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

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 [email protected].

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