SW Legal studies in Business

Statutory Standards, Not Common Law, Determine Employee Status
Description In a dispute between an employer and the state agency that administers unemployment insurance, the Illinois high court held that whether a worker is an employee or an independent contractor will look to the definitions set by state stature, not by the common law definitions of those terms.
Topic Employment Law
Key Words Independent Contractors; Employees; Classification; Unemployment Insurance
C A S E   S U M M A R Y
Facts The Illinois Department of Employment Security audited AFM Messenger Service and assessed the company $12,000 in unpaid unemployment insurance contributions for some of its workers. AFM protested that it was exempt from making such contributions for its drivers because they were independent contractors according to the agreement they signed with AFM. Their pay was 50 percent commissions on deliveries made in their cars. The trial court held that the workers were employees, not independent contractors. AFM appealed.

Affirmed. "Liability for contributions and eligibility for benefits is dependent, in part, on the existence of an ‘employment' relationship. The determination of whether such a relationship exists is not controlled by common law principles of master and servant and independent contractor. Rather, we must look to the statutory definitions, which are more inclusive than the common law. Thus, a person who is regarded at common law as an independent contractor may nonetheless be considered an employee under the [Unemployment Insurance Act]." Here, the drivers' "delivery businesses" were not established "independently" of AFM and without benefit of a relationship with the company, as would be required to qualify for independent contractor status under state law. The company procured customers, set delivery prices, set commission rates, paid the drivers, and retained the right to fire the workers at any time. Under state law, this is an employment relationship.

Citation AFM Messenger Service, Inc. v. Department of Employment Security, — N.E.2d — (2001 WL 1105825, Sup. Ct., Ill., 2001)

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