Does This Look Like an Employee to You?

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Does Guse fit the IRS's definition of an employee? Or the state's? Or any reasonable person's? He's certainly integral to Quicksilver's business -- if the couriers aren't employees at a courier service, who is? And the company tells him where to pick up and drop off deliveries. But he's free to refuse a delivery, he decides how to get there, and he can come and go as he pleases. He's free to work for other services, but he doesn't. The car is an investment but not a big one.

Gallagher's couriers would look more like by-the-book contractors if he could get a business card, a piece of letterhead, any advertising the courier has placed, or even an invoice from each one. His lawyer Nancy Jeorg tells him this. Gallagher is incredulous: "A biker that has business cards?! Who advertises?!" Jeorg knows it's unrealistic. "It's an outdated idea of the independent contractor. It hasn't kept up with the times," she says.

Lots of people have tried to bring the definition up-to-date; even the IRS admits that the fuzzy semantics are a problem. Periodically, Congress holds hearings. Accountants, lawyers, business owners, and labor groups give testimony. Nothing happens. Each interested industry has its political action committee working on Congress, too. Gallagher belongs to the Expedited Package Independent Contractors Council (EPICC), which is trying to win an exemption for the industry at the federal level. Joe Morris, the EPICC's executive director, sees no prospects for a solution anytime soon. "No one in Congress has adopted this fight as his own," he says. "We're in a wait-and-see period."

Powerful interests oppose any solution that would make fewer people employees. Independent contractors are harder to unionize, so labor is opposed. Employees fit more neatly into Clinton's national health-care dreams, so the current administration is opposed. The president's proposal would give the IRS permission to eliminate the Section 530 safe harbor.

As long as the definition of an employee remains hazy, there's always some hope of interpreting the rules favorably. So some industries have focused not on finding an overall solution but on winning exemptions for themselves from Congress. Some, such as real estate agents, have succeeded. Although real estate agents work exclusively for one company, from its office, using its equipment and even training at its expense, they're classified as contractors. The IRS can't touch them.

Courier-industry folks point to real estate agents with outrage -- how can they be contractors if we're not? But they're envious, and they hope to mimic the real estate agents' success, with the help of people like Kevin Gallagher.

Gallagher began his efforts to win a state exemption at the end of 1992. With help from his lawyer Jeorg and Joe Berrios, a lobbyist and former state representative, he wrote and filed House Bill 179, which would exempt Illinois couriers from any penalties for using independent contractors.

It cost Quicksilver $3,500 to hire the lobbyist for four months and to get things this far. To push the bill further, Gallagher needed more money. "We couldn't do this through the local association, the Messenger Service Association of Illinois, because some members use employees," he explains. "So we formed a group outside the association." That group raised $20,000 for the lobbyist. If the bill passes, the lobbyist will get another $20,000 from the group.

When he goes to the capital in Springfield to testify before the House, Gallagher is in his element. "That's the only satisfaction I've gotten out of this whole thing -- the education in the legislative process."

Weirdly, he doesn't sound disillusioned. But his state-level campaign may prove a hard lesson. In Illinois all interested parties must sign off on a bill before it goes to a vote. The IDES has signed off on Bill 179, and so has the industry. The holdouts? The unions. "It boils down to a negotiated settlement," Jeorg says. "No one knows what it will take to get labor to settle."

Gallagher sees the wall up ahead. He thinks he can pursue the appeals process for another five months before the money runs out. If his bill doesn't pass by then, he'll have to decide whether to reclassify. "It would come down to, Do I cut off my nose to spite my face? My partner and I, we both have families, and a lot of other families depend on Quicksilver. If it came down to closing the business on principle or paying, converting, and trying to survive, I'd probably have to . . . I'd just have to wait and see what happens. As the standard-bearer for this legislative battle, I wouldn't want to let anyone down." But later he admits, "If it means retaining the company, there's no contest. Which upsets me, because I believe they're independents."

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