On July 23, 2013, Illinois Governor Pat Quinn (Dem.) signed into law two amendments to the Employee Classification Act, a law that regulates the classification of workers in the construction industry. The Act imposes a three-pronged test to determine independent contractor status for individuals, along with a 12-part test for individuals operating as sole proprietors or partnerships.
The amendments, which were strongly supported by labor unions, include a number of enhancements to the law. For example, the amendments establish individual liability for officers and agents of corporations who knowingly permit violations of the Act to occur.
In addition, the amendments create a new reporting requirement for businesses in the construction industry. They must, upon the Act’s effective date, report annually all payments to individuals, sole proprietorships, and partnerships “performing construction services . . . if the recipient of payment is not classified as an employee.” These reports must include the individual’s name, address, and “business identification number” or “federal employer identification number” as well as the amount paid. This change will provide the Illinois authorities with additional data with which to identify targets for misclassification audits. As such, businesses in the construction industry with operations in Illinois should expect an increase in state audit activity and should take steps now to ensure their worker classifications are defensible.
The amendments to the Employee Classification Act go into effect January 1, 2014.