CHICAGO – A new law means fines for construction companies that inappropriately classify workers as independent contractors instead of regular employees, a practice condemned by labor unions because they say it deprives workers of benefits such as worker’s compensation and unemployment.

“Misclassification of employees as independent contractors is one of the chief devices that greedy employers use to cheat workers out of their benefits,” said AFL-CIO president John Sweeney, who was at Monday’s bill signing with Gov. Rod Blagojevich and other labor leaders.

Sweeney, who was in town for a national union meeting and Tuesday’s Democratic presidential primary forum, said misclassification costs states like Illinois millions of dollars in tax revenue. Employers avoid paying payroll and social security taxes on independent contractors, according to the governor’s office.

Other states have addressed worker misclassification and Illinois is one of at least five states to pass a law, said Bill Looby, political director for the Illinois AFL-CIO.

Illinois’ law presumes workers are regular employees, not independent contractors, unless certain conditions exist, including that the person is in an independently established trade or business.

Violations can cost a company up to $2,500.

Illinois Chamber of Commerce president Doug Whitley said his business group had wanted to support the bill, but differences emerged with the unions over some issues, including the penalties.

Whitley said the measure ultimately ended up “a pretty heavy-handed approach.”