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

By
Nancy E. Joerg, Esq.
Senior Attorney and Shareholder
Wessels Pautsch & Sherman P.C.
St. Charles, Illinois
(630) 377-1554
najoerg@stch.w-p.com
www.w-p.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 new "independent contractor" law and how to take defensive measures against it.

Under this harsh new 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 of the drafting of this article, the actual audits, investigations, and Court cases in enforcement of this new law have not begun. However, many construction and construction-related companies who use independent contractors are wisely taking precautionary measures so that when this new law is truly enforced these construction companies who use independent contractors won't be experiencing unnecessary liability.

As a result of the extreme anxiety among Illinois construction and construction-related companies who use independent contractors, my 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 new 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 new law, companies must keep records on their independent contractors for a full five (5) 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. Because the audits and investigations haven't begun, no one truly knows how detailed the Illinois Department of Labor will expect the records on the independent contractors to be. 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 new law are far more involved than that single issue.

Question 4. Which Agency actually is going to be enforcing this new 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 new law as well.

Question 5. What group sponsored this new law?

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

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

Answer: This new 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 new law?

Answer: Although it is true that this new law has a provision which says that bona fide corporations are not included under this new law, there still remains a great deal of anxiety about who and what will exactly be acceptable as a bona fide corporation. The new law merely hints at what kind of corporations might be considered bona fide, but as the audits and investigations and Court cases have not actually started yet, no one knows for sure what a bona fide corporation will and will not be under this new law.

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 new law for certain kinds of independent contractors?

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

Once the audits, investigations, and court cases begin, we will have a great deal more insight into how the law will be interpreted and enforced. Meanwhile, 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@stch.w-p.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.w-p.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@stch.w-p.com.

TELECONFERENCES: We are having a series of dynamic teleconferences presented by WP&S attorneys entitled "Illinois Employee Classification Act: How Construction and Construction-Related Companies (including trucking) Who Use Independent Contractor Can Protect Themselves!" In just one valuable hour OVER THE TELEPHONE, you and an unlimited number of your staff members will gain a deep understanding of the Illinois Employee Classification Act for only $95 which includes useful handouts. Check the Seminar listings on our website for our entire series of teleconferences on the Illinois Employee Classification Act. To register, call Jill Harenda in our Milwaukee office at (414) 291-0600.

NEW CD ABOUT EMPLOYEE CLASSIFICATION ACT: In this brand new CD, Wessels Pautsch & Sherman Senior Attorneys Nancy Joerg and Jeff Risch will present valuable information on how construction and construction-related companies (including trucking companies) can protect themselves from the frightening and radical new Illinois law called the "Employee Classification Act." This professionally recorded CD is $48. This is the most cost-effective and time efficient way for a company to understand the Illinois Employee Classification Act. Call Ashlei Vogel at 630-377-1554 to order any of our popular CDs.

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.