December 2009

By: Nancy E. Joerg, Esq.

When an Illinois Department of Employment Security (IDES) auditor audits a company that uses independent contractors, the IDES auditor almost always gives the company a questionnaire to fill out. The IDES has been using the same basic multi-page questionnaire called the Worker Relationship Questionnaire for several decades.

The purpose of the Worker Relationship Questionnaire is to obtain detailed information from the company about the alleged independent contractor relationship. The Questionnaire is designed so that it can be filled out by the company or by the auditor. (This is at the auditor’s discretion.) At the end of the Questionnaire, there is a space for the individual who filled out the questionnaire to sign that they indeed filled out the questionnaire and provided the responses.

If a company has several kinds of independent contractors, then the auditor will usually ask the company to fill out several Worker Relationship Questionnaires. For example, many years ago a client company of our law firm was an architectural business that used independent contractor architects, engineers, interior designers, draftsmen, et al. The company, therefore, filled out many different Worker Relationship Questionnaires – each one representing that kind of specialized independent contractor. (It is of course a matter of strategy for a company to decide how many Worker Relationship Questionnaires they will fill out and which independent contractors will be in which grouping. This is a decision for a company and its attorney to carefully evaluate.)

The Worker Relationship Questionnaire is divided into three main sections. Each section represents one part of the strict three-part test [Section 212(A), (B), and (C)] that the Illinois Department of Employment Security uses to decide who is an independent contractor and who is an employee.

Possibly the trickiest part of filling out the Worker Relationship Questionnaire is deciding how to describe the type of business the company is in, and the type of business the independent contractor is in, and whether the company and the independent contractor are in the same course or kind of business. Course or type of business is a crucial part of Section 212(A), (B), and (C).

Remember that if a company fails any one part of the three part test, then the worker at issue will be found to be an employee for IDES purposes.

Clients sometimes ask me what will happen if they refuse to fill out the Worker Relationship Questionnaire. Failure to cooperate with an auditor and provide the auditor with requested information only ends up hurting the company. This is because the legal burden of proof rests on the company during an audit. The legal responsibility to prove that a worker is an independent contractor rests upon the company and not upon the auditor.

Simply stated, there is a legal presumption that the worker is an employee-unless the company can prove the worker is an independent contractor. From a practical standpoint, this means a company must provide proof, evidence, information and documents to the auditor to convince the auditor that the worker is an independent contractor. In the absence of such proof, the auditor is free to find that the worker is an employee and therefore the auditor will assess back unemployment insurance contributions onto the company being audited. (There is also 24% per year interest added to that assessment.)

Be very careful in filling out the Worker Relationship Questionnaire. Even one wrong answer can create legal barriers to proving independent contractor status. Seek the assistance of an attorney experienced with IDES audits.

Questions? Please contact WS Shareholder and Senior Attorney Nancy E. Joerg in our St. Charles, IL office at (630) 377-1554, or najoerg@wesselssherman.com.