The GigReporter

Many states and local jurisdictions across the United States have recently enacted laws governing contracts and payments of individual independent contractors. Illinois’s version, the Freelance Worker Protection Act (“FWPA”)[1], went into effect on July 1st. The law’s penalties for underpayments and non-conforming contracts can be quite harsh, so Illinois brokers need to understand its provisions and how to protect themselves.

First, some good news: The “freelance workers” protected by the law are defined to include only natural persons, unlike the New York State version, which also allowed single-member LLCs to qualify. This means brokers should be able to protect themselves by contracting with LLCs or other business entities instead of directly with individuals, at least for now. (It would not be surprising for the law to be amended on this point, or for a judicial doctrine of corporate identity-piercing to arise.) FWPA also has better geographic guidelines than New York’s version, as a qualifying “freelance worker” must be hired to provide products or services in Illinois or by a contracting entity located in Illinois.

In most other respects, however, the law is similar to those from other jurisdictions. A “freelance worker” who is paid five hundred dollars or more, either in one contract or when aggregated with all contracts between the same parties over the previous 120 days, is subject to this law.[2] Section 15 requires a freelance worker to be furnished with a written contract by the “contracting entity”, defined broadly to include any person or business who retains a freelance worker to provide a service. The contract must include both parties’ names and contact information (including the contracting entity’s mailing address), an itemization of services to be provided with the rate and method of compensation, the date on which the compensation must be paid or a mechanism for determining such date, and the date by which a freelance worker must submit a list of services rendered to ensure timely payment. Compensation must be paid before or on the date set forth in the contract, or if the contract fails to set forth such a date or a mechanism for determining it, then no later than thirty days after the completion of the freelance worker’s services. Additionally, Section 20 bars retaliation against a freelance worker for exercising rights under the law, including threats, harassment, intimidations, discipline, or denied opportunities.

Key takeaways:

• Work with LLCs or other corporate entities over unincorporated individuals as much as possible.

• Define when work will be considered completed in your contracts strictly, so that payment will not become due if there is a mis delivery or serious damage.

• Require cargo insurance, so there are sources of customer compensation other than withheld pay.

• Require invoicing methods that won’t go unnoticed.

• Give your business payment due dates it can meet easily, even if there are unexpected problems.

Have a trusted TPA such as SCI to handle payment processing.

[1] https://www.ilga.gov/legislation/fulltext.asp?DocName=&SessionId=112&GA=103&DocTypeId=HB&DocNum=1122&GAID=17&LegID=143137&SpecSess=&Session=

[2] Workers in the construction industry are exempt, as is any person qualifying as an employee.