By: Mark Glennon*
Leave it to the Illinois General Assembly to find ways to make life more expensive and difficult for employers.
Suppose you’re a contractor and you subcontract out work for part of the project. That’s routine for many elements in most construction and manufacturing projects. A bill pending in the Illinois General Assembly, House Bill 5412, would make you liable if your subcontractor failed to pay a wage claim by the subcontractor’s employees. The bill would let a worker with a grievance against the subcontractor sue the general contractor directly.
That’s crazy because contractors typically have no control over subcontractor’s payroll, or even any information about it. Subcontractors would therefore often likely have to pay for bonds to assure their wage payment. That cost would fall most heavily on small subcontractors, which are often minority owned.
For that reason, minority contractor trade groups oppose the bill. As reported by Capitol News Illinois, opponents include the Hispanic American Construction Industry Association, the Black Contractors Owners and Executives, and the Federation of Women Contractors. And those small subcontractors may well get less work.”By adding to the risk a primary contractor takes in hiring a subcontractor, blanket liability incentivizes the primary contractor to use in-house labor and avoid hiring outside help, the advocacy groups argued.”
Manufacturers, too, oppose the bill and say it would ultimately drive up costs to consumers. Dennis LaComb of the Technology and Manufacturing Association, says the “bill incentivizes large contractors to offer a full umbrella of in-house services which means small business sub-contractors are left holding the bag. In the end, it’s the customers and end users who will be asked to pay more. This is yet another tax on small businesses and Illinois consumers.”
But wait, there’s an exception for what the bill would cover, and it’s no surprise what would be exempt: projects funded by the government and union projects.
“The hypocrisy of Illinois politicians isn’t even surprising anymore,” LaComb said. “So not only are these politicians exempting themselves from this bill, it’s yet another effort to support their union benefactors and punish non-union labor. They don’t even care they’re hurting small businesses, family manufacturers, and consumers in the process.”
An earlier attempt at similar legislation failed in 2019. At the time, a JD Supra column listed the following issues it raised:
- Would Direct Contractors require all subcontractors to furnish payment bonds to guarantee wages are paid?
- Would smaller and newer subcontractors who cannot provide bonds be unable to compete on most private commercial projects?
- How much additional administrative work would be required to track whether subcontractors were paying all employees?
- Would the payment process be slowed for all subcontractors, while proof of payment by lower tiers is gathered, putting further pressure on cash flow?
- What role would politics play in whether a labor management cooperation committee would bring suit against one of its large contractor members?
- Does the word “subcontractors” include material suppliers, as it does under the Illinois Mechanics Lien Act, or does it only include subcontractors covered by the prevailing wage act?
- Are jobs paid for by public funds on private property or projects on public property using private funds included as “private” projects?
- If attorneys’ fees are awarded to a prevailing wage claimant, should they also be available to a successful Direct Contractor?
- Does the provision permitting the attachment of a Direct Contractor’s property to collect a judgment differ from existing law and if so, in what way?
The central problem is that the bill would fundamentally disregard the basic legal concept of agency — that you should not be liable for what you cannot control. As JD Supra put it, “For hundreds of years, American jurisprudence has recognized the distinction between independent contractor and agency law.”
Let’s hope this bill dies as the last attempt at it did.
*Mark Glennon is founder of Wirepoints.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
When idiots are elected, you get idiotic policies. And Illinois voters have been electing idiots for quite a long time now.
So much, maybe the majority, of small contractors are paying their workers as 1099 subcontractors and not payroll employees. Or maybe just plain old cash. Lots of immigrants works (legal or not)…the last thing any small contractor wants is a payroll, an unbalivable headache in Illinois. Im sure Illinois trial lawyers association would love to cash-in on the 1099 subcontractor market…i think this is mostly what this bills about
As a commercial developer in the current environment of rapidly rising construction costs and supply chain disruptions, we are seeking very reliable, stable general and subcontractors. Reliable/stable = credit worthy, as in they can pay their bills and payroll. This Illinois bill is being introduced at exactly the wrong time. Actually any time is the wrong time, but particularly now. We want to engage smaller subs, but the current market volatility makes that decision far more critical. Overlay this bill on top of all that and, like the minority trade group associations say, these smaller businesses will be immediately threatened.… Read more »
This is why we all must vote against Amendment 1 in Nov 22 or the Illinois Right to Collective Bargaining Amendment. These people are just going to price themselves out of a job and no work is ever going to be done in Illinois. Is that what they really want? Who thinks this stuff up? Who wants to live in a state like this? Of all the problems and projects that need to be done in Illinois this is not a top priority. How much do you need to make an hour, how big a pension do you need and… Read more »
What problem is this trying to solve? What percentage of jobs/spend are employees of subcontractors being cheating out of wages for their labor? Usually, there’s context with facts and numbers behind legislation such as this. Where is it?
Its forcing people into unions because unions are exempted from the law.
I get that, but they must have a couple of sob stories at the very least. Opponents should be asking for the numbers behind this.
Illinois government is run by clowns and buffoons. It is a rare occasion when an actual piece of legislation that makes sense comes out the house and senate chzmbers.
I think they should focus on important matters like ” hair discrimination” and leave the other issues for the adults in the room….oh wait,there are no adults in the Illinois legislature,my bad
And those that continue to do business and live in Illinois are enabling these rotten politicians.
Either grow a spine & sanction Illinois by leaving the state.
Or hush and bend over.
Indy, it must be illegal or extremely dangerous to leave Illinois, otherwise why would all these complainers stay year after year? It’s strange, because when my family left, Illinois didn’t seem to care or notice.
Exactly.
Over 3 MILLION people have just fled Ukraine with nothing but the clothes on their back.
Yet these crybaby Illinoisans can’t sell their home and pack the UHaul?
Only gross laziness, incompetence and pure cognitive dissonance explains Illinoisans
…and when asked why they stay, they say it would upset the family or this is where I have my business. They don’t realize how lucky they are to have other well managed states nearby that would welcome them.
Let’s get real. The people complaining and not moving, how much do you know about them? Are they sick, can’t move or caring for someone who’s sick and can’t move? Do they have enough money to move? Do you have a guarantee another state will be a big improvement? Things are changing all over this country and not for the better. Give people, in it for the long haul, the name of a state where things are better and will stay that way and they’ll consider packing up.
We are stupid for staying here. IL was a tolerable dump for years but during the Trump era it was crazy bat sh progressive and I don’t know if it is even salvageable. And now that real estate is more expensive in surrounding states than IL, the cost benefit to moving disappeared too.
That 60 year old New Jersey trucker who defeated the NJ Senate President said that his only choice was to stay and change the state because he’d been in NJ his entire life and he wasn’t about to leave. And he’s right. he’s an inspiring figure.
If I read this correctly you’re saying Trump somehow made the state more Progressive? How did he do that? The man is a lot of things but he’s not Progressive. I don’t understand.
In 2018 the democrats picked up 3 seats in the state senate, 7 seats in the state house, and 2 seats in congress making Illinois a much more democratic state. Much of these gains by democrats is blamed on Trump’s unpopularity at the time.
My father in law escaped NJ a few years ago. He was paying $28,000 in property taxes on a house he ended up selling for $625,000, about what he paid for it in 1990. He had no appreciation in 20 years and was paying out his nose for the privilege of living in NJ. The commute to Manhattan had gone from 40 min. by car when he moved there to 2 hr! IL. is following closely behind NJ, NY et all the east coast cesspools.
…and he had to pay an “exit tax”. If you sell your home in NJ they keep a portion unless you buy a new home in the state. This is liberal insanity at it’s peak. They kno0w they can’t stop you from leaving so they tax you on the way out.
Plenty of sick, jobless, homeless, poor, and those with strong connections to their community just fled Ukraine.
The excuses don’t fly. But it’s easier to be a coward in America than to be a brave hero like the Ukrainians.
“Give people, in it for the long haul, the name of a state where things are better and will stay that way and they’ll consider packing up.”
That’s easy. It’s less than an 8-hour drive from Chicago and one of the most conservative states. Take I-57 south to I-24. You will end up in Tennessee. No pension crisis. No state income tax. Low property taxes. Sales tax about the same as Illinois. Milder winters. The state is just sitting here waiting for Illinois residents to discover it. Some already have. I hope that answers your question.
And what about all the people from Illinois moving to Houston Texas? Does that sound like it was a good move? Research it a little bit.
I researched the entire county when I moved. The main point is just about anywhere is better than Illinois. Some states are much, much better. Maybe you need to do your research.
Houston literally stinks!
I know! Nothing upsets the family more than by moving 30 miles to a neighboring state and defunding Illinois….. /Facepalm
The family excuse is just cognitive dissonance.