When your business requires extra hands, you have two choices. You can hire employees or you can enter into contractual agreements with independent contractors. As you probably are aware, there are advantages and disadvantages to each, and it is important to choose the one—or the appropriate combination of the two—that best meets your company’s needs. The challenge, however, is that it is up to you as a tax-paying business owner to classify your workers properly in accordance with state and federal law, as failure to do so can result in serious financial penalties.
Moving Company Claims Movers Are Contractors
Last month, an Illinois appellate court issued a decision in a case that has been ongoing since 2009, when a former worker for the moving company filed for unemployment benefits. The Illinois Department of Employment Security realized, at that point, that the moving company had not reported any of the worker’s wages. Looking further, the Department discovered that approximately 90 other drivers and physical laborers should have been listed as employees but were not.
In the initial administrative hearing, the moving company claimed that its workers were, in fact, independent contractors and that the company itself was merely a matchmaker of sorts, connecting customers with movers. The Department disagreed, citing that the workers were subject to being hired and fired by the company, were specifically scheduled, were provided equipment with which to serve customers, were limited as to how they could use such equipment, and were prohibited from reassigning jobs to someone else with the company’s consent. According to the Illinois Unemployment Insurance Act, the Department held, the workers should have been employees.
Circuit Court and Appellate Court Rulings
In 2012, the company sought relief through the Cook County Circuit Court system, where a judge actually overturned the Department’s decision in 2015. The Department of Employment Security appealed, bringing the matter before a three-judge panel. The appeals court unanimously sided with the Department, overruling the circuit court decision, saying that the moving company did not satisfy any of the three conditions of an independent contractor provided by Illinois law. To be considered an independent contractor, a worker must be:
- Free from the control or direction of the company;
- Be independently established as a separate entity; and
- Provide services for the company that are outside of its normal scope of operations.
The appeals court observed, at the very least, that the movers were required to wear uniforms and drive trucks emblazoned with the company’s logo, noting that these and other similar requirements constituted control or direction by the company over the workers. The company was ordered to pay more than $25,000 in unemployment insurance contributions on behalf of the misclassified workers.
Legal Guidance for Business Owners
Classifying workers properly is the responsibility of every business owner with hired help. For help in developing a legally sound hiring policy, contact an experienced Schaumburg employment law attorney. Call 847-995-1205 to schedule a free, confidential consultation at The Miller Law Firm, P.C. today.