Update Applicable to:
Employers with independent contractors that meet the definition of Freelance Worker under the Act.
On August 4, 2023, the Freelance Worker Protection Act (FWPA) (HB1122) was signed into law by Governor JB Pritzker in Illinois.
What are the details?
This act aims to establish strong safeguards for freelance workers, defining their status and introducing various requirements and protections.
Defining Freelance Workers: The FWPA outlines the criteria for classifying someone as a “freelance worker.” This term applies to independent contractors providing products or services in Illinois or for Illinois-based entities, with compensation totaling at least $500 within 120 days. Notably, certain categories of workers are excluded, including those in construction, traditional employer-employee relationships, and government entities.
Three Key Requirements for Hiring Freelance Workers: The FWPA mandates three main requirements for engaging freelance workers:
- Written Contracts: Any engagement of a freelance worker for services or products worth $500 or more necessitates a written contract. This contract must include specified details such as contact information for both parties, the scope of services/products, payment details, and deadlines. The Illinois Department of Labor (IDOL) offers a model template for contracts, which must be kept for two years.
- Timely Payment: Contracting entities must compensate freelance workers within 30 days of service/product completion. Offering reduced compensation as a condition for timely payment is prohibited once work has commenced
- Protection from Discrimination and Retaliation: Contracting entities are barred from discriminatory, retaliatory, or harassing behavior against freelance workers who exercise their rights under the FWPA. This encompasses actions like threats, intimidation, or withholding work opportunities.
Enforcement and Penalties: Freelance workers can seek recourse for violations by filing complaints with the IDOL or the Illinois circuit court within two years of the compensation’s due date. They can also file class-action suits. Penalties for violations differ: underpayment leads to double compensation, statutory damages or $500 for contract breaches, and value-based damages plus fees for discrimination violations.
National and Local Context: While Illinois is the first state to enact freelance worker protection laws, other states like New York, Kansas, and Missouri have introduced similar bills. Some cities, including Seattle, Columbus, Los Angeles, Minneapolis, and New York City, have their own localized protections for freelance workers.
Effective Date and Employer Recommendations: The FWPA is set to become effective on July 1, 2024, applying to contracts executed after that date.
For more information, please see the links below:
What do employers need to do?
The Littler law firm advises employers to 1) determine if their independent contractors qualify as freelance workers under FWPA; 2) consult the IDOL’s contract template to ensure compliance; update document-retention policies to cover freelance worker contracts for two years; prepare payroll for timely payment within 30 days; seek legal counsel before reclassifying individuals, as FWPA doesn’t determine employee or contractor status.
Need help understanding how changes to employment laws will affect your business?
Learn more about how Vensure's Illinois PEO services can help you navigate complex employment laws and keep your business compliant.
This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.