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Scott v. Board of Review





Appeal from the Circuit Court of Livingston County; the Hon. William T. Caisley, Judge, presiding.


Unemployment insurance.

The question: Can a corporate officer qualify for unemployment insurance benefits?

Yes — under these conditions.

We affirm.

Paul Scott brought this action seeking judicial review of the determination of the Board of Review of the Illinois Department of Labor (the Board) that he was ineligible for unemployment insurance benefits. The circuit court reversed the Board's decision — and properly so.

Scott is the corporate secretary for Scott Brothers Contractors, and he believes that he is a director. He is not remunerated as an officer, but receives wages only when he works as a laborer. Scott Brothers is in the general contracting business, which customarily experiences a slack period during the winter months. The business shut down in January of 1982, and Scott applied for unemployment insurance benefits. Between January 3 and March 13, 1982, Scott performed no work as a laborer or officer, and he received no wages.

A claims' adjudicator denied Scott's application for benefits solely because Scott had retained his position as corporate secretary. After an administrative hearing a referee, and later the Board, affirmed this decision. Scott filed a petition for judicial review, and the trial court reversed. The Board asserts that the court erred in holding that Scott was eligible for benefits.

The purpose of the Unemployment Insurance Act (the Act) is to protect against economic insecurity due to involuntary unemployment. (Ill. Rev. Stat. 1981, ch. 48, par. 300.) The Act is intended to benefit those who are unemployed through no fault of their own and who are willing, anxious, and ready to obtain employment. (Mohler v. Department of Labor (1951), 409 Ill. 79, 86, 97 N.E.2d 762, 765-66.) While the Act is to be liberally construed (American Steel Foundries v. Gordon (1949), 404 Ill. 174, 180, 88 N.E.2d 465, 468), its purpose will be perverted if its benefits are paid at the compulsory expense of others to persons who are not intended beneficiaries. Fleiszig v. Board of Review (1952), 412 Ill. 49, 54, 104 N.E.2d 818, 821.

In order to achieve its purpose, the Act sets up an insurance program. Employers are compelled to contribute with respect to wages payable for "employment." (Ill. Rev. Stat. 1981, ch. 48, par. 550.) "Employment" includes services an officer performs even if the officer is also a stockholder or director of the corporation. (Ill. Rev. Stat. 1981, ch. 48, par. 316.) Scott Brothers, therefore, was required to contribute to the program based upon the wages it paid Scott as a laborer.

• 1 An individual must meet two conditions to be eligible for benefits. Similar to any other insurance program, an individual is entitled to benefits only if contributions to the fund are made for him. An individual whose employer does not contribute cannot get benefits under the Act. (Ill. Rev. Stat. 1981, ch. 48, pars. 346, 420.) The individual must also be "unemployed." (Ill. Rev. Stat. 1981, ch. 48, par. 420.) An individual is "unemployed in any week with respect to which no wages are payable to him and during which he performs no services." Ill. Rev. Stat. 1981, ch. 48, par. 349.

The Board asserts that Scott is not an intended beneficiary of the Act. The Board reasons that because Scott is an officer of a closely held, family corporation, he has retained control over his employment. Thus, his unemployment cannot be involuntary. The Board, therefore, concludes that Scott is not an "unemployed individual." Under this interpretation, Scott can never be eligible for benefits, though the corporation is still compelled to contribute based upon his wages.

The issue, then, is whether the legislature intended to deny benefits to one whose wages are the subject of employer contributions.

The court, in Garland v. Department of Labor (1984), 121 Ill. App.3d 562, recently addressed this same issue. In Garland the plaintiff applied for unemployment benefits after she was laid off by her employer corporation. She continued to hold corporate office, although she performed no services and received no wages. The Bureau of Employment Security denied her benefits because it concluded that as president of a closely held, family corporation, she controlled her employment status, and thus, her unemployment was voluntary. The court, however, noted that the Act establishes an insurance program, and not a tax. The court went on to state that unlike a tax, the benefits of an insurance program should be payable to all for ...

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