HB5002ham002 94TH GENERAL ASSEMBLY

Rep. Larry McKeon

Filed: 3/1/2006

09400HB5002ham002 LRB094 15270 WGH 56763 a

AMENDMENT TO HOUSE BILL 5002

AMENDMENT NO. ______. Amend House Bill 5002, AS AMENDED, by replacing everything after the enacting clause with the following:

"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:

"Construction" means building, altering, repairing, improving, or demolishing any structure or building or making improvements of any kind to real property.

"Contractor" means any person or entity who is engaged in construction as defined in this Act. "Contractor" includes a general contractor and a subcontractor, but does not include a person or entity who furnishes only materials or supplies.

"Department" means the Department of Labor.

"Director" means the Director of Labor.

"Employer" means any contractor that employs individuals deemed employees under Section 10 of this Act; however, "employer" does not include (i) the State of Illinois or its officers, agencies, or political subdivisions or (ii) the federal government.

"Entity" means any contractor for which a person is performing any service and is not classified as an employee under Section 10 of this Act; however, "entity" does not include (i) the State of Illinois or its officers, agencies, or political subdivisions or (ii) the federal government.

Section 10. Applicability; status of individuals performing service. For the purposes of this Act, an individual performing any service for a contractor is deemed to be an employee unless it is shown 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. Provided however, that this shall not impair the ability of a contractor to subcontract with a subcontractor provided the subcontractor satisfies the provisions of this Section, nor impair the ability of a subcontractor to subcontract with a lower tiered subcontractor provided the lower tiered subcontractor satisfies the provisions of this Section.

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 designate or classify persons performing services as employees.

(a) Except as provided in subsection (b), it is a violation of this Act for an employer or entity not to designate an individual as an employee under Section 10 of this Act unless the employer or entity satisfies the provisions of Section 10.

(b) Subsection (a) does not apply to any designation of an individual by an employer or entity in accordance with the requirements of any other law, rule, or regulation. However, a general contractor shall not be liable under this Act for a lower tier subcontractor's failure to properly designate or classify persons performing services as employees, nor shall a subcontractor be liable for a lower tiered subcontractor's failure to properly designate or classify persons performing services as employees.

(c) Nothing in this Section shall be deemed to apply to any action arising out of personal injury or tort.

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 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 27. Order for violation and public hearing. Whenever the Department believes upon investigation that there has been a violation of any of the provisions of this Act or any rules or regulations promulgated under this Act, the Department may: (i) issue and cause to be served on any party an order to cease and desist from further violation of this Act; (ii) take affirmative or other action as deemed reasonable to eliminate the effect of the violation; and (iii) assess any civil penalty allowed by this Act. The civil penalties assessed by the Department shall be recoverable in an action brought in the name of the People of the State of Illinois by the Attorney General. In any order issued to an offending party under this Act, the Department shall include a summary of its findings, which give evidence of the violation. Any party affected by an order of the Department shall have the right to a hearing before the Department; however, a written request for such hearing shall be served on the Department within 10 days of notice of such order. In the absence of the receipt of a request for hearing, the affected party shall be deemed to have waived its right to a hearing and the Department's order shall become a final administrative decision.

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. 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 $1,500 for each violation 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 5 years. For purposes of this Section, 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. The amount of the penalty, when finally determined, may be recovered in a civil action filed in any circuit court by the Director of Labor, or a person aggrieved by a violation of this Act or any rule adopted under this Act. For any second or subsequent violation determined by the Department which is within 5 years of an earlier violation, the Department shall add the employer or entity's name to a list to be posted on the Department's website. Upon such determination the Department shall notify the violating employer or entity. Such employer or entity shall then have 10 working days to request a hearing by the Department on the alleged violations. The amount of the penalty, when finally determined, may be recovered in a civil action filed in any circuit court by the Director of Labor or a person aggrieved by a violation of this Act or any rule adopted under this Act. In any civil action brought by an aggrieved person pursuant to this Section, the circuit court shall award the aggrieved person 10% of the amount recovered. In such case the remaining amount recovered shall be submitted to the Director of Labor. Any uncollected amount shall be subject to the provisions of the Illinois State Collection Act of 1986.

Section 42. Debarments. For any second or subsequent violation determined by the Department which is within 5 years of an earlier violation, the Department shall add the employer or entity's name to a list to be posted on the Department's website. Upon such notice, the Department shall notify the violating employer or entity. No State contract shall be awarded to an employer or entity appearing on the list until 4 years have elapsed from the date of the last violation.

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 Director of Labor, or his or her representatives, 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 in subsection (a) of this Section.

(c) 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. Any uncollected amount shall be subject to the provisions of the Illinois State Collection Act of 1986.

Section 50. Employee Classification Fund. All moneys received by the Department 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 and other personnel 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) 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) 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, 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 each violation of this Act or any rule adopted under this Act;

(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. 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 75. Cooperation. The Department of Labor, the Department of Employment Security, the Department of Revenue, the Office of the State Comptroller, and the Illinois Workers' Compensation Commission shall cooperate under this Act by sharing information concerning any suspected misclassification by an employer of one or more of its employees as independent contractors. Upon determining that an employer or entity has misclassified employees as independent contractors in violation of this Act, the Department of Labor shall notify the Department of Employment Security, the Department of Revenue, the Office of the State Comptroller, and the Illinois Workers' Compensation Commission who shall be obliged to check such employer or entity's compliance with their laws, utilizing their own definitions, standards, and procedures.

Section 900. The State Comptroller Act is amended by adding Section 9.06 as follows:

(15 ILCS 405/9.06 new)

Sec. 9.06. Misclassification of employees as independent contractors. The Department of Labor, the Department of Employment Security, the Department of Revenue, the Office of the State Comptroller, and the Illinois Workers' Compensation Commission shall cooperate under the Employee Classification Act by sharing information concerning any suspected misclassification by an employer or entity, as defined in the Employee Classification Act, of one or more employees as independent contractors.

Section 901. 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 Labor, the Department of Employment Security, the Department of Revenue, the Office of the State Comptroller, and the Illinois Workers' Compensation Commission shall cooperate under the Employee Classification Act by sharing information concerning any suspected misclassification by an employer or entity, as defined in the Employee Classification Act, of one or more employees as independent contractors.

Section 905. The Department of Labor Law of the Civil Administrative Code of Illinois is amended by adding Section 1505-125 as follows:

(20 ILCS 1505/1505-125 new)

Sec. 1505-125. Misclassification of employees as independent contractors. The Department of Labor, the Department of Employment Security, the Department of Revenue, the Office of the State Comptroller, and the Illinois Workers' Compensation Commission shall cooperate under the Employee Classification Act by sharing information concerning any suspected misclassification by an employer or entity, as defined in the Employee Classification Act, of one or more employees as independent contractors.

Section 910. 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 Labor, the Department of Employment Security, the Department of Revenue, the Office of the State Comptroller, and the Illinois Workers' Compensation Commission shall cooperate under the Employee Classification Act by sharing information concerning any suspected misclassification by an employer or entity, as defined in the Employee Classification Act, of one or more employees as independent contractors.

Section 915. 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 920. 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 925. 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 Department of Labor, the Department of Employment Security, the Department of Revenue, the Office of the State Comptroller, and the Illinois Workers' Compensation Commission shall cooperate under the Employee Classification Act by sharing information concerning any suspected misclassification by an employer or entity, as defined in the Employee Classification Act, of one or more 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.".