Contractors Beware: Strict Amendments to the Illinois Employee Classification Act

Contributed by Jonathon Hoag

House Bills 923 and 2649 were signed into law amending the Illinois Employee Classification Act (IECA), effective January 1, 2014.  The IECA sets forth strict requirements in order to lawfully classify individuals as independent contractors within the construction industry (defined very broadly by the act).  The IECA has been amended to give the Illinois Department of Labor more oversight and authority to enforce this act.  The recent amendments mandate that (1) contractors follow annual reporting requirements when contracting with an individual, sole proprietor, or partnership to perform construction services; (2) add individual liability; and (3) change the department’s method for enforcing the act (i.e. easing enforcement).

Beginning January 1, 2014, contractors that make payments to an individual, sole proprietor, or partnership for construction services must report contact and payment information to the Illinois Department of Labor by January 31 following the taxable year in which payment was made.  The department intends to closely monitor the use of (non-employee) sole proprietors and partnerships in the construction industry.  Contractors that fail to submit required reports are subject to penalties and debarment.

In addition, officers and agents of contractors who knowingly permit the contractor to violate the IECA, or are otherwise considered an employer under the act, are subject to individual liability.  This provision does not apply to contractors primarily engaged in the sale of tangible personal property or doing work for a business primarily engaged in the sale of tangible personal property.

Lastly, the enforcement procedure was drastically amended so that now alleged violations will be prosecuted by the Illinois Department of Labor through an administrative hearing, subject to administrative review in the courts.  Currently, the Illinois Department of Labor’s administrative findings have no significant weight and violations must be proved by the Attorney General in the circuit court.  This change to the enforcement procedure will give the Illinois Department of Labor substantial control and power in how this act is enforced. 

Interestingly, contractors in compliance with the responsible bidder requirements set forth in the Illinois Procurement Code are exempt from these statutory amendments.  There are a number of requirements under the responsible bidder provision of the Illinois Procurement Code, but the one of most significance is the requirement that contractors have an apprenticeship program approved by the U.S. Department of Labor to cover each craft of work performed on the job.  There has been a concerted effort to broaden the application of the responsible bidder requirements to contractors throughout Illinois, and it appears the strategy will be to give contractors who satisfy the responsible bidder requirements special treatment under other Illinois laws.