My Smart Home is book smart, not street smart.

It’s going to be hard to move my garage. I figure I’ll need at least four or five strong guys to help. My garage is heavy and seems pretty securely attached to the ground, so the work will be hard and I’m sure that I’d have to pay them at least $500 apiece.

But at least I don’t live in Illinois. Starting July 1, 2023, freelance labor will be governed by the Freelance Worker Protection Act (FWPA), another freelancer law similar to the ones in Los Angeles, Minneapolis, New York City, Seattle, and Columbus Ohio.

Here’s what you need to know before retaining a solo independent contractor in Illinois:

When the Law Applies

• Independent contractor who is a natural person (i.e., a human, not an entity)
• Providing services in Illinois
• Providing services for a person or entity in Illinois
• Total value is $500+, including all work aggregated over 120 days

Exclusions

• N/a to construction or subcontractors, as defined in the Illinois Employee Classification Act (construction industry)
• N/a to employees, as defined by the Illinois Wage Payment and Collection Act

Requirements

There must be a written contract that includes:

• The name and contact information of both parties (including the hiring party’s mailing address);
• An itemization of all products and services to be provided by the freelance worker;
• The value of the products and services to be provided;
• The rate and method of compensation;
• The date when payment is due, which must be “no later than 30 days after the products or services are provided”; and
• If the hiring party requires a list of products and services rendered in order to meet any payment processing deadlines (such as an invoice), the date by which the freelance worker must submit the list.
  (IDOL will provide model contracts)

Prohibitions

• Once the IC “has commenced preparation of the product or performance of the services under the contract,” the hiring party cannot require, as a condition of timely payment, that the IC accept less compensation
• Hiring party cannot threaten to withhold payment unless IC takes a lesser amount (no exception for unsatisfactory performance?)
• Hiring party cannot do anything that would discourage the IC from exercising rights under the Act
• No retaliation
• Waivers are void against public policy (does that mean you can’t settle a dispute?)
• If the contract failed to specify a due date for payment, the hiring party violates the Act if payment is made more than 30 days days “after the completion of the freelance worker’s services under the contract”

Record Keeping

• Hiring party must retain a copy of the contract for two years

Enforcement

• IC can file a civil lawsuit, or
• IC can file an administrative complaint, which can lead to a broader investigation as to overall compliance

Penalties

• For failure to timely pay: 2x amount owed, plus attorneys fees and costs
• For failure to contract or to provide the contract: value of the contract or $500, whichever is greater
• For discrimination or retaliation: value of contract, plus attorneys fees and costs

In addition, the IDOL may impose civil penalties up to $5000 for each violation, or $10,000 for each repeat violation within a five-year period, plus monetary damages to the state, restitution, and equitable relief, including injunctions.

Other Stuff

• The law does not weigh in on whether the worker is misclassified
• The Illinois DOL will issue regulations

Problems I See with the Law, as Written:

I see a few problems, and hopefully the IDOL will address these issues in its rulemaking.

First, suppose the IC’s work is unsatisfactory. Suppose the IC is slow or sloppy or rude or has terrible body odor. Suppose the IC does the work you requested but stomps all over your prized rose garden when walking in an out of the building. Suppose the IC comes into your home or business and breaks stuff or takes a cell phone picture of confidential information.

The law does not take into consideration all of the things that could warrant reduced or nonpayment, even if the products or services are ultimately provided. It seems that you’d still have to pay the value of the contract.

Second, the law seems to prohibit settlements. It says that any waiver of rights under this law is void as against public policy. It does say “except as otherwise provided by law,” so maybe a settlement would fall into that category.

Tips for Retaining ICs in Illinois after July 1, 2024

• Consider including specifications or other requirements in the contract, to preserve an argument that the work is not yet completed or that the work was not performed as contractually agreed. (But don’t impose control over how the work is done, because that could lead to misclassification.)
• Evaluate current use of individual ICs in Illinois, and consider whether this law will apply to those relationships.
• Implement a Gatekeeper System like this, prohibiting managers from retaining ICs without going thorough an internal chokepoint for vetting. Managers who don’t know about the FWPA might retain ICs to get something done, creating liability for the company under the FWPA.
• Look for the IDOL to release regulations that will hopefully provide clarity on the poor performance and settlement concerns.
• Be careful about any IDOL investigation. If your business uses freelancers and the IDOL receives a complaint of a potential FWPA violation, the IDOL is likely conduct a thorough investigation that extends beyond the one complaining worker. With fines of $5,000 per occurrence, the penalties for noncompliance can get big in a hurry.

The scope of this law is broad. It applies to all “natural persons” (hey, no jokes about the weird guy down in the cubicle down the hall) who perform services for $500 or more. That would include your regular babysitter, your house cleaner, the guy you pay to wash the windows, solo consultants, or the guy you pay to assemble all the new modular furniture.

That would also include the guys I’m gonna need to pick up and move my garage.

© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.