Illinois Supreme Court Decision Against Messenger-Courier Company

Illinois Supreme Court Decides Against Messenger-Courier Company
on the Issue of Independent Contractor Status...

Devastating News for Illinois Messenger-Courier Companies Who Use Independent Contractor Messenger-Couriers

by Nancy E. Joerg, Esq.

In September of 2001, a unanimous Illinois Supreme Court handed down its long-awaited decision on the issue of the independent contractor status of traditional messenger-couriers – and the decision is a body blow to the sizeable segment of the Illinois messenger-courier industry that uses the services of independent contractor messenger-couriers.

In this crucial case, AFM Messenger Service, Inc. v. the Department of Employment Security, the Illinois Supreme Court affirmed all of the decisions below, including the decision of the Director of the Illinois Department of Employment Security (IDES) – i.e., that the drivers were employees (and not independent contractors) for IDES purposes.

This stunning decision has sent shock waves around the State of Illinois. The decision not only was very bad news for AFM Messenger Service in that the "Determination and Assessment" against AFM (for over $12,000 in unpaid unemployment insurance contributions for the years 1988 and 1989) was upheld, but the decision was also terrible news for similar business operations.

Many messenger-courier companies around the State of Illinois use independent contractor messenger-couriers. In the typical independent contractor relationship for this industry, the messenger-courier company "dispatches" the independent contractor messenger-couriers (who drive their own vehicles; pay their own business expenses; can turn down jobs; set their own schedules; pay their own insurance, gas, repairs, maintenance; work for other messenger-courier companies; have the right to hire assistants; work under an independent contractor agreement; etc.).

The Illinois Supreme Court still found that, in the AFM Messenger case, the proper "standard of review" for the Court to use in this case was "clearly erroneous," rather than the "manifest weight of the evidence" standard. The "clearly erroneous" standard is more deferential to the decision made by the Illinois Department of Employment Security "down below" than the "manifest weight of the evidence" standard.

The Illinois Supreme Court in the AFM Messenger case concluded that, under the "clearly erroneous" standard of review, the IDES’ decision (finding that the messenger-couriers for AFM Messenger were employees and not independent contractors under Section 212(A), (B) and (C)) was not "clearly erroneous." Therefore, the Illinois Supreme Court affirmed the judgment of the Appellate Court, and, in doing so, affirmed all of the decisions below the Appellate Court, all of which had found the messenger-couriers to be employees for IDES purposes.

The AFM Messenger case is significant. All eyes around the state were on this case. The AFM Messenger case might (but unfortunately didn’t!) have overturned the Rozran v. Durkin case, a 1942 Illinois Supreme Court decision finding that the messenger-couriers who performed services for Cannonball were employees (and not independent contractors) for purposes of Section 212(A), (B) and (C).

Because so many years have elapsed since the Rozran v. Durkin 1942 decision, it was hoped (throughout the part of the messenger-courier industry that uses independent contractor messenger-couriers) that the Illinois Supreme Court would now realize that "modern" messenger-couriers are truly independent contractors in the way they conduct their independent businesses. However, the Illinois Supreme Court upheld the 1942 reasoning of Rozran v. Durkin and specifically commented that Rozran continues to be "good law." The AFM Messenger Court felt that the messenger-courier industry, back in the days of Cannonball, was a centralized dispatch and a fleet of drivers, and the same is true today in the year 2001.

The Illinois Supreme Court said in AFM Messenger that, under Section 212(C) of the Illinois Unemployment Insurance Act (which goes to the issue of the independence of the independent contractor), the messenger-couriers of Rozran v. Durkin were dependent upon Cannonball in the same way that the messenger-couriers of AFM Messenger are dependent upon AFM. The Illinois Supreme Court decided that the messenger-couriers of AFM Messenger are employees based simply on a strict reading of Section 212(C). The Illinois Supreme Court in AFM decided it didn’t even need to look at Section 212(A) and (B) because the Section 212 "A-B-C" test is conjunctive. If you fail Section 212(C), you have an employee regardless of how well you do on Section 212(A) and (B).

Shockingly, the Illinois Supreme Court in AFM Messenger also overruled the United Delivery Service v. Didrickson 1996 Appellate Court decision in which delivery drivers were found to be independent contractors for purposes of Section 212(A), (B) and (C) of the Illinois Unemployment Insurance Act. (The United Delivery Service case had been terrific news for Illinois messenger-courier companies who use independent contractor messenger-couriers. Sadly, the Illinois Supreme Court in AFM specifically overruled United Delivery Service to the extent that the United Delivery Service case conflicts with the AFM Messenger case.)

Some state unemployment insurance laws around the United States have specific exemptions from employment for messenger-couriers. My personal belief as an attorney who has spent many years defending companies who use independent contractors (and many among them have been messenger-courier companies) is that the State of Illinois badly needs such an exemption. It will be increasingly challenging to represent Illinois messenger-courier companies who use independent contractors under Illinois legal precedent such as Rozran v. Durkin and AFM Messenger v. the Department of Employment Security. Of course, if messenger-courier companies can "distinguish themselves" on the facts or on the law, then they will have a shot at proving independent contractor status for state unemployment insurance purposes. It will not be easy!

Messenger-courier companies and their attorneys should pour over the specific (and often convoluted) language of AFM Messenger in order to find ways to distinguish themselves from the particular factual structure of AFM Messenger. This might be difficult to do because AFM Messenger appears to be a traditional messenger-courier company. The Illinois Supreme Court has not given Illinois messenger-courier companies really any room to move in terms of meaningful restructuring (in order to establish an independent contractor relationship with their messenger-couriers that might withstand an IDES challenge).

Hopefully, the Illinois messenger-courier industry will channel its disappointment and outrage at the AFM Messenger case into a vigorous lobbying effort (to establish a badly needed exemption from employment for independent contractor messenger-couriers).

If you wish to discuss the AFM Messenger case, please call Nancy E. Joerg at the St. Charles office of Wessels Pautsch & Sherman P.C. at 630-377-1554. If you would like a full copy of the AFM Messenger case, please call Legal Assistant Tammy Nelson at the St. Charles office of Wessels Pautsch & Sherman P.C. at 630-377-1554.

Posted 12/21/2001