Heyl Royster

 


Heyl Royster

 

Recent Development In The Courts-IL Sup Ct concludes Employee Classification Act Constitutional

8/4/14

In Bartlow v. Costigan, 2014 IL 115152, the Illinois Supreme Court reviewed a challenge to the constitutionality of the Employee Classification Act, ("the Act") 820 ILCS 185/1, et seq. (West 2010), which addresses the classification of employees in the construction industry. Plaintiffs had a construction related business called "Jack's Roofing" that installed siding, windows, seamless gutters, and roofs. In September 2008, the Illinois Department of Labor ("DOL") sent Jack's Roofing a notice of investigation advising that it had received a complaint. DOL is empowered to conduct investigations. Following investigation, if it believes the Act has been violated, DOL may take action, including assessing civil penalties. The complaint alleged that the company was violating the Act by misclassifying its employees as independent contractors. Following an exchange of written materials and telephone interviews with various individuals, DOL sent Jack's Roofing its "preliminary determination" that the employer had misclassified ten individuals resulting in a "potential penalty" of $1,683,000.

On March 1, 2010, DOL sent Jack's Roofing a notice of a second investigation and requested additional information. Plaintiffs then filed an action against DOL seeking injunctive relief and declaratory judgment. Plaintiffs sought a declaration that the Act was unconstitutional. Plaintiff argued that: the Special Legislation Clause of the Illinois Constitution prohibits more stringent employment standards for the construction industry than other industries, and the Act failed to provide an opportunity to be heard in violation of the Due Process clauses of the United States and Illinois Constitutions. Plaintiff also argued that the Act is vague and in violation of the Equal Protection Clause of the United States Constitution because no other industry is subjected to the same standards when seeking to hire independent contractors.

The Illinois Supreme Court analyzed the provisions and purpose of the Act meant to "address the practice of misclassifying employees as independent contractors" in the construction industry. 820 ILCS 185/3. The Act generally "provides that any individual 'performing services' for a construction contractor is 'deemed to be an employee of the employer.'" Bartlow at ¶20 (quoting 820 ILCS 185/10(a)). "Performing services" is broadly defined, thus creating a presumption that an individual is an employee of the contractor.

During the pendency of the appeal before the court, the Act was amended to require DOL to give notice and conduct formal administrative hearings according to the Administrative Review Law. See Bartlow at ¶27; Pub. Act. 98-106 (eff. Jan 1, 2014 (the amendments)). Additionally, the amendments reduced civil penalties. The court first concluded that DOL must apply the amended Act in the case against Jack's Roofing. It then considered whether plaintiffs' constitutional challenges had been rendered moot by those amendments.

The court determined that plaintiffs' procedural due process challenge to the government's enforcement system was moot. Considering plaintiffs' vagueness challenge, the court concluded that Section 10 of the Act, left unchanged by the January 2014 amendments, was not unconstitutionally vague. It reasoned that a person of ordinary intelligence could determine from the language of Section 10 whether a contractor had complied with the Act. The court also noted that a reasonably intelligent person could understand how he or she could qualify for an exemption since the provisions were specific and highly detailed. Bartlow at ¶45. The Illinois Supreme Court likewise concluded that the statutory provisions were sufficiently detailed and specific enough to preclude arbitrary enforcement. The Illinois Supreme Court did not address plaintiffs other constitutional challenges because it concluded plaintiffs forfeited them for failure to brief them. Bartlow v. Costigan indicates that the Act is constitutional and will likely remain the law for some time.