What are the "Penalties" Under the Illinois Employee Classification Act?

By Nancy E. Joerg, Esq.

The Illinois Employee Classification Act (formerly House Bill 1795) is very punitive towards companies who are found to have misclassified their independent contractors!! It applies to construction and construction-related companies (including trucking companies) who use independent contractors in construction and construction related jobs. The law (heavily supported by unions) became effective January 1, 2008. It will usher in a blood bath for a large part of the Illinois business sector.

As used in this Act "penalties" encompass the following:

1. FIRST ILLINOIS DEPARTMENT OF LABOR (IDOL) AUDIT: An employer or entity that violates any of the provisions of this Act or any rule adopted under this Act shall be subject to a civil penalty not to exceed $1,500 for each violation found in the first audit by the IDOL.
2. ADDITIONAL IDOL AUDITS: Following a first audit, an employer or entity shall be subject to a civil penalty not to exceed $2,500 for each repeat violation found by the IDOL within a 5 year period.
3. VIOLATION FOR EACH PERSON FOR EACH DAY: For purposes of this Section, each violation of this Act for each person and for each day the violation continues shall constitute a separate and distinct violation.
4. AMOUNT OF PENALTY: In determining the amount of a penalty, the IDOL Director shall consider the appropriateness of the penalty to the employer or entity charged, upon the determination of the gravity of the violations. The amount of the penalty, when finally determined, may be recovered in a civil action filed in any circuit court by the IDOL Director, or a person aggrieved by a violation of this Act or any rule adopted under this Act.
5. BOUNTY HUNTER GETS 10%: In any civil action brought by an "interested party" (can be anyone!), the circuit court shall award the interested party 10% of the amount recovered. In such case, the remaining amount recovered shall be submitted to the IDOL Director. Any uncollected amount shall be subject to the provisions of the Illinois State Collection Act of 1986.
6. DEBARMENT FROM STATE CONTRACTS: For any second or subsequent violation determined by the IDOL which is within 5 years of an earlier violation, the IDOL shall add the employer or entity's name to a list to be posted on the IDOL's official website. Upon such notice, the Department shall notify the violating employer or entity. No state contract shall be awarded to an employer or entity appearing on the list until 4 years have elapsed from the date of the last violation.
7. WILLFUL VIOLATIONS: [DOUBLE VIOLATIONS]

• Whoever willfully violates any of the provisions of this Act or any rule adopted under this Act or whoever obstructs the IDOL Director, or his or her representatives, or any other person authorized to inspect places of employment under this Act shall be liable for penalties up to double the statutory amount. 
• PUNITIVE DAMAGES: Whoever willfully violates any of the provisions of this Act or any rule adopted under this Act shall be liable to the employee for punitive damages in an amount equal to the penalties assessed in subsection (a) of this Section.
• The penalty shall be imposed in cases in which an employer or entity's conduct is proven by a preponderance of the evidence to be willful. The penalty may be recovered in a civil action brought by the IDOL Director in any circuit court. In any such action, the IDOL Director shall be represented by the Attorney General. Any uncollected amount shall be subject to the provisions of the Illinois State Collection Act of 1986. 
• MISDEMEANOR/FELONY: An entity or employer that willfully violates any provision of this Act or any rule adopted under this Act commits a Class C misdemeanor. An entity or employer that commits a second or subsequent violation within a 5 year period commits a Class 4 felony.

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