Illinois Companies Need to React to Stern Warnings from the IDES Regarding Future Fraud Penalties for Independent Contractor Misclassification

By Nancy E. Joerg, Esq., Managing Shareholder – St. Charles Office, Wessels Sherman Joerg Liszka Laverty Seneczko P.C., St. Charles, Illinois, (630) 377-1554, [email protected], www.wesselssherman.com

Illinois companies should be acutely aware that one of the newest audit strategies of the increasingly aggressive Illinois Department of Employment Security (IDES) is to give Illinois companies (who are currently being audited) stern warnings of hefty fraud penalties that these companies may face in the future!
HEFTY FRAUD PENALTIES: The standard routine that IDES auditors follow is to unleash the topic of future 60% fraud penalties at the “exit interview.”
The exit interview is the final communication that the IDES auditor has with the company being audited. The IDES auditor solemnly informs the company (or its representative) that if the company persists in wrongly classifying these workers as independent contractors (because the company now presumably knows, due to the current IDES audit, what it must change in terms of classifying workers as independent contractors), then the company faces a bleak future of possible massive fraud penalties (and possible personal liability) for its alleged INTENTIONAL WRONGDOING!
AGGRESSIVE FOLLOW-UP AUDITS: To make matters even more dangerous, IDES audit supervisors have very recently started assigning FOLLOW-UP AUDITS in great numbers! Hitting previously audited companies with follow-up audits is a brand new and worrying audit strategy by the IDES!
So, if your company was previously audited by the IDES (and your independent contractors were reclassified to employee status by the IDES auditor), your company may well be selected now for a FOLLOW-UP AUDIT!
Illinois companies who face a FOLLOW-UP AUDIT should brace themselves for Determination and Assessments (audit tax bills) with 24% interest – and then ANOTHER 60% fraud penalty on top of that – if they are found to have intentionally MISCLASSIFIED their independent contractors.
In view of the combination of 1) potential fraud penalties of 60% and 2) follow-up IDES audits of Illinois companies who have had prior misclassification difficulties with IDES auditors and hearing officers, it is very important to restructure and make strategic changes to the Independent Contractor relationship.
Questions?: Contact Nancy Joerg at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at [email protected].
For assistance 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 [email protected].