Is Your Company Being Audited by the Illinois Department of Employment Security (IDES)? If So, WHO in Your Company Should Work with the IDES Auditor?!

By Nancy E. Joerg, Esq., Senior Attorney and Shareholder, Wessels Sherman Joerg Liszka Laverty Seneczko P.C., www.wesselssherman.com

In working with Illinois companies over the years who have received notification

from the Illinois Department of Employment Security (IDES) that their company is going to be audited by the IDES, one of the first questions that clients ask me is “Who in our company should be the one to actually meet with the IDES auditor (and interact with the auditor) during the audit process?”

CONSIDER THE FOLLOWING ANALYSIS: The answer to this common question depends largely upon the following:

1. Who in the Company is familiar with the Company’s payroll and payroll procedures?

2. If there are independent contractors who have provided services for the Company during the audit years, who in the Company understands the working relationship between the independent contractors and the Company?

3. Who in the Company has first hand knowledge of the overall operations of the Company?

4. Who in the Company has the time available to work with the IDES auditor? [One reason that this is important is that it is very unwise (and perilous!) to simply dump a big pile of documents and records on the IDES auditor and then run for the hills. The burden of proof is always on the taxpayer Company to actually prove to the IDES auditor that all the books, records, and classification of workers are correct.]

DON’T DELEGATE TO SOMEONE WHO DOES NOT UNDERSTAND THE COMPANY’S OPERATIONS: One huge mistake that I see client companies often make when audited by the IDES is to delegate the job of interacting with the IDES auditor to an administrative person who really doesn’t understand the operations of the Company (or why the independent contractors, for example, are classified they way they are).

Especially when it comes to explaining to the IDES auditor why the independent contractors are properly classified (under the special IDES legal tests for independent contractor status), it is extremely dangerous and self destructive for a company to assign that very sophisticated task to someone who is not knowledgeable about independent contractor status.

COMPLEX FORMS TO FILL OUT: Only a person who is very experienced as to the IDES independent contractor tests should fill out the complex forms that the IDES auditor gives a company to fill out, such as the UI-1 form (the report to determine liability) and the Worker Relationship Questionnaire (a multi-page document in which the Company is to answer many questions about a class representative for each category of independent contractor used during the audit years).

SELECTING THE RIGHT INDIVIDUAL IS AN IMPORTANT DECISION: Selecting the individual in your company to work with the IDES auditor is a very serious and often momentous decision—very likely one which will largely determine whether your Company will “do well” during an IDES audit.

If you are contacted by the IDES for an audit, do not speak with the IDES auditor until you have the benefit of advice from an attorney who is experienced and seasoned as to all of the many complex legal issues which can arise during an IDES audit.

Questions? Call Attorney Nancy E. Joerg of Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Areas of Practice: Nancy Joerg represents employers in administrative actions and audits before the Equal Employment Opportunity Commission, the Illinois Department of Human Rights, the Cook County Commission on Human Rights, the Illinois Department of Employment Security, the Illinois Department of Labor, and the U.S. Department of Labor.

She represents employers in all types of discrimination charges, unemployment insurance hearings, Employee Classification Act complaints, IDES audits, IDOL and USDOL audits, employee termination issues, and wage & hour issues (including exempt/non-exempt status for overtime, deductions from wages, and state and federal wage claims). Nancy Joerg effectively counsels and advises clients concerning preventive efforts such as the preparation and review of severance and release agreements, independent contractor owner-operator agreements, independent contractor-based manuals and websites, employee handbooks and personnel policies, anti-harassment training, sex harassment investigations, and the development of strategies to help ensure exemptions from overtime.

Nancy Joerg is the Managing Shareholder of the St. Charles, Illinois office of Wessels Sherman Joerg Liszka Laverty Seneczko P.C.