Are you aware that your independent contractor can file for unemployment insurance benefits? You probably thought that only W-2 employees could apply for unemployment benefits. The truth is, even if you have a signed independent contractor agreement (which you should always obtain), 1099 workers can apply for benefits through the Illinois Department of Employment Security (IDES) office. Of course, not everyone who applies will be successful in obtaining unemployment benefits. IDES will ask for sources of income from the individual applying, and will cross check those sources against the individual’s social security number. When IDES finds out that the business did not report wages for that individual, that discrepancy should trigger an IDES audit of that company-even if the individual was classified by the company as an independent contractor.
Here’s where it gets tricky—independent contractors may be eligible to apply for special pandemic unemployment insurance benefits, because of COVID-19 under the new federal legislation passed by Congress. However, they can only apply AFTER they have been denied (because they are not employees and, therefore, are not entitled to regular state unemployment insurance benefits). The independent contractor will receive a written denial of regular state unemployment benefits. You will want to obtain a copy of this written denial. Why? If a discrepancy triggered the IDES when the independent contractor applied for unemployment insurance benefits, you will most likely receive a notification to be audited. These written denials will be valuable, should you be audited. In addition, it is important that you protest/respond to every Notice of Claim making it clear that the Claimant is an independent contractor and not an employee.
For questions or concerns regarding a Notice of Claim received, please feel free to contact us. We have various labor law attorneys with whom we work, and would be happy to refer you to one of them.
Check out our last blog post which explains the difference between an employee and independent contractor: https://www.jhamlin.com/employee-vs-independent-contractor-what-is-the-difference/