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St. Augustine's Center v. Dep't of Labor

OPINION FILED MAY 10, 1983.

ST. AUGUSTINE'S CENTER FOR AMERICAN INDIANS, INC., PLAINTIFF-APPELLANT,

v.

THE DEPARTMENT OF LABOR ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. James C. Murray, Judge, presiding.

PRESIDING JUSTICE DOWNING DELIVERED THE OPINION OF THE COURT:

Rehearing denied June 9, 1983.

This is an appeal from the circuit court's affirmance of a determination made by defendant, the Illinois Department of Labor, that plaintiff, St. Augustine's Center for American Indians, Inc., is not exempt from paying employer's contributions under the Unemployment Insurance Act (Ill. Rev. Stat. 1981, ch. 48, par. 300, et seq.).

Plaintiff was founded in 1962 in Chicago by an Episcopal priest, Father Peter J. Powell. *fn1 According to the bylaws, it was "established to provide counseling, casework and supportive services, and scholarship aid for American Indians, primarily those resident in Chicago." Plaintiff is a separate legal entity with the backing of the Episcopal Church of Chicago. The Bishop of the Episcopal Diocese of Chicago is an ex officio member of the board of trustees, an ex officio member of the corporation and its ex officio president. All members of the corporation and at least two-thirds of the board of trustees must be members of the Episcopal Church.

The building plaintiff owns and uses for its activities has three stories with a chapel on the first floor. Approximately 2,500 American Indian families are helped annually by plaintiff, by means of monetary assistance, food, clothing, job training, counseling and other services. Mass. is offered in the chapel twice daily and on Sundays; confessions are heard at least once weekly and priests offer the full range of sacraments.

In late 1974, upon learning of a change in the Unemployment Compensation Act (Act), plaintiff contacted defendant in order to obtain a determination of whether it was exempt from coverage. After initially being told that it was exempt, plaintiff was notified on September 28, 1978, that it was covered under the Act and an assessment and demand for payment of unpaid contributions was made for the period covering November 1, 1974, through August 1, 1978. Since that date, plaintiff has been paying the contribution voluntarily, but filed a timely protest to the determination and the assessment.

On February 22, 1979, a hearing was held before the Director's representative, during which plaintiff presented documentary and testimonial evidence. Plaintiff argued that it was exempt from paying contributions under section 211.3(A)(2) of the Act (Ill. Rev. Stat. 1981, ch. 48, par. 321.3(A)(2)) as an organization operated primarily for religious purposes. On January 29, 1980, the Director's representative issued his report which contained the finding that plaintiff was not operated primarily for religious purposes and the recommendation that a minor modification be made to the Department's assessment. On February 15, 1980, before the period allowed for filing objections to the report had expired, the Director rendered a final decision affirming the representative's report. On February 22, 1980, plaintiff filed its timely objections to the report.

Plaintiff filed a complaint for administrative review in the circuit court of Cook County. The trial court remanded the matter to the Department because it failed to consider plaintiff's objections before affirming the report of the Director's representative. After the Director overruled plaintiff's objections, oral argument was held in the circuit court on plaintiff's amended complaint. On May 3, 1982, a final order was entered by the trial court affirming defendant's decision and assessing the amount of $11,030.72 plus costs for unpaid unemployment insurance contributions and interest.

STATUTORY HISTORY

Prior to January 1, 1972, section 221 of the Unemployment Compensation Act exempted services performed for a "foundation, organized and operated exclusively for religious, charitable * * * or educational purposes * * *." (Ill. Rev. Stat. 1969, ch. 48, par. 331.) As a result of changes in the Federal Employment Security Amendments of 1970, all States were required to extend, by 1972, State unemployment insurance coverage to nonprofit organizations. In response, Illinois amended section 221 of the Act to no longer apply to services performed in the employ of a nonprofit organization. Section 211.2 of the Act provides that the term "employment" does include services performed by individuals working for a nonprofit organization that is "organized and operated exclusively for religious, charitable * * * purposes * * *." Ill. Rev. Stat. 1981, ch. 48, par. 321.2.

The next section, 211.3(A)(2), however, allows for a religious organization exemption and states that "employment" shall not include services performed in the employ of an organization "which is operated primarily for religious purposes and which is operated, supervised, controlled or principally supported by a church or convention or association of churches." (Ill. Rev. Stat. 1981, ch. 48, par. 321.3(A)(2).) The second of the dual requirements, concerning control or supervision by a church, is not being questioned in this appeal, as the Department conceded that plaintiff meets this prerequisite. The sole issue with regard to the statute, therefore, is whether the trial court correctly agreed with the Director that plaintiff is not "operated primarily for religious purposes." Plaintiff also argues on appeal that this decision was against the manifest weight of the evidence. For further history of the Act and the historical context of unemployment insurance programs, see Community Renewal Society v. Department of Labor (1982), 108 Ill. App.3d 773, 777-78, 439 N.E.2d 975.

I

The portion of the Act involved in this appeal (Ill. Rev. Stat. 1981, ch. 48, par. 321.3(A)(2)) had not been judicially construed in Illinois at the time both the Director and the trial court made their respective decisions in regards to plaintiff's exemption under it. This section has been subsequently examined by this court in Community Renewal Society v. Department of Labor (1982), 108 Ill. App.3d 773, 439 N.E.2d 975 (Community Renewal). Relying upon this case, plaintiff argues that the Director utilized an erroneous standard which would, as in Community Renewal, warrant a reversal of the Director's decision.

The following well-established rules of statutory construction are applicable in this situation: the Unemployment Compensation Act is a benevolent attempt to shield unfortunate persons from economic burdens caused by involuntary unemployment; the statute must be liberally construed with this objective in mind; the burden of proving a tax exemption is upon the one claiming it; exemption statutes are strictly construed; and debatable questions are ...


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