Illinois Chamber Tells IDOL Joint Employer Rule Unnecessary
Todd Maisch, Illinois Chamber of Commerce President and CEO, provided testimony to the Illinois Department of Labor (IDOL) virtual hearing on its proposed rule regarding joint employer designation. He was joined by Michael Hughes of SmithAmundsen who provided the legal problems with the proposed rule.
In response to the federal USDOL rule, IDOL filed a proposed rule that took a different approach to the joint employer issue in May. The Illinois Chamber provided written comments to the rule raising a number of concerns. Maisch's testimony highlighted those concerns:
Notice is insufficient given the significant impact on business:
The Illinois Chamber which represents a broad swath of Illinois business and industries adversely affected by the proposed rule was not notified of the IDOL's intention. We also are unaware of any business or business organization being provided any advance notice or ability to provide input on this significant policy change.
The proposed rule will have a significant negative impact on Illinois business especially small businesses:
We believe the Department's proposed rule will:
- Eliminate the uniformity that the USDOL rule provides thus creating greater uncertainty for both employers and workers;
- Increase the cost of compliance and likelihood of litigation for businesses because of:
- multiple standards that employers must comply with; and
- lack of viable examples to provide guidance to small businesses;
- Discourage the use of franchise models in Illinois which results in lower economic and job opportunities; and
- Place an additional regulation and cost of doing business that other states are unlikely to impose creating another obstacle for Illinois small businesses to operate successfully.
In IDOL's notice of proposed rule published in the May 22, 2020 edition of the Illinois Register, the IDOL erroneously indicated in its "Initial Regulatory Flexibility Analysis" that small businesses are not affected. A similar statement of "No adverse impact" was provided in its "Small Business Impact Analysis". We do not know how IDOL could arrive at such analysis or whether it did any analysis of the impact of the proposed rule on Illinois small businesses. We suggest IDOL has not considered options to address the negative impact on small business.
The Department is not within its statutory authority:
In 2004, the USDOL issued updated regulations regarding overtime under the federal Fair Labor Standards Act (FLSA). In response, Illinois "decoupled" from the federal law by enacting SB 1645 as PA 93-672. The 2004 legislative changes to decouple the state law from the federal regulations were made to the Illinois Minimum Wage Act. Since 2004, no statutory change has been made to IDOL's rule-making authority under the Minimum Wage Act. However unlike 2004, IDOL in this instance is exceeding its authority by seeking to decouple from recently adopted U.S. DOL FSLA regulations by rule and establish state policy that is the purview of the Illinois General Assembly and the Governor.
The Illinois Chamber believes IDOL without any evidence, is presuming negative outcomes will result from the federal changes to the joint employer status. Instead of jumping to unfounded conclusions that likely will result in negative economic consequences for our State, the Illinois Chamber of Commerce urged the Department to withdraw its proposed rule and allow time for determination of the status and impact of the federal rule. If experience shows that the federal rule change is implemented and it results in a negative impact, then we would ask IDOL to meet with the Illinois Chamber, other Illinois business groups and other key stakeholders to address any problems with the federal rule.
Hughes pointed out in his testimony that the federal rule has been struck down by a NY federal court and while it is being appealed it is unlikely that an incoming Biden Administration will continue the appeal. With the federal rule being inoperative, the law reverts to the previous federal rule and case law. This makes the IDOL proposed rule unnecessary.
Also providing testimony in opposition to the rule was the National Federation of Business and the Illinois Construction Industry. Supporting the proposed IDOL rule were the National Employment Lawyers Association, the Raise the Floor Alliance, the Shriver Center on Poverty and the Illinois Attorney General's Office.
Key Unemployment Insurance Information
Several important dates affecting the Illinois UI system are forthcoming:
December 26, 2020:
- Pandemic Unemployment Assistance (PUA, assistance to self-employed) ends
- Pandemic Emergency Unemployment Compensation (PEUC, 13 weeks emergency UI) ends
- 100% federal funding of Extended Benefits (will revert to 50% federal funding)
- Illinois Extended Benefits of 20 weeks will revert to 13 weeks when federal funding falls to 50%
- Federal flexibility of training and merit requirements for staff ends
- Federal reimbursement of 50% of amount payable by reimbursable not-for-profits and governmental employers ends
- Federal funding of first week of benefits (the currently waived "waiting week") ends
- Federal funding of first week of EB ends for as long as Illinois continues to pay regular benefits for waiting week
December 31, 2020:
- Interest free borrowing from the federal government for the trust fund ends January 1, 2021:
- First calendar year that UTF account begins with outstanding federal advances; interest begins to accrue on total Title XII advances.
January 2, 2021:
- State law cancellation of COVID-19-related benefit charges ends
- Non-instructional educational employee eligibility for UI between academic terms ends
Important UI Data
- The yearend Unemployment Insurance Trust Fund balance will be a deficit of $3.5 to $4 billion with the Department borrowing an additional estimated $1.5 billion in the first quarter of 2021. The State of Illinois will be responsible for any interest that has accrued due to the nonpayment of borrowing by the end of this year, which could be as much as $145 million by 12/31/21. The Illinois Chamber has been advocating for forgiveness of the federal loans to pay for unemployment insurance benefits. If federal support does not materialize, we will be urging to look to the private marketplace where interest rates are significantly lower than the federal interest rate. This is the approach that was successfully used after the 2008 recession;
- There has been a recent surge in fraudulent claims filed. The Department indicated that it has prevented to date over 115,000 fraudulent regular claims and nearly 200,000 PUA fraudulent claims. The Illinois Chamber is especially concerned as to how much in fraudulent claims have been paid and how much of those payments will be recouped. Paid fraudulent claims are paid by all Illinois employers as it is reflected in the unemployment insurance tax rate. IDES link to information on how to address fraudulent claims;
- Tax parameters for 2021:
- The Adjusted State Experience Factor increases from 79 to 95;
- The fund building rate increase from 0.425% to 0.475%; minimum rate goes to 0.675% and the maximum to 6.875%; and
- The Taxable Wage Base goes to $12, 960.
Workers' Compensation Committee Meets with IWCC Commissioners
Nearly 50 members of the Illinois Chamber/Employment Law Council participated in a virtual meeting with the Illinois Workers' Compensation Commission Commissioners (IWCC) earlier today. IWCC Chairman Michael Brennan led off with several Commission updates including an update on the advancement of the Commission's IT systems; the response of the Commission to COVID; and the pending move of the IWCC's operations.
We also heard comments from Public Commissioners: Barbara Flores, Stephen Mathis and Maria Portela; Management Commissioners: Elizabeth Coppoletti, Kathryn Doerries, and Deborah Simpson. Commissioners Coppoletti, Flores, Mathis and Simpson are up for reappointment in January.
During their presentations the Commissioners offered these suggestions to employers:
- Just don't fight a claim for the sake of fighting, if it is a legitimate claim get it paid...fight those claims that you believe are not compensable;
- There has been an increase in disputes regarding loaned/leased employees...it was recommended that in agreements regarding these employees that it is specifically spelled out as to which party will be responsible for workers' compensation;
- Employers need to be aware that the COVID rebuttable presumption is just that, rebuttable and employers have a right under the law to challenge and defeat the presumption;
- It also was recommended that settlements need to be more specific regarding medical payments and job offers...the lack of being specific leads to penalties; and
- Communication with and civility towards the injured worker and their legal counsel generally results in better outcomes.