Employee Classification Act FAQ
The Frequently Asked Questions (FAQs) provided below highlight topics and specific questions that are often asked of the Illinois Department of Labor (IDOL). The information provided in the FAQs is intended to enhance public access and understanding of IDOL laws, regulations and compliance information.
The FAQs should not be considered a substitute for the appropriate official documents (i.e. statute and/or administrative rules.) Individuals are urged to consult legal counsel of their choice. Court decisions may affect the interpretation and constitutionality of statutes. The Department cannot offer individuals legal advice or offer advisory opinions. If you need a legal opinion, we suggest you consult your own legal counsel. These FAQs are not to be considered complete and do not relieve employers from complying with applicable IDOL laws and regulations.
- 1. What is the Employee Classification Act, 820 ILCS 185, (“ECA”)?
- 2. Does the ECA cover public and private construction?
- 3. What is the standard for an employee versus an independent contractor under the ECA?
- 4. If I hire a person who is a corporation or a LLC, am I free from liability for classifying that person as an independent contractor rather than an employee?
- 5. Are subcontractors and lower tiered subcontractors covered by the ECA?
- 6. Are there penalties for misclassifying a person who should be classified as an employee?
- 7. Does a contractor who misclassifies persons who should be classified as employees, subject to any liability for the misclassification?
- 8. Who can file a complaint regarding a misclassification?
- 9. What happens when a complaint regarding a misclassification is filed?
- 10. Can I be fired for filing a complaint with the Department regarding misclassification?
- 11. What if a contractor continues to improperly classify persons performing services?
- 12. Can an employer and an individual agree or contract to waive the provisions of the Act?
1. What is the Employee Classification Act, 820 ILCS 185, (“ECA”)?
It is a law that addresses the improper classification of persons working in the construction industry by classifying them as independent contractors rather than properly classifying them as employees.
2. Does the ECA cover public and private construction?
Yes. ECA covers all public and private construction including moving construction related materials on the job site and to or from the job site.
3. What is the standard for an employee versus an independent contractor under the ECA?
An individual performing services for a contractor is considered to be an employee except if is shown
the individual has been and will continue to be free from control or direction over the performance of service,
the service performed is outside the scope of the usual course of services performed by the contractor and
the individual is engaged in an independently established trade or business or the individual is deemed a legitimate sole proprietor or partnership under subsection c of Section 185/10.
4. If I hire a person who is a corporation or a LLC, am I free from liability for classifying that person as an independent contractor rather than an employee?
No. Because a person holds themselves as a corporation or a LLC, that fact by itself does not absolve a contractor from misclassifying an employee. An individual performing services does not include an entity which is and operates as a bona fide corporation or a bona fide LLC as determined by the Department under its regulations at 56 Ill. Adm. Code 240.110.
5. Are subcontractors and lower tiered subcontractors covered by the ECA?
Yes. All contractors and subcontractors are subject to the Act and must properly classify all persons performing services on their behalf.
6. Are there penalties for misclassifying a person who should be classified as an employee?
A civil penalty not to exceed $1500 for each violation may be imposed. A separate violation occurs for each person improperly classified and for each day on which a violation continues.
For example, if a contractor misclassifies two persons for two days the maximum penalty is $6000. A contractor who willfully violates the Act or who obstructs an investigation can be subject to penalties of double the amount.
7. Does a contractor who misclassifies persons who should be classified as employees, subject to any liability for the misclassification?
Yes. Once a person performing services is found to be an employee under the ECA and is found to have been improperly classified, that employee is entitled to all rights and benefits to which employees are entitled under other applicable state laws. A person who is misclassified shall be entitled to receive all salary, employment benefits, or other compensation which the individual lost as a result of the misclassification, including but not limited to all lost wages resulting from not being paid the minimum wage or overtime. An employer can be ordered to reimburse the person for improper deductions such as lost unemployment or workmen’s compensation benefits or to have contributions made on the employee’s behalf.
8. Who can file a complaint regarding a misclassification?
Any interested party can file a complaint. An interested party can be the individual employee, another employee or employer, a labor organization, or the Department of Labor on its own initiative.
9. What happens when a complaint regarding a misclassification is filed?
The Department engages in an investigation and makes a finding with a recommendation regarding the appropriate remedial action for violations of the ECA. If a contractor fails to comply with the results of the investigatory action, the matter will be referred to the Attorney General for appropriate court action.
10. Can I be fired for filing a complaint with the Department regarding misclassification?
It is a violation of the ECA for an employer or any entity to retaliate, through discharge or in any other manner, against a person for exercising any rights granted under the Act.
11. What if a contractor continues to improperly classify persons performing services?
The Department could consider the subsequent conduct as a willful violation and in addition a subsequent violation has a maximum penalty of $2500 for each violation. In addition a contractor may be debarred from state contracts.
12. Can an employer and an individual agree or contract to waive the provisions of the Act?
No. The Act prohibits employers from attempting to induce or encourage any individual to waive rights provided for under the Act. A contractor found in violation of this provision may be found guilty of a Class C misdemeanor.