Wednesday, December 23, 2015

Written Notice Required to Document Change in Pay!

November, 2015
By Nancy E. Joerg, Esq.

Another legal requirement for Illinois employers to follow! The Illinois Wage Payment and Collection Act now requires Illinois employers to provide a written notice to the employee of his/her rate of pay when the employee begins to work for an employer.

Additionally, if the employer changes the rate of pay at some point, a new written notice must be given to the employee. This Illinois law became effective August 22, 2014.

Below is an excerpt from Section 300.630 Records and Notice Requirements of the Illinois Wage Payment and Collection Act which states the following with regard to this requirement:
  • An employer is required to notify an employee in writing, at the time of hiring, of the rate of pay. An employee commencing work shall reflect mutual assent to the rate of pay.
  • An employer shall not change an agreement regarding the payment of wages and compensation without first notifying the employee prior to the effective date of the change. 
  • The employer shall place the arrangement in writing at the time of the change and present the change to the employee unless impossible to do so.
Because of extraordinary circumstances, the immediate placement in writing may not be able to be accomplished, but this inability to do so must be immediately rectified.

An employer cannot rely upon an employee's continued employment as affirmation that the employee consented to an adverse modification of the employee's rate of compensation when the employee was not notified in writing of the modification prior to its effective date.

However, when the employee continues to work after being notified of a change in writing, the employee shall be presumed to have assented to the change, absent evidence to the contrary. An employer may not retroactively adversely affect the wages earned by an employee.

IMPORTANT TIP: Have the employee sign and date a copy of the written notification of salary change, and keep the signed and dated copy in the employee’s personnel file.

Questions?: Contact Nancy Joerg at Wessels Sherman's St. Charles, Illinois office: (630) 377-1554 or email her at najoerg@wesselssherman.com.

Monday, November 30, 2015

Illinois Accountants Need to React to Stern Warnings from the IDES Regarding Future Fraud Penalties for Independent Contractor Misclassification

December, 2015



Illinois accountants should be acutely aware that one of the newest audit strategies of the increasingly aggressive Illinois Department of Employment Security (IDES) is to give Illinois companies (who are currently being audited) stern warnings of hefty fraud penalties that these companies may face in the future!

HEFTY FRAUD PENALTIES: The standard routine that IDES auditors follow is to unleash the topic of future 60% fraud penalties at the “exit interview.” 

The exit interview is the final communication that the IDES auditor has with the company being audited. The IDES auditor solemnly informs  the company (or its representative) that if the company persists in wrongly classifying these workers as independent contractors (because the company now presumably knows, due to the current IDES audit, what it must change in terms of classifying workers as independent contractors ), then the company faces a bleak future of possible massive fraud penalties (and possible personal liability) for its alleged INTENTIONAL WRONGDOING!

AGGRESSIVE FOLLOW-UP AUDITS: To make matters even more dangerous, IDES audit supervisors have very recently started assigning FOLLOW-UP AUDITS in great numbers! Hitting previously audited companies with follow-up audits is a brand new and worrying audit strategy by the IDES!

So, if you have a client who has been audited before by the IDES (and whose independent contractors were reclassified to employee status by the IDES auditor!), that client may well be selected now for a FOLLOW-UP AUDIT!

Illinois companies who face a FOLLOW-UP AUDIT should brace themselves for Determination and Assessments (audit tax bills) with 24% interest – and then ANOTHER 60% fraud penalty on top of that – if they are found to have intentionally MISCLASSIFIED their independent contractors.  

Explain to your clients that 60% fraud penalties are the devastating weapon that IDES auditors will unleash at these FOLLOW-UP AUDITS.

In view of the combination of 1) potential fraud penalties of 60% and 2) follow-up IDES audits of Illinois companies who have had prior misclassification difficulties with IDES auditors and hearing officers, it is very important to restructure and make strategic changes to the Independent Contractor relationship. 

Please contact me so that we can evaluate your clients’ current independent contractor usage and risks and also discuss ideas for damage control in the event the IDES contacts your clients for follow up audits.

My office number is 630-377-1554. My cell number is 630-440-1945. My email address is najoerg@wesselssherman.com. I look forward to hearing from you sometime soon.

FREE COPY OF REGULATIONS PERTAINING TO SECTION 1402 FRAUD PENALTY: Also, if any readers of this article want a copy of the Illinois Unemployment Insurance Act as it relates to fraud penalties (Section 1402) or wishes a free copy of the Regulations pertaining to the fraud penalty law, please contact my legal assistant Tammy Nelson (tanelson@wesselssherman.com or 630-377-1554). I will continue to keep accountants updated as more becomes known about the new and developing situation concerning fraud penalties and IDES audits in general. 

Now is the time to act to protect Illinois clients who use independent contractors. 

Friday, September 25, 2015

Warning for Illinois Accountants: Significant Change in IDES Audit Policy!

October 2013

Starting in early 2013, the Illinois Department of Employment Security (IDES) "increased the pain" on Illinois businesses using independent contractors. The IDES audit division modified their audit policy guidelines to be much more likely to result in multi-year audits.

Now, IDES auditors will audit an Illinois company for a second year if the first year being audited results in an assessment of only $2,000 or more.

In other words, if an Illinois company is audited by the IDES and the auditor finds that (for that initial audit year) the company has made enough "mistakes" to result in money owed to the IDES in the amount of $2,000 or more, then the IDES auditor will proceed to audit that company for another year. There used to be a much more forgiving $5,000 threshold, so now there is a much greater danger of multi-year audits.

In my opinion as an attorney who has handled many IDES audits over twenty-four years, this new audit policy is misguided in many ways. It is very damaging financially to small Illinois businesses that use independent contractors (if those independent contractors are found to be employees by the IDES auditor under the brutal test for independent contractor status). Keep in mind that the interest rate that the IDES inflicts on these harsh assessments is 24% per year (2% per month).

Accountants and others advising their Illinois clients should take immediate action when they find out that one of their clients is going to be audited by the Illinois Department of Employment Security. The best advice to clients and their advisors is to first "say nothing whatsoever" to the IDES auditor until experienced legal counsel is obtained (and the Company can understand its legal position/vulnerability and then can effectively plan its defense strategy).

The independent contractor test used by the IDES--Section 212 (A), (B), and (C)--must be thoroughly understood and discussed with the client before any conversation takes place between the company/accountant and the IDES auditor. Seemingly innocuous questions by the IDES auditor such as "what does the company do" and "what does the independent contractor do" are frighteningly important in terms of an accurate legal analysis under Section 212 (A), (B), and (C).

Much harm or much good can be done right at the beginning of an IDES audit, so immediate legal advice should be sought. A strategy for defending independent contractor status should be developed right at the beginning of the audit process, to avoid a multi-year IDES audit and to reduce potential reclassification liability.

If any readers of this e-mail would like a free copy of Section 212 (A), (B), and (C) of the Illinois Unemployment Insurance Act and its Regulations to better understand the severity of the IDES test for independent contractor status, please contact Legal Assistant Tammy Nelson at 630-377-1554 or via email at tanelson@wesselssherman.com.

Questions about lowering your clients' risk in the use of independent contractors or how best to handle an IDES audit? Call Attorney Nancy E. Joerg of Wessels Sherman's St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Wednesday, September 16, 2015

Significant Change Coming In U.S. Department of Labor Audits Involving Independent Contractors

July 2013

The 2014 budget for the U.S. Department of Labor was released on April 10, 2013, and it has troubling overtones for employers. By evaluating this very telling budget information, it becomes clear that the U.S. Department of Labor is unfortunately going to change the way it organizes its enforcement activities aimed at worker classification (i.e., whether certain workers are independent contractors or employees).

MORE INVESTIGATIONS BASED ON INDUSTRY: According to this 2014 budget information, the U.S. Department of Labor will increase the percentage of investigations that it does based upon industry rather than complaints.
 
In the past, the U.S. Department of Labor has based its independent contractor investigations largely on complaints made by disgruntled workers. Now, the U.S. Department of Labor will look at companies in industries with a high prevalence of worker misclassification.
 
CERTAIN INDUSTRIES MORE LIKELY TO HAVE WORKER MIS­CLASSIFICA­TION: The U.S. Department of Labor’s 2014 budget information notes that certain industries are more likely to have worker misclassification (some of the industries named in this regard are construction, janitorial, home health care, child care, transportation, warehousing, meat and poultry processing, personnel service, etc).
 
The bottom line here is that a company using independent contractors may not have any reported complaints from its workers, but that company may still be targeted by the U.S. Department of Labor for an audit.
COORDINATION WITH VARIOUS STATES: The U.S. Department of Labor continues to threaten that it is going to coordinate its efforts in investigating independent contractor status with various states. 
 
The Obama administration has been vocal about the fact that it wants to increase its investigation and enforcement of those businesses that use independent contractors and also increase its coordination with other federal and state agencies.
 
COMPANIES SHOULD HAVE INDEPENDENT CONTRACTOR RELATION­SHIPS CAREFULLY REVIEWED BY A KNOWLEDGEABLE PROFESSIONAL: Any company that uses independent contractors should realize that the climate throughout the United States is much more aggressive in terms of state and federal investigation. Therefore, those companies should be sure to have their websites, independent contractor agreements and documentation, and overall independent contractor relationships carefully reviewed by a knowledgeable professional.
 
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.

Friday, July 17, 2015

Review of Scalia/Ginsburg (The Opera)


July, 2015
By Nancy E. Joerg, Esq.

On Saturday, July 11, 2015, I attended the world premiere of the one act comic opera Scalia/Ginsburg and thought it would be fun to share this experience.

On Friday, July 10, 2015, I flew to Dulles airport in Washington D.C., rented a car, and found myself out in the extremely beautiful and very rural area of Virginia where the Castleton Music Festival is located. The Castleton Festival takes place each summer on a very picturesque 650 acre farm, surrounded by gorgeous rolling hills, the Shenandoah National Park, and the Blue Ridge Mountains.

The opera, Scalia/Ginsburg, is based on the opinions and dissents of two very vocal Supreme Court Justices, Antonin Scalia and Ruth Bader Ginsburg. Justice Scalia is the outspoken and fiery “originalist” conscience of the Supreme Court, and Justice Ginsburg is a passionate advocate for equal rights, especially gender equality. Yet they are buddies. They often travel together, attend operas together, ring in the New Year together, and very much appreciate each other as colleagues and friends.

Recent high profile Supreme Court cases, such as the marriage equality Obergefell decision, have brought the sharp differences in judicial philosophy among the Supreme Court Justices into especially keen public awareness.

THEME OF THE OPERA: The theme of Scalia/Ginsburg is that, even though Scalia and Ginsburg are sharply divided on treatment of many constitutional issues, these two Justices of the Supreme Court are united in their deep respect for the institution of the Supreme Court. There is a beautiful duet towards the end of the opera entitled “We are Different, We are One.” In that duet, Scalia (in a role sung by a feisty black-robed tenor) and Ginsburg (played by a charming black-robed soprano) sing about the tremendous devotion that the Justices of the Supreme Court share for the court. They sing together:

“Separate strands unite in friction
To protect our country’s core.
This, the strength of our nation,
Thus is our Court’s design:
We are kindred,
We are nine.”

GINSBURG AND WANG WERE IN ATTENDANCE: Prior to the opera’s world premiere that evening, Ruth Bader Ginsburg gave a fascinating one hour talk about the law as it appears in the plots of many operas. Castleton opera singers sang and acted out Ginsburg’s humorous examples of the intertwining law and the opera.

Later that evening, Ruth Bader Ginsburg and her son James Ginsburg (founder of Cedille Records in Chicago) attended the world premiere of Wang’s opera and sat two rows in front of me. Also, the composer (and librettist) of the opera, Derrick Wang, was present. The Castleton audience (containing, among others, many members of the Washington, D.C. legal community) warmly applauded both Ginsburg and Wang when they were introduced from the stage. Justice Scalia did not attend the premiere of Scalia/Ginsburg as he was in Rome.

COMPOSER DERRICK WANG: The composer, Derrick Wang, graduated from Harvard with a degree in music and then went on to Yale for a Masters in music. He then went to the University of Maryland Carey School of Law. While he was studying constitutional law there, he was struck by the operatic quality of Justice Scalia’s very dramatic and forceful opinions and dissents. Derrick Wang could hear a “rage aria” in his mind as he studied Scalia’s angry dissenting words. Derrick Wang also realized that the opinions and dissents of Justice Ruth Bader Ginsburg were very strong in a completely different way. Wang could hear a soprano singing her carefully crafted words.

CONTENT OF THE OPERA: Scalia/Ginsburg takes place in a chamber in the Supreme Court. There is just one set for the entire one act opera. There are only three singers: Scalia (a tenor), Ginsburg (a soprano), and a Commentator (bass-baritone) who is in the role of a celestial bureaucrat, sent to put Justice Scalia through three trials (to see if Scalia is guilty of “excessive dissenting”). The Commentator sings:

“I am the Commentator!
I come from a powerful administration,
And I am here to conduct an investigation
Into why you have managed to be so unrelenting
In spending so much of the past eight-and-twenty years in substantial, and
possibly excessive, dissenting.”

Both Scalia and Ginsburg are presented by Wang in a sympathetic light. It is not the intent of the opera to approve of one to the disadvantage of the other. On the contrary. Wang does a fine job of explaining the firmly held positions of both Scalia and Ginsburg.

The opera was charming, clever and amusing. Derrick Wang loaded Scalia/Ginsburg with musical jokes and clever references from Scalia’s and Ginsburg’s legal opinions and public remarks. Classic Scalia phrases such as “argle bargle” and “sheer applesauce” were inserted into the libretto at key points, to the delight and applause of the enthusiastic audience.

Scalia sang in utter frustration:

“The Justices are blind!
How can they possibly spout this—?
The Constitution says absolutely nothing about this,
This right that they’ve enshrined—
When did the document sprout this?
The Framers wrote and signed
Words that endured without this;
The Constitution says absolutely nothing about this!”

Scalia sings to his good friend and colleague, Ruth Bader Ginsburg, about her errors in interpreting the Constitution to include expanding rights:

“Oh, Ruth, can you read? You’re aware of the text,
Yet so proudly you’ve failed to derive its true meaning,
And never were so few
Rights made so numerous—
It’s almost humorous
What you construe!”

The music contains fragments from such classical music sources as Carmen, La Traviata, La Bohème, the Star Spangled Banner, and Mozart. This is an opera which will appeal to lawyers, Supreme Court watchers and opera lovers.

Ginsburg actually appears on the set of the opera by “crashing through a glass ceiling.” She is there to help Scalia pass his three trials as set by the Commentator.

Scalia sings a wonderful aria where he recalls his father as a man of great moral character who built stone stairs and was an immigrant who revered America and the fundamental and traditional values. Scalia sings:

“And so he taught me what he knew:
Follow the rules
Down to the letter:
Stay good and right and true,
For brains and brawn will sell without fail,
But character is never for sale.
His virtues,
His values,
They built stairs,
Lending me support
As I reached this Court,
Where I have judged and learned.”

The message of the opera is that the Supreme Court has justices who respect and care about each other at a deep and sincere level, even though they often have vastly different jurisprudential theories.

GINSBURG’S LATE HUSBAND: At the end of the opera was a nod to Justice Ginsburg’s late husband Marty Ginsburg who was a tax attorney. Marty had taught himself (early in their marriage) to cook elaborate French cuisine after he discovered his wife had no interest in cooking. (Currently there is a book sold in the Supreme Court gift shop entitled Chef Supreme which is a collection of Marty Ginsburg’s recipes.)

I highly recommend that anyone interested in the Supreme Court, the Constitution, and the human drama surrounding these vital Supreme Court decisions attend a showing of Scalia/Ginsburg if it is given again in the future (I hope it will be; I would go again).

Derrick Wang’s score for the opera includes many direct quotations from the judicial writings of both Scalia and Ginsburg. Printed versions of the enjoyable and witty libretto for the opera have detailed footnotes citing not just the source of the text but the musical allusions. For those readers who are interested in the libretto, it can be found online in The Columbia Journal of Law & The Arts at: http://lawandarts.org/articles/scaliaginsburg-a-gentle-parody-of-operatic-proportions/.

Questions or comments? Contact attorney Nancy Joerg, Managing Shareholder of the St. Charles office of Wessels Sherman at (630) 377-1554 or via email at najoerg@wesselssherman.com

Friday, March 13, 2015

The Difficult Job of Proving Misconduct to the Illinois Department of Employment Security (IDES) When a Truck Driver is Terminated for Poor Performance

March 2015
By Nancy E. Joerg, Esq.



As one would expect, sometimes a trucking company finds it best to terminate a truck driver for poor performance. This poor performance may involve very serious accidents or negligence (such as cross-dropping no lead gasoline into a premium tank, thereby contaminating that product). Sometimes, instead of properly loading thousands of gallons of no-lead and thousands of gallons of mid-grade, the driver carelessly loads thousands of gallons of no-lead and thousands of gallons of premium.

While there is of course usually no problem in terminating a driver who has had many accidents which cost the company time, money and damage to their reputation, our trucking clients are often surprised when they don’t win with the Illinois Department of Employment Security (IDES) - if the terminated truck driver files for unemployment insurance benefits with the IDES.

What many trucking clients don’t realize is that the IDES WILL give unemployment insurance benefits to drivers (even when they have had many serious accidents in the course of their employment) if the trucking company cannot successfully prove that these accidents were willful and deliberate on the part of the employee truck driver.

IDES DEFINITION OF MISCONDUCT: The IDES works under a strict legal definition of misconduct which requires that the trucking company prove that the incident was intentional, willful and deliberate. Mere negligence and terrible driving or a series of significant mistakes or accidents do not qualify as misconduct under the IDES definition.

Under Section 602A of the Illinois Unemployment Insurance Act, the definition of misconduct is:  “the deliberate and willful violation of a reasonable rule or policy of the employing unit, governing the individual’s behavior in performance of his work, provided such violation has harmed the employing unit or other employees or has been repeated by the individual despite a warning or other explicit instruction from the employing unit.” 

Section 602A requires deliberate and willful behavior and that behavior must have caused harm to the trucking company.  (These elements need to be proven by the trucking company in order for unemployment insurance benefits to be blocked.)

TIPS FOR TERMINATION LETTER: When you terminate a truck driver for a series of incidents in the course of their truck driving, indicate in the termination letter what reasonable rule or policy the truck driver intentionally failed to follow. This is a way to win with the IDES, by emphasizing the deliberate and willful nature of the driver’s behavior. For example, if the driver failed to double check the gasoline in a manner in which he was instructed by the trucking company, then that might be a winning strategy to block his claim for unemployment insurance benefits.

PROTESTING THE DRIVER’S CLAIM FOR UNEMPLOYMENT: Keep this in mind the next time you protest a truck driver’s claim for unemployment insurance benefits with the IDES…your goal is to prove to the IDES that the truck driver’s behavior was willful, deliberate and intentional. Merely pointing out what a bad driver that individual was is NOT a winning strategy. Accidents and negligence are (sadly) not enough.

For assistance with IDES audits, hearings, and independent contractor agreements (or for consultations on limiting your liability in the use of independent contractors), contact Attorney Nancy E. Joerg, who enjoys a nationwide reputation in working with 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.