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New Illinois Law Establishes Pay and Contract Requirements When Retaining Freelance Workers

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In August, Illinois passed the Freelance Workers Protection Act, Public Act 103-0417. (the “Act”). The Act goes into effect on July 1, 2024. The Act requires contracts and payments to freelance workers be made in a timely manner.

Freelance worker

Under the Act, an individual is a freelance worker when they are hired or retained as an independent contractor to provide products or services in Illinois or for an Illinois contracting entity. The contract for the freelance worker must be in exchange for products or services equal to or greater than $500 for a single contract, or for all contracts, between the freelance worker and contracting entity in the preceding 120 days. Individuals that perform construction services as contractors or subcontractors under the Employee Classification Act, or perform as an employee under the Illinois Wage Payment and Collection Act, are expressly excluded as a freelance worker.

Contracting Entity

Under the Act, a contracting entity is any individual or business entity that retains a freelance worker. The act expressly excludes the United States Government, the State of Illinois, local governments, school districts, and foreign governments as a contracting entity.

Contracting Requirements

The Act requires contracts between freelance workers and contracting entities be reduced to writing and for the contracting entity to provide a copy of the contract to the freelance worker. The contracting entity must retain the contract for 2 years. The contract, at a minimum, must contain: the name and contact information of the contract entity and the freelance worker, the mailing address of the contracting entity, itemization of all products and services the freelance worker will provide along with the corresponding values, the rate and method of compensation to the freelance worker, the date compensation will be provided to the freelance worker or the method used to determine the date of compensation. If a method is used to determine the payment date, the date must still be within 30 days of the freelance worker providing the products and/or services. If a list of the products or services from the freelance worker is required for the contracting entity to internally process the freelance workers compensation, the contract must also include the date in which the freelance worker must provide such a list in order for compensation to be processed to the freelance worker by the agreed contract payment date.

Payment Requirements

The freelance worker must be paid the contracted amount by the date provided in the contract. If the contract does not provide a date or uses a method to determine such a date, payment must be provided no later than 30 days after the freelance worker has completed the services under the contract. If a freelance worker has already started to prepare the product or perform the services under the contract, the contracting entity may not require the freelance worker to accept compensation less than what was contracted for as a condition of receiving timely payment.

Additional Provisions

A contracting entity may not discriminate against the freelance worker. Discrimination under the Act provides that a contracting entity may not threaten, intimidate, discipline, harass, deny opportunity to, or prevent future work opportunities to a freelance worker for the freelance worker’s exercise of their rights under the Act or to deter the freelance worker from exercising their rights.

The Act will only apply to contracts created on or after July 1, 2024. Any contracts that waive the rights of freelance workers under the Act are void.

Enforcement

The Act allows a freelance worker to file a complaint with the Illinois Department or Labor or civil action in State Court for violations under the Act. A freelance worker does not need to exhaust their administrative remedies with the Illinois Department of Labor before filing a civil action. Under either remedy, the freelance worker has 2 years to file from the date that payment was due under the contract regardless of if the violation is regarding payment, the contract or discrimination issues. For violations related to failure to pay, the freelance worker may be awarded double the amount of the underpayment and attorneys fees and costs. For violations related to failing to enter into, or providing, the contract, awards for the greater of $500 or the value of the contract may be available to the freelance worker. For violations regarding discrimination, the freelance worker may be awarded recovery of the value of each underlying contract and attorney fees and costs.

The Illinois Attorney General may also pursue actions against contracting entities by initiating or intervening in civil actions for violations of the Act. The Attorney General may obtain civil penalties, restitution and/or equitable relief. Civil penalties may not exceed $5,000 for each violation or $10,000 for each repeat violation within a 5-year period.

Guidance

Additional information is currently unavailable from the Illinois Department of Labor. However, under the Act, the Department will provide model contracts. Additionally, the Department will establish rules for implementing the Act and provide information regarding the Act on its website.

Illinois employers that hire freelance workers are advised to reach out to their employment law attorneys for assistance regarding complying with this Act, well in advance of the Act’s July 1, 2024, effective date. At Reno & Zahm, we are proud to represent individuals and businesses in Northern Illinois for over 100 years. Our professionals regularly counsel clients on a large variety of employment matters, including hiring contracts. Contact us today at (815) 987-4050 to schedule a consultation.

This posting is for informational purposes only and is not intended to be legal advice. As the facts and circumstance of each employer are unique, the information provide herein should not be used or relied upon without first consulting a lawyer.

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