16.60 or $664 a week.

  • $12.62/hour for tipped employees

A worker who has Chicago “within a reasonably stable labor market” around their home should be able to make that much at even sedentary/light and other jobs.

I would suggest that applies to any worker that lives within 50 miles of Chicago because lots of folks travel that far to get to work.

This new math started on July 1, 2025.

If your WC Defense attorney doesn’t know how this works or what your accurate reserves should be, in light of the new minimum wage, send a reply to consider better defense counsel.

If you aren’t sure how this works, please call me to discuss.

Be sure your teams and clients are prepared for these changes and compliant with the updated rates.

Illinois Statewide Minimum Wage

As a reminder, the statewide minimum wage increased to $15.00/hour on January 1, 2025. This rate applies across Illinois, outside of municipalities like Chicago that set their own higher thresholds.

In short, every worker in IL with any full-time job should be making $15.00 per hour at minimum.

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