Under the Illinois Unemployment Insurance Act (hereinafter “Act”), there are certain kinds of workers (for example, real estate appraisers, direct sellers, certain kinds of newspaper delivery people) who are exempt from employment (i.e., independent contractors) as long as the specific legal requirements are met.

If your company uses any of these types of workers, it is important to know the details of the specific exemption under the Act so that you don’t unwittingly fail to meet the requirements of the exemption.

As an illustration, in Illinois, truck owner-operators are exempt from employment under Section 212.1 of the Act, but specific legal requirements must be met in order for the truck owner-operator to be exempt from employment. If all six parts of Section 212.1 are not met, then the truck owner-operator will be considered an employee and not an independent contractor under the Act.

The following is a list of some of the many industry specific and other exemptions under the Illinois Unemployment Insurance Act:

1. Persons free from the employer’s control and direction who are engaged in an independent trade, occupation, business or profession and who perform services which are outside the course of the employer’s business or performed outside the place of business. (Section 212) Note: This is the general legal test for independent contractor status.
2. Owner-operators of their own trucks but only under certain specified circumstances as provided in the Act. (Section 212.1
3. Direct seller engaged in the trade or business of selling, or soliciting the sale of, consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis in the home or in an establishment other than a permanent retail establishment, if: Substantially all the remuneration (whether or not paid in cash) for the performance of the Direct Seller’s services is directly related to sales or other output (including the performance of services)-rather than to the number of hours worked, AND the services performed by the Direct Seller are performed pursuant to a written contract between the Direct Seller and the entity for whom the services are performed (and the written contract states that the Direct Seller will not be treated as an employee for federal tax purposes).(Section 217) – Nickname: “Tupperware Test”
4. Real estate salesmen to the extent that such services are compensated for by commission. (Section 217) Tip: So…don’t pay them by the hour!
5. Real estate closing agents when their contract with the title insurance company specifies that they are not employees and they are paid on a per closing basis. (Section 217.1) Tip: Have a written independent contractor agreement.
6. Real estate appraisers whose written employment contract provides that they are paid on a fee-per-appraisal basis and that they are free to accept or reject appraisal requests from that entity or from other entities. (Section 217.2) Tip: Have a written independent contractor agreement.
7. Persons under the age of 18 who deliver newspapers or shopping news and any persons who deliver newspapers or shopping news to the ultimate consumer, if substantially all of their remuneration is on a “per piece” or output rather than an hourly basis and they work under written contracts that indicate they are not to be treated as employees for federal tax purposes. Freelance editorial and photographic work for newspapers is also exempt from employment. (Section 225)
8. Insurance agents who are paid solely by commission. (Section 228) Tip: So…don’t pay them by the hour.
9. Golf caddies if they are full-time students under the age of 22 and are paid directly by a golf club member or by the golf club on behalf of a member. (Section 232.1)

In most situations, the services of actors, actresses, singers, musicians, models and other “talent” constitute employment, not independent contractor status. However, a talent or modeling agency that is licensed under the Private Employment Agency Act is not the employing unit with respect to the performance of services for which an individual has been referred by the agency. (Section 204)

The moral of the story here is to look over the kinds of independent contractors you use and be ready to prove these exemptions if you are counting on that legal defense. If you are ever audited by the Illinois Department of Employment Security and can prove the exemptions, then you will not owe any back unemployment insurance contributions (taxes) to the IDES on the workers who meet the requirements of the exemption(s).

For assistance with IDES audits, hearings, and independent contractor agreements (or for consultations and overall evaluations 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 najoerg@wesselssherman.com.