The Public Employee Disability Act (“PEDA”) provides qualifying public employees with continued salary payments when they suffer disabling injuries in the line of duty. However, employees receiving PEDA benefits are prohibited from engaging in secondary employment, regardless of whether that employment is paid or unpaid. This framework raises an important question: What happens when a municipality discovers that an employee has been working another job for months while receiving PEDA benefits?
In City of Monmouth v. Thomas, 2026 IL App (4th) 250830 (October 13, 2026), the Illinois Appellate Court, Fourth District, held that PEDA provides an implied cause of action allowing public employers to seek recovery of benefits paid during prohibited secondary employment. The decision provides covered public employers with a potential avenue for recovering benefits paid before prohibited secondary employment is discovered.
- When Can Public Employers Recover PEDA Benefits?
Section 1(d) of PEDA expressly prohibits employees receiving disability benefits from engaging in other employment, “with or without monetary compensation.” Employees who violate this prohibition forfeit their continuing compensation “from the time such employment begins.” 5 ILCS 345/1(d). Although the statute expressly provides for forfeiture, it does not explicitly authorize public employers to bring lawsuits to recover benefits already paid.
In Monmouth, the City sought to recover $55,370.66 in PEDA benefits paid to employee Justin Thomas, alleging that Thomas had engaged in prohibited secondary employment beginning February 10, 2023. The City brought claims under PEDA and, alternatively, under a theory of unjust enrichment. The trial court dismissed the City's statutory claim, concluding that PEDA did not provide an implied cause of action and that unjust enrichment offered an adequate alternative remedy.
The appellate court reversed, finding that PEDA implicitly authorizes public employers to recover forfeited benefits. Applying the four-factor test for recognizing an implied statutory cause of action, the court determined that PEDA protects not only injured public employees, but also public employers from improper benefit payments. In reaching this conclusion, the court relied on City of Jacksonville v. Coop, 176 Ill. App. 3d 527 (1988), which recognized that the statute’s predecessor was intended to prevent employees from receiving duplicative compensation. Monmouth, ¶¶ 12–16.
The court also distinguished a statutory recovery claim from unjust enrichment. While unjust enrichment requires demonstrating that retaining a benefit violates principles of equity and good conscience, a PEDA claim focuses on whether prohibited secondary employment occurred and the amount of compensation paid during that period. Importantly, forfeiture begins when secondary employment commences, not when the employer discovers it. Thus, benefits paid before discovery may also be recoverable. Monmouth, ¶ 17.
The appellate court did not determine whether Thomas actually engaged in prohibited employment or the amount, if any, recoverable by the City. Rather, it reversed the dismissal and remanded the case for further proceedings. Monmouth, ¶¶ 18–20.
- Practical Considerations for Illinois Public Employers
Beyond establishing a potential avenue for recovering forfeited benefits, Monmouth underscores the importance of proactive PEDA administration. Municipalities and other covered public employers should consider the following measures:
- Communicate restrictions clearly. Provide employees with written notices explaining PEDA's prohibition on secondary employment, including uncompensated employment, and the potential forfeiture of benefits. Employers should recognize that PEDA's prohibition is distinct from an employee's medical restrictions. An employee's ability to perform another job does not necessarily mean that such employment is permissible while receiving PEDA benefits.
- Establish reporting procedures. Consider adopting procedures requiring employees to disclose existing outside employment and promptly report changes in employment activities during PEDA leave, consistent with applicable law, collective bargaining agreements, and employer policies.
- Maintain accurate records. Document benefit payments, employee acknowledgments, relevant communications, and reported employment activities. Because forfeiture begins when prohibited employment commences – not when the employer discovers it – accurate records may be critical to establishing the relevant period and calculating potential recovery.
- Investigate suspected violations carefully. Before seeking repayment, determine whether the activities constitute prohibited employment, establish when they began, and identify the benefits paid during the relevant period. Employers should avoid assuming that every outside activity constitutes employment under PEDA.
- Consult legal counsel before pursuing recovery. The decision recognizes a statutory cause of action, not an automatic entitlement to repayment. Any recovery effort should be supported by the particular facts and applicable law.
- Looking Ahead
Monmouth strengthens the remedies available to Illinois public employers when PEDA benefits are paid during prohibited secondary employment. However, the decision does not establish an automatic right to repayment. Employers should carefully evaluate the facts and applicable legal requirements before pursuing recovery.
Airdo Werwas, LLC assists municipalities and other public employers with employment policies, statutory leave administration, and workplace investigations. If you have questions about PEDA compliance or the implications of this decision, please contact Michael A. Airdo at mairdo@airdowerwas.com or Elizabeth M. Yanan at eyanan@airdowerwas.com.
