Illinois Renews Effort to Stamp Out Payroll Fraud

Last week the Illinois Department of Employment Security (IDES) and Governor Pat Quinn announced a renewed effort to protect workers and reward law abiding companies by fighting worker misclassification, or payroll fraud, through education and enforcement. Payroll fraud occurs when companies intentionally treat their employees as independent contractors in order to avoid paying unemployment insurance, workers’ compensation insurance, minimum wage, overtime pay, and to avoid having to withhold payroll taxes.  IDES has posted a clear explanation of how to tell whether an individual should be considered an employee or an independent contractor on their website, as well as a link where suspected payroll fraud may be reported.  As stated on their web site:

“Law abiding businesses that properly classify their employees are subsidizing businesses that misclassify and could end up paying higher unemployment insurance contributions, higher workers' compensation premiums, and higher taxes than would be required if all employers followed Illinois law.”

A press release from the Illinois Department of Labor quoted Governor Quinn:

“Hiding a full-time employee as an independent contractor creates an unfair competitive advantage.  It artificially lowers the costs for the business owner who breaks the law, undermining and out-bidding the honest business owner who follows the rules.  Stopping this fraud means business owners will compete fairly, workers will be paid the wages and overtime they earn, and funds set aside to help someone when they are hurt or unemployed no longer will be short-changed.  This initiative rewards those who do it right and punishes those who knowingly do it wrong.”

Jay Rowell, Illinois Department of Employment Security Director, stated:

“Competitive advantages should come from hard work, not cheating.  This effort is not about those companies who make an honest mistake.  Rather, it targets those who knowingly break the law.”

Efforts like this one are being mounted across the country as industry leaders are becoming unwilling to put up with this destructive practice which cheats both affected workers and honest employers.