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Illinois workers’ compensation: Misclassifying an employee as a contractor

On Behalf of | Nov 6, 2020 | Workers' Compensation

Imagine the surprise of someone who has worked for an employer under the assumption they were employed in the following situation. The worker suffers an injury on the job, files a workers’ compensation claim and the “employer” refuses to pay the claim because they say the claimant is an independent contractor.

Employment relationship or contractual one?

Under Illinois workers’ compensation law, employers have responsibilities to their employees, but not to independent contractors whom they retain. The Illinois Workers’ Compensation Act provides that the Illinois Workers’ Compensation Commission (WCC), a state agency, must share information among other state agencies pertaining to “suspected misclassification by an employer or entity … of one or more employees as independent contractors.”

Put simply – if a worker is an employee, the employer must have workers’ compensation insurance coverage and is responsible for covered employee claims for work-related injury or illness. If the worker is an independent contractor, the employer is free from these costs and liabilities – perhaps providing motivation for misclassification of employees as contractors.

Such misclassification may result in monetary penalties to the employer, including for willful failure to get workers’ compensation insurance.

An Illinois worker may discover the misclassification when they file a workers’ compensation claim and the employer denies it, asserting that it has no liability because the claimant has independent contractor status. The claimant may request that an arbitrator with the WCC hold a hearing and review the denial. Further opportunities for review are available before a three-commissioner panel of the WCC and then in Illinois state courts. It is also possible that the claimant and employer might negotiate a settlement of the disputed claim.

Truck driver found to be an employee

One Illinois case illustrates the legal test for determining the nature of the relationship. In Steel & Machinery Transportation, Inc. v. Illinois Workers’ Compensation Commission, the Appellate Court of Illinois, First District, affirmed the WCC’s decision that an over-the-road truck driver was an employee of the trucking company despite the existence of their contract called “Independent Contractor Agreement.”

The court said that the WCC’s decision that found an employer-employee relationship was not against the “manifest weight of the evidence.” The classification question depends heavily on the unique circumstances of the relationship and the application of specific factors to the work arrangement, the most important of which are the employer’s right to control the work duties and the nature of the work within the employer’s business. Other factors include:

  • Does the employer set the worker’s schedule?
  • Is the worker paid by the hour?
  • Does the employer withhold taxes from the worker’s pay?
  • Can the employer fire the person for no reason?
  • Does the employer provide equipment and supplies for the job?
  • How is the relationship labeled?

Still, the court explained that the “significance of these factors rests on the totality of the circumstances, and no single factor is determinative.” The work relationship may have attributes of both employment and contractor arrangements, so the analysis can be difficult and detailed.

The case, available at the above link, contains a detailed analysis of these factors as they applied to the truck driving job.

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