Oct 08, 2014
Illinois leads the nation in employer audits of misclassified workers
On August 11, 2014, the Illinois Department of Employment Security (“IDES”) issued a press release stating that Illinois leads the nation in auditing employers who misclassify workers as independent contractors. According to the press release, an audit showed Illinois employers wrongly classified nearly 20,000 of their workers as independent contractors rather than full-time employees in 2013, which resulted in more than $250 million in wages and contributions to unemployment funds and other funds that support laid-off and injured workers.
According to the Bureau of Labor Statistics, the audits showed that Illinois had the most productive employer auditing effort in the nation. According to the release, Illinois audited 3,635 employers in 2013. In doing so it identified 19,765 misclassified employees, $245.6 million in unreported taxable wages and $5.1 million in unreported contributions that fund unemployment insurance benefits. Illinois led by a wide margin all other states in effective audit measures.
The IDES has clearly stepped up its efforts in auditing and collecting from employers who classify workers as independent contractors. A simple contract identifying a worker as an independent contractor is not sufficient to establish the worker as a true independent contractor under the Act. The test under the Illinois Unemployment Insurance Act for determining whether a worker is an independent contractor will depend on the facts and circumstances of each case.
The IDES can recover unpaid contributions from employers for each employee it finds is misclassified as an independent contractor, impose fines for misclassifications of at least $10,000 and impose up to 60 percent interest on past-due payments. The press release states that the IDES, Illinois Department of Labor, Illinois Department of Revenue and Illinois Workers’ Compensation Commission are working together to help responsible business owners while punishing fraud.
Illinois employers would be wise to consult with an employment attorney should they have questions about whether a particular worker is appropriately classified as an independent contractor. Taking proper steps now may help employers successfully navigate an IDES audit in the future.
This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.
Client Alert authored by: Ryan A. Haas