Read this article in:
11 September, 2007
An important new law was enacted in the US state of Illinois on 6 August 2007, when the state’s governor, Rod Blagojevich, signed into force a bar on construction companies falsely classifying workers as “independent contractors.” The new law in the midwestern state is seen as a harbinger for what could occur across the US nationally, considering the coming political ballots, and George Bush’s mandatory departure.
“Misclassification of employees as independent contractors is one of the devices that greedy employers use to cheat workers out of their benefits,” said AFL-CIO President John Sweeney, who joined Blagojevich and other proponents of the regulation at the 6 August signing ceremony.
AFL-CIO President John Sweeney
The measure, passed by the Illinois Senate and House of Representatives early in the year, had broad support, including labour and scores of legitimate construction companies. These firms, relying on skilled, generally unionised workers, have been left at a competitive disadvantage by unscrupulous employers, who deliberately mis-classify workers as contractors in order to reduce their operating costs. In Illinois, estimates say that such nefarious enterprises save an average of 24% in submitting bids on projects.
The law in Illinois, introduced as the Employee Classification Act, presumes all workers are regular employees unless certain conditions exist, such as being a partner or sole proprietor, a specific business or profession, or providing a service outside of the usual course of business. The law, the fifth such statute among the US’s 50 state laws, includes US$2,500 penalties on companies that deliberately misclassify construction workers. Repeat offenders can face felony charges.
A university study found Illinois losing an average of US$125.7 million annually in tax revenue over a five-year period in the early 2000s. Cut-rate employers avoid paying Social Security, workers’ compensation benefits, jobless relief, state and federal taxes, and other social costs. Sweeney stated that such tax revenue losses deprive governments of immediate funds that could address “so many vital programs.”
The US Congress, in the House of Representatives, took up the independent contractor issue in hearings last March, but has yet to act on legislation that could update US labour code on this crucial workplace issue.