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Hart v. Johnson





APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR L. DUNNE, Judge, presiding.


This is an appeal by the Director of Labor of the State of Illinois (Director) of an order of the Circuit Court of Cook County reversing a decision of the Director which determined that Will Hart d/b/a H. Kirby Company (Hart) was an employer as defined in the Illinois Unemployment Compensation Act (Act) and was liable for contributions and interest pursuant to the Act. Ill. Rev. Stat. 1975, ch. 48, par. 300 et seq.

On July 21, 1975, the Director issued to Hart a notice of determination and assessment and demand for payment in the amount of $4366.30 for unpaid contributions plus interest as required by the provisions of the Act. Hart filed a protest and a hearing was held on April 28, 1976, before the Director's representative.

Hart is in the business of distributing vacuum cleaners manufactured by the Kirby Company of Cleveland, Ohio. He maintains an office in Oak Park, Illinois. The vacuum cleaners are sold to the public by various dealers who enter into an independent dealer agreement with Hart. This agreement provides that the relationship between Hart and the dealer is that of vendor and vendee. In addition, it provides that all work and duties to be performed by the dealer shall be performed as an independent contractor. The contract specifically states that the dealer is not an agent or employee of Hart. Hart has never made contributions for unemployment compensation on behalf of any dealer with whom he entered into an independent dealer agreement.

Section 206 of the Act (Ill. Rev. Stat. 1975, ch. 48, par. 316) defines employment as "any service * * * performed by an individual for an employing unit." Hart maintains that the dealers are in business for themselves and do not perform services for him. Hart also urges that if the dealers are found to be performing services under section 206 of the Act, they meet the requirements for an independent contractor set forth in section 212, which states:

"Service performed by an individual for an employing unit, whether or not such individual employs others in connection with the performance of such services, shall be deemed to be employment unless and until it is proven in any proceeding where such issue is involved that

A. Such individual has been and will continue to be free from control or direction over the performance of such services, both under his contract of service and in fact; and

B. Such service is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and

C. Such individual is engaged in an independently established trade, occupation, profession, or business." Ill. Rev. Stat. 1975, ch. 48, par. 322.

The only evidence presented at the hearing was the testimony of Hart and two dealers. Hart explained that he purchases the vacuum cleaners wholesale from the factory in Ohio, and the dealers sell them door-to-door. He obtains the dealers either by referral from other dealers or through newspaper advertisements. Hart provides a three to four-day training program at which he demonstrates to the dealers the manner in which to assemble and operate the machines. The program is not required of dealers who have experience with vacuum cleaners.

When a dealer is prepared to commence selling, he takes a vacuum cleaner and signs a card accepting the merchandise on consignment. When a cash sale is made, the cash or check is delivered to Hart who withholds the sales taxes due to the State. Hart pays the dealer his profit.

Over 90% of the sales are installment purchases. Hart provides the dealers with application forms from various finance companies and has no requirement which form they should use. The buyer completes the credit application and signs an installment sales contract which names the H. Kirby Company as seller. The dealer usually returns the completed documents to Hart who relays the credit information to the finance company. Occasionally, a dealer will contact the finance company directly. Hart testified that the only reason he would reject a contract is if the credit was unacceptable to the finance company. When the finance company has approved the transaction, Hart assigns the contract to the company.

Hart conducts morning sessions in his office at which sales films are presented and dealers engage in general discussions. Although many dealers participate regularly, these meetings are not required. One of Hart's dealers serves as a sales manager and assists in training dealers both in and outside the office. Hart testified that the sales manager does not receive a salary but he receives a higher profit margin.

Hart testified that there is no general supervision of the dealers' work. He does not specify working hours, assign territories, establish sales quotas or impose a dress code. Dealers are not provided with office space, clerical assistance, business cards, transportation or reimbursement for expenses. Hart does not provide group insurance, a pension plan or any other ...

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