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

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 [email protected].

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