AFM Messenger Serv., Inc. v. Department of Employment Security, No. 1-98-4794

• Decision Date: 30 June 2000
• Docket Number: No. 1-98-4794, No. 1-98-4845.
• Citation: 315 Ill. App.3d 308,248 Ill.Dec. 74,733 N.E.2d 749
• Parties: AFM MESSENGER SERVICE, INC., an Illinois Corporation, Plaintiff-Appellant, v. The Department of Employment Security; Loleta Didrickson, Director of the Department of Employment Security; and Irwin Racine, Director's Representative, the Department of Employment Security, Administrative Hearings, Defendants-Appellees. AFM Messenger Service, Inc., an Illinois Corporation, Plaintiff-Appellant, v. The Department of Employment Security; Lynn Doherty, Director of the Department of Employment Security, Board of Review of the Department of Employment Security, and Mark Przbylinski, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

733 N.E.2d 749

315 Ill. App.3d 308

248 Ill.Dec. 74

AFM MESSENGER SERVICE, INC., an Illinois Corporation, Plaintiff-Appellant, v. The Department of Employment Security; Loleta Didrickson, Director of the Department of Employment Security; and Irwin Racine, Director's Representative, the Department of Employment Security, Administrative Hearings, Defendants-Appellees.

AFM Messenger Service, Inc., an Illinois Corporation, Plaintiff-Appellant, v. The Department of Employment Security; Lynn Doherty, Director of the Department of Employment Security, Board of Review of the Department of Employment Security, and Mark Przbylinski, Defendants-Appellees.

Nos. 1-98-4794, 1-98-4845.

Appellate Court of Illinois, First District, Fifth Division.

June 30, 2000.

Robert S. Brody, Ltd., Chicago (Robert S. Brody, of counsel), for Appellant.

James E. Ryan, Illinois Attorney General, Chicago (Joel D. Bertocchi, Solicitor General and Darryl B. Simko, Assistant Attorney General, of counsel), for Appellees.

Justice QUINN delivered the opinion of the court:

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

AFM is engaged in the messenger service delivery business. To carry out its enterprise, AFM hires delivery drivers to pick up and deliver parcels to customers. In the first of two consolidated appeals (X-XX-XXXX), a former AFM employee filed a claim for unemployment benefits, which prompted the Department to audit AFM. The audit found AFM liable for unemployment 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, the Department found that the delivery drivers were employees of the company and that, as employees, the drivers were covered for purposes of unemployment insurance contributions. AFM filed a complaint for administrative review, and following a hearing, the circuit court affirmed the Department's decision.

In the second appeal (X-XX-XXXX), Mark Przbylinski, who worked for AFM as a delivery driver from August 1994 through September 1994, appealed his wage findings from a previous application for employment insurance benefits. Przbylinski contended that the wages he earned from several employers, including AFM, were not included in his base period wages. A claims adjudicator found that the remuneration paid to Przbylinski was not wages under the Act. Przbylinski appealed to a Department hearings referee. The Department held that the remuneration paid was wages in employment and that the driver's services were not exempt pursuant to section 212 of the Act. AFM appealed the decision to the Board, which affirmed 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 all drivers with a written contract that included a statement that the drivers were considered independent contractors. In accordance with Illinois law, all drivers were required to enter into an Illinois Commerce Commission (ICC) equipment lease 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 also provided that the drivers were paid a commission of 45% to 60% of total revenues derived from the operation of their vehicle which was payable weekly.

Drivers Brian Lhotka and Angelo Cisneros testified that, in conformity with ICC rules, they displayed a sign furnished by AFM that stated that the vehicle was under lease to AFM. Przbylinski testified that he was required to keep the equipment lease in the glove compartment of his vehicle and that he was required to post signage identifying his vehicle as from AFM in order to enter and exit customer loading areas. When drivers appeared at the customer's place of business, they announced to the customer that they were from AFM. AFM also provided baseball caps to identify drivers as being AFM messengers, 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 than use equipment furnished by AFM, they were given a larger commission. Delivery drivers were also required to pay for their own insurance, gasoline, oil and maintenance repairs in connection with the vehicle. Drivers could also hire assistants, but any 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 in as 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-owner Susan Vitula testified that drivers were free to refuse a delivery assignment without being penalized or disqualified from opportunities for future assignments.

Regarding delivery routes, drivers were free to choose the route to take in executing assignments and AFM did not impose time restrictions on the completion of assignments. Drivers were free to use their vehicles for purposes other than delivering packages 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 not maintain offices separate from AFM, but worked out of their own homes. Questionnaires filled out by AFM during the course 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 few times throughout the week. Drivers were also free to mail in the delivery tickets. With their paycheck, drivers received a list of 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 with AFM at any time.

An employer seeking an exemption under section 212 of the Act has the burden of proof. 56 Ill. Adm.Code § 2732.200(d) (1991). We review the decision of the Board, not the decision of the referee (Garner v. Department of Employment Security, 269 Ill.App.3d 370, 373, 206 Ill.Dec. 871, 646 N.E.2d 3 (1995)) or the decision of the trial court. Richard's Tire Co. v. Zehnder, 295 Ill.App.3d 48, 56, 229 Ill.Dec. 587, 692 N.E.2d 360 (1998). Judicial review of the Board's decision is governed by the Administrative Review Law (735 ILCS 5/3-110 (West 1996)) and extends to all questions of law and fact presented by the record. Northwest Mosquito Abatement District v. Illinois State Labor Relations Board, 303 Ill. App.3d 735, 741, 236 Ill.Dec. 962, 708 N.E.2d 548 (1999). The Board's factual findings are held to be prima facie true and correct and a reviewing court may set aside such decisions only if they are contrary to the manifest weight of the evidence. Cohen Furniture Co., v. Department of Employment Security, 307 Ill. App.3d 978, 981, 241 Ill.Dec. 204, 718 N.E.2d 1058 (1999). The Board's conclusions of law, however, are not entitled to the same deference and are subject to de novo review. County of Cook v. Licensed Practical Nurses Ass'n, 284 Ill.App.3d 145, 152, 219 Ill.Dec. 620, 671 N.E.2d 787 (1996). There is a conflict in recent appellate decisions as to which standard of review applies in cases where the only question is the legal conclusion to be drawn from the facts. In Richard's Tire Co. v. Zehnder, 295 Ill.App.3d 48, 56-57, 229 Ill. Dec. 587, 692 N.E.2d 360 (1998), the Second District held that a de novo standard of review is appropriate in such cases. In XL Disposal Corp. v. Zehnder, 304 Ill. App.3d 202, 207, 237 Ill.Dec. 307, 709 N.E.2d 293 (1999), the Fourth District held that the clearly erroneous standard of review is applicable in such cases. We agree with the Fourth District's holding and with its analysis of our supreme court's holding in City of Belvidere v. Illinois State Labor Relations Board, 181 Ill.2d 191, 205, 229 Ill.Dec. 522, 692 N.E.2d 295 (1998).

As here, the facts in Belvidere were not in dispute. Our supreme court held that "because this case involves an examination of the legal effect of a given set of facts, it involves a mixed question of fact and law." City of Belvidere, 181 Ill.2d at 205, 229 Ill.Dec. 522, 692 N.E.2d 295. The court then held that...