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December 14, 2009
Contractor vs Employee: Were Workers Properly Classified?

An Illinois appellate court recently had to decide whether couriers were independent contractors or employees of the company for whom they made deliveries.

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What happened. Veterans Messenger Service, a “delivery brokerage service” in Bensenville, was audited by the Department of Employment Security in 1990 to determine the employment status of its couriers, who were contracted with Veterans to carry out delivery orders to customers. Veterans set the delivery prices, made delivery assignments, billed customers, paid drivers, and reserved the right to terminate its relationship with couriers.

The Department found that the couriers were employees and ultimately assessed Veterans $52,043 that it should have contributed to the department's unemployment trust fund. Since 1991, Veterans filed several appeals to decisions upholding the audit's finding that the couriers were employees. An Illinois appeals court agreed to review the Department's most recent reaffirmation of the assessment.

What the court said. The court said that, in its review, it would only reverse the Department's assessment if it was “clearly erroneous”--that is, if it was clear the Department had made a mistake. Illinois law (820 ILCS 405/212) allows an employer to classify a worker as an independent contractor if, among other requirements, the individual “is an independently established trade, occupation, profession, or business.” The court explained that a worker is engaged in an independent “business” if the business is “capable of operation without hindrance from any other individual.” The court wrote that these couriers “relied entirely on their relationship with Veterans to obtain business on their behalf.”

The court noted there were some factors that favored Veterans' claim that the workers were independent contractors--they profited from their deliveries, filed tax returns as independent businesses, and reserved the right to perform similar delivery services for others. However, “several other factors” did not favor Veterans' claim, according to the court: “the couriers did not make their businesses available to the general public … they did not maintain business listings in phone directories or trade journals; they made no payments for common carrier authority in their own names.”

The court noted that it was up to the department to weigh these opposing factors in reaching its decision. It let the Department's finding stand. Veterans Messenger Service v. Jordan , Appellate Court of Illinois, First District, No. 1-08-0004 (2009)

Point to remember. Because the evidence did not demonstrate that the drivers were able to operate their delivery businesses without the benefit of a relationship with Veterans or another delivery brokerage service like Veterans, the drivers did not own independent businesses under Illinois law.

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