December 2014
By Nancy E. Joerg, Esq.
The Illinois Department of Employment Security (IDES) has a
handy list of questions that it uses to determine whether or not a salesperson
is an independent contractor or an employee for IDES purposes. This valuable list
of questions can be found on the entire last page of the IDES Worker Relationship
Questionnaire.
WORKER
RELATIONSHIP QUESTIONNAIRE: The IDES
Worker Relationship Questionnaire is a multi-page document (six pages), but
there is a special seventh page attached to the Questionnaire which is
especially designed for evaluating whether or not independent contractor
salespersons are really misclassified employees. IDES auditors use that
last page to determine whether or not a particular salesperson is actually “controlled
and directed” by the company being audited (and therefore should be reclassified
to employee status).
The entire IDES Worker Relationship Questionnaire is based
on Section 212(A),(B), and (C) of the Illinois Unemployment Insurance Act. This
is the Section of the law that defines whether or not a worker is in employment
i.e., an employee, or exempt from employment i.e., an independent contractor.
ONLY
EXEMPTION FOR SALES IS THE DIRECT SELLERS EXEMPTION: There is no actual exemption
from employment under the Illinois Unemployment Insurance Act for sales, except
for the direct sellers’ exemption (Section 217(B)) which is specifically for direct
sellers who go door-to-door with consumer products under very narrowly
described circumstances.
However, for the normal sales personnel (who do not sell
consumer products door-to-door), the last page of the IDES Worker Relationship
Questionnaire is a GOLD-MINE of
suggestions as to how a sales personnel can be a bona fide independent
contractor for IDES purposes.
SALES
RELATED QUESTIONS FROM WORKER RELATIONSHIP QUESTIONNAIRE: Let us look at some of these
very helpful questions:
Question: Does
the firm furnish the worker with transportation (the worker, meaning the
alleged independent contractor sales person.) Yes or no?
Answer: For
independent contractor status, the firm should not be furnishing the worker
with transportation.
Question: Does
the firm furnish the worker with business cards? Yes or no?
Answer: For
independent contractor status, the best answer here is no (the firm does not
furnish the salesperson with business cards).
Question: Does
the firm restrict the worker/salesperson as to territory? Yes or no?
Answer: The
best answer for independent contractor status is no, the salesperson is not
restricted as to territory.
Question: Does
the firm have the right to require the salesperson to follow its instructions?
Yes or no?
Answer: The
best answer for independent contractor status is no.
Question: Does
the firm have the right to require the alleged independent contractor
salesperson to attend meetings?
Answer: The
best answer here for independent contractor status is no.
Question: Does
the firm being audited require the alleged independent contractor salesperson
to work fixed work hours?
Answer: If
the answer is yes, it is more likely that that salesperson is a misclassified
employee.
This last page of the IDES Worker Relationship
Questionnaire is extremely helpful when a company is drafting an independent
contractor agreement for its salespeople because all of the factors listed
on the sales page of the IDES Worker Relationship Questionnaire should be
covered in an effective independent contractor agreement for salespeople.
INDEPENDENT
CONTRACTOR AGREEMENT: If
the Company’s independent contractor agreement for its salespeople has
restrictive provisions in it such as a non-compete agreement, a requirement to
work a minimum number of sales or a minimum number of calls, etc., then if the
company is ever audited by the IDES, the IDES will likely find the Company to
be the employer of the salesperson (because of the direction and control that
the Company has over the salesperson).
SELF-AUDIT
TOOL: Even
if a company that uses independent contractor salespeople is not currently
under an IDES audit, it is an excellent
“self-audit tool” for the Company to fill out the Worker Relationship
Questionnaire for its salespeople in order to determine the strengths and
weaknesses of that independent contractor relationship.
For assistance and strategic planning with IDES audits,
hearings, and independent contractor agreements (or for consultations on
limiting your liability in the use of independent contractors), contact
Attorney Nancy E. Joerg, who enjoys a nationwide reputation in working with
companies who use Independent Contractors of all types. Nancy Joerg can be
reached at Wessels Sherman's St. Charles, Illinois office: 630-377-1554 or
email her at najoerg@wesselssherman.com.