The Illinois Employee Classification Act (“ECA”) provides remedies and rewards for misclassified construction industry workers.
Employee Classification Act
Employers in Illinois are required to cover all payroll taxes, pay minimum wage and overtime, and contribute to unemployment, worker’s compensation, and medical insurance for all non-exempt employees.
These obligations only apply to a contractor’s “employees,” so contractors often illegally classify their employees as something else (most commonly “independent contractors”). They do this to shift the burden of taxes and insurance onto the worker, with the added bonus of not having to pay minimum wage or overtime. The State of Illinois estimates that $8,700,000 in taxes are lost each year due to misclassification of employees in the construction industry.
To stop employers from misclassifying their workers, Illinois passed the Employee Classification Act (the “ECA”), which provides penalties and remedies (including substantial remedies and rewards for workers) for misclassification in the construction industry.
The ECA broadly applies to all “employees” in the construction process. This broad definition of employees includes:- Public and private construction
- Residential and commercial buildings
- Maintenance, renovation, and repair work
- Custom fabricating
- Wrecking
- Landscaping
- Painting, decorating, and remodeling work
- Moving construction-related materials to or from the job site
- Road, bridge, sewer, railroad, excavation and water works
- The worker satisfies the three-part test for an Independent Contractor
- The worker satisfies the twelve-part test for a Sole Proprietorship or Partnership, or
- The worker works via his Bona Fide Corporation or Limited Liability Company
- he is free from direction or control
- the service performed is outside the usual course of services provided by the contractor, and
- the individual is engaged in an independently established trade, occupation, profession, or business
- the worker 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
- the worker is not subject to cancellation or destruction upon severance of the relationship with the contractor
- the worker has a substantial investment of capital in the sole proprietorship or partnership beyond ordinary tools and equipment and a personal vehicle
- the worker owns the capital goods and gains the profits and bears the losses of the sole proprietorship or partnership
- the worker makes his services available to the general public or the business community on a continuing basis
- the worker includes services rendered on a Federal Income Tax Schedule as an independent business or profession
- the worker performs services for the contractor under the sole proprietorship’s or partnership’s name
- the worker obtains and pays for any required license or permit in the name of the sole proprietorship or partnership
- the worker furnishes the tools and equipment necessary to provide the service
- the worker 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
- the contractor does not represent the worker as an employee of the contractor to its customers, and
- the worker has the right to perform similar services for others on whatever basis and whenever it chooses
- is capitalized
- has issued corporate stock
- maintains a corporate bank account
- holds itself out as a corporation
- maintains current and complete corporate books and records, including corporate meeting minutes
- has filed Articles of Incorporation
- making a complaint to an employer, co-worker, organization, or agency
- causing any proceeding to be instituted under the ECA
- testifying in an investigation or proceeding under the ECA