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Valuable Tips for Illinois Trucking Companies Who Are Being Audited for Their Independent Contractor Owner-Operators by the IDES

September 2013

By: Nancy E. Joerg, Esq.

When Illinois trucking companies find out that they are going to be audited by the Illinois Department of Employment Security (IDES), they usually are overwhelmed - and don't know where to even begin in their preparation for their initial meeting with the IDES auditor.

The purpose of this article is to give some helpful advice to Illinois trucking companies who are suddenly faced with an IDES audit.

STRICT SIX-PART TEST: The best way to understand what will happen in an IDES audit of your Illinois trucking company is to actually look at the definition of Independent Contractor Owner-Operator under the Section of the Illinois Unemployment Insurance Act which lays out the six part independent contractor test - Section 212.1.

Looking over Section 212.1, it becomes apparent that the six part test is strict. Unless the Illinois trucking company being audited passes all six parts for a particular independent contractor owner-operator, the IDES auditor will reclassify that particular owner-operator to employee status (and then the Illinois trucking company will owe back unemployment insurance contributions/taxes to the IDES).

If a company has many independent contractor owner-operators at risk of being reclassified to employee status upon IDES audit, the potential liability for that Illinois trucking company can become quite high (one of my clients was recently hit with an IDES assessment because of an audit and a reclassification; the total amount came to $154,000 for a three year audit).

It is always best to completely understand the law you are going to be audited under. Therefore, I highly recommend that any Illinois trucking company who is going to be audited by the IDES carefully study and understand the six part test of Section 212.1.

WORKER RELATIONSHIP QUESTIONNAIRE: After you have studied the six part test, then fill out the IDES Worker Relationship Questionnaire for trucking companies (the Questionnaire that IDES auditors use when auditing a trucking company). The IDES audit questionnaire is entitled "Worker Relationship Questionnaire: Owner-Operator of Trucks."

The language used in the Questionnaire is very awkward and complicated. It is certainly not "plain English". Therefore, I find that many clients need me to actually interpret for them what the convoluted English means!!

An example of the hard to understand language in this Questionnaire is Question b 2): "Following the termination of the lease contract, was the driver able to perform the same or similar services for others, on whatever basis and whenever he or she chose, without incurring any liability to the company to which he or she was contracted?"

Many people say to me "What in the heck does that mean?!" Well, that particular question (b2) is simply asking "Was the independent contractor owner-operator under a non-compete agreement of any kind?"

Be aware that if you "fail" any part of the Questionnaire, that particular independent contractor owner-operator who is the subject of the Questionnaire may be reclassified to employee status by the IDES auditor - even if just one small part of the Questionnaire is the problem.

The real lesson of this article is that it is SO IMPORTANT to be totally prepared and knowledgeable before your trucking company is audited by the IDES. It is extremely important to understand the six part test of Section 212.1 and it is crucial to fill out the Worker Relationship Questionnaire for Owner-Operators before the IDES auditor actually hands you one to fill out "for real".

Have an experienced attorney both review the independent contractor agreement for owner-operators and your responses to the Questionnaire before submitting this information to the IDES auditor. There are many ways to "go wrong." It is better to know what your problems might be up front.

For assistance with IDES audits and hearings (or for consultations on limiting your liability in the use of independent contractors), contact Attorney Nancy E. Joerg, who enjoys a nationwide reputation in assisting companies who use Independent Contractors of all types. Nancy Joerg can be reached at Wessels Sherman's St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

If readers would like a free copy of Section 212.1 and the Questionnaire, please contact Legal Assistant Tammy Nelson at 630-377-1554 or via email at tanelson@wesselssherman.com.