On May 27, 2014, the Illinois Supreme Court resolved the issue of whether the Illinois Employee Classification Act was unconstitutional due to alleged defects in procedure. The Act, which is directed at the classification of construction employees, became effective on January 1, 2008 to address the practice of misclassifying employees as independent contractors. Consistent with this purpose, the Act broadly provides that any individual “performing services” for a construction contractor is “deemed to be an employee of the employer”. Section 10 of the Act defining the term “performing services” was held not to be unconstitutionally vague. The Court found its provisions were highly detailed and specific, and sufficient for a person of ordinary intelligence to understand what conduct the Act prohibits.
Another challenge to the Act’s constitutionality was the limited procedural rights available to a contractor found to be in violation of the Act. The Court found the Plaintiffs' procedural challenge to the Act’s pre-amendment enforcement provisions were rendered moot by the 2014 amendments, establishing detailed procedural rights for contractors.
In another recent decision in June of this year, the Illinois Appellate Court for the First District Court affirmed summary judgment to a defendant window company, finding facts showing that the company contracted with a residential contractor that was a bona fide corporation under the Department of Labor administrative regulations, and that thus the Illinois Employee Classification Act did not apply. The contracting company, and not the owner individually, rendered services to the window company through the contractor's own employees. Thus, the company owner was not an "individual performing services" as defined under the Act.
This decision effectively eliminates the argument that individuals performing services for a bona fide corporation retained by a contractor can bring claims under the Act. The court noted the possibility exists that a contractor could skirt the Act’s requirements by nominally entering into contracts with corporations and not directly with individuals. However, the court also noted that the corporation would have to meet the requirements of the Act to qualify as a bona fide corporation so the concern was unfounded.
Clearly, construction contractors are better protected if they obtain their work force through agreements with bona fide employers rather than with individuals. In the latter case, construction contractors are urged to audit their categorization of these individuals to limit their exposure under the Act.