Illinois Construction Workers Presumed to be Employees

9-05-09

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.

The 5 companies have agreed to pay more than $79,000 in fines. The settlement agreement forbids the companies from participating in public construction projects for the next 4 years.

“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

Illinois Employee Classification Act: Construction Workers, Proposed Rule Changes

7-28-08

The Illinois Employee Classification Act provides that individuals performing services for construction contractors on or after January 1, 2008 are presumed to be employees of the contractor unless they meet the criteria specified in the Act. If a contractor has misclassified individuals as independent contractors, the Department may assess civil penalties and seek other remedies provided for in the Act.

See link for an overview of the Act’s definitions and prohibitions .

The Act addresses a known practice in the construction industry of contractors misclassifying individuals as independent contractors in order to avoid payroll taxes, unemployment insurance contributions, workers' compensation premiums and minimum wage and overtime payments.

For the purpose of ensuring that all Illinois contractors comply with Illinois tax and employment laws, the Illinois Department of Labor, the Illinois Department of Employment Security, the Illinois Department of Revenue and the Illinois Workers' Compensation Commission will be sharing any information on employers suspected of misclassification of employees as independent contractors.

The Department of Labor issued new proposed rule changes for the act 6/26/08 in response to recent public comments and recent departmental experience. The hearings on proposed rules will be heard before the Joint Committee on Administrative Rules.

Questions regarding proposed rule changes, contact Carmela Gonzalez at 312-793-1808.

Chicago Workers Compensation Attorneys – http://wc-chicago.com 7-28-08

Illinois Employer Assignment of Work Comp Lien- must pay 25% Attorneys Fees

6-7-08

Normally an Illinois employer that pays workers compensation benefits is entitled to seek repayment of all amounts paid in any 3^rd party personal injury action brought by the worker against a responsible 3^rd party. In construction injury cases, that responsible 3^rd party is often the general contractor or another contractor on the job site that are blamed for causing the workers’ injury.

In any lien reimbursement action where the employer seeks repayment from the proceeds of the personal injury law suit, Illinois law requires the employer to pay the injured workers attorney 25% of any recovery or reimbursement as attorneys fees. Therefore Illinois employers usually only obtain 75% reimbursement of amounts paid in workers compensation benefits. Meanwhile, the primary defendants will get to set off 100% of the workers compensation payments as a credit or set-off in any award against them to prevent a double recovery by the injured worker.

Where the employer was also negligent or partially responsible for causing the injury, a law suit for contribution is usually brought by the main defendants against the employer. To the extent that an employer is partially responsible for the workers’ injuries, the right to reimbursement will be reduced by the amount or % of negligence of the employer.

Section 5(b) of the Illinois Workers Compensation Act states:

“Out of any reimbursement received... the employer shall pay his pro rata share of costs… and expenses… and where the services of an attorney… of the employee… substantially contributed to procurement… of the proceeds out of which the employer is reimbursed, then, … the employer shall pay such attorney 25% of the gross… reimbursement.” 820 ILCS 305/5(b) (West 2006)

In a recent case, Evans v Doherty ( 1ts Dist., 4/25/08) the employer in a construction injury setting attempted to shirk payment of attorneys fees by giving an “assignment” of the employers workers compensation lien to the primary defendants. The employer had paid out $152,000 in workers compensation benefits and sold their right to reimbursement to Doherty and other primary defendants for the sum of $90,000. The employer in an argument too cute for the court said they received no reimbursement of their workers compensation lien but merely sold their rights to repayment in an assignment of lien. The Court said it was a distinction without a difference and ordered the employer to pay the 25% attorneys fees on the $90,000 they received.

Questions on Illinois workers compensation lien recovery and reimbursement should be addressed by an Illinois workers compensation attorney with practical experience and knowledge in this frequently changing area.

Chicago Workers Compensation Attorneys --WC-Chicago.com 6-07-08

Illinois Construction Workers Employee Classification Act

5-04-08

Effective January 1, 2008, new laws apply to the Construction industry to guarantee the proper classification of Construction Workers. Workers performing services for construction contractors on or after January 1, 2008 are presumed to be employees of the contractor unless they meet the exceptions specified in Section 10 of the Act. If a contractor chooses to misclassify a worker as an independent contractor in violation of the new law, the State of Illinois can assess civil penalties (money, stop work orders) or other remedies. The Department will notify other State agencies such as the Department of Employment Security (unemployment taxes), the Department of Revenue (income taxes for State & Fed) and the Workers’ Compensation Commission (Work comp insurance compliance penalties for no insurance) who are then required to review and check the contractor’s compliance with each of their respective laws. www.state.il.us/agency/idol/laws/Law185.htm

Employee Classification Information Contact #: (217) 782-1710

This new law is certain to give rise to litigation in construction negligence cases and in workers compensation cases for construction site injuries. For a current update on the practical effect of the new law and new cases interpreting the application of this new law, contact our Chicago workers compensation attorneys with any questions or seek out an experienced Illinois attorney specializing in construction litigation.

Chicago Workers Compensation Attorneys --- http://wc-chicago.com 5-04-08