Chicago Gig Economy: Who is an Independent Contractor in Illinois

Most contracts I see contain some version of the following boilerplate: “Each Party is an independent contractor and shall not be deemed an employee, agent, subcontractor, partner, or joint venturer of the other Party.” That’s it - voila, magic wand waived and we’re done, right?

Unfortunately, no. Due to a labor economy where many large employers have wrongly classified their employees an independent contractors, Illinois has adopted a number of rules to curb these types of abuses. That means that in your agreements, the above language is nice but ultimately the parties themselves are not the ones responsible for determining whether a person is an employee or an independent contractor. That is left to the trier of fact interpreting the contract.

In the link above, Ken Adams recommends using the language of intention - to demonstrate the parties intent in entering the agreement and I think that’s a good idea that I generally follow when working on an independent contractor agreement. However, the larger question is really not related to the words in the agreement but the facts of the parties.

In Illinois, courts use what is called the ABC test to determine who is an independent contractor. The ABC test has 3 factors: (1) The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; (2) The worker performs work that is outside the usual course of the hiring entity’s business; and (3) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

There are some exceptions (especially for construction trades) but generally, an business in Illinois must demonstrate that all three factors are met with respect to the worker for the worker to be considered an independent contractor - not an employee. So start with contract language, that’s the easy part but remember the work doesn’t stop there: a business must have a plan in place that goes beyond boilerplate to ensure that it is correctly classifying and using independent contractors.

If you have any questions, feel free to reach out! I’ve worked with a lot of Illinois businesses on this issue and can help you plan your compliance process.