Background on the Illinois Employee Classification Act
The Illinois Employee Classification Act (ECA) went into effect on January 1st, 2008. This legislation is aimed at the construction industry, but also affects construction-related trucking.
The ECA addresses situations where a construction company improperly classifies a person as an “independent contractor” or a “subcontractor” instead of classifying them as an employee in order to avoid paying payroll taxes, unemployment insurance contributions, workers compensation, overtime, etc.
Without these costs, non-compliant businesses gain a competitive advantage against competitors who comply with tax and employment laws. Additionally, these workers may go without benefits they might otherwise receive if they worked for a compliant employer.
How the Employee Classification Act works
The ECA is enforced by the Department of Labor. Companies who violate the act can be subject to fines for violations, which accrue daily, per employee.
The act sets forth a test to determine whether a person is an employee or not. As outlined in this article from Ice Miller, the Act “creates a legal presumption that an individual providing construction services is an employee unless proven otherwise.”
Additionally, complaints can by filed by any interested party. This could include other contractors who bid on the project, unions, disgruntled employees etc.
What construction (and trucking) businesses need to do
Become familiar with the Employee Classification Act. The Illinois Department of Labor posted a Employment Classification Act FAQ that answers many common questions.
Be sure to consult with your attorney and accountant if your business employs subcontractors or independent contractors to be sure that you are compliant.
For more information
For another read by a third party, “A Plain-English Guide to the IL ECA”.
Also, look for my follow-up post, Illinois Employee Classification Act – Part II.