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Contractors Beware (of where your workforce resides): The New Employment of Illinois Workers on Public Works Act

Posted on July 26th, 2010 by Kevin Green

On June 16, Governor Pat Quinn signed House Bill 6349 (Public Act 96-929, found at 30 ILCS 570) which is aimed at enhancing the Employment of Illinois Workers on Public Works Act, commonly referred to as the Illinois Preference Act, by establishing monetary penalties for violations of the Act, clarifying the law’s coverage, and adding a private right of action to allow individuals to seek remedies regarding violations of the law. These changes are effective immediately.

Under the revised law, contractors on State public works projects are required to employ a workforce that is comprised of at least 90% Illinois laborers during periods of excessive unemployment. If you are a contractor or subcontractor, a few questions may immediately come to mind. What is a public works project? What is a period of excessive unemployment? How is an Illinois laborer defined? Does this apply to me? What happens if I do not comply? Here is a brief analysis of the new law that should help you understand how this new law affects your business.

What is a public works project?

The law defines a public works project as “any fixed work construction or improvement for the State of Illinois or any political subdivision of the State if that fixed work construction or improvement is funded or financed in whole or in part with State funds or funds administered by the State of Illinois.” Thus, a public works project includes any project funded or financed in whole or in part with State funds or funds administered by the State of Illinois. This includes federally funded projects when the federal funds are administered by the State of Illinois. The law places the focus of defining a public works project on how the project is financed, not the recipient of the project. Consequently, an entity building a new road for Illinois without any public funds would not be subject to the 90% requirement.

What is a period of excessive unemployment?

For the law to be applicable, there must be a period of excessive unemployment. Such a period occurs when the level of unemployment in Illinois has exceeded 5% for at least 2 consecutive months. In Illinois, the unemployment rate for the past year has been hovering between 10 and 12% according to the U.S. Bureau of Labor Statistics, meaning we are currently in a period of excessive unemployment.

What is an Illinois laborer?

An Illinois laborer “refers to any person who has resided in Illinois for at least 30 days and intends to become or remain an Illinois resident.” The revised law still allows every contractor on a public works project or improvement to place no more than 3 of his regularly employed non-resident executive and technical experts, even though they do not qualify as Illinois laborers

Does this law apply to me?

The revisions to this law mean that those under contract to construct or build a public work today must know the residence of their employees and ensure that 90% of them reside in Illinois or have resided in Illinois for at least 30 days with the intent to become or remain Illinois residents. More importantly, the revised law appears to apply to both contractors and subcontractors. The new law applies if any “person or entity is charged with the contractual duty of constructing or building any public works.” Moreover, an entity “means any sole proprietor, partnership, firm, corporation, limited liability company, association, or other business enterprise,” but does not include the State or the Federal Government. Additionally, “every public works contract let by any such person shall contain a provision requiring that such labor be used.”

Because the law was just passed, there is no case law analyzing its scope; however, the language of the statute suggests it has a broad sweep, applying to both contractors and subcontractors. Additionally, the complaint form found at the Department of Labor’s website contains check boxes for both contractors and subcontractors, suggesting both are subject to the law. The language of the statute could even be read to suggest that a contractor is on the hook for a subcontractor’s violation of the law, even if the subcontractor is the party that did not employ the proper workforce.

What happens if I do not comply?

The new law makes major changes to the enforcement and penalty provisions. Under the old version, the Attorney General, on behalf of the Department of Labor, could sue for injunctive relief against the awarding of any contract or the continuation of any work under any contract for public works or improvements for violations of the Act.

Now, the law explains that the Department of Labor has the power to conduct investigations, and any investigator with the Department is authorized to visit and inspect, at all reasonable times, any places covered by the Act. Additionally, the inspector can inspect documents related to the determination of whether a violation of the Act exists. Furthermore, the Department may compel, by subpoena, the attendance and testimony of witnesses and the production of books, payrolls, records, papers, and other evidence in any investigation and may administer oaths to witnesses.

The revised law also enhances the Attorney General’s enforcement mechanisms. In addition to injunctive relief, the Attorney General can issue and cause to be served a cease and desist order and “take affirmative or other action as deemed reasonable to eliminate the effect of the violation,” and collect any civil penalties assessed by the Department.

These civil penalties are a new addition. Under the old version, a violation of the Act resulted in a Class C misdemeanor. Each separate failure to use Illinois laborers constituted a separate offense. Now, any person or entity that violates the provisions of the Act is subject to a civil penalty. The Act sets maximum fines for first, second, and third offenses.

1st offense – $1000 max for each violation
2nd offense – $5,000 max for each violation
3rd offense – $15,000 max for each violation

Each violation of the Act for each worker and for each day the violation continues constitutes a separate and distinct violation.

Finally, the revised law adds a private right of action, meaning that in addition to an action brought by the Attorney General, any interested party or person aggrieved by a violation of the Act or any rule adopted under the Act may file suit in Circuit Court, in the county where the offense occurred or where any party to the action resides. These private actions can only be brought:

(1) 30 days or more after a complaint has been filed with the Department of Labor or
(2) any time after the filing of a complaint if the Department of Labor gives notice that it will not proceed with the complaint.

Actions can be brought by one or more person or entity for and on behalf of themselves and other persons or entities similarly situated. A person is entitled to collect attorneys fees and costs and compensatory damages not to exceed $500 for each violation.

Let’s make this a bit more concrete with an example. A general contractor enters a contract to build a new gym at a public high school. The project is partially funded by federal funds administered by the State of Illinois. The unemployment rate at the time is 10.8%. These facts establish that the law is applicable. The contractor must be sure to comply with the law or face civil penalties. If the contractor has a workforce of 1,000, it may hire no more than 100 non-Illinois residents. If the contractor hired 105 non-Illinois residents (5 more non-Illinois residents than the law allowed), it would have 5 separate violations. If it kept these 5 employees working for 5 days, it would have 5 separate violations for each worker, leading to 25 violations (5 workers x 5 days). If this was the first offense for the contractor and the maximum penalty was applied in a case brought by the Attorney General, the contractor would owe $25,000 ($1,000 x 25 violations). Moreover, an Illinois resident that was not hired might bring a private civil action against the contractor seeking compensatory damages at $500 per violation ($12,500) and attorney fees and costs.

It is easy to see how a contractor not knowing the residence of its workforce could quickly become expensive. Because it does not appear that the unemployment rate for the State of Illinois will dip below 5% any time soon, contractors should be aware of the Employment of Illinois Workers on Public Works Act and continue (or start) accounting for the residence of their workforce.

To discuss this or another Business or Commercial legal issue, please contact the author, Kevin Green.