HB2137eng 94TH GENERAL ASSEMBLY

HB2137 Engrossed LRB094 03060 WGH 33061 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 Truth in Employment Act.

Section 3. Purpose. This Act is intended to address the practice of misclassifying employees as independent contractors.

Section 5. Definition. As used in this Act:

"Contractor" means any person who, in any capacity other than as the employee of another for wages as the sole compensation, undertakes to construct, alter, repair, move, wreck, or demolish any fixture or structure. "Contractor" includes a general contractor and a subcontractor, but does not include a person who furnishes only materials or supplies.

"Department" means the Department of Revenue.

Section 10. Filing by contractors.

(a) A contractor for whom a person is performing work on a construction project and is classified as an independent contractor with respect to that work must file with the Department a statement regarding that person. The Department shall adopt rules concerning the form, contents, and filing of the statement. The statement shall be available in English and Spanish and shall include: the name and address of the contractor and the person performing the work; the name and address of the general contractor (if the general contractor is not the contractor for whom the person is performing the work); and any other information required by the Department. A separate statement shall be filed by the contractor for each calendar year during which the worker performs work for the contractor. The statement shall be filed no later than 3 days after the first date of the calendar year on which the worker performs work for the contractor. The information obtained by the Department through the statement is confidential and shall be used solely for the purposes of this Act.

(b) A contractor that is required to file a statement under subsection (a) and does not timely file that statement shall pay, when it files the statement, a $10 late-filing penalty to the Department.

Section 15. Notice.

(a) The Department shall post a summary of the requirements of this Act in English and Spanish on its web site and on bulletin boards in each of its offices.

(b) A contractor for whom one or more persons classified as independent contractors are performing work shall post and keep posted, in conspicuous places on each job site where those persons work and in each of its offices, a notice in English and Spanish, prepared by the Department, summarizing the requirements of this Act. The Department shall furnish copies of summaries to contractors upon request without charge.

Section 20. Investigations.

(a) The Department shall commence an investigation if a report is not timely filed under subsection (a) of Section 10 or if the Department finds, based on statements filed under this Act or other information supplied to the Department or otherwise obtained by the Department, that there is reason to suspect that a contractor has misclassified one or more employees as independent contractors.

(b) A final determination by the United States Internal Revenue Service or a federal court that a person is an employee is deemed correct for all purposes under this Act.

(c) The Department shall hire as many investigators as may be necessary to carry out the purposes of this Act.

Section 25. Misclassification of employees as independent contractors.

(a) If, upon completion of an investigation commenced pursuant to subsection (a) of Section 20 of this Act, the Department determines that a contractor has misclassified one or more employees as independent contractors on a construction project, that contractor is subject to penalties and interest as provided in subsections (c) and (d) of Section 1002 of the Illinois Income Tax Act. Procedures for notice, protest, and hearings shall be in accordance with the Illinois Income Tax Act and the rules adopted under that Act.

(b) If, upon completion of an investigation commenced pursuant to subsection (a) of Section 20 of this Act, the Department determines that a contractor has knowingly or intentionally misclassified one or more employees as independent contractors on a construction project, the Department may: (i) direct the employer to cease its operations on that project; (ii) direct the employer to pay $200 to the Department for each day during which the violation continues; (iii) direct the employer to pay $400 to the Department for each day during which a second or subsequent violation occurs that involves different employees than those involved in an earlier violation by that employer; and (iv) require the employer to continue to pay, for 5 days, employees affected by the determination. The Department shall adopt rules governing notice and protest and establishing procedures for hearings in accordance with Article 10 of the Illinois Administrative Procedure Act.

(c) A contractor that knowingly or intentionally misclassifies one or more of its employees as independent contractors on a construction project commits a Class C misdemeanor. A contractor that commits a second or subsequent violation commits a Class 4 felony if the second or subsequent violation involves different employees than those involved in an earlier violation.

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.

Section 35. Truth in Employment Fund. The Truth in Employment Fund is created as a special fund in the State treasury. All moneys received by the Department under this Act shall be deposited into the Fund. Moneys in the Fund 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. 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 transferred to the General Revenue Fund.

Section 40. Rulemaking. In addition to any rulemaking required by any other provision of this Act, the Department may adopt reasonable rules to implement and administer this Act.

Section 45. Judicial review. A final administrative decision of the Department under this Act is subject to judicial review under the Administrative Review Law.

Section 50. No waivers.

(a) There shall be no waiver of any provision of this Act.

(b) It is a Class C misdemeanor for a contractor to attempt to induce any individual to waive any provision of this Act.

Section 85. 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 shall cooperate with the Department of Revenue under the Truth in Employment Act by providing information to the Department of Revenue concerning any suspected misclassification by a contractor of one or more of its employees as independent contractors.

Section 90. The State Finance Act is amended by adding Section 5.641 as follows:

(30 ILCS 105/5.641 new)

Sec. 5.641. The Truth in Employment Fund.

Section 92. The Illinois Income Tax Act is amended by changing Section 917 as follows:

(35 ILCS 5/917) (from Ch. 120, par. 9-917)

Sec. 917. Confidentiality and information sharing.

(a) Confidentiality. Except as provided in this Section, all information received by the Department from returns filed under this Act, or from any investigation conducted under the provisions of this Act, shall be confidential, except for official purposes within the Department or pursuant to official procedures for collection of any State tax or pursuant to an investigation or audit by the Illinois State Scholarship Commission of a delinquent student loan or monetary award or enforcement of any civil or criminal penalty or sanction imposed by this Act or by another statute imposing a State tax, and any person who divulges any such information in any manner, except for such purposes and pursuant to order of the Director or in accordance with a proper judicial order, shall be guilty of a Class A misdemeanor. However, the provisions of this paragraph are not applicable to information furnished to (i) the Department of Public Aid, State's Attorneys, and the Attorney General for child support enforcement purposes and (ii) a licensed attorney representing the taxpayer where an appeal or a protest has been filed on behalf of the taxpayer. If it is necessary to file information obtained pursuant to this Act in a child support enforcement proceeding, the information shall be filed under seal.

(b) Public information. Nothing contained in this Act shall prevent the Director from publishing or making available to the public the names and addresses of persons filing returns under this Act, or from publishing or making available reasonable statistics concerning the operation of the tax wherein the contents of returns are grouped into aggregates in such a way that the information contained in any individual return shall not be disclosed.

(c) Governmental agencies. The Director may make available to the Secretary of the Treasury of the United States or his delegate, or the proper officer or his delegate of any other state imposing a tax upon or measured by income, for exclusively official purposes, information received by the Department in the administration of this Act, but such permission shall be granted only if the United States or such other state, as the case may be, grants the Department substantially similar privileges. The Director may exchange information with the Illinois Department of Public Aid and the Department of Human Services (acting as successor to the Department of Public Aid under the Department of Human Services Act) for the purpose of verifying sources and amounts of income and for other purposes directly connected with the administration of this Act and the Illinois Public Aid Code. The Director may exchange information with the Director of the Department of Employment Security for the purpose of verifying sources and amounts of income and for other purposes directly connected with the administration of this Act and Acts administered by the Department of Employment Security. The Director may make available to the Illinois Workers' Compensation Commission information regarding employers for the purpose of verifying the insurance coverage required under the Workers' Compensation Act and Workers' Occupational Diseases Act. The Director may exchange information with the Illinois Department on Aging for the purpose of verifying sources and amounts of income for purposes directly related to confirming eligibility for participation in the programs of benefits authorized by the Senior Citizens and Disabled Persons Property Tax Relief and Pharmaceutical Assistance Act.

The Director may make available to any State agency, including the Illinois Supreme Court, which licenses persons to engage in any occupation, information that a person licensed by such agency has failed to file returns under this Act or pay the tax, penalty and interest shown therein, or has failed to pay any final assessment of tax, penalty or interest due under this Act. The Director may make available to any State agency, including the Illinois Supreme Court, information regarding whether a bidder, contractor, or an affiliate of a bidder or contractor has failed to file returns under this Act or pay the tax, penalty, and interest shown therein, or has failed to pay any final assessment of tax, penalty, or interest due under this Act, for the limited purpose of enforcing bidder and contractor certifications. For purposes of this Section, the term "affiliate" means any entity that (1) directly, indirectly, or constructively controls another entity, (2) is directly, indirectly, or constructively controlled by another entity, or (3) is subject to the control of a common entity. For purposes of this subsection (a), an entity controls another entity if it owns, directly or individually, more than 10% of the voting securities of that entity. As used in this subsection (a), the term "voting security" means a security that (1) confers upon the holder the right to vote for the election of members of the board of directors or similar governing body of the business or (2) is convertible into, or entitles the holder to receive upon its exercise, a security that confers such a right to vote. A general partnership interest is a voting security.

The Director may make available to any State agency, including the Illinois Supreme Court, units of local government, and school districts, information regarding whether a bidder or contractor is an affiliate of a person who is not collecting and remitting Illinois Use taxes, for the limited purpose of enforcing bidder and contractor certifications.

The Director may make any information concerning a criminal violation that may have occurred under the Truth in Employment Act available to the Attorney General or the appropriate State's Attorney when the Department refers a matter under Section 30 of the Truth in Employment Act.

The Director may also make available to the Secretary of State information that a corporation which has been issued a certificate of incorporation by the Secretary of State has failed to file returns under this Act or pay the tax, penalty and interest shown therein, or has failed to pay any final assessment of tax, penalty or interest due under this Act. An assessment is final when all proceedings in court for review of such assessment have terminated or the time for the taking thereof has expired without such proceedings being instituted. For taxable years ending on or after December 31, 1987, the Director may make available to the Director or principal officer of any Department of the State of Illinois, information that a person employed by such Department has failed to file returns under this Act or pay the tax, penalty and interest shown therein. For purposes of this paragraph, the word "Department" shall have the same meaning as provided in Section 3 of the State Employees Group Insurance Act of 1971.

(d) The Director shall make available for public inspection in the Department's principal office and for publication, at cost, administrative decisions issued on or after January 1, 1995. These decisions are to be made available in a manner so that the following taxpayer information is not disclosed:

(1) The names, addresses, and identification numbers of the taxpayer, related entities, and employees.

(2) At the sole discretion of the Director, trade secrets or other confidential information identified as such by the taxpayer, no later than 30 days after receipt of an administrative decision, by such means as the Department shall provide by rule.

The Director shall determine the appropriate extent of the deletions allowed in paragraph (2). In the event the taxpayer does not submit deletions, the Director shall make only the deletions specified in paragraph (1).

The Director shall make available for public inspection and publication an administrative decision within 180 days after the issuance of the administrative decision. The term "administrative decision" has the same meaning as defined in Section 3-101 of Article III of the Code of Civil Procedure. Costs collected under this Section shall be paid into the Tax Compliance and Administration Fund.

(e) Nothing contained in this Act shall prevent the Director from divulging information to any person pursuant to a request or authorization made by the taxpayer, by an authorized representative of the taxpayer, or, in the case of information related to a joint return, by the spouse filing the joint return with the taxpayer.

(Source: P.A. 93-25, eff. 6-20-03; 93-721, eff. 1-1-05; 93-835; eff. 7-29-04; 93-841, eff. 7-30-04; revised 10-25-04.)

Section 95. 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 Commission shall cooperate with the Department of Revenue under the Truth in Employment Act by providing information to the Department of Revenue concerning any suspected misclassification by a contractor of one or more of its employees as independent contractors.

Section 97. Severability. The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.