SB0837sam001 102ND GENERAL ASSEMBLY

Sen. Cristina Castro

Filed: 4/9/2021

10200SB0837sam001 LRB102 04635 JLS 24609 a

AMENDMENT TO SENATE BILL 837

AMENDMENT NO. ______. Amend Senate Bill 837 by replacing everything after the enacting clause with the following:

"Section 1. Short title. This Act may be cited as the Fair Play in Employment Act.

Section 5. Findings and intent. The General Assembly finds and declares the following:

(1) Illinois workers are experiencing dangerous levels of employee misclassification. Companies that misclassify workers as independent contractors deny the workers of Illinois basic labor standards, including wage and hour protections, health and safety standards, workers' compensation, retirement security, and unemployment insurance. Misclassification robs workers of their livelihood and basic protections, while padding the pockets of violators and draining public funds.

(2) Misclassification also results in workers and their families being excluded from critical paid sick time, paid family and medical leave, and health insurance benefits.

(3) The misclassification of workers as independent contractors has been a significant factor in the erosion of the middle class and the rise in income inequality.

(4) The misclassification of workers as independent contractors allows unscrupulous employers and hiring entities to gain an unfair advantage over employers that obey the law. It also allows such employers to shift the cost of providing benefits such as a safe workplace, retirement security, and unemployment insurance to governmental bodies and, ultimately, the taxpayers.

(5) It is the intent of the General Assembly in enacting this Act to ensure that workers who are currently exploited by being misclassified as independent contractors instead of recognized as employees have the basic rights and protections they deserve under the law, including a minimum wage and overtime pay, workers' compensation if they are injured on the job, unemployment insurance, and any other benefits and protections the General Assembly provides to workers recognized as employees. This Act restores these important protections to workers who have been denied these basic workplace rights that all workers are entitled to under the law. It is also the intent of the General Assembly to ensure that companies that rely on Illinois workers to operate their businesses pay their fair share into the Illinois unemployment insurance program so that their workers, and all Illinois workers, can count on a solvent fund during economic downturns.

(6) It is further the intent of the General Assembly to establish a clear standard for determining the classification of a worker in order to provide stability and certainty to both workers and Illinois employers.

(7) Therefore, the government has an obligation to curb employee misclassification throughout the economy, take proactive measures to enforce long-standing employment laws that establish basic protections for Illinois' workers through the enactment of this Act, to empower workers to assert their rights under the law, and to establish a level playing field for employers who obey the employment laws.

(8) Nothing in this Act is intended to diminish the flexibility of employees to work part-time or intermittent schedules or to work for multiple employers.

(9) Nothing in this Act shall be construed to wholly eliminate the independent contractor status where the classification is in accordance with this Act.

Section 10. Definitions. In this Act:

"Business service provider" means a business entity that is not a hiring entity that is formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation.

"Contracting business" means a hiring entity or business service provider that has contracted with another business service provider.

"Department" means the Department of Labor.

"Domestic work" means housekeeping, house cleaning, home management, nanny services including childcare and child monitoring, caregiving, personal care or home health services for elderly persons or persons with an illness, injury, or disability who require assistance in caring for themselves, laundering, cooking, companion services, chauffeuring, or other household services for members of households or their guests in or about a private home or residence or any other location where domestic work is performed any workweek on a regular basis.

"Domestic worker" means any individual who performs domestic work.

"Family member" means a child, spouse, parent, child or parent of an employee's spouse, sibling, grandparent, grandchild, or any other individual related by blood or whose close association with the employee is the equivalent of a family relationship as determined by the employee.

"Employer" means any individual or entity that employs individuals, including domestic workers, deemed employees under this Act. "Employer" includes any individual or entity acting directly or indirectly in the interest of an employer with the authority, whether reserved or exercised, over the workers' wages, hours, and other terms and conditions of employment. "Employer" may include any such entity that contracts for services or pays for the services of a worker through an oral or written contract or application software designed to run on smartphones and other mobile devices or software designed to run inside a web browser. "Employer" also includes the State of Illinois and all other governmental entities. "Employer" excludes employers who are subject to the Employee Classification Act and further excludes the federal government.

"Hiring entity" means any individual, partnership, association, corporation, business trust, or any entity, person, or group of persons that pays a wage or pays for the services of individuals or domestic workers, including employers. "Hiring entity" also means any such entity or person acting directly or indirectly in the interest of a hiring entity in relation to the individual. "Hiring entity" also includes the State of Illinois and other governmental entities except for the federal government.

"Interested party" means a person or organization with an interest in compliance with this Act.

"Professional services" means any of the following:

(1) professional services provided by writers;

(2) professional services provided by graphic designers;

(3) professional services provided by webpage and digital designers;

(4) professional services provided by animators, illustrators, industrial product designers, interior designers, or fashion designers;

(5) professional services provided by fine artists;

(6) professional services provided by photographers;

(7) professional services provided by journalists, freelance digital media workers, videographers, and audio or podcast producers;

(8) professional services provided by software engineers;

(9) professional services provided by a direct seller as described in Section 217(b) of the Unemployment Insurance Act, so long as the conditions of that section are satisfied;

(10) professional services provided by a travel promoter under the Travel Promotion Consumer Protection Act; or

(11) a profession, trade, or occupation licensed and regulated by the Department of Financial and Professional Regulation, Department of Insurance, or the Illinois Supreme Court Attorney Registration and Disciplinary Commission, if employment in such occupation is exempted from Sections 206 and 207 of Title 29 of the United States Code as employment in a bona fide professional capacity.

"Retaliate" means to:

(1) discharge;

(2) demote or decline to promote;

(3) deactivate or otherwise prevent an individual from returning to work;

(4) reassign;

(5) willfully prevent or attempt to prevent an individual from securing other employment or work by word, writing, or other action;

(6) harass;

(7) reduce worker hours;

(8) reduce worker pay;

(9) report or threaten to report an employee or hired individual, or former employee or hired individual, for suspected immigration or work authorization status;

(10) report or threaten to report the suspected immigration or work authorization status of a family member of an employee or hired individual, or a former employee or hired individual, to a federal, State, or local agency; or

(11) take any other action, including threatening to take action against an employee or any other person for exercising or attempting to exercise any right under this Act if that action or threat would dissuade a reasonable employee or person from making a complaint, bringing an action or proceeding, cooperating in an investigation for the purposes of enforcing this Act, participating in an action or proceeding concerning the exercise or waiver of any right under this Act, any right of employees, or any right of individuals who experience misclassification, as required under a local, State, or federal law.

"Willfully violates" means a hiring entity knew or should have known that its conduct was prohibited by this Act.

Section 15. Presumption of employment.

(a) Any person performing any services for a hiring entity other than professional services or an individual who is the child, parent, sibling, or spouse of the hiring entity or its owner, shall be classified as an employee of the hiring entity, and the hiring entity shall be deemed an employer unless it can be shown by the hiring entity that the person is a separate business entity under subsection (b) or all of the following criteria are met, in which case the person shall be an independent contractor:

(1) the individual has been and will continue to be free from control or direction over the performance of such services, both under the individual's contract of service and in fact; and

(2) the service is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and

(3) the individual is engaged in an independently established trade, occupation, profession, or business.

(b) If a business service provider contracts to provide services to a contracting business, the business services provider shall be considered an independent contractor only if the contracting business demonstrates that all of the following criteria are satisfied:

(1) the business service provider is free from the control and direction of the contracting business in connection with the performance of the work, both under the contract for the performance of the work and in fact;

(2) the business service provider is providing services directly to the contracting business rather than to customers of the contracting business;

(3) the contract with the business service provider is in writing;

(4) if the work performed requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration;

(5) the business service provider holds itself out as a distinct business;

(6) the business service provider maintains a business location that is separate from the business or work location of the contracting business;

(7) the business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed;

(8) the business service provider contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the contracting business;

(9) the business service provider has a substantial investment of capital in its own business entity beyond ordinary tools and equipment and a vehicle, such as a website or website business listings for the business entity, business cards, dedicated workspace apart from a vehicle, trademarks, general liability insurance for the business entity, or business or professional software, and not including any payments for access to an application through which work is distributed;

(10) the business service provider provides its own tools, vehicles, and equipment to perform the services;

(11) the business service provider can negotiate its own rates;

(12) consistent with the nature of the work, the business service provider can set its own hours and location of work; and

(13) the business service provider's services are either outside the usual course of the contracting business's business or performed outside all places of the contracting business's business.

(c) The failure of a hiring entity to withhold federal or State income taxes or to pay unemployment insurance contributions or workers' compensation premiums with respect to an individual's wages shall not be considered in making a determination under this Section.

(d) An individual's act of securing workers' compensation or liability insurance as a sole proprietor, partnership, or otherwise shall not be binding on any determination under this Section.

(e) When a business service provider meets the definition of an independent contractor pursuant to this Section, the business service provider shall be considered a hiring entity subject to all of the provisions of this Act in regard to classification of individuals performing services for it.

(f) A professional services provider shall be considered an independent contractor only if the hiring entity demonstrates that all of the following factors are met:

(1) the professional services provider maintains a business location, which may include the individual's residence, that is separate from the hiring entity, however, nothing in this Section prohibits an individual from choosing to perform services at the location of the hiring entity;

(2) the professional services provider has any license or permit required by law for the individual to practice his or her profession;

(3) the professional services provider has the ability to set or negotiate his or her own rates for the services performed;

(4) outside of project completion dates, timing that is inherent in the project itself, and reasonable business hours, the professional services provider has the ability to set his or her own hours;

(5) the professional services provider is customarily engaged in the same type of work performed under contract with another hiring entity or holds himself or herself out to other potential hiring entities as available to perform the same type of work; and

(6) the professional services provider customarily and regularly exercises discretion and independent judgment in the performance of the services.

(g) Any individual classified by a hiring entity or employer as an employee shall enjoy an irrebuttable presumption of employee status under the laws of this State.

Section 20. Failure to properly designate or classify individuals performing services as employees. It is a violation of this Act for an employer not to designate an individual as an employee unless the employer satisfies the applicable provisions of Section 15.

Section 22. Flexibility to work.

(a) Any individual reclassified as an employee pursuant to this Act has the right to maintain the same schedule and scheduling flexibility that the individual possessed at any time while performing labor for the employer as an independent contractor in the 12-month period prior to the effective date of this Act. As used in this Section, "scheduling flexibility" includes:

(1) the timing of the work throughout an hour, day, week, month or year;

(2) the total duration of the work in any given period; and

(3) the location where the work is performed.

(b) It shall be considered an unlawful employment practice under Section 25 to deny a reclassified individual this right to scheduling flexibility.

Section 25. Unlawful employment practices; preservation of employment status.

(a) No hiring entity, or his or her agent, or person acting as or on behalf of a hiring entity shall discharge, threaten, penalize, or in any other manner discriminate or retaliate against any employee or hired individual because the employee or hired individual:

(1) exercises rights or attempts to exercise rights under this Act;

(2) opposes practices which such individual believes to be in violation of this Act; or

(3) supports the exercise of rights of another under this Act.

(b)Such unlawful employment practices include, but are not limited to, any reference to the individual's or any of the individual's family members' citizenship or immigration status, or any threat to contact or actual contact with any local, State, or federal government entities regarding the individual's or any of the individual's family members' citizenship or immigration status, or sexual harassment.

(c) Exercising rights under this Act includes:

(1) when such employee or hired individual has made a complaint to his or her hiring entity, or to the Department or its authorized representative, or to the Attorney General or any other person or organization, that the hiring entity or other person has engaged in conduct that the employee or hired individual, in good faith, believes violates any provision of this Act or any rule adopted by the Department to enforce this Act;

(2) when such hiring entity or his or her agent, or person acting on behalf of a hiring entity, believes such employee or hired individual has made a complaint to his or her hiring entity, to the Department or its authorized representative, or to the Attorney General or any other person or organization, that the hiring entity or other person has engaged in conduct that the employee or hired individual, in good faith, believes violates any provision of this Act, or any rule adopted by the Department to enforce this Act;

(3) when such employee or hired individual has caused to be instituted or is about to institute a proceeding under or related to this Act;

(4) when such employee or hired individual has provided information to the Department or the Attorney General;

(5) when such employee or hired individual has testified or plans to testify in an investigation or proceeding under this Act;

(6) when such employee or hired individual has otherwise exercised rights protected under this Act;

(7) when the hiring entity or other person has received an adverse determination from the Department involving the employee or hired individual;

(8) when such employee or hired individual has refused or declined to waive his or her rights under this Act; or

(9) when such employee or hired individual has otherwise exercised or attempted to exercise his or her rights under local or State laws governing the payment of wages, the rights of employees, or the rights of individuals who experience misclassification or the hiring entity or other person believes that such employee or hired individual has exercised, attempted to exercise, or plans to exercise such rights.

(d) No provision of this Act shall permit an employer to reclassify an individual who was an employee on the effective date of this Act as an independent contractor or reclassify a worker who receives gratuities, as defined under the Minimum Wage Law, based solely or in part on this Act.

Section 30. Notice to individuals receiving pay for hire.

(a) Every hiring entity shall post or distribute in a prominent and accessible manner a legible statement, provided by the Department, that describes the responsibility of independent contractors to pay taxes required by State and federal law, the rights of employees to workers' compensation, unemployment benefits, minimum wage, overtime and other federal and State workplace protections, the protections against retaliation, and the penalties under this Act if the hiring entity fails to properly classify an individual as an employee. This notice shall also contain contact information for individuals to file complaints or inquire with the Department about employment classification status. This information shall be provided in English, Spanish, and other languages that are spoken as a primary language by a significant portion of the workers in a place of employment or by a significant portion of the State's population, as determined by the Department.

(b) Within 30 days of the effective date of this Act, the Department shall create the notice described in subsection (a) and post the notice on the Department's website for downloading by hiring entities.

(c) Any hiring entity that violates this Section shall be subject to a civil penalty of up to $1,500 for a first violation and up to $5,000 for a subsequent violation and any additional violations thereafter.

Section 35. Enforcement.

(a) Any interested party that believes that a hiring entity or employer is in violation of this Act may file a complaint with the Department against the hiring entity or employer covered under this Act. It is the duty of the Department to enforce the provisions of this Act either on the basis of a complaint received or a random audit conducted by the Department. The Department has the power to conduct random audits of entities subject to this Act to determine compliance with this Act. The Department has the power to conduct investigations in connection with the administration and enforcement of this Act and any investigator with the Department is authorized to visit and inspect, at all reasonable times, any places covered by this Act and is authorized to inspect, at all reasonable times, documents deemed by the Department to be relevant to the determination of whether an individual is an employee under this Act. The Department may compel, by subpoena, the attendance and testimony of witnesses and the production of books, payrolls, records, papers, and other evidence in any investigation and may administer oaths to witnesses. The Department's investigation may exceed the scope of the allegations, persons, and entities contained in a complaint.

(b) Complaints under this Section must be filed within 5 years after the final date of performing services to the hiring entity.

(c) Whenever the Department believes upon investigation that there has been a violation of any of the provisions of this Act or any rules adopted under this Act, the Department may:

(1) issue and cause to be served on any party an order to cease and desist from further violation of the Act;

(2) take affirmative or other action as deemed reasonable to eliminate the effect of the violation;

(3) collect the amount of any wages, salary, employment benefits, or other compensation denied or lost to the individual; and

(4) assess any civil penalty allowed by this Act.

(d) If, upon investigation, the Department finds cause to believe that Section 15 or Section 20 of this Act has been violated, the Department shall notify the hiring entity, in writing, of its finding and any relief due and penalties assessed and that the matter will be referred to an Administrative Law Judge to schedule a formal hearing in accordance with the Illinois Administrative Procedure Act.

(e) A final decision by an Administrative Law Judge issued in accordance with this Section is subject to the provisions of the Administrative Review Law and shall be enforceable in an action brought in the name of the people of the State of Illinois by the Attorney General or by any other interested party.

Section 40. Penalties.

(a) Whenever the Department believes upon investigation that there has been a violation of this Act or any rules adopted in accordance with this Act, the Department may:

(1) issue and cause to be served on any party an order to cease and desist from further violation of the Act;

(2) take affirmative or other action as deemed reasonable to eliminate the effect of the violation;

(3) collect the amount of any wages, salary, employment benefits, or other compensation denied or lost to the individual; and

(4) assess any civil penalty allowed by this Act.

(b) The civil penalties set forth in this Section shall be imposed as follows: by the Department when such penalty is based on a violation of this Act; by the chair of the Illinois Workers' Compensation Commission when such penalty is based on a violation of workers' compensation law; and by the Director of the Department of Revenue when such penalty is based on a violation of tax law, provided that no more than one civil penalty under this Section may be imposed per employee per incident of misclassification.

(c) Any hiring entity who fails to properly classify an individual as an employee as provided under this Act shall be subject to a civil penalty of up to $2,500 for the first violation per misclassified employee and to a civil penalty of up to $5,000 for each subsequent violation per misclassified employee. In determining the amount of the penalty, the Department shall consider the appropriateness of the penalty to the hiring entity charged and the gravity of the violation.

(d) Any hiring entity that willfully fails to properly classify an individual as provided under this Act shall be subject to a civil penalty of an additional $2,500 for the first violation per misclassified employee and to an additional civil penalty of up to $5,000 for each subsequent violation per misclassified employee within a 5-year period.

(e) If the hiring entity is a corporation, any officer of such corporation or shareholder who owns or controls at least 10% of the outstanding stock of such corporation who knowingly permits the corporation to violate the provisions of this Act shall also be in violation of this Act and the civil penalties herein shall attach to such officer.

(f) Any hiring entity subject to civil penalties under this Act shall also be subject to any other applicable penalties or remedies provided by law for failure to pay any other statutory payment or coverage obligations, including, but not limited to, unemployment insurance, workers' compensation insurance, and corporate or personal income tax.

(g) Any hiring entity or any officer or shareholder who owns or controls at least 10% of the outstanding stock of such corporation that has been convicted of a misdemeanor shall be subject to debarment and be ineligible to submit a bid on or be awarded any public works contract under the Illinois Procurement Code with the State, any municipal corporation, public benefit corporation, public authority, or public body for a period of up to one year from the date of a first such conviction or final determination and up to 5 years from the date of any subsequent violation.

(h) In addition to any other remedies available, an action for injunctive relief to prevent the continued misclassification of employees as independent contractors may be prosecuted against the putative employer in court by the Attorney General or by a State's Attorney upon his or her own complaint or upon the complaint of an interested party.

(i) Nothing in this Section limits the availability of other remedies at law or in equity for a violation of this Act.

(j) Penalties imposed shall be collected by the Department and deposited into the Day and Temporary Labor Services Enforcement Fund.

Section 45. Private right of action.

(a) An interested party or person aggrieved by a violation of this Act or any rule adopted under this Act by a hiring entity that is not the State of Illinois or its officers, agencies, or political subdivisions may file suit in circuit court in the county where the alleged offense occurred or where any person who is party to the action resides without regard to exhaustion of any administrative remedies. If a complaint filed against the State of Illinois or its officers, agencies, or political subdivisions with the Department pursuant to Section 45 of this Act has been pending for more than 75 days with the Department, that interested party or person aggrieved may file suit in circuit court in the county where the alleged offense occurred or where any person who is party to the action resides without regard to exhaustion of administrative remedies. Actions may be brought by one or more persons for and on behalf of themselves and other persons similarly situated. A person whose rights have been violated under this Act by a hiring entity is entitled to collect:

(1) the amount of any wages, salary, employment benefits, or other compensation denied or lost to the person by reason of the violation, plus an equal amount in liquidated damages;

(2) civil penalties pursuant to subsection (d);

(3) in the case of unlawful retaliation, all legal or equitable relief as may be appropriate, including, but not limited to, reinstatement to the worker's former position or its equivalent, an award of lost compensation or front pay, and restitution and liquidated damages equal to the economic compensation lost due to the retaliation; and

(4) the costs and reasonable attorney's fees of pursuing the cause of action.

(b) The Court may order appropriate injunctive relief.

(c) The right of an interested party or aggrieved person to bring an action under this Section terminates upon the passing of 5 years from the final date of performing services to the hiring entity. This limitations period is tolled if the hiring entity has deterred a person's exercise of rights under this Act or during the time a complaint is pending before the Department.

(d) An employee or hired individual may seek the civil penalties provided under Section 35 of this Act if, at the commencement of the action, a copy of the complaint is served on the Department and the Department has declined or failed to initiate an investigation. The commencement of an action under this Section shall terminate the administrative proceeding before the Department. The Department shall be granted intervenor status as of right if sought by the Department within 30 days of the service of the complaint for the purpose of collecting civil penalties under Section 35 of this Act. Any award of civil penalties obtained as a result of an action brought under this Section by an aggrieved employee or hired individual, on behalf of themselves or others similarly situated shall be awarded in the name of the State, of which the plaintiff shall be entitled to a 25% allotment, in addition to the other relief that may be recovered under this Section.

Section 55. Contempt. Whenever it appears that any hiring entity has violated a valid order or any final determination from the Department issued under this Act, the Department shall refer the matter to the Attorney General who shall commence an action and obtain from the court an order commanding the hiring entity to obey the order of the Department or be adjudged guilty of contempt of court and punished accordingly.

Section 60. Rulemaking. The Department may adopt reasonable rules to implement and administer this Act. For purposes of this Act, the General Assembly finds that the adoption of rules to implement this Act is deemed an emergency and necessary for the public interest and welfare.

Section 65. No waivers. There shall be no waiver of any provision of this Act. Any such waiver shall be considered an unlawful employment practice under Section 25.

Section 67. Conflict of law. To the extent that any provision of this Act conflicts with any Act that seeks to define employee, the provisions of this Act shall control, except for the Unemployment Insurance Act which shall control for the purposes of administering unemployment insurance benefits only.

Section 70. Cooperation. The Department, the Department of Employment Security, the Department of Revenue, and the Illinois Workers' Compensation Commission shall cooperate under this Act by sharing information concerning any suspected misclassification by a hiring entity of one or more of its employees as independent contractors. Upon determining that a hiring entity has misclassified employees as independent contractors in violation of this Act, the Department shall notify the Department of Employment Security, the Department of Revenue, the Office of the State Comptroller, and the Illinois Workers' Compensation Commission each of which shall be obliged to check such hiring entity's compliance with laws it administers, utilizing its own definitions, standards, and procedures.

Section 75. Waiver of sovereign immunity. For the purposes of this Act, the State of Illinois waives sovereign immunity.

Section 90. The Illinois Administrative Procedure Act is amended by adding Section 5-45.8 as follows:

(5 ILCS 100/5-45.8 new)

Sec. 5-45.8. Emergency rulemaking; Fair Play in Employment Act. To provide for the expeditious and timely implementation of the Fair Play in Employment Act, emergency rules implementing that Act may be adopted in accordance with Section 5-45 by the Department of Labor. The adoption of emergency rules authorized by Section 5-45 and this Section is deemed to be necessary for the public interest, safety, and welfare.

This Section is repealed on January 1, 2027.".