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The Illinois Independent Contractor Law: The Illinois Employee Classification Act - Frequently Asked Questions and Answers


By
Nancy E. Joerg, Esq.
Senior Attorney and Shareholder
Wessels Sherman Joerg Liszka Laverty Seneczko P.C.
St. Charles, Illinois
(630) 377-1554
najoerg@wesselssherman.com
www.wesselssherman.com

The Illinois Employee Classification Act is causing a lot of buzz and angst among companies. As "ignorance of the law" is not a defense, Illinois companies are scurrying to learn all they can about this "independent contractor" law and how to take defensive measures against it.

Under this harsh law which became effective January 1, 2008, a company such as a construction company, a trucking company which hauls gravel or road building materials, a landscape company, and a wide variety of other construction related companies, can be challenged by the Illinois Department of Labor (IDOL) and "interested parties" on how the company classifies workers as independent contractors. The Illinois Employee Classification Act brings with it very harsh civil and even criminal penalties.

As a result of the extreme anxiety among Illinois construction and construction-related companies who use independent contractors, the phone has been literally "ringing off the hook" with questions from companies who want to better understand the Illinois Employee Classification Act and lower their liability in any way possible.

Therefore, this article is going to focus on frequently asked questions and answers so that readers can better grasp some of the basics concerning this new law:

Question 1. I hear there are recordkeeping provisions under this law. How long do I have to keep records on my independent contractors? (We are a quarry and use independent contractor truck drivers.)

Answer: Under this law, companies must keep records on their independent contractors for a full three (3) years..

Question 2. I just hire my independent contractors by the job. How can I keep records on days and hours that they work as required by the new law?

Answer: Do the best you can. Obviously, if you can develop a system under which you can record days and hours of work, you should do so.

Question 3. We are a flooring company but we do not have any employee installers. We only use independent contractor installers. Do we have liability under this new law?

Answer: Yes, you certainly do. Just because you may have a good argument that you and your independent contractors are in a different course of business, the independent contractor tests under this law are far more involved than that single issue.

Question 4. Which Agency is enforcing this law?

Answer: The Illinois Department of Labor, the same state agency that investigates Illinois companies for questions of overtime, minimum wage, etc. By the way, the same investigators who go out and investigate prevailing wage complaints will be investigating complaints under this law as well.

Question 5. What group sponsored this law?

Answer: The labor unions including the AFL-CIO, Governor Blagojevich, and other sympathetic pro-union political figures strongly supported this law.

Question 6. What is the whole point of this law?

Answer: This law is to punish Illinois construction or construction-related companies who use independent contractors but have actually misclassified them in some way and the independent contractors should really be classified as employees. The point is to discourage or frighten companies from using independent contractors, or at the very least from classifying them improperly.

Question 7. Is it true that if an independent contractor is incorporated, then the company using the incorporated independent contractor will have no potential liability under this law?

Answer: Although it is true that this law has a provision which says that bona fide corporations are not included under this law, there still remains a great deal of anxiety about who and what will exactly be acceptable as a bona fide corporation

TIP: Check on an annual basis that all the corporations you are relying upon are indeed in good standing. Be certain that you do this each and every year. It is very easy to look up an Illinois corporation and see whether it is in good standing. Just go to the Secretary of State's website at www.cyberdriveillinois.com.

Question 8. Are there any exemptions under this law for certain kinds of independent contractors?

Answer: "No," there are no actual exemptions under this law except for bona fide corporations.

Companies should be sure to have their independent contractor agreements carefully reviewed. They should review their websites with an eye to this new law. Any promotional materials regarding their independent contractors and any independent contractor relationships should be carefully evaluated as well.

Also, be aware that the Illinois Employee Classification Act requires you to post the IDOL's Notice about the Illinois Employee Classification Act (in English, Spanish, and Polish) in your workplace and at every worksite. Where it is not practicable to post a notice on the job site, you must give a copy of the Notice to each independent contractor.

TIP: Give each of your independent contractors a copy of the Notice for them to keep, and have them sign and date another copy for you to keep in each independent contractor's file to prove that the independent contractor received the Notice. Do this on a yearly basis.

FREE INFORMATION: Readers can contact Legal Assistant Tammy Nelson at 630-377-1554 or tanelson@wesselssherman.com for a free copy of the Illinois Employee Classification Act, the Proposed Rules, and the required Poster. Please also visit our website at www.wesselssherman.com.

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