Employees who are misclassified as “independent contractors” are not covered under workers compensation insurance, so their injury claims and benefits may be compromised.
Misclassification of Workers
Worker classification impacts workers compensation benefits. If an employer classifies a worker as an “independent contractor” instead of an “employee”, the employer does not have to cover that person under the company’s workers’ compensation insurance plan.
Under Illinois workers compensation guidelines, a clear employer/employee relationship must be shown. If an alleged misclassification is investigated, state officials look at the following factors: How was the worker paid?; Who set the ground rules for job requirements?; Who controlled the work and completion requirements?; What skills were required to complete the work?; and Who provided materials, tools, and equipment for the job?
Employees and independent contractors operate very differently on a job. When an individual is classified as an employee, the employer controls all the ground rules and work requirements, while independent contractors control these factors themselves. Independent contractors do not answer to an employer, only to general contractors or other professionals working in multi-employer worksites.
Why do Employers Misclassify Workers?
Generally, employers misclassify workers to save money and avoid responsibility. If an employer classifies an employee as an independent contractor, the employer avoids payment and responsibility for the following:
Workers Compensation Insurance
Unemployment benefits
Social Security
Tax Withholding
Minimum Wage and Overtime
Consequences and Penalties
In Illinois, all employers are required to provide workers compensation insurance for their “employees.” Some employers try to get around these state requirements by misclassifying employees as “independent contractors.” The consequences of doing this may include financial penalties for failure to report employee wages; financial penalties for willful failure to contribute to unemployment insurance; and interest at an annual rate of 24 percent for delinquent unemployment contributions.
Avoiding mandated state laws for workers compensation is a serious offense. Any employer that knowingly and willfully fails to obtain workers compensation insurance for employees may be fined up to $500 for each day of noncompliance, with a minimum fine of $10,000.
If the company fails to pay the penalty, corporate officers can be held personally liable for the penalties. If corporate officers are found guilty of negligently failing to obtain insurance, they can be charged with a Class A misdemeanor in Illinois. If they are found guilty of intentionally failing to obtain insurance, they can be charged with a Class 4 felony, which may include jail time.
