U.S. DOL Urges State Departments of Unemployment Insurance to Clamp Down on Worker Misclassification

Over $39 million in federal grants was awarded by the U.S. Department of Labor to 45 states and territories to help reduce the misclassification of employees as independent contractors and enhance unemployment insurance programs. With emotion and fanfare, U.S. Secretary of Labor Thomas Perez on September 22, 2015 explained:

"For more than 80 years, the unemployment insurance system has been a crucial lifeline for millions of working people who lost their job through no fault of their own. These (federal) grants will help states use every tool at their disposal to ensure payments are available to those who are eligible, and take important steps to reduce and recover improper payments.”

A concrete example of an important step is an increase in unemployment insurance audits with resulting assessments for independent contractor misclassification!

This is the second year that the U.S. DOL awarded federal grants to financially support the ability of state unemployment insurance tax programs to identify instances where employers allegedly misclassify employees as independent contractors or fail to report the wages paid to employee workers.

The U.S. Department of Labor’s website proudly announces:

“The Wage and Hour Division is working with the IRS and many states to combat employee misclassification and to ensure that workers get the wages, benefits, and protections to which they are entitled. We have entered into partnerships with 27 states to work together on this issue in a variety of ways – through, for example, information sharing and coordinated enforcement – to ensure that we are all using our resources most strategically, effectively and efficiently to address this significant (misclassification) problem.”

The U.S. DOL has been front and center lately as a champion of employees’ rights and a mortal foe of worker misclassification. It is therefore an increasingly hostile climate for companies using independent contractors.

Questions? Consultations on Independent Contractor Status? Call Attorney Nancy E. Joerg of Wessels Sherman’s St. Charles, Illinois office: (630) 377-1554 or email her at najoerg@wesselssherman.com.

Employer Alert: Keep Track of 30 Working Days for Illinois Unemployment Insurances Purposes

March 2010
By: Nancy E. Joerg, Esq.

Many clients ask me: "How many days does an employee need to work for me before my company becomes the chargeable employer for Illinois Unemployment Insurance purposes?"

There is a simple unemployment insurance rule that Illinois employers should be aware of: A company will usually not be "charged" for an ex-employee's unemployment insurance benefits if that ex-employee did not work for the company for at least 30 working days.

This is an extremely simple rule that employers should keep in mind because, if used properly, it is a wonderful way for a company to help keep its unemployment insurance rate down.

Below are some examples to provide guidance on how the Illinois Department of Employment Security (IDES) calculates the 30 working days: 

1. The individual works a shift which begins at 10:00 p.m. on Monday and ends at 7:00 a.m. on Tuesday. While this individual performs services for this employer on two calendar days, for the purpose of determining whether the 30 day requirement has been met, the individual's shift counts as only one day of service (Monday).
2. The individual begins his shift at Noon but becomes ill fifteen minutes later. Since the individual performed services for the employer for fifteen minutes, one day is counted toward meeting the 30-day requirement.
3. The individual is scheduled to work on a certain day but fails to report for work because he is ill. Even if the employer provides paid sick leave to the individual for that day, it will not be counted toward the 30-day requirement.
4.  Upon the permanent layoff of an individual, the employer pays that individual for any unused, accrued vacation time that the individual is due and grants him severance pay in the amount of one day's pay for each year of continuous service. These payments are not included for the purpose of determining whether this employer has met the 30-day requirement.
5. The individual works a four-day work week. That is, instead of working eight hours per day, five days per week, he works ten hours per day, four days per week. Even if the individual's ten-hour shift extends over two calendar days, each shift still counts as only one day, and this individual will have worked only four days in a normal work week.

Overtime work (or working additional shifts) is not included in determining whether the 30-day requirement has been met unless there is at least 6 hours between the beginning of the overtime work (or the additional shift) and the end of the prior shift and the overtime work (or additional shift) does not occur on a day which will otherwise be included in meeting the 30-day requirement. Examples:

1. The individual's normal shift ends at 3:00 a.m., and he is asked to work the next shift which begins at 4:00 a.m. Even if he works both shifts, since there is not at least 6 hours between the shifts, only one day will be counted toward meeting the 30-day requirement.
2. The individual's shift ends at 3:00 a.m. on Saturday, and he is asked to return to work for an additional overtime shift from 9:00 a.m. until 2:00 p.m. He must then return to work at 7:00 p.m. to work his regular shift. This overtime work does not count as an additional day toward meeting the 30-day requirement because his regular shift begins that same day and would already be included in meeting the 30-day requirement.
3. The individual's normal shift begins at 3:00 p.m. and ends at 11:00 p.m. However, he is required to work four hours of overtime every day so that he does not complete his shift until 3:00 a.m. This shift still counts as only one day toward the 30-day requirement.

 NOTE: An employer may also become the chargeable employer after less than 30 days if it was the single employer that paid wages to the individual permitting the individual to requalify for benefits after a previous disqualification under Section 601 (voluntary leaving), 602 (misconduct), or 603 (refusal of work). To requalify, the individual must earn an amount equal to or in excess of his current Weekly Benefit Amount in each of four calendar weeks.

Questions? Please contact WS Shareholder and Senior Attorney Nancy Joerg at (630) 377-1554, or najoerg@wesselssherman.com.

IDES Audits for Independent Contractor Truck Drivers

March 2012

By Nancy E. Joerg, Esq.

HIDDEN DANGERS IN ILLINOIS UNEMPLOYMENT INSURANCE LAW
DEFINING INDEPENDENT CONTRACTOR STATUS FOR TRUCK DRIVERS 

Section 212.1 of the Illinois Unemployment Insurance Act defines when truck owner-operators are independent contractors and not employees for Illinois Department of Employment Security (IDES) purposes. All requirements of Section 212.1 must be met! If the Carrier is not in compliance with Section 212.1, the painful result (ignorance of the law is no excuse!) is that the frustrated Carrier will owe the IDES for back unemployment insurance contributions plus interest (a whopping 24% per year). Be prepared!!! The following is a rough summary of only some of the key points of Section 212.1:

OWNERSHIP: Do the drivers hold title to their vehicles or lease them from third-party (stranger) leasing companies and not the Carrier? The independent contractor must be the owner of the truck or must be leasing the truck from an unrelated third-party leasing company. Many carriers express surprise and anger that such a restriction exists under Section 212.1. Why can't drivers lease-purchase a truck from whomever they wish? The bottom line is that the so-called independent contractors will likely be reclassified upon IDES audit to employee status if they lease-purchase their trucks from the Carriers for whom they haul, or amazingly, even if they lease-purchase the trucks from a family member of a shareholder or owner of, or partner in, the company for whom they haul. Further, the Carrier cannot specify the person or entity from which the driver is to lease or purchase the equipment.

SCHEDULING: Who sets the schedule for the drivers? Section 212.1 indicates that the shipper or receiver can set those times, but the Carrier cannot.

LICENSING AND OPERATING EXPENSES: Do the drivers pay all costs directly associated with licensing and operating the equipment (e.g., paying for fuel, or wear and tear), without being separately reimbursed? If the Carrier pays for or reimburses any costs directly associated with operating and licensing the drivers' equipment, except when federal or state law or regulation requires the Carrier to pay, then Section 212.1 has been violated.

IDENTIFICATION ON TRUCK: Do the drivers have their name and address as owner on their trucks? Section 212.1 requires that the drivers maintain a separate business identity by displaying their name and address on their equipment or otherwise. We don't know yet how the IDES will interpret "or otherwise." We strongly recommend that the drivers put their business name and business address as owner on their trucks.

NON-COMPETE AGREEMENTS ARE FORBIDDEN: Does the lease contract contain a covenant not to compete? The answer must be "No." Following the termination of the lease contract, the driver must be able to perform the same or similar services for others, on whatever basis and whenever the driver chooses, without incurring any liability to the Carrier to which the driver was contracted.

HOW TO OBTAIN FREE INFORMATION ABOUT SECTION 212.1: Readers who wish a free copy of Section 212.1 and its regulations should contact Legal Assistant Tammy Nelson at the St. Charles, Illinois office of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. at 630-377-1554.

Questions? Please contact Senior Attorney and Shareholder Nancy Joerg at 630-377-1554, or najoerg@wesselssherman.com.

Keep Track of 30 Working Days for Illinois Unemployment Insurance Purposes

March 2010
By: Nancy E. Joerg, Esq.

Many clients ask me: "How many days does an employee need to work for me before my company becomes the chargeable employer for Illinois Unemployment Insurance purposes?"

There is a simple unemployment insurance rule that Illinois employers should be aware of: a company will usually not be "charged" for an ex-employee's unemployment insurance benefits if that ex-employee did not work for the company for at least 30 working days.

This is an extremely simple rule that employers should keep in mind because, if used properly, it is a wonderful way for a company to help keep its unemployment insurance rate down.

Below are some examples to provide guidance on how the Illinois Department of Employment Security (IDES) calculates the 30 working days: 

1. The individual works a shift which begins at 10:00 p.m. on Monday and ends at 7:00 a.m. on Tuesday. While this individual performs services for this employer on two calendar days, for the purpose of determining whether the 30 day requirement has been met, the individual's shift counts as only one day of service (Monday).
2.  The individual begins his shift at Noon but becomes ill fifteen minutes later. Since the individual performed services for the employer for fifteen minutes, one day is counted toward meeting the 30-day requirement.
3. The individual is scheduled to work on a certain day but fails to report for work because he is ill. Even if the employer provides paid sick leave to the individual for that day, it will not be counted toward the 30-day requirement.
4. Upon the permanent layoff of an individual, the employer pays that individual for any unused, accrued vacation time that the individual is due and grants him severance pay in the amount of one day's pay for each year of continuous service. These payments are not included for the purpose of determining whether this employer has met the 30-day requirement.
5. The individual works a four-day work week. That is, instead of working eight hours per day, five days per week, he works ten hours per day, four days per week. Even if the individual's ten-hour shift extends over two calendar days, each shift still counts as only one day, and this individual will have worked only four days in a normal work week.

Overtime work (or working additional shifts) is not included in determining whether the 30-day requirement has been met unless there is at least 6 hours between the beginning of the overtime work (or the additional shift) and the end of the prior shift and the overtime work (or additional shift) does not occur on a day which will otherwise be included in meeting the 30-day requirement. Examples:

1. The individual's normal shift ends at 3:00 a.m., and he is asked to work the next shift which begins at 4:00 a.m. Even if he works both shifts, since there is not at least 6 hours between the shifts, only one day will be counted toward meeting the 30-day requirement.
2. The individual's shift ends at 3:00 a.m. on Saturday, and he is asked to return to work for an additional overtime shift from 9:00 a.m. until 2:00 p.m. He must then return to work at 7:00 p.m. to work his regular shift. This overtime work does not count as an additional day toward meeting the 30-day requirement because his regular shift begins that same day and would already be included in meeting the 30-day requirement.
3. The individual's normal shift begins at 3:00 p.m. and ends at 11:00 p.m. However, he is required to work four hours of overtime every day so that he does not complete his shift until 3:00 a.m. This shift still counts as only one day toward the 30-day requirement.

NOTE: An employer may also become the chargeable employer after less than 30 days if it was the single employer that paid wages to the individual permitting the individual to requalify for benefits after a previous disqualification under Section 601 (voluntary leaving), 602 (misconduct), or 603 (refusal of work). To requalify, the individual must earn an amount equal to or in excess of his current Weekly Benefit Amount in each of four calendar weeks.

Questions about this topic or other management-side labor and employment law issues? Please contact WS Shareholder and Senior Attorney Nancy E Joerg at 630-377-1554, najoerg@wesselssherman.com, or visit our website.

 

Employers are Confused! How Can my Employees Both Work and Collect Unemployment Insurance Benefits from the IDES?!

April 2011
By: Nancy E. Joerg, Esq.

In this extremely challenging economy, many employers are cutting back on their employees' hours. Their employees are making a small enough amount of money that they are able to also collect unemployment insurance benefits from the Illinois Department of Employment Security (IDES).

In other cases, individuals have lost their jobs completely and have been able to obtain unemployment insurance benefits. However, in the course of collecting unemployment insurance benefits, these individuals may have been fortunate enough to obtain part-time employment. These employees worry about whether they will lose their unemployment insurance benefits because they are working part time and drawing a small income. How does this all work?

Yes, it is possible for an individual to legally and ethically collect unemployment insurance benefits from the IDES and still earn wages from a part time job.
 
Here's an example to show how it works:

WEEKLY BENEFIT AMOUNT: Stanley (fictitious name) lost his job several months ago. He has been collecting unemployment. His average Weekly Benefit Amount is $385 per week gross and $149 per week gross added to that for his dependents (his two children). Stanley's Weekly Benefit Amount of $385 is the part of Stanley's unemployment insurance which has nothing to do with his dependents.

CAN EARN UP TO 50% OF WEEKLY BENEFIT AMOUNT AND IT WON'T AFFECT UNEMPLOYMENT: Stanley can make up to half of his Weekly Benefit Amount and it will not affect his unemployment. Stanley's Weekly Benefit Amount is $385; half of his Weekly Benefit Amount is $192.

Stanley has found a job as a commission salesperson selling cosmetics. Under the IDES system for partial unemployment, Stanley can make up to $192 per week gross and it will not affect his unemployment So, if Stanley made $150 in a week in commissions for selling cosmetics, he can report that openly to the IDES as to wages he made in that week and it will not affect his unemployment insurance at all.

WHEN EARNINGS EXCEED 50% OF WEEKLY BENEFIT AMOUNT: If Stanley would earn $225 in commissions in a given week, that would affect his unemployment insurance benefits. For each dollar that is over the $192 (recall that the $192 is half of Stanley's Weekly Benefit Amount), he would lose dollar for dollar that amount of money from his unemployment insurance benefits. So, if Stanley made $225, then $33 ($225 minus $192) is subtracted from the $385 Weekly Benefit Amount in that week only.

INDIVIDUALS WHO ARE DRAWING UNEMPLOYMENT MUST REPORT EACH WEEK SEPARATELY: It is important to realize that the IDES has individuals who are drawing unemployment report each week separately so they can indicate if they are working (yes or no), and if they are working, how much they are earning in a particular week.

An individual can keep drawing unemployment until they go over a certain amount of money at which time they are taken off of the unemployment insurance roles. In Stanley's case, if he ever earned more than $385 in a given week (his Weekly Benefit Amount), he will be taken off the unemployment insurance roles. If he makes less than $385 thereafter, he would have to reapply for unemployment as if he were a brand new claimant.

When Stanley sells on commission, even though he is not paid his commission for several weeks or months down the road, he still should report to the IDES that he earned his commission in the week he actually made the sale (rather than saying that he wasn't working and not reporting this until several weeks or months down the road when he actually receives the check). This is an understandable source of confusion to many people and they do not know whether to report they are working when they are selling on commission (and they receive no actual check in their hand during that week).

If at all possible, the unemployment insurance recipient should report to Teleserv what the commissions will be for the sales they made in that week even though they won't receive payment for weeks or months down the road. Of course, in situations where the individual will not earn any commission unless the customer actually pays, that is a more complex situation and the unemployment insurance recipient should not report that they have earned money unless the likelihood that they will receive the money is a certainty.

As an attorney who assists employers with all kinds of employment law questions including unemployment insurance matters, I find that I am getting an increasing number of phone calls from confused employers who want to better understand how their employees can collect unemployment insurance benefits and still work for the company. This situation is being caused because there is an overall lack of work and lack of business in many companies, and their employees' hours are being dramatically reduced.

Questions about this topic or other management-side labor and employment law issues? Please contact WS Shareholder and Senior Attorney Nancy E Joerg at 630-377-1554, najoerg@wesselssherman.com, or visit our website.