HB5002 94TH GENERAL ASSEMBLY

LRB094 15270 WGH 54774 b

94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB5002

Introduced 01/23/06, by Rep. Gary Hannig

SYNOPSIS AS INTRODUCED:

New Act
20 ILCS 1005/1005-160 new
20 ILCS 2505/2505-750 new
30 ILCS 105/5.663 new
30 ILCS 500/50-70
820 ILCS 305/26.1 new

Creates the Employee Classification Act. States that the Act is intended to address the practice of misclassifying employees as independent contractors. Provides that an individual performing any service is deemed to be an employee unless specified conditions are met. Requires summaries of the requirements of the Act to be posted by specified methods. Provides that it is a violation of the Act to misclassify persons performing services as employees. Contains provisions regarding: enforcement; investigations; hearings; remedies; review; contempt as a remedy; civil penalties for violations; creation of an Employee Classification Fund and the uses of moneys in the Fund; retaliation; creation of a private right of action; adoption of rules; criminal penalties; and other matters. Amends the State Finance Act to include the Fund as a special fund. Amends the Department of Employment Security Law, the Department of Revenue Law, and the Workers' Compensation Act to require cooperation with the Department of Labor. Amends the Illinois Procurement Act to conform to the new Act. Contains a severability clause. Effective July 1, 2006.

CORRECTIONAL BUDGET AND IMPACT NOTE ACT MAY APPLY

FISCAL NOTE ACT MAY APPLY

A BILL FOR

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:

"Break in service" means a person not classified as an employee under Section 10 of this Act that performs any service for an entity but fails to perform any service for a period of 120 business days.

"Consecutive services" means a person not classified as an employee under Section 10 of this Act that performs any service for an entity with no break in service.

"Employer" means any individual, firm, partnership, corporation, limited liability company, association, or other legal entity permitted by law to do business within the State of Illinois, the State of Illinois, or any political subdivision thereof and includes every school district, county, city, township, irrigation, utility, reclamation improvement or other district and every other political subdivision, district, or municipality of the State whether such political subdivision, municipality, or district operates under a special charter or not, but excepting the federal government who employ individuals deemed employees under Section 10 of this Act.

"Entity" means any individual, firm, partnership, corporation, limited liability company, association, or other legal entity permitted by law to do business within the State of Illinois, the State of Illinois, or any political subdivision thereof and includes every school district, county, city, township, irrigation, utility, reclamation improvement or other district and every other political subdivision, district, or municipality of the State whether such political subdivision, municipality, or district operates under a special charter or not, but excepting the federal government for which a person is performing any service and is not classified as an employee under Section 10 of this Act.

"Department" means the Department of Labor.

"Director" means the Director of Labor.

Section 10. Status of individuals performing service. For the purposes of this Act, an individual performing any service is deemed to be an employee unless it is shown by proof beyond a reasonable doubt that:

(1) the individual has been and will continue to be free from control or direction over the performance of the service, both under his or her contract of service and in fact;

(2) the service is either outside the usual course of the business for which the service is performed or the service is performed outside of all the places of business of the enterprise for which the service is performed; and

(3) the individual is engaged in an independently established trade, occupation, profession, or business.

Section 15. Notice.

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

(b) An employer or entity for whom one or more persons classified as independent contractors are performing service 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, Spanish, and Polish, prepared by the Department, summarizing the requirements of this Act. The Department shall furnish copies of summaries to employers and entities upon request without charge.

Section 20. Failure to properly classify persons performing services as employees. It is a violation of this Act for an employer or entity to misclassify persons performing services as employees under Section 10 of this Act.

Section 25. Enforcement. 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 a person is an employee under Section 10 of this Act. The Department shall conduct hearings in accordance with the Illinois Administrative Procedure Act upon written complaint by an investigator of the Department or any interested person of a violation of the Act. After the hearing, if supported by the evidence, 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, and(iii) determine the amount of any civil penalty allowed by the 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 or hearing and may administer oaths to witnesses.

Section 30. Review under Administrative Review Law. Any party to a proceeding under this Act may apply for and obtain judicial review of an order of the Department entered under this Act in accordance with the provisions of the Administrative Review Law, and the Department in proceedings under the Act may obtain an order from the court for the enforcement of its order.

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.

(a) 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 $6,000 for violations 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 4 years. For purposes of this subsection, 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. For any violation determined by the Department to be willful which is within 4 years of an earlier violation, the Department shall add the employer or entity's name to a list to be posted on the Departments website. No State contract may be awarded to an employer or entity who is posted or should be posted to this list until 4 years have elapsed from the date of a second or subsequent violation. The amount of the penalty, when finally determined, may be:

(1) Recovered in a civil action brought by the Director of Labor in any circuit court. In this litigation, the Director of Labor shall be represented by the Attorney General.

(2) Ordered by the court, in an action brought by any party for a violation under this Act, to be paid to the Director of Labor.

(b) The Department shall adopt rules for violation hearings and penalties for violations of this Act or the Department's rules in conjunction with the penalties set forth in this Act. Any administrative determination by the Department as to the amount of each penalty shall be final unless reviewed as provided in Section 30 of this Act.

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 Department of Labor, its inspectors or deputies, 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 is subsection (a) of this Section.

(c) The Director may promulgate rules for the collection of these penalties. 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.

Section 50. Employee Classification Fund. All moneys received 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 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) Prohibition. 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.

(b) Protected Acts from Retaliation. 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) A 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 of Illinois, 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 the violation of each subpart of each Section;

(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 aggrieved person to bring an action under this Section terminates upon the passing of 3 years from the final date of service 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 by contacting or threatening to contact law enforcement agencies.

Section 65. 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. 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 900. 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 Employment Security and the Department of Labor shall cooperate with each other under the Employee Classification Act by providing information to each other concerning any suspected misclassification by an employer of one or more of its employees as independent contractors.

Section 902. 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 Revenue and the Department of Labor shall cooperate with each other under the Employee Classification Act by providing information to each other concerning any suspected misclassification by an employer of one or more of its employees as independent contractors.

Section 905. The State Finance Act is amended by adding Section 5.663 as follows:

(30 ILCS 105/5.663 new)

Sec. 5.663. The Employee Classification Fund.

Section 910. 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 915. 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 Illinois Workers' Compensation Commission and the Department of Labor shall cooperate with each other under the Employee Classification Act by providing information to each other concerning any suspected misclassification by an employer of one or more of its 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 July 1, 2006.