Evaluating your Independent
Contractor Agreement
Under the Illinois
Employee Classification Act
(Formerly HB 1795 - Now Public Act 95-0026)

ecause this new law, the Illinois Employee Classification Act (formerly HB 1795 - now Public Act 95-0026), will become effective on January 1, 2008, the phone calls are coming fast and furious to our office. Construction companies; construction-related businesses such as landscaping, painting, welding, etc.; and trucking companies that pick up and deliver to construction sites, haul road building materials, etc. are all very nervous about this extraordinarily harsh new law.

Many callers to our law firm wonder if their independent contractor agreement with their various independent contractors is in compliance with this new law.

DOING A SELF-AUDIT: The first step in doing a "self-audit" of your independent contractor agreement is to study Section 10 of this new law. Section 10 defines when a worker in a construction or construction-related field, or a truck driver who has a connection to construction, is an independent contractor and when they are an employee under this new law. If a construction worker or truck driver is found to be misclassified as an independent contractor under this new law, severe penalties can be levied against the company who has misclassified this worker. Therefore, it is important to do everything possible to comply with the strict, rigid, and punitive provisions of this new law.

YOUR AGREEMENT SHOULD NOT CONFLICT WITH SECTION 10: The next step in doing a self-audit of your independent contractor agreement is to carefully read over your independent contractor agreement word for word and line by line and make sure nothing conflicts with Section 10.

TWO TESTS: Section 10 contains two tests - one is a three-part test and the other is a twelve-part test.

If an independent contractor meets all three parts of the three-part test, that independent contractor is properly classified as an independent contractor for purposes of the Illinois Employee Classification Act.

If an alleged independent contractor cannot meet all three parts of the three-part test of Section 10, there is still a hope-if the alleged independent contractor can pass the twelve-part test of Section 10, then the alleged independent contractor would be found to be properly classified under the Illinois Employee Classification Act.

IF ANYTHING CONFLICTS WITH THE FACTORS, CHANGE YOUR AGREEMENT AND THE WAY YOU INTERACT WITH THE INDEPENDENT CONTRACTORS TO ENSURE CONSISTENCY WITH SECTION 10: If there is anything in your independent contractor agreement which conflicts with any of the factors of Section 10, consider changing your independent contractor agreement, and, if necessary, the way you interact with your independent contractors on an ongoing basis.

For example, Section 10 says that the alleged independent contractor must obtain and pay for all licenses and permits. The words of your independent contractor agreement should be consistent with that factor. Additionally, the way you actually operate with the independent contractor should be consistent with that factor.

In order to properly conduct this self-audit, it is always a good idea to work with an attorney who is deeply involved with this new law and is very experienced in the independent contractor issue in general.

FREE INFORMATION: Readers can contact Legal Assistant Tammy Nelson at 630-377-1554 or tanelson@stch.w-p.com for a free copy of the Illinois Employee Classification Act. Readers should be alert that soon the Illinois Department of Labor (IDOL) may issue Regulations to interpret the Illinois Employee Classification Act. Keep your eye on the Wessels Pautsch & Sherman P.C. website (http://www.w-p.com/) where we will have frequent updates and articles about the Illinois Employee Classification Act.

If you have any questions about the Illinois Employee Classification Act, contact Senior Attorney and Shareholder Nancy Joerg at 630-377-1554 or najoerg@stch.w-p.com.

Biographical Information for Nancy E. Joerg

Nancy E. Joerg is a senior attorney and shareholder at Wessels Pautsch & Sherman P.C., a labor and employment law firm concentrating exclusively in the representation of management. Wessels Pautsch & Sherman P.C. maintains offices in St. Charles and Chicago, Illinois; Milwaukee, Wisconsin; Davenport, Iowa; Minneapolis, Minnesota; and Indianapolis, Indiana. (Ms. Joerg can be reached at the St. Charles, Illinois office at 630-377-1554.)

Ms. Joerg defends trucking, construction, and many kinds of companies in audits and hearings before various state agencies (including the Illinois Department of Employment Security and the Illinois Department of Labor) on the issue of independent contractor status and other issues of employment law. She is deeply involved in consulting with construction and trucking companies who are concerned about the Illinois Employee Classification Act. Ms. Joerg reviews and drafts IDES owner-operator leases, independent contractor agreements, and employee handbooks. Ms. Joerg also defends companies before the EEOC and the IDHR as to discrimination cases of all kinds.