New laws apply to employers and contractors in the construction industry eff., January 1, 2008. Illinois Attorney General Lisa Madigan is now prosecuting non-compliant employers under the new law. All construction workers working for construction contractors after January 1, 2008 are presumed to be employees of the contractor by law unless they meet the specific exceptions listed in (b) and (c) below as set out in Section 10 of the new Employee Classification Act.
(820 ILCS 185/10)
Sec. 10. Applicability; status of individuals performing service.
(a) For the purposes of this Act, an individual performing services for a contractor is deemed to be an employee of the employer except as provided in subsections (b) and (c) of this Section.
(b) An individual performing services for a contractor is deemed to be an employee of the contractor unless it is shown that:
(1)the individual has been and will continue to be free from control or direction over the performance of the service for the contractor, both under the individual's contract of service and in fact
(2) the service performed by the individual is outside the usual course of services performed by the contractor; and
(3) the individual is engaged in an independently established trade, occupation, profession or business; or
(4) the individual is deemed a legitimate sole proprietor or partnership under subsection (c) of this Section
(c) The sole proprietor or partnership performing services for a contractor as a subcontractor is deemed legitimate if it is shown that:
(1) the sole proprietor or partnership is performing the service free from the direction or control over the means and manner of providing the service, subject only to the right of the contractor for whom the service is provided to specify the desired result;
(2) the sole proprietor or partnership is not subject to cancellation or destruction upon severance of the relationship with the contractor;
(3) the sole proprietor or partnership has a substantial investment of capital in the sole proprietorship or partnership beyond ordinary tools and equipment and a personal vehicle;
(4) the sole proprietor or partnership owns the capital goods and gains the profits and bears the losses of the sole proprietorship or partnership;
(5) the sole proprietor or partnership makes its services available to the general public or the business community on a continuing basis;
(6) the sole proprietor or partnership includes services rendered on a Federal Income Tax Schedule as an independent business or profession;
(7) the sole proprietor or partnership performs services for the contractor under the sole proprietorship's or partnership's name;
(8) when the services being provided require a license or permit, the sole proprietor or partnership obtains and pays for the license or permit in the sole proprietorship's or partnership's name;
(9) the sole proprietor or partnership furnishes the tools and equipment necessary to provide the service;
(10) if necessary, the sole proprietor or partnership hires its own employees without contractor approval, pays the employees without reimbursement from the contractor and reports the employees' income to the Internal Revenue Service;
(11) the contractor does not represent the sole proprietorship or partnership as an employee of the contractor to its customers; and
(12) the sole proprietor or partnership has the right to perform similar services for others on whatever basis and whenever it chooses.
(d) Where a sole proprietor or partnership performing services for a contractor as a subcontractor is deemed not legitimate under subsection (c) of this Section, the sole proprietorship or partnership shall be deemed an individual for purposes of this Act.
(e) Subcontractors or lower tiered contractors are subject to all provisions of this Act.
(f) A contractor shall not be liable under this Act for any subcontractor's failure to properly classify persons performing services as employees, nor shall a subcontractor be liable for any lower tiered subcontractor's failure to properly classify persons performing services as employees.
(Source: P.A. 95-26, eff. 1-1-08.)
If an employer/ contractor miss-classifies a worker as an independent contractor in violation of the new law, the Attorney General of Illinois can and will prosecute and the courts can and do assess fines, stop work orders or other remedies. The Illinois Department of Labor will also notify other State agencies such as the Department of Employment Security (unemployment taxes), the Department of Revenue (income taxes for State & Fed) and the Illinois Workers’ Compensation Commission (Workers comp insurance compliance penalties) who are all then required to review and check the contractor’s compliance with each of their own respective laws. Contractors found in multiple violations can be in a whole world of hurt.
Recently, Attorney General Lisa Madigan settled claims against 5 Chicago area construction firms that were accused of falsely classifying their employees as independent contractors in violation of the new law rather than as employees.
The settling defendants are:
- Jerry Ryce Builders, Inc. and Jerry Ryce Masonry, Inc., owned by Boguslaw Omielan and operating out of 3801 South Archer Chicago, Ill.; and
- J S Masonary, Inc., JS Masonry & Tuckpointing, Inc., and JS Masonry & Stone, Inc., owned by Jan Staszel and operating out of 9001 W. Deerwood, Palos Hills, Ill.
“This agreement requires these five companies to legally recognize the hard-working men and women they employ by no longer denying them the benefits to which they are entitled,” Madigan said. “Illinois businesses, especially those involved in the construction trades, should be aware that this practice – which harms workers and puts honest employers at a competitive disadvantage – will not be tolerated.”
The Illinois Workers Compensation Commission will also take notice of the new law when looking at independent contractor defenses in workers compensation construction injury claims involving actual or claimed employees. There seems to be a recent trend at the Commission to favor employment relationships in cases for injured workers in both trucking and the construction industry.
To review construction accident work injury claims, contact an experienced Illinois workers compensation attorney. The construction area and the rights of the parties are often confusing. Often, a loaned/borrowed employment relationship may exist in a construction setting which may be governed by the subcontract indemnification agreements or by the agreements for primary liability for workers compensation claims or other such hold harmless language in the construction contracts.
Chicago Workers Compensation Attorney -- 9-05-09