Appeal from the Circuit Court of Cook County; the Hon. James
C. Murray, Judge, presiding.
JUSTICE WHITE DELIVERED THE OPINION OF THE COURT:
Rehearing denied December 7, 1984.
Plaintiffs, Gus A. Pavlakos and G.H.P. Corporation, appeal from an order of the trial court affirming the decision of the Director of Labor finding plaintiffs liable, pursuant to section 2600 of the Illinois Unemployment Insurance Act (Ill. Rev. Stat. 1979, ch. 48, par. 750), for unpaid contributions, interest and penalties incurred by Metropolitan Nursing Care Service, Inc. (Metropolitan). On appeal plaintiffs contend that: (1) section 2600 violates the equal protection and due process clauses of the Illinois and United States constitutions; (2) the Department of Labor (Department) is barred by the doctrines of estoppel and laches from recovering the unpaid contributions, interest and penalties; and (3) the findings of fact of the Director of Labor are against the manifest weight of the evidence.
On October 5, 1979, plaintiffs agreed to purchase all the assets of Metropolitan, a medical personnel agency which furnished registered nurses, practical nurses, and nurses' aides to hospitals, nursing homes and private homes. The assets of Metropolitan consisted of telephone numbers and listings, list of customers, list of licensed practical nurses, registered nurses and nurses' aides, leasehold rights and improvements, logo of Metropolitan, and the interest of Metropolitan in that name and in the name of Metro Nursing, and good will. As consideration for the sale, plaintiffs were to pay certain liens which had been filed against Metropolitan by the FDIC, the Internal Revenue Service and the Illinois Department of Revenue.
Pursuant to sections 6-105 and 6-106 of the Uniform Commercial Code (Ill. Rev. Stat. 1979, ch. 26, pars. 6-105, 6-106), plaintiffs sent notice of bulk sale to the creditors of Metropolitan. A notice of bulk sale was also sent to the Department of Labor and received by it on October 17, 1979. *fn1 The Department did not respond to the notice. Thereafter, on November 12, 1979, plaintiffs consummated the sale.
On March 24, 1980, the Department of Labor mailed to plaintiffs a notice of determination and assessment against purchaser or transferee and demand for payment informing plaintiffs that Metropolitan was indebted to the Department for unpaid contributions, interest and penalties; *fn2 that Metropolitan had failed to pay the amount of the contributions, interest and penalties; and that plaintiffs, as purchasers of all the assets of Metropolitan, were being assessed the sums due. The unpaid contributions, interest and penalties amounted to $99,829.42.
Plaintiffs contend that section 2600 of the Unemployment Insurance Act denies them the equal protection of the laws. However, the briefs submitted by plaintiffs leave this court in doubt as to whether plaintiffs maintain that section 2600 is unconstitutional because it imposes a higher burden on purchasers of businesses indebted to the Department or because it accords preferential treatment to the Department. We therefore address both arguments.
• 1-3 Under traditional equal protection analysis, a statute classifying persons or objects is not unconstitutional because it affects one class and not another, provided that it affects all members of the same class alike and provided that the classification is not arbitrary, but based upon some substantial difference in circumstances properly related to the classification. (Fujimura v. Chicago Transit Authority (1977), 67 Ill.2d 506, 512, 368 N.E.2d 105.) Furthermore, the legislature may differentiate between persons similarly situated as long as the classification bears a reasonable relationship to a legitimate legislative purpose. (Kujawinski v. Kujawinski (1978), 71 Ill.2d 563, 578, 376 N.E.2d 1382; S. Bloom, Inc. v. Mahin (1975), 61 Ill.2d 70, 76, 329 N.E.2d 213.) Section 2600 of the Unemployment Insurance Act in relevant part provides:
"The purchaser or transferee shall withhold sufficient of the purchase money to cover the amount of all contributions, interest and penalties due and unpaid by the seller or transferor or, if the payment of money is not involved, shall withhold the performance of the condition that constitutes the consideration for the transfer, until such time as the seller shall produce a receipt from the Director showing that the contributions, interest and penalties have been paid or a certificate that no contributions, interest or penalties are due. If the seller or transferor shall fail to pay such contributions within the 10 days specified, then the purchaser or transferee shall pay the money so withheld to the Director of Labor. If such seller or transferor shall fail to pay the aforementioned contributions, interest or penalties within the 10 days and said purchaser or transferee shall either fail to withhold such purchase money as above required or fail to pay the same to the Director immediately after the expiration of 10 days from the date of such sale as above required, or shall fail to withhold the performance of the condition that constitutes the consideration for the transfer in cases where the payment of money is not involved or is not the sole consideration, such purchaser or transferee shall be personally liable to the Director for the payment to the Director of the contributions, interest and penalties incurred by the seller or transferor up to the amount of the reasonable value of the property acquired by him." (Ill. Rev. Stat. 1979, ch. 48, par. 750.)
Section 2600 treats purchasers or transferees of businesses which are indebted to the Department alike. These purchasers or transferees are required to withhold part of the purchase money or performance of the condition that constitutes the consideration for the transfer until the seller produces a receipt from the Department showing that the contributions have been paid or a certificate that no contributions are due. If the purchasers fail to withhold the money or other consideration, they will be held liable for the unpaid contributions. All members of the class affected by section 2600 are thus treated similarly.
Plaintiffs maintain that they are similarly situated to purchasers of businesses indebted to the Illinois Department of Revenue pursuant to the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1981, ch. 120, par. 440 et seq.) or to purchasers of businesses indebted to private individuals. Plaintiffs argue that, pursuant to section 2600, they have a continuing obligation to discover a seller's indebtedness and to withhold purchase money, unlike purchasers of businesses indebted to private creditors or to the Department of Revenue. Plaintiffs therefore conclude that section 2600 violates the equal protection clause.
• 4 Assuming, arguendo, that section 2600 treats similarly situated individuals differently, we believe that the section is nevertheless constitutional because the classification that it creates bears a reasonable relationship to a legitimate legislative purpose. (Kujawinski v. Kujawinski (1978), 71 Ill.2d 563, 578.) The Unemployment Insurance Act was enacted to prevent the spread of unemployment and to lighten its burden. Accordingly, the Act provides for the setting aside of reserves during periods of employment to be used to pay benefits during periods of unemployment. Section 2600 furthers the purpose of the Act by providing that the purchasers of a business which is indebted to the Department shall withhold sufficient of the purchase money to cover the amount of all contributions, interest and penalties due and unpaid by the seller or shall withhold performance of some condition until the seller provides proof of payment of the contributions to the Department. In the event that the seller does not pay the contributions and the purchaser fails to withhold money or performance of a condition, the purchaser will be held liable for the contributions. Section 2600 thus insures that contributions owed the Department are paid by either the sellers or the purchasers of businesses indebted to the Department. We conclude that the classification created by section 2600 is reasonably related to the purpose of the Unemployment Insurance Act.
We next consider whether section 2600 violates the equal protection clause because it accords preferential treatment to the Department. The alleged preferential treatment is that the Department can "ignore a notice of sale and still claim unpaid assessments from a purchaser." *fn3 Plaintiffs assert that no other creditor, public or private, is given such treatment.
• 5 The functions of the Department include enforcement of the Unemployment Insurance Act with the objective of preventing the spread of unemployment and alleviating its burdens. Enforcement of the Act generates unique operational problems. The Department is required to deal with and collect contributions from countless numbers of employers. Private creditors are not faced with collection problems of such proportions. Additionally, a requirement that the Department respond to every notice of sale sent to the Department or forego unpaid contributions would put an intolerable burden on the Department in light of the fact that purchasers of businesses which are not indebted to the Department may nevertheless send notices of sale to the Department. Further, section 2600 provides a simple process by which the purchaser of a business can avoid liability for moneys owed by the seller under the Act merely withhold payment until seller produces a receipt showing that contributions have been paid or a certificate that none are ...