Yes, the Illinois Employee Classification Act Complaints are Starting to Roll in!

By Nancy E. Joerg, Esq.


Clients are asking me if we have started receiving complaints from the Illinois Department of Labor relating to the harsh new Illinois law, the Employee Classification Act. Yes, we are starting to see these complaints coming in from the Illinois Department of Labor.

Under this new law, 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 either employees or independent contractors.
If the construction related trucking company who uses independent contractors is found in violation of the Illinois Employee Classification Act, the trucking company could be hit with substantial financial penalties, possible shut down of its business or job sites, and, most worrying to many, misdemeanor or felony criminal charges.

Below is the kind of wording we are seeing in these initial complaints:

Re: IDOL File No. 2008-###/Request for Records

Please be advised that the Illinois Department of Labor (IDOL) has received a complaint, alleging that you have violated Illinois' Employee Classification Act, 820 ILCS 185, by misclassifying one or more individuals performing construction services on your behalf in connection with re-roofing a house at 123 ABC Street, St. Charles, IL.

In connection with its investigation of this complaint, and pursuant to its authority under Section 25 of the Act, IDOL hereby requests that within fifteen (15) days you make available or provide copies to IDOL of all records in your power, possession or control relating to your business relationship with the individual(s) performing services, including but not limited to:

• Their names, addresses, phone numbers and Social Security numbers;
• Any/all written agreements or contracts you have with them;
• Any/all records of days/hours worked;
• Any/all payroll or payment records; and
• Any federal and state documents related to the individuals performing services.

Failure to comply with this request for records may result in the issuance of a subpoena to compel production of the requested information. Furthermore, failure to comply with a valid IDOL order may result in the imposition of civil and/or criminal penalties, as prescribed in the Act.

Also note that if there is any additional information you wish IDOL to consider in its investigation of this matter, please submit information in writing to IDOL within 15 days of this letter.

We urge all trucking companies who use independent contractors to seek legal counsel regarding their usage of independent contractors—not just with regard to the Illinois Employee Classification Act, but also in terms of the IRS, the Illinois Department of Employment Security (IDES), workers' compensation, etc. Don't wait until you are hit with a complaint or an audit. Get legal advice early on in the game.

This is the period in Illinois history when it is particularly important for construction and construction-related companies to really sit down, take the time, and lower liability in every way possible. Your independent contractor agreement must be carefully drafted to be consistent with the Illinois Employee Classification Act and any other independent contractor laws from other Agencies. It is a time to carefully assess independent contractor relationships, contracts, and practices.


CONSULTATION: If you have any questions about the Illinois Employee Classification Act and want to evaluate your company's liability (and discuss ways to protect your company in its use of independent contractors), contact Senior Attorney and Shareholder Nancy Joerg at 630-377-1554 or najoerg@wesselssherman.com.

What is "Construction" Under the Illinois Employee Classification Act?

By Nancy E. Joerg, Esq.

The Employee Classification Act (formerly House Bill 1795) is a frightening and radical Illinois law which went into effect January 1, 2008. It applies to construction and construction-related companies (including trucking companies) who use independent contractors in construction and construction related jobs. It is very punitive towards companies who are found to have misclassified its independent contractors!!

Many nervous clients understandably ask, "Exactly what is construction and am I considered a construction or construction-related company?" As used in this far-reaching Act, "construction" means:

1. any constructing;
2. any altering;
3. any reconstructing;
4. any repairing;
5. any rehabilitating;
6. any refinishing;
7. any refurbishing;
8. any remodeling;
9. any remediating;
10. any renovating;
11. any custom fabricating;
12. any maintenance;
13. any landscaping;
14. any improving;
15. any wrecking;
16. any painting;
17. any decorating,
18. any demolishing;
19. adding to or subtracting from any building, structure, highway, roadway, street, bridge, alley, sewer, ditch, sewage disposal plant, water works, parking facility, railroad, excavation or other structure, project, development, real property or improvement or to do any part thereof; and
20. construction shall also include moving construction-related materials on the job site to or from the job site.

 Note that certain trucking companies are classified as "construction" under this harsh law because of the final sentence: "Construction shall also include moving construction-related materials on the job site to or from the job site."

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.

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.

Warning to Illinois Companies About Employee Classification Act: New Danger!

August 2009
By: Nancy E. Joerg, Esq.


All Illinois companies who are in construction-related industries should be fully aware of the strict legal requirements of the Illinois Employee Classification Act, a brutal law (pushed through by several Unions) which went into effect on January 1, 2008. This terribly punishing law applies to a wide range of Illinois construction-related businesses (some trucking companies, building trades, landscaping, decorating, flooring, etc.).

The law requires covered companies to post special notices in English, Spanish, and Polish and keep specific records. The main thrust of the law is to hammer (severely!) those construction-related companies who "misclassify" independent contractors. Our law firm is currently representing clients who have been hit with assessments from the Illinois Department of Labor (IDOL), some in excess of $200,000.00!!! We are, of course, assisting our clients in fighting back.

Any Illinois businesses who are construction-related should seek immediate legal counsel. Even a small amount of legal assistance can be tremendously helpful should these businesses ever be targeted by the IDOL under this horrible (and powerful!!) new law.

A new danger under this law: Very recently, we have found that the IDOL may try to "fool" companies by sending them a Notice which asks for broad information and records pertaining to a substantial period of time, rather than one particular construction-related project. This approach by the IDOL is not proper, and it is excessively burdensome on the company. Do not answer these IDOL Notices under the Illinois Employee Classification Act without experienced legal counsel. You may expose yourself to over-broad liability. Remember, these IDOL assessments under this new law can be huge.

We recommend that all Illinois construction-related companies who use "1099 independent contractors", "subcontractors", "outside vendors", "casual labor", or any kind of "non-employees" seek preventative legal help at once. The IDOL (at the urging of some Unions) are using this new law to cripple, and in some cases almost destroy, Illinois construction-related companies who use independent contractors of all types.

Don't wait for the ax to fall. Learn everything you can about this law and protect yourselves and your business. There are many (relatively simple) ways to do this. Call Attorney Nancy E. Joerg to learn more about this extremely serious problem and how to coexist with it.

Questions? Call Attorney Nancy E. Joerg of Wessels Sherman's St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com. 

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

By: Nancy E. Joerg, Esq.


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.
 

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.

Strict Posting and Record Keeping Requirements Under the Illinois Employee Classification Act

March 2008
By Nancy E. Joerg, Esq.

In January 2008, the Illinois Department of Labor published its "Proposed Rules" for the Illinois Employee Classification Act. Under this law, 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 either employees or independent contractors.There was a "public comment" period which gave "the public" a chance to be heard on how it feels regarding the Proposed Rules for the Illinois Employee Classification Act. The public comment period expired on February 25, 2008.

This article will discuss two key issues: 1) record keeping requirements, and 2) the posting requirements.

RECORD KEEPING REQUIREMENTS:
 
There are strict record keeping requirements in the Proposed Rules to the Illinois Employee Classification Act. You must keep the documents specified in the Rules, on each construction-related independent contractor, for a period of FIVE years.

For example, if your were audited by the Illinois Department of Labor in 2015, the IDOL would require you to have records [as described below] on each construction-related independent contractor that you used for the past five years.

1. Records that must be maintained for each construction-related independent contractor include, but are not limited to:
2. their names, addresses, phone numbers, Social Security numbers, Individual Tax Identification Numbers and Federal Employer Identification Numbers;
3. the type of work performed and the total number of days and hours worked;
4. the method, frequency and basis on which wages were paid or payments were made;
5. all invoices, billing statements or other payment records, including the dates of payments, and any miscellaneous income paid or deductions made;
6. copies of all contracts, agreements, applications and policy or employment manuals; AND any federal and State tax documents or other information the Illinois Department of Labor deems relevant or necessary.

Beware: If you violate the record keeping requirements, you violate the Illinois Employee Classification Act! 
 
POSTING REQUIREMENTS:
 
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 construction-related independent contractor.

TIP: Give each of your independent contractors who are construction-related 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.

Beware: If you violate the posting requirements, you violate the Illinois Employee Classification Act! 
 
When a construction related company who uses independent contractors is found in violation of the Employee Classification Act, the company could be hit with substantial financial penalties, possible shut down of its business or job sites, and, most worrying to many, misdemeanor or felony criminal charges.

Questions? Contact

Six Questions and Answers Under the Illinois Employee Classification Act

February 2008

By: Nancy E. Joerg, Esq.

The Employee Classification Act (formerly House Bill 1795) is a frightening and radical Illinois law which went into effect January 1, 2008. It affects construction and construction-related companies (including trucking companies) who use independent contractors in construction and construction related jobs.

Under the Employee Classification Act, Illinois construction and construction related companies (including trucking companies which haul gravel or road building materials, landscape companies, etc.) can be severely penalized by the Illinois Department of Labor (IDOL) and other "interested parties" for misclassifying workers as independent contractors on construction related projects. The term "construction" is very liberally defined by the Act and includes all aspects of construction.
The following are some of the most common questions that I have received from construction-related companies including trucking on almost a daily basis:

•1) Question: We are a trucking company. How do I know if we are the kind of company that would be covered under the Illinois Employee Classification Act?

Answer: If the kind of hauling you do is construction-related, then your company would be covered under the Act. If you haul construction materials to and from the construction site - for example, road building materials - the independent contractors you use would be at issue under the Illinois Employee Classification Act.

•2) Question: Who can turn us in to the Illinois Department of Labor under the Illinois Employee Classification Act?

Answer: Any interested party. It could be a jealous competitor, a disgruntled employee, a dissatisfied independent contractor, a hostile Union, etc.-and they may be rewarded with a "bounty."

•3) Question: How do I know whether or not my independent contractors would be considered misclassified employees under the Illinois Employee Classification Act?

Answer: You really won't know until you are legally challenged, but for a rough idea, look at the two independent contractor tests in Section 10 of the Act. Take protective steps now to strengthen independent contractor status.

•4) Question: I have passed an Illinois Department of Employment Security (IDES) audit on the issue of the independent contractor status of various kinds of workers who provide services for our company. Does this mean that I am "bullet-proof" in the face of an audit or investigation under the Illinois Employee Classification Act?

Answer: No. Unfortunately, each Agency is an independent entity. Just because you have passed other legal challenges and audits on the independent contractor status of your workers does not mean that you have any level of protection whatsoever under the Illinois Employee Classification Act.

•5) When did this Act go into effect?

Answer: January 1, 2008.

•6) Question: Is it true there are both criminal and civil penalties under this new law?

Answer: Yes, and they can be severe.

Dramatic and dangerous times are here for Illinois construction and construction-related companies (including trucking companies) who use independent contractors. Be assured that we are here to help you do an emergency "self audit."

Questions or concerns? Call Attorney Nancy E. Joerg of Wessels Sherman's St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.