Chitkowski Law Offices
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Tips from the Pros

What Every Contractor Needs To Know About The Illinois Employee Classification Act To Avoid Having The State Impose Severe Penalties

The Illinois Employee Classification Act, 820 ILCS 185/1, applies to all contractors who pays any person to perform any construction work in the State of Illinois.  

1) In order to avoid liability, the Contractor needs to prove that the independent contractor (party performing work) is i) free from the contractor's control and direction in performing the work; ii) outside the usual scope of work that the contractor performs;  and iii) the independent contractor regularly performs the construction work as part of its own business or trade.    

2) An oral or written contract between the Contractor and the independent contractor, which identifies the person as an independent contractor, will not prevent liability from being imposed upon the Contractor.  The contract will be just one factor the State may consider when determing whether the person is an independent contractor or employee.  However, the actual actions between the parties and of the independent contractor will control over the terms of the contract.  

3) The Act requires the Contractor to report to the Dept. of Labor any payments made to any individual, sole proprieteror or partnership (independent contractor) by April 30th of the followng year.  Failure to report is considered to be a violation of the Act. 

4) An example of a Contractor violating this Act: A painting contractor hires independent contractors to perform painting work.  To be in compliance, the painting contractor needs to pay the painters as employees.  

5) While the Illinois Dept. of Labor is the State agency that enforces this Act, any person with a reasonable belief that the Contractior is violating this Act can file a claim against the Contractor for violating the Act.  This includes a competitor of the Contractor.  The penalties include a $1,000 per day violation for each person that should have been identified as an employee and barring the Contractor from contracting with the State to perform work.  

6) In order to prevent any liability, the Act provides a list of twelve factors that the Contractor and independent contractor should perform and the Dept. of Labor will consider when determining whether the Contract is paying a person as an  independent contractor or employee.   In general,  the indpendent contractor should file its own taxes as an independent contractor, obtain its own insurance, advertise to the public, have its own tools, its profits/losses must be based upon its own actions; have the right to continue working if the Contractor terminates the contract, and performs work that the Contractor typically does not perform. 

For more information and to implement procedures to be in complaince with the Act and prevent the Dept. of Labor from imposing fines, contact Corey B. Stern at cbs@chitkowskilaw.com or at 630-824-4808.  

Non-Competition Agreements Cannot Be Enforced Agaisnt Low-Wage Employees

By Corey B. Stern, Esq., Chitkowski Law Offices

Pursuant to the Illinois Freedom to Work Act, enacted by the State of Illinois this year, a private company is prohibbited from enforcing a non-competition agreement against any employee who makes less than $13.00 per hour.  A non-competition agreement is any restriction that prevents a person from working for another employer for a specific period of time; a specific geographical area; or for another similar employer. 

However, the Act does not prevent an employer from executing and enforcing a non-disclosure agreement, which protects an employer's confidential or trade secret information; or executing and enforcing a non-solicitation agreement, which prevents an employee from soliciting other employees or the employer's customers.  In that regard, not all information that the employer believes is confidential or a trade secret is actually that.  The information must meet certain requirements. 

For more information on non-competition, non-disclosure, non-solictitation and maintaining confidential information/trade secrets, contact Corey B. Stern at cbs@chitkowskilaw.com. 

Top 10 Clauses For Every Construction Contract

By Corey B. Stern, Esq., Chitkowski Law Offices

1) Payment Terms: Identify the amount and the date or construction event when each payment is due.  Additionally, confirm that the Owner has the funds to complete the project or if financing is being used.  

2)  Explain Allowances vs. Furnished Items by Owner:  The amount and description of the allowances and items furnished by owner should be specifically identified.  Attach an exhibit, plans or specifications, if available.  

3)  Change Order Process: Provide the procedures to be used when any of the following tems are changed: materials, construction schedule, or contract price. Additionally, attach a sample change order to the contract, identifying who has authorization to sign the change order from both parties. 

4)  Timeframe for the Construction Work:  Identify the date when the construction shall begin (i.e.: 7 days after receiving permits) and when the construction should be completed (i.e.: 4 months after receiving permits or after 90% of the contract price has been paid).  

5)  Unforseen Site Condition Clause: Whether new construction or remodeling, there should be a procedure in place when the contractor discovers work or an issue that was not previously known at the time the contract was entered into.  

6) Photos and Videos:  State that you are entitled to use photos and videos of the work you are performing for marketing purposes without compensation to the Owner.  

7)  Warranty:  A limited warranty should be provided stating what you will and will not cover; and the Implied Warranty of Habitability should be specifically waived by the owner or upper tier contractor. This provision along with the Remedy clause will limit your liability in both duration and costs. 

8)  Insurance Clause:  Identify the type (CGL/WC) and amounts/limits of insurance the contractor and owner/upper tier contractor should have.  Moreover, every owner should be required to obtain Builders Risk Insurance.  

9)  Dispute Resolution:  At the very least, every contract should require mediation before a claim is filed in Court or arbitration proceedings begin.  The selection of a mediator should be identified in the contract.  

10)  Remedy and Termination Clause:  Provide for a procedure in the event either the Owner or Contractor materially breaches a contract term (lack of payment, construction schedule, performance of work); and allow for the party time to cure the default, in the event the breach is not an emergency.  

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