We are frequently asked by our clients whether independent contractors are eligible for worker’s compensation benefits in Illinois. Employers need to know the extent of their obligations under the Illinois Workers’ Compensation Act. Those injured in the workplace want to know if they are eligible for workers’ compensation benefits. Such concerns are becoming increasingly common in today’s economy.
What is Workers’ Compensation?
Workers’ Compensation is a mandated insurance program that every employer in the state needs to carry. The purpose of workers’ compensation is to ensure that employees injured while working are entitled to medical treatment. In addition to covering the costs of medical treatment, the employee is also entitled to receive a portion of lost wages for time missed from work.
In Illinois, workers’ compensation is administered by the Illinois Workers’ Compensation Commission. The Commission is responsible for overseeing all disputes that arise between employers and employees over workers’ compensation benefits.
The Rise of Independent Contractors
A recent study conducted by the Bureau of Labor Statistics (BLS) examined alternative work arrangements in the United States. According to the study, some 15.5 million workers in the U.S. have alternative work arrangements. These workers include independent contractors, those on-call and workers from “temp” agencies. This marks an increase from 12.1 million workers in 1995.
Many employers are shifting away from the traditional employment relationship. Much of the change in the job market can be attributed to technology. To be sure, technological improvements have mostly benefited both sides. Employers prefer the greatly reduced operating expenses of outsourcing work. Workers prefer the flexibility of working from home and the elimination of the morning commute. There are, however, some significant downsides to this new trend.
Independent contractors are required to maintain their own health insurance and pay taxes absent any employer contributions. Not to mention a lack of long-term benefits like a 401(k). However, there is another more immediate implication that most independent contractors never consider. For those independent contractors injured while working on the job, they may not be eligible for workers’ compensation benefits under Illinois law.
Employers commonly will seek to label all workers as independent contractors, even if they are otherwise considered employees under the law. The reasons for this are fairly straightforward: where an employer has employees, it is required to pay payroll taxes and workers’ compensation premiums. In addition, many employers offer benefits like retirement or health insurance in order to attract and retain more qualified workers.
When all of the foregoing are taken into account, employees cost an employer far more than their base salaries. According to Joe Hadzima, a Senior Lecturer at MIT, once you take into account salary, taxes and benefits, the real costs of having an employee is between 1.25 and 1.4 times his or her base salary range. Thus, an employer’s real cost of an employee earning a base salary of $50,000 per year is between $62,500 and $70,000 annually. Consider large companies that employ many workers and the benefits of outsourcing work to independent contractors (or attempting to classify workers as independent contractors) becomes apparent.
What Determines Whether a Worker is an Employee or Independent Contractor?
The obvious legal question that arises in this context is who is considered an independent contractor and who is considered an employee? At the outset it is important to note that the title your employer gives you has no bearing under Illinois law whether you are eligible for workers’ compensation benefits. For instance, you may sign an agreement with your employer that defines you as an independent contractor when under the law you are considered an employee and eligible for workers’ compensation benefits. Signing an independent contractor agreement does not decide whether you are or are not an employee under the Worker’s Compensation Act, however.
The distinction between employees and independent contractors can be confusing depending on the work relationship. Fortunately, the Illinois legislator has identified a number of factors to determine whether an injured worker is an independent contractor or employee. As a general matter, the employer’s level of control over the worker is of particular importance. The more control that an employer has over the worker and his or her schedule, the greater the likelihood of being deemed eligible for benefits.
The standard is very similar to the Internal Revenue Service’s (IRS) regulations governing independent contractor status. The IRS applies these rules to determine individual and business tax obligations. There are, however, some differences. For instance, it is possible that a worker can be classified as an employee under the Worker’s Compensation Act even if he or she receives 1099 income. Under Illinois law the following factors are examined to determine control which determines eligibility:
- Whether the employer determines what the worker does and how the worker performs his or her job duties
- Whether the employer controls the work-related aspects of the worker’s job. For instance, does the employer determine when the worker is paid or whether to reimburse for expenses. Is the worker required to provide his or her own tools or supplies?
- Whether there is a written employment agreement and what the parties’ obligations are under the agreement
- Whether the worker receives benefits such as retirement, vacation pay or insurance
- Whether the worker is exclusively bound to work for just the employer. In other words, does the worker have the ability to work for other employers of his or her choosing?
- Whether the employer deducts taxes from the worker’s paycheck
The above list is in no way meant to constitute an exhaustive list. Again, the most important consideration is control. If an employer has the right to control what work is to be done and how that work is to be performed, a worker will likely be deemed eligible for workers’ compensation benefits. Remember, just because you are labeled as an independent contractor does not mean that you are not eligible for benefits. We have assisted many workers deemed independent contractors by their employers to recoup their losses under Illinois workers’ compensation law.
In Roberson v Industrial Commission, 225 Ill.2d 159, 866 N.E.2d 191 (Ill.S.Ct. 2007), the Illinois Supreme Court found that a truck driver labeled as an “Independent Contractor” was actually an Employee under the Illinois Worker’s Compensation Act because the employer controlled nearly every aspect of Mr. Roberson’s work day. Conversely, in Esquinca v IWCC, 51 N.E.3d 5 (1st Dist. 2016), the Illinois Appellate Court found that Mr. Equinca, also a truck driver, was not an employee since he could do the job in any manner he chose and the employer’s control of the manner in which he did the work was very limited.
The laws governing workers’ compensation in Illinois are complex. If you have suffered an injury at work and are unsure whether you are eligible for benefits, contact our team of experienced Illinois workers’ compensation lawyers today.