Categories
Independent Contractor

One Crucial Legal Difference Between An Independent Contractor And An Employee

One Crucial Legal Difference Between An Independent Contractor And An Employee

By Nancy E. Joerg of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Independent Contractor on Monday, July 15, 2019.

The IRS uses a Questionnaire called the IRS Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding) to determine when a particular “worker” is an independent contractor and when the “worker” is an employee.

This Questionnaire has been used by the IRS for decades. One of the key questions on the IRS Form SS-8 is: Can the relationship be terminated by either party without incurring liability or penalty?

State unemployment insurance agencies across the United States have their own Questionnaires to determine when workers are independent contractors or employees. In Illinois, the Illinois Department of Employment Security (IDES) asks the question that almost every State asks which is: “Can the firm discharge the worker at any time?”

Another question almost universally asked by State unemployment insurance agencies is: “Can the worker terminate his/her services at any time?”

These questions, state and Federal, have the same legal purpose. The government agency is trying to figure out 1) whether the Company can end the relationship with the worker on a whim without giving any notice, and 2) whether the worker quit without giving any notice of any kind and without incurring any liability.

NO NOTICE INDICATES AN EMPLOYEE: Government agencies reason that if a worker can simply walk off the job (or if a company can fire a worker with no notice whatsoever), then that relationship is the classic employment-at-will relationship, not an independent contractor relationship.

IF NOTICE IS REQUIRED, IT POINTS MORE TO AN INDEPENDENT CONTRACTOR RELATIONSHIP: However, if the company has to give some kind of notice before firing the worker (or if the worker is contractually obligated to give some kind of notice before leaving), then that relationship is closer to an independent contractor relationship.

MAKE SURE INDEPENDENT CONTRACTOR AGREEMENT CONTAINS A NOTICE PROVISION: If a company uses independent contractors, the company should carefully review the Independent Contractor Agreement to see if the Agreement permits the parties to terminate the relationship at will with no notice or if the relationship can only be ended with a specified notice period.

If an Independent Contractor Agreement has a provision under which the independent contractor can quit at any time or the independent contractor relationship can be severed at any time, then that provision weakens independent contractor status.

If an Independent Contractor Agreement has a provision under which the parties must, for example, give one weeks’ notice before termination of the independent contractor relationship, then that notice provision strengthens independent contractor status.

MISCONCEPTION: These distinctions confuse many people because it is a commonly held belief (really a misconception) that if a worker is truly “free,” he can simply walk away from the job at any time. But the reverse is actually true-it is a stronger independent contractor relationship when the worker is contractually bound to a specified notice period.

To discuss your potential liability in using independent contractors (as well as strategies for reducing your liability in using independent contractors), please contact Attorney Nancy Joerg at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Related Posts: Yes, You Can Win Before an IDES Hearing Officer on the Issue of Independent Contractor Status!!, IRS Form SS-8 Continues To Upset And Confuse Employers Across The U.S.!, Psychological Counselors In Pennsylvania Found To Be Independent Contractors, Yes, There are Certain Categories of Workers Who Are Independent Contractors By Law Under the Illinois Unemployment Insurance Act

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Coronavirus/COVID-19

New Federal Covid-19 Legislation And Its Dramatic Impact On Independent Contractor Status: How Have Things Changed?

New Federal Covid-19 Legislation And Its Dramatic Impact On Independent Contractor Status: How Have Things Changed?

By Nancy E. Joerg of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Coronavirus/COVID-19 on Thursday, May 21, 2020.

The independent contractor “legal world” is quickly transforming in many ways! It is hard to keep up with the flood of new laws and court cases impacting independent contractor status on both the Federal and State levels.

FEDERAL COVID-19 LEGISLATION AFFECTING INDEPENDENT CONTRACTORS: Recently Congress passed two major bills (signed into law by President Trump) which included benefits historically reserved for employees but now suddenly expanded by these two surprising laws to also include self-employed individuals (also known as independent contractors or gig workers).

COVID-19 related unemployment insurance benefits have been made available to independent contractors under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. Paid sick and family leave has also been made available to independent contractors under the Families First Coronavirus Response Act (“FFCRA”).

CARES ACT: Under the CARES Act, enacted into law on March 27, 2020, independent contractors will be entitled to Federal Pandemic Unemployment Assistance (PUA) if the independent contractors are able and willing to work or telework for pay, but are unable to do so due to the obstacles and economic stresses related to the COVID-19 pandemic. PUA is available not only if such independent contractors are “unemployed” but also if “partially unemployed.” PUA is available to independent contractors retroactively from January 27, 2020 through December 31, 2020.

FFCRA: Under the FFCRA, enacted on March 18, 2020 and effective April 1, 2020, both paid sick time under the Emergency Paid Sick Time Act, and expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act are available not only to employees, but (very surprisingly!) also to eligible independent contractors.

Paid sick leave is available to independent contractors for up to ten (10) days where the independent contractor is unable to work or telework because the independent contractor is subject to a government quarantine or order of isolation related to COVID-19; has been advised by a health care provider to self-quarantine; or is experiencing symptoms of COVID-19 and is seeking medical attention. It is clear that Congress viewed many independent contractors as needing significant financial help.

UNEMPLOYMENT INSURANCE BENEFITS: Now that Congress has provided an emergency form of financial help for freelancers, gig workers, and other independent contractors, state departments of unemployment insurance (across America) have for the most part struggled to quickly create online processes to provide such unemployment insurance benefits to independent contractors.

Strangely, most state departments of unemployment insurance require independent contractors to first apply for unemployment benefits as if they were employees, and then, only when DENIED by their state’s department of unemployment insurance because they are found to be non-employees, are they able to proceed with the process to submit documentation that they are self-employed (i.e., independent contractor) and have suffered a loss of income. Yes, a very awkward process!

COMPANIES ARE RECEIVING NOTICES OF CLAIM ON INDEPENDENT CONTRACTORS: As a result of independent contractors being “forced” to apply for unemployment insurance benefits as if they were employees, companies are receiving Notices of Claim from state departments of unemployment insurance about workers they regard as independent contractors. Clearly the independent contractor claimants have no choice but to apply for unemployment insurance benefits as if they were really employees. What a confusing situation for all involved!

By not responding in an effective manner to an unemployment insurance Notice of Claim about a worker regarded by the company as an independent contractor, companies using independent contractors will likely receive a determination from the state department of unemployment insurance that the claimant is really an employee of that business.

Such a legal finding of employee status can create enormous potential legal risks and liabilities for companies that have not been paying unemployment and payroll taxes on the money paid to individuals treated as independent contractors.

TIMELY AND THOUGHTFULLY REPLY TO NOTICES OF CLAIM: Any company who receives a Notice of Claim (for unemployment insurance benefits) on an independent contractor should thoughtfully and fully respond in a timely manner. Even being one day late with a protest response may take away a Company’s right to protest a Notice of Claim.

The Company should explain in detail why the unemployment insurance claimant is not an employee but rather is an independent contractor. Each state has its own legal definition of independent contractor status. Be aware of your state’s “legal test” for independent contractor status under that state’s unemployment insurance law. Design your protest response to prove legally that the unemployment insurance claimant is in fact an independent contractor under your state’s “legal test” for independent contractor status. Attach any available proof of independent contractor status to your written response (protest) such as the independent contractor’s business card, the IRS Form 1099 you issued that independent contractor, print-outs from the independent contractor’s website, any advertising done by the independent contractor, etc.

If you do not aggressively respond to these unemployment insurance Notices of Claim by independent contractors, you may find in the future that your ability to defend the independent contractor status of your workers has been severely damaged! For example, if your company is audited by your state’s department of unemployment insurance in the coming years, the agency may attempt to use these “COVID-19 era” unemployment insurance decisions as the legal basis to find your independent contractors to be misclassified (i.e., they should have been classified as employees).

We do not know exactly what will be the legal long-term result of all these independent contractors getting unemployment insurance benefits in this COVID-19 era. No one knows at this juncture. We are in unchartered waters. Play it “safe” and vigorously defend the independent contractor status of your workers. Answer (protest) each Notice of Claim (by independent contractors) for unemployment insurance benefits with great seriousness and detail.

For assistance with figuring out the best course of action in view of these dramatic new laws regarding unemployment insurance benefits, contact Attorney Nancy Joerg at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Related Posts: Employee Return to Work Under Covid-19: What Should Employers Do?, Some Minnesota Businesses Allowed to Resume Operations , OSHA Issues Guidance on Recording COVID-19 Cases, Illinois Companies Using Independent Contractors Must Now Handle IDES Notices of Claims: What Should Illinois Companies Do?

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Categories
Coronavirus/COVID-19

Illinois Companies Using Independent Contractors Must Now Handle IDES Notices of Claims: What Should Illinois Companies Do?

Illinois Companies Using Independent Contractors Must Now Handle IDES Notices of Claims: What Should Illinois Companies Do?

By Nancy E. Joerg of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Coronavirus/COVID-19 on Thursday, May 7, 2020.

We now know the basic outline of how the Illinois Department of Employment Security (IDES) will process independent contractor unemployment insurance claims.

The IDES issued a press release on May 5, 2020 about 1099 workers who have lost work due to COVID-19.

The IDES press release states: “Workers who believe they may be eligible for new federal benefits under the Pandemic Unemployment Assistance (PUA) program, must first apply for regular unemployment insurance before applying for benefits under PUA when a new application portal opens on May 11, 2020 via the IDES website.”

IDES Notices of Claims From 1099 Workers Will Be Arriving!: This means that Illinois companies using independent contractors should expect to begin receiving IDES Notices of Claims for these unemployment insurance benefit claims that are now being filed by 1099 workers!

Be sure to timely respond to the IDES when your company receives a Notice of Claim filed by a 1099 worker (independent contractor). Make it clear to the IDES that the claimant is, in fact, an independent contractor and not your employee. Respond with a very detailed letter in support of independent contractor status. Keep your record strong with the IDES in defending independent contractor status.

Several clients have already called to tell me that they have received a Notice of Claim in the mail which already is “not timely.” In other words, the Notice of Claim has a reply due date which has already passed. The client wants to know if it is a waste of their time to protest the Notice of Claim since the reply due date has already come and gone. My advice to the client is to absolutely protest the Notice of Claim!, even though technically it is not timely.

I instruct the client to explain in the protest that the Notice of Claim arrived on [fill in date of arrival] and the company opened its mail immediately on that day and discovered the reply due date had come and gone. I tell the client to state there are witnesses in the company who are willing to testify under oath that the Notice of Claim from the unemployment insurance agency arrived on a specific date and was opened immediately.

If the envelope in which the Notice of Claim arrived has a postmark, I tell the company to attach a copy of the envelope as an exhibit to the protest.

Independent Contractors Have Joined The Ranks of Those Applying for Unemployment Insurance Benefits: Federal and IDES laws have historically shut out independent contractors from unemployment insurance benefits-until the COVID-19 crisis hit the U.S. economy. This COVID-19 pandemic, almost overnight, wrecked work opportunities for many of those who have operated as 1099 workers.

To Be Eligible For PUA, Independent Contractor Must First Be Denied Regular Unemployment Insurance Benefits: If a 1099 worker (independent contractor) receives an eligibility determination of $0 after applying for regular unemployment insurance benefits with the IDES, this shows the IDES views the 1099 worker to be a “non-employee.” Then the 1099 worker can protest that decision by providing to the IDES verification of wages earned, or the 1099 worker can submit a claim to the IDES for PUA benefits.

Unemployment insurance claimants who have already applied for and been denied regular unemployment benefits by the IDES can submit a claim to the IDES through the new PUA portal when it opens on the IDES website on May 11, 2020. Receiving a denial for regular unemployment benefits is a mandatory first step in determining eligibility for PUA under the IDES system.

What is Pandemic Unemployment Assistance (PUA) And How Long Does It Last?: PUA provides 100% federally-funded unemployment benefits for independent contractors who are unemployed for specified COVID-19-related reasons. These 1099 unemployment insurance claimants must not be eligible for the IDES’s regular unemployment insurance program, the extended benefit (EB) program under Illinois law, or the Pandemic Emergency Unemployment Compensation program (PEUC). Up to 39 weeks’ worth of unemployment insurance benefits are potentially available under the program for COVID-19-related unemployment claims.

PUA claims by independent contractors will be backdated by the IDES to the 1099 claimant’s first week of unemployment, but no earlier than February 2, 2020, and will continue for as long as the independent contractor remains out of work as a result of COVID-19, but no later than the week ending December 26, 2020.

PUA will be available to independent contractors who are unable to work or telework if the 1099 worker certifies that he or she:

  • is diagnosed with COVID-19 or experienced symptoms or is seeking a diagnosis,
  • has a member of his or her household that has been diagnosed with COVID-19,
  • is providing care to a family member with COVID-19,
  • has primary caregiving responsibility to a child that is unable to attend school due to COVID-19,
  • cannot reach his or her place of work because of a quarantine or advice of a health care provider to self-quarantine,
  • has become a breadwinner after the head of household has died from COVID-19,
  • has had to quit his or her work as a result of Coronavirus, or
  • has a work location that is closed as a direct result of a COVID-19 public health emergency.

PUA is available not only if such independent contractors are “unemployed” but also if “partially unemployed.” This benefit is not available, though, if and when such self-employed individuals are receiving paid sick leave or other paid leave benefits, including such benefits available to independent contractors under the federal Families First Coronavirus Response Act or a state law providing such paid benefits to self-employed workers.

Companies Must be Vigilant about Defending Independent Contractor Status: This is a crucial time to have a strong independent contractor agreement and strong independent contractor files loaded with documentation of self-employment. Companies need to be extremely vigilant about defending the independent contractor status of their workers who might be applying for unemployment insurance benefits. Yes, they may be entitled to unemployment insurance benefits, but only as independent contractors-not as employees!

For assistance with protesting IDES Notices of Claims and evaluating independent contractor relationships, contact Attorney Nancy Joerg at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Related Posts: Employee Return to Work Under Covid-19: What Should Employers Do?, Some Minnesota Businesses Allowed to Resume Operations , OSHA Issues Guidance on Recording COVID-19 Cases, New Federal Covid-19 Legislation And Its Dramatic Impact On Independent Contractor Status: How Have Things Changed?

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Coronavirus/COVID-19

The Latest from the IDES Regarding Independent Contractors: What Has Changed in the COVID-19 Era?

The Latest from the IDES Regarding Independent Contractors: What Has Changed in the COVID-19 Era?

By Nancy E. Joerg of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Coronavirus/COVID-19 on Tuesday, April 14, 2020.

As I write this article in the COVID-19 era with the purpose of assisting Illinois companies who use independent contractors, things are moving rapidly in terms of new federal laws, regulations and state guidelines. Changes are occurring at the Illinois Department of Employment Security (IDES) with shocking speed!

NEW REGULATIONS AND GUIDELINES CHANGING ALMOST WEEKLY: For those companies using independent contractors, this article is relying on the latest information from the IDES website. The reader should be aware that new regulations and guidelines can pop up on an almost weekly basis. Be sure to check with your employment lawyer before formulating any actual plans based upon statements made in this article.

IDES CURRENT TREATMENT OF INDEPENDENT CONTRACTORS: One of the most controversial things that I have read on the IDES website page about COVID-19 and Unemployment Benefits (in the section on Frequently Asked Questions for Claimants) concerns the question and answer as follows:

Claimant Question: “I am an independent contractor and do not have any business because of COVID-19. Am I eligible?”

IDES Answer: Only employees get regular state unemployment insurance benefits.

The bottom line is that MISCLASSIFIED INDEPENDENT CONTRACTORS IN ILLINOIS ARE ELIGIBLE FOR REGULAR STATE UNEMPLOYMENT INSURANCE BENEFITS BECAUSE THEY ARE VIEWED AS EMPLOYEES BY THE IDES.

IDES WILL INVESTIGATE WORKING RELATIONSHIP: Another startling concept to be gleaned from the IDES website is that the IDES will have to investigate the working relationship between the independent contractor and the Illinois company that pays the independent contractor to determine if the Claimant is actually a misclassified independent contractor or a “legitimate independent contractor.” Of course, there are other issues to be decided such as whether the independent contractor lost his or her job due to COVID-19.

THE $600 PER WEEK BENEFIT: It has been widely publicized all over the Internet, on television, on the radio, and in newspapers that independent contractors, due to new federal legislation, are eligible for a $600 per week (federal stimulus) unemployment insurance benefit. Many people assumed that the $600 per week federal stimulus would be added on top of what the independent contractor would also get for regular state unemployment insurance benefits.

There are several things to keep in mind here. One is that only misclassified independent contractors will get both regular state unemployment insurance benefits and the flat $600 per week federal unemployment insurance stimulus benefit (keep in mind the $600 per week benefit ends, per federal legislation, at the end of July 2020).

Legitimate independent contractors (as defined by the IDES under the Illinois Unemployment Insurance Act) will not get regular state unemployment insurance benefits and will only get the flat $600 per week federal stimulus benefit until the end of July 2020. It appears that after July 31, 2020, legitimate independent contractors will no longer be getting any unemployment insurance benefit of any type.

It is unclear at this point in time if every independent contractor who applies for unemployment insurance benefits will get the full $600 per week federal stimulus benefit, but the implication is that they will. It remains to be seen how this actually will shake out. Additional legal issues will also arise such as if the independent contractor is lacking work due to COVID-19 because this appears to be a legal requirement under the federal stimulus legislation.

PARTIALLY-EMPLOYED INDEPENDENT CONTRACTOR: An interesting question and answer on the IDES website page about COVID-19 and Unemployment Benefits (in the section on Frequently Asked Questions for Claimants) appears as follows:

Claimant Question: If I am a partially-employed independent contractor and I am eligible for benefits under the federal legislation, will I receive the full amount of the extra $600 per week?

IDES Answer: Yes. If you are eligible for even $1 of unemployment benefits, you are eligible for the entire $600 extra.

UNEMPLOYED DUE TO COVID-19: Another interesting question asked and answered on the IDES website page about COVID-19 and Unemployment Benefits (in the section on Frequently Asked Questions for Claimants) is as follows:

Claimant Question: I am an independent contractor. In order to receive benefits under the federal stimulus legislation, do I have to be unemployed because of COVID-19?

IDES Answer: Yes. The federal stimulus legislation requires that individuals not eligible for regular unemployment benefits, such as independent contractors, are unemployed due to COVID-19. (emphasis added)

HOW THE IDES EVALUATES THE EARNINGS OF AN INDEPENDENT CONTRACTOR: Illinois companies that use independent contractors may wonder how the IDES is going to evaluate the earnings for an independent contractor who files for unemployment insurance benefits.

The IDES website explains that the independent contractor claimant must provide 2019 federal income tax return or other documentation to show earnings in 2019. So, it appears that the focus will be on 2019 earnings and presumably what the independent contractor relationship was like in 2019 between the Illinois company (i.e., the company that paid the independent contractor in 2019) and the Claimant.

IDES WEBSITE FREQUENTLY ASKED QUESTIONS: I highly recommend that companies using independent contractors go to the IDES website and read the Frequently Asked Questions for both claimants and employers. Here’s the link.

INFORMATION WILL LIKELY CHANGE VERY QUICKLY: Please be aware that the IDES has had to make very quick judgements under enormous time pressure and hurriedly put general guidance on its website that the IDES may later realize needs to be modified. Realize that guidelines on the IDES website may be changed as time goes by (possibly in the face of new legislation and regulations) and as the IDES tackles the many thousands of real-life cases involving COVID-19 and related issues.

CAUTION MUST BE USED WHEN RESPONDING TO ANY IDES NOTICE OF CLAIM: These are extraordinarily complicated times for employers in Illinois. Companies need to be extremely vigilant about defending the independent contractor status of their workers who might be applying for unemployment insurance benefits.

This new order of things means that Illinois companies who use independent contractors must be very careful in how they respond to any IDES Notice of Claim as a result of an independent contractor filing for unemployment insurance benefits. It would be unwise for a company to miss any opportunity to assert that their independent contractors are properly classified under the Illinois Unemployment Insurance Act [under Section 212(A), (B), (C); Section 212.1 for truck owner-operators; Section 217b for independent contractor direct sellers, or some other section defining when a particular kind of worker is an independent contractor].

Such an assertion by the Illinois company should be carefully planned and, in many cases, should be accompanied by documentation proving independent contractor status (such as an independent contractor agreement, proof of incorporation of the independent contractor, advertising by the independent contractor, business card of the independent contractor). Be very aware of all correspondence and mail from the IDES. Immediately note the reply due date. Don’t lose the opportunity to respond with a timely, strong protest.

For assistance with figuring out the best strategy for Illinois companies in view of these dramatic new laws and guidelines regarding unemployment insurance benefits in Illinois, contact Attorney Nancy Joerg at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Related Posts: COVID-19 and Unions, OSHA Issues Guidance for Recordkeeping of COVID-19 in the Workplace, COVID-19 and Hazard Pay, Covid-19 and Refusal to Work

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Coronavirus/COVID-19

Illinois Employers Need to Understand Changes to Unemployment Insurance Due to Covid-19

Illinois Employers Need to Understand Changes to Unemployment Insurance Due to Covid-19

By Nancy E. Joerg of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Coronavirus/COVID-19 on Tuesday, March 31, 2020.

In this remarkable era of coronavirus legislative relief from Congress, many new laws are impacting employers. This naturally is very stressful because there is suddenly “a new normal” about so many aspects of the workplace. Employers are being asked to adapt very quickly to a virtual ocean of new legislation, and the unemployment insurance area is one of those areas deeply impacted.

Coronavirus Aid, Relief and Economic Security Act (CARES Act): On March 27, 2020, President Trump signed the CARES Act (Coronavirus Aid, Relief and Economic Security Act) into law. For someone who is used to the “old unemployment insurance system,” the CARES Act introduces a shockingly different approach to providing claimants with unemployment insurance benefits.

Let’s look at some of the unique and startling features of the CARES Act as it applies to unemployment insurance benefits:

1. Independent contractors are now eligible for unemployment insurance benefits! Yes, this is truly stunning because, in the past, independent contractors were not eligible for unemployment insurance benefits. The Illinois Unemployment Insurance Act provides for the payment of benefits to eligible unemployed employees (not independent contractors).

But now, Congress has created the CARES Act which intentionally is designed to financially help independent contractors, gig workers, and other such self-employed workers who are now out of work and therefore unemployed and need such financial assistance in the form of unemployment insurance benefits [in Illinois, from the Illinois Department of Employment Security (IDES)].

2. Will employer’s IDES account be charged? In general, the contribution rate of an Illinois employer is based, in part, on the amount of unemployment benefits paid to the employer’s former employees. That has been the past system in Illinois. Now we have the CARES Act, and we are not sure what will happen to each employer’s unemployment insurance rate with the legislative granting of unemployment insurance benefits to so many workers across the State of Illinois-both employee claimants and independent contractor claimants.

It is not known at this time if the Illinois employer’s IDES account will be “charged” for all of these COVID-19 related claims. My best guess is that there will be a system set up whereby these charges (to individual companies’ IDES Accounts) will be made against a state pool of money rather than to the employer’s IDES account number. My educated guess (but of course I cannot make a guarantee of any kind) is that the employer’s unemployment insurance contribution rate will not go up because of COVID-19 claims made against the employer’s IDES account number. Time will tell.

There is some precedent under Illinois unemployment insurance law where an employee receives unemployment insurance benefits without his/her ex-employer’s IDES account number being charged (through a rate increase) for those benefits. Rather, the benefits are charged against a state pool of money. For example, when a Claimant is awarded unemployment insurance under the 601B1 exception to voluntary leave of the Illinois Unemployment Insurance Act (when the Claimant is deemed physically unable to perform his or her work by a licensed and practicing physician), a special “pool” of state money pays for the departing employee’s unemployment insurance benefits (which means the employer’s IDES Account is not charged for these unemployment insurance benefits, and the employer’s unemployment insurance rate will not increase as a result of this type of a claim).

3. No waiting period. Unemployment insurance benefits are handled by each state. Each state has its own unemployment insurance system. Illinois has always had a one week waiting period. A waiting week occurs during the first week of unemployment when a jobless worker satisfies all the requirements for eligibility, but does not receive any unemployment insurance benefit payment for his/her first week of unemployment. In the past, unemployment insurance benefits started with the second week of joblessness.

However, under the CARES Act, the Federal government will pay for that first week of unemployment. This means the Claimant (whether employee or independent contractor) will start drawing unemployment insurance from the very first day of being unemployed.

4. Federal government will pay an additional $600 per week. Another unusual feature of the CARES Act is that a Claimant (whether a traditional employee or an independent contractor) will receive $600 per week from the federal government. This $600 per week payment is on top of the Claimant’s unemployment insurance amount that the IDES would normally give that person (based upon the Claimant’s wages and other factors).

The $600 per week increase (on top of regular unemployment insurance benefits) will last through July 31, 2020. After July 31, 2020, the Claimant (either a traditional employee or an independent contractor) may continue to get state unemployment insurance benefits but no longer the extra $600 per week.

It is expected in Illinois that unemployment insurance benefits will extend beyond the usual 26 weeks to an unusually long period of up to 39 weeks. One area of confusion that the IDES must face is the challenge of trying to figure out the “wages” to use in calculating the unemployment insurance benefits for independent contractors. We will learn more about this as the IDES wrestles with this unique challenge.

5. All of these changes have absolutely shell-shocked the Illinois unemployment insurance system. I have received many phone calls from frustrated people telling me there is no way to reach the IDES by phone or computer. Systems are jammed and overloaded.

The IDES has periodically added some helpful information to the IDES website (for example, the best times to try to access the claims process online). Hopefully systems will improve over time.

How to respond to a Notice of Claim due to a COVID-19 related reason: The most common question I have received as an employment lawyer representing employers is how an employer should respond when a Notice of Claim comes to the employer telling the employer that a Claimant has filed for unemployment insurance benefits due to a COVID-19 related reason.

Even if the Illinois employer doesn’t want to protest the unemployment insurance claim (whether it is by an employee or an independent contractor), my suggestion thus far has been to respond with some written communication to explain to the IDES that the claim for unemployment insurance benefits is related to an issue caused by COVID-19.

This detailed explanation by the employer is to create a written record that the particular unemployment insurance claim was made because of a COVID-19 related reason and not because of some other unrelated reason. This written record will hopefully protect the Illinois employer (especially if the situation evolves to where the Illinois employer’s IDES account number will not be charged if and only if the unemployment insurance benefits were granted to a Claimant because of a COVID-19 related situation).

We’re doing our best to offer advice and commentary but must stress that things have moved fast and will continue to move fast, so beware that any statement made about the CARES Act or any other new legislation is preliminary and is based upon only current information. As state and federal agencies provide additional guidance, our opinions may be revised.

For assistance with figuring out the best course of action in view of these dramatic new laws regarding unemployment insurance benefits in Illinois, contact Attorney Nancy Joerg at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Related Posts: DOL Rolls Out Regulations Implementing FFCRA Obligations, DOL Provides Additional Guidance on FFCRA Obligations, Alert to Illinois Employers: Understanding the New IDES Unemployment Insurance Climate in the Coronavirus Era!, Minnesota Joins Ranks of States With Shelter at Home Orders

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Categories
Independent Contractor

IRS Form SS-8 Continues To Upset And Confuse Employers Across The U.S.!

IRS Form SS-8 Continues To Upset And Confuse Employers Across The U.S.!

By Nancy E. Joerg of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Independent Contractor on Monday, December 2, 2019.

The IRS SS-8 Program allows either a Company or a Worker to request that the IRS evaluate and determine whether the Worker is an employee or an independent contractor for Federal/IRS Purposes. The resulting Determination by the IRS SS-8 Unit is just the SS-8 Unit’s “opinion” (not an actual audit!).

Either party can start the IRS SS-8 request. Most frequently, it is a disgruntled Worker who submits the request by filing an IRS Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding). The Worker claims to the IRS SS-8 Unit that he/she was misclassified by the Company and therefore should not be asked to now pay self-employment tax.

NO REQUIRED WITHHOLDINGS FOR INDEPENDENT CONTRACTORS: When the Company classifies a Worker as an independent contractor, the Company does not make any withholdings from a Worker’s paycheck as the Company would do for a W-2 employee. When a Company uses independent contractors, the Company saves money on the payroll taxes and does not have the significant cost of employee benefits like vacation pay, profit sharing plans, bonuses, overtime costs, etc. The Company usually issues an IRS Form 1099 to the independent contractor.

WITHHOLDINGS REQUIRED FOR EMPLOYEES: On the other hand, if the Company classifies a worker as a W-2 employee, the Company must withhold certain Federal income taxes, Social Security, and Medicare taxes.

Employees (as opposed to independent contractors) pay 7.65% of payroll taxes and the employer pays its 7.65% share with the total amount paid being 15.3%. Independent contractors shoulder the entire 15.3% of payroll taxes.

LEGAL CHALLENGE: Companies may face a legal challenge if the Company classifies the Worker as an independent contractor, but the Worker believes he/she is really an employee. Often this issue arises if a “terminated” independent contractor/Worker files for unemployment insurance.

Also, a disgruntled worker who is classified as an independent contractor (but believes he/she should be an employee) will sometimes contact the IRS to file an IRS Form SS-8 (which is a four page questionnaire), asking the IRS to make a determination as to whether the Worker is an employee or an independent contractor.

FILING AN IRS FORM SS-8: The IRS Form SS-8 cannot be filed anonymously. The IRS only issues determination letters based on actual real life Worker/Company relationships. The IRS SS-8 Unit evaluates real facts as described in detail by the parties.

Most companies (wisely) do not initiate an SS-8 request (most of the evaluations by the IRS SS-8 Unit find that the Worker is an employee and not an independent contractor).

WHEN A COMPANY RECEIVES AN IRS SS-8 FILED BY A WORKER: The Company can either fill out the IRS Form SS-8 or choose to not respond. It is in essence a voluntary process for both parties.

When the Company doesn’t respond, then the only information the IRS SS-8 Unit gets is from the Worker making the complaint. This of course gives the SS-8 Unit a very one- sided view of the alleged independent contractor relationship (which greatly increases the likelihood that the SS-8 Unit will find that the Worker is misclassified).

IRS FORM SS-8 DETERMINATION: After gathering detailed information, the IRS applies the law regarding independent contractor status and renders a detailed written decision called a Determination (and that written Determination will be sent to both the Company and the Worker).

This Determination letter will not request a specific amount of money to be paid or even a specific action which must be taken. It is written in a strange tone of voice which is largely in the form of a suggestion rather than a legal mandate.

SECTION 530: Companies involved in an IRS SS-8 controversy should be aware that if the Company is entitled to Section 530 of the Internal Revenue Act of 1978 (also called “Safe Haven” or “Safe Harbor”), this powerful relief is still available regardless of the legal conclusion of the IRS SS-8 Unit as announced in the Determination. When Section 530 relief is available, the IRS cannot force the Company to reclassify the affected workers to employee status.

Also be aware that neither the IRS SS-8 Determination process nor the review of any records in connection with the Determination constitutes an official IRS tax audit. Strangely there are not official procedures to appeal or protest an IRS SS-8 Unit Determination.

This is a complex legal issue. Before a Company ventures forth with a response to an IRS SS-8 request letter, consult with an experienced attorney to understand your options.

Questions?: For further information on this issue and various strategy steps to take in the face of such an IRS request or any independent contractor questions or concerns, please contact Attorney Nancy Joerg at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Related Posts: Yes, You Can Win Before an IDES Hearing Officer on the Issue of Independent Contractor Status!!, Psychological Counselors In Pennsylvania Found To Be Independent Contractors, Yes, There are Certain Categories of Workers Who Are Independent Contractors By Law Under the Illinois Unemployment Insurance Act, Independent Contractor Surgeon Cannot Sue Hospital For Discrimination Under Title VII

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Independent Contractor

Yes, You Can Win Before an IDES Hearing Officer on the Issue of Independent Contractor Status!!

Yes, You Can Win Before an IDES Hearing Officer on the Issue of Independent Contractor Status!!

By Nancy E. Joerg of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Independent Contractor on Friday, December 13, 2019.

Many clients are convinced that it is “hopeless” to protest the often disappointing results of an Illinois Department of Employment Security (IDES) audit and then win at a Hearing before an IDES Hearing Officer.

It is true that IDES Hearing Officers (called Administrative Law Judges) are employees of the IDES. Therefore, clients often believe that because the Hearing Officers are employees of the IDES, they cannot be objective and unbiased, but rather these Administrative Law Judges will always agree with the IDES auditor and not the Company who has been audited (and then assessed for back “contributions” to the IDES-i.e., back unemployment insurance taxes).

This is surprisingly not true. Over the many years that I have worked with companies in protesting IDES audits and then weathering the experience of an IDES Hearing, I have found that if the Company has sufficient evidence and testimony to convince an IDES Hearing Officer that the workers at issue are independent contractors under Section 212(A), (B), and (C) of the Illinois Unemployment Insurance Act (legal definition of independent contractor), then the IDES Hearing Officer WILL usually cancel the Determination & Assessment (i.e., the tax bill), in whole or in part.

This article is about a very satisfying total legal victory that one of our law firm’s clients (fictitious name, Champion Builders) enjoyed last month. Our client is an Illinois general contractor who builds various commercial projects. Champion Builders manages the project, bids the jobs and is involved in design interpretation services.

Champion Builders uses independent contractors who perform various specialty functions such as spray foam insulation, installation of countertops, painting, installation of cabinets, striping of parking lots, roofing, etc.

SECTION 212: Champion Builders was audited by the IDES for the years 2011 and 2012. The IDES auditor then reclassified the independent contractors to employees, finding that the Company did not meet its burden of proof under Section 212(A), (B), and (C) of the Illinois Unemployment Insurance Act. Section 212 is the strict three-part test evaluating when workers are exempt from employment, in other words are independent contractors under Illinois unemployment insurance law.

Below is the text of Section 212:

“Service performed by an indi­vidual for an employing unit, whether or not such individual employs others in connection with the per­formance of such services, shall be deemed to be employment unless and until it is proven in any proceeding where such issue is involved that –

A. Such individual has been and will continue to be free from control or direction over the performance of such services, both under his contract of service and in fact; and

B. Such service is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and

C. Such individual is engaged in an independently established trade, occu­pation, profession, or busi­ness.”

CLIENT PROTESTED DETERMINATION & ASSESSMENT (TAX BILL): Since the IDES auditor reclassified the independent contractors to employees, although Champion Builders tried very hard to persuade the auditor otherwise, Champion Builders received a Determination & Assessment (tax bill) from the IDES. Champion Builders protested the Determination & Assessment within the strict 20 days allowed by law, and requested a Hearing before an IDES Hearing Officer.

IDES HEARING OFFICER’S DECISION: After five years passed from the date of the Notice of Determination & Assessment, a telephone Hearing was held in July 2019.

In November 2019, the IDES Hearing Officer issued a fair and very well-reasoned written Decision and concluded that Champion Builders met its legal burden with respect to proving that the workers at issue were independent contractors and not employees under Section 212 of the Illinois Unemployment Insurance Act. The IDES Hearing Officer’s findings included the following:

  • Section 212A (direction and control): The IDES Hearing Officer noted (with approval) that the independent contractors at issue were given no tools, training, materials or specific instructions by Champion Builders. The Hearing Officer noted that under Section 212(A) of the Illinois Unemployment Insurance Act, Champion Builders may control the outcome of the work (ok for an independent contractor), but not the manner or means in which the work is completed (as would be the case with an employee). The Hearing Officer noted with further approval that the independent contractors bid on work in a competitive process in which they choose whether to take the work offered, thus demonstrating the entrepreneurial posture of an independent contractor, not an employee.
  • Section 212B (course or place of business): The IDES Hearing Officer found that the independent contractors at issue did not perform the “same or substantially similar” work as Champion Builders. All had specialties and offered the kind of services that Champion Builders does not offer. This analysis by the IDES Hearing Officer was crucial to the legal victory for Champion Builders. If Champion Builders flunked Section 212(B), the entire case would have been lost. Section 212(A), (B), and (C) is a three-part test. All three parts must be passed to result in a legal finding of independent contractor status.
  • Section 212C (independently established): The IDES Hearing Officer found that the independent contractors at issue all held themselves out to the public as working for their own or other companies. The Hearing Officer noted that Champion Builders offered as evidence business cards, t-shirts, signs on trucks, Internet listings and websites for each of the independent contractors at issue. Additionally, some of the independent contractors also had contracts and 1099s from other general contractors (showing that the independent contractors worked for other companies as well as Champion Builders).

Happily, the IDES Hearing Officer decided that the entire Determination & Assessment issued against Champion Builders should be cancelled in total. Naturally the client was very pleased at this result.

IMPORTANCE OF ESTABLISHING AND MAINTAINING INDEPENDENT CONTRACTOR FILES: Note that in this case, Champion Builders had a great deal of evidence for each of the independent contractors to show that the independent contractors were well established businesses in their own right. The auditor didn’t properly appreciate the wealth of evidence of independent contractor status, but the IDES Hearing Officer (a licensed attorney) was able to properly evaluate it.

When I work with clients on reducing their liability and risk in using independent contractors, I always recommend they set up and maintain an independent contractor file on each independent contractor filled with proof of self-employment.

This article is intended to convey a powerful lesson: Yes, an Illinois company can successfully protest the results of an IDES audit, but it is important to have well maintained independent contractor files so that you can prove at an eventual IDES Hearing that the independent contractors are self-employed entities.

For assistance with IDES audits, hearings, and independent contractor agreements (or for consultations on limiting your liability in the use of independent contractors), contact Attorney Nancy E. Joerg, who enjoys a nationwide reputation in working with companies who use Independent Contractors of all types. Nancy Joerg can be reached at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Related Posts: IRS Form SS-8 Continues To Upset And Confuse Employers Across The U.S.!, Psychological Counselors In Pennsylvania Found To Be Independent Contractors, Yes, There are Certain Categories of Workers Who Are Independent Contractors By Law Under the Illinois Unemployment Insurance Act, Independent Contractor Surgeon Cannot Sue Hospital For Discrimination Under Title VII

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Independent Contractor

Psychological Counselors In Pennsylvania Found To Be Independent Contractors

Psychological Counselors In Pennsylvania Found To Be Independent Contractors

By Nancy E. Joerg of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Independent Contractor on Wednesday, October 9, 2019.

In July 2019, a state appeals court, the Pennsylvania Commonwealth Court (hereinafter “Court”), decided that psychological counselors (who provided services to clients) had been properly classified as independent contractors. [The case is Pathways Counseling Services LLC v. Commonwealth of Pennsylvania et al., Case Number 1332 CD 2018.]

Pathways Counseling Services LLC (hereinafter “Company”) referred clients to the independent contractor psychological counselors. The Company vigorously defended itself from the charge that it was the employer of the independent contractor psychological counselors for state unemployment insurance purposes.

Pennsylvania Unemployment Compensation Law uses a two-prong legal test to determine whether an independent contractor is properly classified as an independent contractor. The two-part test is:

  • The individual (i.e., psychological counselor) has been and will continue to be free from control or direction over the performance of the services involved, both under the contract of service and in fact, and
  • As to such services, the individual (i.e., psychological counselor) is customarily engaged in an independently established trade, occupation, profession or business.

Both parts of the two-part test must be passed to have an independent contractor relationship.

NO DIRECTION AND CONTROL: The Court found that the Company did not direct and control the psychological counselors because the psychological counselors set their own work schedules, had the right to reject or accept clients, and obtained and paid for their own professional licenses and liability insurance.

The Court further noted that the Company provided no training, meetings, or tools to the psychological counselors, thus indicating an independent contractor relationship. The psychological counselors were not subject to supervision by the Company, also bolstering independent contractor status.

INDEPENDENTLY ESTABLISHED: As to the second prong of Pennsylvania’s two-part test, the Court found that the psychological counselors were independently established professionals who “held themselves out to the public” as providing their professional services as psychological counselors. Therefore, the independent contractors passed both parts of the Pennsylvania two-part independent contractor test (and the Company won its argument that they were not the employer).

PENNSYLVANIA’S TWO-PART TEST IS EASIER THAN ILLINOIS’ THREE-PART TEST: Readers who are familiar with the brutal three-part legal test for independent contractor status under the Illinois Unemployment Insurance Act will know that Illinois uses an additional and very burdensome prong [Part B of the Section 212(A), (B), (C) test] where the Company must prove a different course or different place of business (meaning that the Company and the independent contractor must be in a different type of business or a different place of business). Pennsylvania companies who use independent contractors are fortunate they don’t have Illinois’ dreaded “course of business/place of business test.”

Interestingly, the insurer for the Company in the Pennsylvania unemployment insurance case required that the independent contractor psychological counselors provide their services right at the offices of the Company, but the Court noted that this requirement as to place of business was imposed by the insurer and not by the Company. Therefore the Court found this requirement was not direction and control by the Company over the independent contractor psychological counselors. Had this case been in Illinois, there may well have been an insurmountable legal issue with Illinois’ place of business/course of business prong.

Strategy Tip on Establishing a Different Place of Business: Charging a fixed rental for use of office facilities is a solid way to dramatically strengthen independent contractor status. Employees do not pay rent to their employers to work in an office owned by the employer. I have handled several legal challenges where my client charged rent to the independent contractors, and it was extremely persuasive to the auditor or Hearing Officer in reaching a finding that the independent contractors enjoyed their own place of business (by paying rent).

To discuss your potential liability in using independent contractors (as well as strategies for reducing your liability in using independent contractors), please contact Attorney Nancy Joerg at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Related Posts: Yes, You Can Win Before an IDES Hearing Officer on the Issue of Independent Contractor Status!!, IRS Form SS-8 Continues To Upset And Confuse Employers Across The U.S.!, Yes, There are Certain Categories of Workers Who Are Independent Contractors By Law Under the Illinois Unemployment Insurance Act, Independent Contractor Surgeon Cannot Sue Hospital For Discrimination Under Title VII

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Yes, There are Certain Categories of Workers Who Are Independent Contractors By Law Under the Illinois Unemployment Insurance Act

Yes, There are Certain Categories of Workers Who Are Independent Contractors By Law Under the Illinois Unemployment Insurance Act

By Nancy E. Joerg of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Independent Contractor on Wednesday, September 18, 2019.

Under the Illinois Unemployment Insurance Act (hereinafter “Act”), there are certain kinds of workers (for example, real estate appraisers, direct sellers, certain kinds of newspaper delivery people) who are exempt from employment (i.e., independent contractors) as long as the specific legal requirements are met.

If your company uses any of these types of workers, it is important to know the details of the specific exemption under the Act so that you don’t unwittingly fail to meet the requirements of the exemption.

As an illustration, in Illinois, truck owner-operators are exempt from employment under Section 212.1 of the Act, but specific legal requirements must be met in order for the truck owner-operator to be exempt from employment. If all six parts of Section 212.1 are not met, then the truck owner-operator will be considered an employee and not an independent contractor under the Act.

The following is a list of some of the many industry specific and other exemptions under the Illinois Unemployment Insurance Act:

  1. Persons free from the employer’s control and direction who are engaged in an independent trade, occupation, business or profession and who perform services which are outside the course of the employer’s business or performed outside the place of business. (Section 212) Note: This is the general legal test for independent contractor status.
  2. Owner-operators of their own trucks but only under certain specified circumstances as provided in the Act. (Section 212.1
  3. Direct seller engaged in the trade or business of selling, or soliciting the sale of, consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis in the home or in an establishment other than a permanent retail establishment, if: Substantially all the remuneration (whether or not paid in cash) for the performance of the Direct Seller’s services is directly related to sales or other output (including the performance of services)-rather than to the number of hours worked, AND the services performed by the Direct Seller are performed pursuant to a written contract between the Direct Seller and the entity for whom the services are performed (and the written contract states that the Direct Seller will not be treated as an employee for federal tax purposes).(Section 217) – Nickname: “Tupperware Test”
  4. Real estate salesmen to the extent that such services are compensated for by commission. (Section 217) Tip: So…don’t pay them by the hour!
  5. Real estate closing agents when their contract with the title insurance company specifies that they are not employees and they are paid on a per closing basis. (Section 217.1) Tip: Have a written independent contractor agreement.
  6. Real estate appraisers whose written employment contract provides that they are paid on a fee-per-appraisal basis and that they are free to accept or reject appraisal requests from that entity or from other entities. (Section 217.2) Tip: Have a written independent contractor agreement.
  7. Persons under the age of 18 who deliver newspapers or shopping news and any persons who deliver newspapers or shopping news to the ultimate consumer, if substantially all of their remuneration is on a “per piece” or output rather than an hourly basis and they work under written contracts that indicate they are not to be treated as employees for federal tax purposes. Freelance editorial and photographic work for newspapers is also exempt from employment. (Section 225)
  8. Insurance agents who are paid solely by commission. (Section 228) Tip: So…don’t pay them by the hour.
  9. Golf caddies if they are full-time students under the age of 22 and are paid directly by a golf club member or by the golf club on behalf of a member. (Section 232.1)

In most situations, the services of actors, actresses, singers, musicians, models and other “talent” constitute employment, not independent contractor status. However, a talent or modeling agency that is licensed under the Private Employment Agency Act is not the employing unit with respect to the performance of services for which an individual has been referred by the agency. (Section 204)

The moral of the story here is to look over the kinds of independent contractors you use and be ready to prove these exemptions if you are counting on that legal defense. If you are ever audited by the Illinois Department of Employment Security and can prove the exemptions, then you will not owe any back unemployment insurance contributions (taxes) to the IDES on the workers who meet the requirements of the exemption(s).

For assistance with IDES audits, hearings, and independent contractor agreements (or for consultations and overall evaluations on limiting your liability in the use of independent contractors), contact Attorney Nancy E. Joerg, who enjoys a nationwide reputation in working with companies who use Independent Contractors of all types. Nancy Joerg can be reached at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Related Posts: Yes, You Can Win Before an IDES Hearing Officer on the Issue of Independent Contractor Status!!, IRS Form SS-8 Continues To Upset And Confuse Employers Across The U.S.!, Psychological Counselors In Pennsylvania Found To Be Independent Contractors, Independent Contractor Surgeon Cannot Sue Hospital For Discrimination Under Title VII

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Independent Contractor Surgeon Cannot Sue Hospital For Discrimination Under Title VII

Independent Contractor Surgeon Cannot Sue Hospital For Discrimination Under Title VII

By Nancy E. Joerg of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Independent Contractor on Thursday, August 15, 2019.

If an individual is found to be an independent contractor under Title VII of the Civil Rights Act of 1964, that individual cannot sue for discrimination under that law because they are not an employee. Only employees can claim legal protection under Title VII. A surgeon recently discovered this legal reality when she sued the hospital for discrimination. She sued because the hospital revoked her medical practice privileges. She claimed to be an employee (and not an independent contractor), and therefore sued the hospital as her employer under Title VII on the basis of her sex, religion and ethnicity.

U.S. DISTRICT COURT RULED THE SURGEON WAS AN INDEPENDENT CONTRACTOR: The U.S. District Court for the Northern District of Illinois granted summary judgement in favor of the hospital because that Court found the surgeon was an independent contractor physician-not an employee of the hospital.

SURGEON APPEALED TO U.S. COURT OF APPEALS FOR THE SEVENTH CIRCUIT: The surgeon then appealed to the U.S. Court of Appeals for the Seventh Circuit. The surgeon argued that she should be classified as an employee of the hospital (and therefore she was entitled to have legal protection under Title VII). She pointed out that she was subject to “peer review” by other doctors so she was surely an employee. The U.S. Court of Appeals for the Seventh Circuit did not agree with the surgeon; the Court found her to be an independent contractor-not an employee of the hospital. Levitin v. Northwest Community Hospital, No. 16-3774 (7th Cir. May 8, 2019)

FACTS PROVING INDEPENDENT CONTRACTOR STATUS: The U.S. Court of Appeals for the Seventh Circuit ruled that the surgeon was self-employed (and an independent contractor-not an employee of the hospital) because she owned her own medical practice, billed her patients directly, filed her taxes as a self-employed physician, did not receive any traditional employee benefits from the hospital, paid her own professional licensing dues, set her own schedule and hours, could obtain medical practice privileges at other hospitals, and could use her own medical staff in surgeries.

COMPLIANCE WITH REGULATORY & STATUTORY REQUIREMENTS DOES NOT ESTABLISH CONTROL: The U.S. Court of Appeals for the Seventh Circuit noted that compliance with regulatory or statutory requirements does not by itself establish control by the hospital over the surgeon for purposes of Title VII of the Civil Rights Act of 1964. In other words, the kind of control and direction that an employer would exercise over an employee is not the same kind of control that involves mere compliance by the hospital with regulatory or statutory requirements.

To discuss your potential liability in using independent contractors (as well as strategies for reducing your liability in using independent contractors), please contact Attorney Nancy Joerg at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com. Nancy Joerg can also help you modify your independent contractor agreement and website, as well as defend you in audits and investigations.

Related Posts: Yes, You Can Win Before an IDES Hearing Officer on the Issue of Independent Contractor Status!!, IRS Form SS-8 Continues To Upset And Confuse Employers Across The U.S.!, Psychological Counselors In Pennsylvania Found To Be Independent Contractors, Yes, There are Certain Categories of Workers Who Are Independent Contractors By Law Under the Illinois Unemployment Insurance Act

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