Public Act 095-0026
 
HB1795 Enrolled LRB095 08260 RLC 28432 b

    AN ACT concerning employment.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 1. Short title. This Act may be cited as the
Employee Classification Act.
 
    Section 3. Purpose. This Act is intended to address the
practice of misclassifying employees as independent
contractors.
 
    Section 5. Definitions. As used in this Act:
    "Construction" means any constructing, altering,
reconstructing, repairing, rehabilitating, refinishing,
refurbishing, remodeling, remediating, renovating, custom
fabricating, maintenance, landscaping, improving, wrecking,
painting, decorating, demolishing, and 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, whether or not the performance of
the work herein described involves the addition to, or
fabrication into, any structure, project, development, real
property or improvement herein described of any material or
article of merchandise. Construction shall also include moving
construction related materials on the job site to or from the
job site.
    "Contractor" means any sole proprietor, partnership, firm,
corporation, limited liability company, association or other
legal entity permitted by law to do business within the State
of Illinois who engages in construction as defined in this Act.
    "Contractor" includes a general contractor and a
subcontractor.
    "Department" means the Department of Labor.
    "Director" means the Director of the Department of Labor.
    "Employer" means any contractor that employs individuals
deemed employees under Section 10 of this Act; however,
"employer" does not include (i) the State of Illinois or its
officers, agencies, or political subdivisions or (ii) the
federal government.
    "Entity" means any contractor for which an individual is
performing services and is not classified as an employee under
Section 10 of this Act; however, "entity" does not include (i)
the State of Illinois or its officers, agencies, or political
subdivisions or (ii) the federal government.
    "Interested party" means a person with an interest in
compliance with this Act.
    "Performing services" means the performance of any
constructing, altering, reconstructing, repairing,
rehabilitating, refinishing, refurbishing, remodeling,
remediating, renovating, custom fabricating, maintenance,
landscaping, improving, wrecking, painting, decorating,
demolishing, and 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,
whether or not the performance of the work herein described
involves the addition to, or fabrication into, any structure,
project, development, real property or improvement herein
described of any material or article of merchandise.
Construction shall also include moving construction related
materials on the job site to or from the job site.
 
    Section 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.
 
    Section 15. Notice.
    (a) The Department shall post a summary of the requirements
of this Act in English, Spanish, and Polish on its official web
site and on bulletin boards in each of its offices.
    (b) An entity for whom one or more individuals perform
services who are not classified as employees under Section 10
of this Act shall post and keep posted, in a conspicuous place
on each job site where those individuals perform services and
in each of its offices, a notice in English, Spanish, and
Polish, prepared by the Department, summarizing the
requirements of this Act. The Department shall furnish copies
of summaries without charge to entities upon request.
 
    Section 20. Failure to properly designate or classify
individuals performing services as employees. It is a violation
of this Act for an employer or entity not to designate an
individual as an employee under Section 10 of this Act unless
the employer or entity satisfies the provisions of Section 10
of this Act.
 
    Section 25. Enforcement.
    (a) Any interested party may file a complaint with the
Department against an entity or employer covered under this Act
if there is a reasonable belief that the entity or employer is
in violation of this Act. It shall be the duty of the
Department to enforce the provisions of this Act. The
Department shall have the power to conduct investigations in
connection with the administration and enforcement of this Act
and any investigator with the Department shall be authorized to
visit and inspect, at all reasonable times, any places covered
by this Act and shall be authorized to inspect, at all
reasonable times, documents related to the determination of
whether an individual is an employee under Section 10 of this
Act. The Director of Labor or his or her representative may
compel, by subpoena, the attendance and testimony of witnesses
and the production of books, payrolls, records, papers, and
other evidence in any investigation and may administer oaths to
witnesses.
    (b) Whenever the Department believes upon investigation
that there has been a violation of any of the provisions of
this Act or any rules or regulations promulgated under this
Act, the Department may: (i) issue and cause to be served on
any party an order to cease and desist from further violation
of the Act, (ii) take affirmative or other action as deemed
reasonable to eliminate the effect of the violation, (iii)
collect the amount of any wages, salary, employment benefits,
or other compensation denied or lost to the individual, and
(iv) assess any civil penalty allowed by this Act. The civil
penalties assessed by the Department as well as any other
relief requested by the Department shall be recoverable in an
action brought in the name of the people of the State of
Illinois by the Attorney General.
 
    Section 30. Attorney General; State's Attorneys. Criminal
violations of this Act shall be prosecuted by the Attorney
General or the appropriate State's Attorney. The Department
shall refer matters to the Attorney General and the appropriate
State's Attorney upon determining that a criminal violation may
have occurred. In all other proceedings the Department shall be
represented by the Attorney General's Office.
 
    Section 35. Contempt. Whenever it appears that any employer
or entity has violated a valid order of the Department issued
under this Act, the Director of Labor may commence an action
and obtain from the court an order commanding the employer or
entity to obey the order of the Department or be adjudged
guilty of contempt of court and punished accordingly.
 
    Section 40. Penalties. 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
Department. 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 Department within a 5 year
period. 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. In
determining the amount of a penalty, the 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 Director of Labor, or a person aggrieved by a violation
of this Act or any rule adopted under this Act. In any civil
action brought by an interested party pursuant to this Section,
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 Director of Labor. Any uncollected
amount shall be subject to the provisions of the Illinois State
Collection Act of 1986.
 
    Section 42. Debarments. For any second or subsequent
violation determined by the Department which is within 5 years
of an earlier violation, the Department shall add the employer
or entity's name to a list to be posted on the Department'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.
 
    Section 45. Willful violations.
    (a) Whoever willfully violates any of the provisions of
this Act or any rule adopted under this Act or whoever
obstructs the Director of Labor, 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.
    (b) 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.
    (c) 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 Director of Labor in any circuit
court. In any such action, the Director of Labor shall be
represented by the Attorney General. Any uncollected amount
shall be subject to the provisions of the Illinois State
Collection Act of 1986.
    (d) 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.
 
    Section 50. Employee Classification Fund. All moneys
received by the Department as fees and civil penalties under
this Act shall be deposited into the Employee Classification
Fund and shall be used, subject to appropriation by the General
Assembly, by the Department for administration, investigation,
and other expenses incurred in carrying out its powers and
duties under this Act. The Department shall hire as many
investigators and other personnel as may be necessary to carry
out the purposes of this Act. Any moneys in the Fund at the end
of a fiscal year in excess of those moneys necessary for the
Department to carry out its powers and duties under this Act
shall be available to the Department for the next fiscal year
for any of the Department's duties.
 
    Section 55. Retaliation.
    (a) It is a violation of this Act for an employer or
entity, or any agent of an employer or entity, to retaliate
through discharge or in any other manner against any person for
exercising any rights granted under this Act. Such retaliation
shall subject an employer or entity to civil penalties pursuant
to this Act or a private cause of action, or both.
    (b) It is a violation of this Act for an employer or entity
to retaliate against a person for:
        (1) making a complaint to an employer or entity, to a
    co-worker, to a community organization, before a public
    hearing, or to a State or federal agency that rights
    guaranteed under this Act have been violated;
        (2) causing to be instituted any proceeding under or
    related to this Act; or
        (3) testifying or preparing to testify in an
    investigation or proceeding under this Act.
 
    Section 60. Private right of action.
    (a) An interested party or person aggrieved by a violation
of this Act or any rule adopted under this Act by an employer
or entity may file suit in circuit court, in the county where
the alleged offense occurred or where any person who is party
to the action resides, without regard to exhaustion of any
alternative administrative remedies provided in this Act.
Actions may be brought by one or more persons for and on behalf
of themselves and other persons similarly situated. A person
whose rights have been violated under this Act by an employer
or entity is entitled to collect:
        (1) the amount of any wages, salary, employment
    benefits, or other compensation denied or lost to the
    person by reason of the violation, plus an equal amount in
    liquidated damages;
        (2) compensatory damages and an amount up to $500 for
    each violation of this Act or any rule adopted under this
    Act;
        (3) in the case of unlawful retaliation, all legal or
    equitable relief as may be appropriate; and
        (4) attorney's fees and costs.
    (b) The right of an interested party or aggrieved person to
bring an action under this Section terminates upon the passing
of 3 years from the final date of performing services to the
employer or entity. This limitations period is tolled if an
employer or entity has deterred a person's exercise of rights
under this Act.
 
    Section 65. Rulemaking. The Department may adopt
reasonable rules to implement and administer this Act. For
purposes of this Act, the General Assembly finds that the
adoption of rules to implement this Act is deemed an emergency
and necessary for the public interest and welfare.
 
    Section 70. No waivers.
    (a) There shall be no waiver of any provision of this Act.
    (b) It is a Class C misdemeanor for an employer to attempt
to induce any individual to waive any provision of this Act.
 
    Section 75. Cooperation. The Department of Labor, the
Department of Employment Security, the Department of Revenue,
and the Illinois Workers' Compensation Commission shall
cooperate under this Act by sharing information concerning any
suspected misclassification by an employer or entity of one or
more of its employees as independent contractors. Upon
determining that an employer or entity has misclassified
employees as independent contractors in violation of this Act,
the Department shall notify the Department of Employment
Security, the Department of Revenue, the Office of the State
Comptroller, and the Illinois Workers' Compensation Commission
who shall be obliged to check such employer or entity's
compliance with their laws, utilizing their own definitions,
standards, and procedures.
 
    Section 80. Effect of Final Order. Any finding made
pursuant to this Act is for the purpose of enforcing this Act
and may not be admissible or binding against a party in any
other proceeding.
 
    Section 900. The State Comptroller Act is amended by adding
Section 9.06 as follows:
 
    (15 ILCS 405/9.06 new)
    Sec. 9.06. Misclassification of employees as independent
contractors. The Department of Labor, the Department of
Employment Security, the Department of Revenue, the Office of
the State Comptroller, and the Illinois Workers' Compensation
Commission shall cooperate under the Employee Classification
Act by sharing information concerning any suspected
misclassification by an employer or entity, as defined in the
Employee Classification Act, or one or more employees as
independent contractors.
 
    Section 901. The Department of Employment Security Law of
the Civil Administrative Code of Illinois is amended by adding
Section 1005-160 as follows:
 
    (20 ILCS 1005/1005-160 new)
    Sec. 1005-160. Misclassification of employees as
independent contractors. The Department of Labor, the
Department of Employment Security, the Department of Revenue,
the Office of the State Comptroller, and the Illinois Workers'
Compensation Commission shall cooperate under the Employee
Classification Act by sharing information concerning any
suspected misclassification by an employer or entity, as
defined in the Employee Classification Act, of one or more
employees as independent contractors.
 
    Section 905. The Department of Labor Law of the Civil
Administrative Code of Illinois is amended by adding Section
1505-125 as follows:
 
    (20 ILCS 1505/1505-125 new)
    Sec. 1505-125. Misclassification of employees as
independent contractors. The Department of Labor, the
Department of Employment Security, the Department of Revenue,
the Office of the State Comptroller and the Illinois Workers'
Compensation Commission shall cooperate under the Employee
Classification Act by sharing information concerning any
suspected misclassification by an employer or entity, as
defined in the Employee Classification Act, of one or more
employees as independent contractors.
 
    Section 910. The Department of Revenue Law of the Civil
Administrative Code of Illinois is amended by adding Section
2505-750 as follows:
 
    (20 ILCS 2505/2505-750 new)
    Sec. 2505-750. Misclassification of employees as
independent contractors. The Department of Labor, the
Department of Employment Security, the Department of Revenue,
the Office of the State Comptroller, and the Illinois Workers'
Compensation Commission shall cooperate under the Employee
Classification Act by sharing information concerning any
suspected misclassification by an employer or entity, as
defined in the Employee Classification Act, of one or more
employees as independent contractors.
 
    Section 915. The State Finance Act is amended by adding
Section 5.675 as follows:
 
    (30 ILCS 105/5.675 new)
    Sec. 5.675. The Employee Classification Fund.
 
    Section 920. The Illinois Procurement Code is amended by
changing Section 50-70 as follows:
 
    (30 ILCS 500/50-70)
    Sec. 50-70. Additional provisions. This Code is subject to
applicable provisions of the following Acts:
        (1) Article 33E of the Criminal Code of 1961;
        (2) the Illinois Human Rights Act;
        (3) the Discriminatory Club Act;
        (4) the Illinois Governmental Ethics Act;
        (5) the State Prompt Payment Act;
        (6) the Public Officer Prohibited Activities Act; and
        (7) the Drug Free Workplace Act; and .
        (8) the Employee Classification Act.
(Source: P.A. 90-572, eff. 2-6-98.)
 
    Section 925. The Workers' Compensation Act is amended by
adding Section 26.1 as follows:
 
    (820 ILCS 305/26.1 new)
    Sec. 26.1. Misclassification of employees as independent
contractors. The Department of Labor, the Department of
Employment Security, the Department of Revenue, the Office of
the State Comptroller, and the Illinois Workers' Compensation
Commission shall cooperate under the Employee Classification
Act by sharing information concerning any suspected
misclassification by an employer or entity, as defined in the
Employee Classification Act, of one or more employees as
independent contractors.
 
    Section 990. Severability. The provisions of this Act are
severable under Section 1.31 of the Statute on Statutes.
 
    Section 999. Effective date. This Act takes effect January
1, 2008.
INDEX
Statutes amended in order of appearance
    New Act
    15 ILCS 405/9.06 new
    20 ILCS 1005/1005-160 new
    20 ILCS 1505/1505-125 new
    20 ILCS 2505/2505-750 new
    30 ILCS 105/5.675 new
    30 ILCS 500/50-70
    820 ILCS 305/26.1 new