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Pierce v. B & C Electric

OPINION FILED FEBRUARY 1, 1982.

NORMAN PIERCE ET AL., PLAINTIFFS-APPELLANTS,

v.

B & C ELECTRIC, INC., DEFENDANT-APPELLEE.



APPEAL from the Circuit Court of Cook County; the Hon. MICHAEL F. ZLATNIK, Judge, presiding.

JUSTICE O'CONNOR DELIVERED THE OPINION OF THE COURT:

Plaintiffs, known collectively as the Electrical Insurance Trustees, filed suit against defendant B & C Electric, Inc., for $2944.24 and costs under the liquidated damage provision of a collective bargaining agreement for the late payment between October 1977 and August 1978 by defendant of fringe benefit contributions on behalf of its employees. At the end of a bench trial, the court found that the provision was a penalty, rather than liquidated damages, and entered judgment for defendant. Plaintiffs appeal, contending that the trial court erroneously found as it did and that the judgment for defendant should be reversed and judgment entered for them in the amount of $2944.24 and costs.

• 1 Defendant has failed to file in this court. In accordance with First Capitol Mortgage Corp. v. Talandis Construction Corp. (1976), 63 Ill.2d 128, 345 N.E.2d 493, we will consider plaintiffs' appeal on its merits.

Defendant is an employer of union workers of Local Union 134, International Brotherhood of Electrical Workers. By letters of assent, defendant agreed to be bound by provisions contained in the collective bargaining agreement between the Electrical Contractors' Association of the City of Chicago and Local Union 134, International Brotherhood of Electrical Workers. In pertinent part, that agreement provides:

"[Article XVII, section 9]

The Payroll Report for Participating Employers and a single check payable to Electrical Insurance Trustees covering the Employer's contribution for fringe benefits and the deductions made from the wages of Employees shall be sent monthly to:

Electrical Insurance Trustees 228 North LaSalle Street, Room 2212 Chicago, Illinois 60601 Phone: ST 2-5442."

"[Article XVIII, section 1]

* * * The payment and the payroll report shall be mailed to reach the office of the appropriate Local Board not later than fifteen (15) calendar days following the end of each calendar month."

"[Article XIX, section 1]

Employers who fail to have sufficient funds in the bank to meet all pay checks issued to Employees covered hereby, and checks issued to cover contributions as outlined above, shall be penalized by the Electrical Joint Arbitration Board. Liquidated damages in the amount of 10% will be assessed on all contributions and deductions not paid within fifteen (15) days. Such assessments shall be disbursed proportionately into various Trust Funds." (Emphasis added.)

For the months of October 1977 through August 1978, defendant's fringe benefit contributions were made after the 15th calendar day following the end of each calendar month. The lateness ranged between 20 and 67 days.

Plaintiffs moved for summary judgment, supported by the affidavit of Ralph Hogan, the manager of Electrical Insurance Trustees. This motion was denied. At the bench trial, Ralph Hogan was the only witness. He testified that if fringe benefit contributions are not submitted by an employer by the 15th day of a month, an employee's medical and dental insurance is suspended and at the end of the quarter in which contribution payments are not made, an employee's vacation fund is terminated. Often, upon receiving a termination notice, an employee or his spouse will complain to the Trustee's employees in an abusive manner. If contribution payments are received after the employee's benefits were terminated, the process of termination has to be reversed to reinstate the benefits. Five hundred employers participate in the union contract, and it is not possible to estimate how many staff hours are spent terminating and reinstating employee benefits when an employer submits late contributions.

• 2 The sole issue is whether the provision "[l]iquidated damages in the amount of 10% will be assessed on all contributions and deductions not paid within fifteen (15) days" is a liquidated damages provision or a penalty provision. The standard for determining whether a liquidated damages provision will be enforced is section 339, subsection (1), of the Restatement of Contracts (1932). ...


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