The Employee Classification Act: How will it affect your business?
April, 2008 – Effective January 1, 2008, the Act addresses classifying workers as 1099s versus W2s. The Act focuses on the “construction” industry; broadly defining it to include adding or subtracting from any structure, roadway, sewer, parking facility, real property or improvement, including maintenance, landscaping, painting, and decorating. Under the Act, all workers are presumed to be W2s, unless they meet certain criteria. The test broadens the “control test” most employers are familiar with, adding elements that must be met in order to qualify as a 1099.
Your 1099s can no longer hide behind a corporate shell and assume that it will give you protection. The Act allows “interested parties” to file complaints with the Illinois Department of Labor or in court; leaving companies open to defending lawsuits from competitors. The penalties are enticing; including $1,500 per day/violation, double lost wages and benefits, plus $500 per day and attorneys fees to interested parties.Protect yourself by auditing your 1099 contracts—do they meet the new test? The cost of coming into compliance is far less than the possible penalties.
Summary: Employee Classification Act sets out rules for determining if an individual is an employee or an independent contractor and sets out penalties for misclassification.