APPEAL from the Circuit Court of Cook County; the Hon. HARRY
M. FISHER, Judge, presiding.
MR. JUSTICE FULTON DELIVERED THE OPINION OF THE COURT:
This is an appeal brought by Conlon Brothers Manufacturing Company, a corporation, hereinafter referred to as petitioner, from an order of the circuit court of Cook County, affirming a decision of the Director of Labor, confirming the petitioner's contribution rate under the Unemployment Compensation Act at 2.7 per cent for the year 1948. The Director of Labor and the Department of Labor are the respondents in the cause and will hereinafter be referred to as such.
The petitioner attacks the constitutionality of that portion of section 18(c) of the Unemployment Compensation Act (Ill. Rev. Stat. 1949, chap. 48, par. 234(c),) which, for the purpose of contribution rates, classifies employers into two groups, those having little or no experience with the risk of unemployment and having contributions at the set basic rate of 2.7 per cent, and those employers who have had experience with the risk of unemployment, who pay a variable rate of contribution on the basis of their experience with the risk of unemployment.
In February, 1948, the Director of Labor notified petitioner that its contribution rate under the act for the year 1948 was 2.7 per cent. The petitioner applied for a review of the determination in March of that year and, in July, the Director of Labor denied the application for review. Petitioner filed a protest and a petition for a hearing, which was held in November, 1948. In January, 1949, the report of such hearing was issued, holding, in substance, that petitioner incurred liability under the act commencing January 1, 1946; that petitioner had not incurred such liability for a preceding period of five consecutive years and, therefore, was required to pay 2.7 per cent in accordance with section 18(c). Ill. Rev. Stat. 1949, chap. 48, par. 234(c).
Petitioner filed objections to the report, which were overruled, and in February, 1949, the respondent Director of Labor affirmed the report of the hearing and adopted the report as part of the decision affirming the rate determination. Petitioner appealed to the circuit court of Cook County, which court affirmed the decision of the Director of Labor and entered a judgment for respondents.
The evidence is not disputed and the question presented here is one of law. The facts showed that the petitioner is a manufacturer of domestic laundry equipment, located in the city of Chicago, and is classified as such by the Unemployment Compensation Division of the Department of Labor. In 1948, there were five domestic laundry equipment firms subject to the act, exclusive of petitioner. The contribution rates of these firms ranged from 0.5 to 1.5 per cent and the average contribution rate for such industry in 1947 was 1.4 per cent. The total benefit wages paid for petitioner's employees to June 30, 1948, was $1079.36 on total wages from January 1, 1946, to June 30, 1948. For 1948, had petitioner had its rate determined in the same way as employers who had incurred five years of liability for contributions, its rate would have been 0.5 per cent. Figures were introduced to indicate that had the five-year experience factor been eliminated, the plaintiff and all other employers liable for contributions under the act would have been required to pay contributions of considerably less than the 2.7 per cent which was allocated to them by the act.
On these facts, the petitioner urges that the contribution rate of 2.7 per cent as applied to it is arbitrary and excessive and greater than that which should be assessed against the petitioner if the rate were computed on petitioner's experience factor. It also urges that the rate assessed against petitioner is greater than that assessed against other manufacturers and competitors who are engaged in the same business. Lastly, it urges that the Unemployment Compensation Act, and more particularly section 18 thereof, deprives petitioner of his property without due process of law and denies to petitioner the equal protection of the law, contrary to section 1 of the fourteenth amendment to the constitution of the United States, and section 2 of article II and section 22 of article IV of the constitution of the State of Illinois.
These errors, relied upon for reversal, may be summed up in the one contention that the exactions imposed by the Unemployment Compensation Act of this State are in violation of both the Federal and State constitutions, because in their classifications they are unreasonable, arbitrary and capricious. The petitioner is arguing that because the law requires a contribution at the rate of 2.7 per cent from employers for the first five years such employers are under the act, it is an unreasonable, arbitrary and capricious classification whereby those persons are separated from the general class of persons who have been in business for more than five years and who are, therefore, subject to a varying rate of contribution to the fund. Petitioner argues that the rate of 2.7 per cent for the first five years has no actual relationship to the experience of the petitioner, petitioner's industry, or to the requirements of the State as a whole, and that the statistics introduced in the evidence clearly demonstrate that such is the case. It argues that if petitioner were allowed to use its own unemployment risk experience, its contribution to the fund would have been much lower than the 2.7 per cent set up in the statute. It states that, using the experience risk factor applied to those portions of petitioner's industry which are assessed according to their risk experience, it would have been assessed at the rate of 0.5 per cent for the first five years.
It argues that in order for legislation not to fall within the constitutional prohibition of "special legislation" it must support its classification of subjects or objects upon reasonable and substantial differences in kind, situation or circumstance bearing a proper relation to the purposes to be attained by the statute. It cites only one case, the Michigan Millers Mutual Fire Insurance Co. v. McDonough, 358 Ill. 575, wherein section 30 of the Marine Inland and Navigation Insurance Act was declared unconstitutional as denying equal protection of the laws and as being special legislation in violation of the constitution.
The language relied on to the greatest extent from the Michigan Millers case is to the effect that "The equal protection of the laws means subjection to equal laws, applying alike to all in the same situation." Again, "The fourteenth amendment neither denies a State the right justly to exert its taxing power nor prevents it from adjusting its legislation to differences in situation and to that end to make a justifiable classification. It does, however, require that the classification shall be based on a real and substantial difference having a rational relation to the subject of the particular legislation. [Citations.] Mere difference or the mere fact of classification is insufficient and arbitrary selection cannot be justified by calling it classification. [Citations.]" Lastly, "to avoid falling within the constitutional inhibition of special legislation, the classification of subjects or objects must be based upon some reasonable and substantial difference in kind, situation or circumstance bearing a proper relation to the purposes to be attained by the statute. [Citations.]"
In that case the question was presented as to whether or not a classification was unreasonable whereby fire insurance companies doing business within this State were taxed on receipts from all types of business, including casualty insurance, while casualty insurance companies doing business within this State were not so taxed on such casualty business. The State contended that under section 30 of the Act of 1869 (Smith-Hurd Annotated Statutes, chap. 73, sec. 46,) the State had the power to so tax fire insurance companies.
We there held that foreign fire insurance companies could not be taxed in this State on their casualty business when foreign casualty corporations were not so taxed, and that to attempt to do so was to impose an unreasonable classification which deprived the fire insurance corporations, so taxed on other than fire insurance business, of due process of law.
It is to be noted that, in the instant cause, all employers who have had no risk experience in unemployment for the purposes of the act are treated the same. Under the classification of lack of experience of risk, each is required to pay the statutory contribution of 2.7 per cent.
The act provides (Ill. Rev. Stat. 1949, chap. 48, par. 234,) that in cases such as this each employer shall pay contributions of 2.7 per cent with respect to employment occurring each calendar year after December 31, 1937, except as may be otherwise provided for in subsection (c) of section 18. Subsection (c), as amended, provides that for each calendar year, commencing after December 31, 1942, the contribution rate of each employer should be determined as provided in the act, except that no employer's rate shall be less than 2.7 per cent for any calendar year unless throughout the five calendar years immediately preceding the year for which the rate is being determined, the ...