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AFM Messenger Service, Inc., v. Dept. of Employment Security, Nos. 1-98-4794 & 1-98-4845 (consolidated)

1st District, June 30, 2000

FIFTH DIVISION

JUSTICE QUINN delivered the opinion of the court:

Following administrative proceedings, defendants, the Illinois Department of Employment Security (Department), DirectorsLoleta A. Didrickson and Lynn Doherty, Director's representative Irwin Racine and the Board of Review of the IllinoisDepartment of Employment Security (Board), found that plaintiff, A.F.M. Messenger Service, Inc., (AFM), owedunemployment insurance contributions for wages paid to defendant Mark Przbylinski and other delivery drivers pursuant tothe Unemployment Insurance Act (the Act) (820 ILCS 405/100 et seq. (West 1996)). The Department found that theservices performed by the drivers were not exempt under section 212 of the Act. 820 ILCS 405/212 (West 1996). TheBoard affirmed the Department's decision. On administrative review, the circuit court affirmed the Board's ruling. In thisconsolidated appeal, AFM contends that the circuit court erred in affirming the Board's decision that the delivery driverswere employees rather than independent contractors pursuant to section 212 of the Act. For the following reasons, weaffirm.

AFM is engaged in the messenger service delivery business. To carry out its enterprise, AFM hires delivery drivers to pickup and deliver parcels to customers. In the first of two consolidated appeals (1-98-4794), a former AFM employee filed aclaim for unemployment benefits, which prompted the Department to audit AFM. The audit found AFM liable forunemployment insurance contributions made to its delivery drivers for the years 1988 and 1989.

AFM filed a protest and an administrative hearing was held before the Director's representative. Following testimony, theDepartment found that the delivery drivers were employees of the company and that, as employees, the drivers werecovered for purposes of unemployment insurance contributions. AFM filed a complaint for administrative review, andfollowing a hearing, the circuit court affirmed the Department's decision.

In the second appeal (1-98-4845), Mark Przbylinski, who worked for AFM as a delivery driver from August 1994 throughSeptember 1994, appealed his wage findings from a previous application for employment insurance benefits. Przbylinskicontended that the wages he earned from several employers, including AFM, were not included in his base period wages. Aclaims adjudicator found that the remuneration paid to Przbylinski was not wages under the Act. Przbylinski appealed to aDepartment hearings referee. The Department held that the remuneration paid was wages in employment and that thedriver's services were not exempt pursuant to section 212 of the Act. AFM appealed the decision to the Board, whichaffirmed the decision of the hearings referee. On administrative review, the circuit court affirmed the decision of the Board.

The testimony of the witnesses in both cases regarding AFM operations was substantially similar. AFM furnished alldrivers with a written contract that included a statement that the drivers were considered independent contractors. Inaccordance with Illinois law, all drivers were required to enter into an Illinois Commerce Commission (ICC) equipmentlease with AFM. AFM provided the equipment lease and paid the cost of the filing fee. Pursuant to the lease, AFM became"responsible for supervision and control of all operations" involving the drivers' vehicles. The equipment lease alsoprovided that the drivers were paid a commission of 45% to 60% of total revenues derived from the operation of theirvehicle which was payable weekly.

Drivers Brian Lhotka and Angelo Cisneros testified that, in conformity with ICC rules, they displayed a sign furnished byAFM that stated that the vehicle was under lease to AFM. Przbylinski testified that he was required to keep the equipmentlease in the glove compartment of his vehicle and that he was required to post signage identifying his vehicle as from AFMin order to enter and exit customer loading areas. When drivers appeared at the customer's place of business, theyannounced to the customer that they were from AFM. AFM also provided baseball caps to identify drivers as being AFMmessengers, but drivers were not required to wear them.

All drivers were required to carry a radio and a pager. If the drivers chose to furnish their own radio and pager, rather thanuse equipment furnished by AFM, they were given a larger commission. Delivery drivers were also required to pay for theirown insurance, gasoline, oil and maintenance repairs in connection with the vehicle. Drivers could also hire assistants, butany expenses in doing so were borne by the driver.

Drivers received assignments for pick ups and deliveries by either telephone, pager or radio. Although drivers could call inas they desired to get assignments, most drivers contacted AFM every day for work assignments. Przbylinski, however,testified that he was required to call AFM everyday regardless of whether he wanted to work that day. AFM co-ownerSusan Vitula testified that drivers were free to refuse a delivery assignment without being penalized or disqualified fromopportunities for future assignments.

Regarding delivery routes, drivers were free to choose the route to take in executing assignments and AFM did not imposetime restrictions on the completion of assignments. Drivers were free to use their vehicles for purposes other than deliveringpackages and could work for other businesses, including messenger services. Testimony revealed that some drivers,including Przbylinski and Lhotka, worked for AFM only.

The drivers' entire investment in delivering packages consisted of their vehicles, maps and related upkeep. Drivers did notmaintain offices separate from AFM, but worked out of their own homes. Questionnaires filled out by AFM during thecourse of the audit showed that AFM acknowledged that the drivers' offices were their vehicles.

Drivers were paid every Friday. In order to be paid, drivers turned in their delivery tickets at the end of each day or a fewtimes throughout the week. Drivers were also free to mail in the delivery tickets. With their paycheck, drivers received a listof all delivery tickets with the dates and the amounts that were charged to each customer. AFM did not deduct any federal,state, or social security taxes, nor did it offer sick pay or vacation time or any other benefits to its drivers. It was the drivers'responsibility to report income and pay the necessary taxes. All drivers had the right to terminate their relationship withAFM at any time.

An employer seeking an exemption under section 212 of the Act has the burden of proof. 56 Ill. Adm. Code