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08/27/87 Carson Pirie Scott & v. the Department of

August 27, 1987

CARSON PIRIE SCOTT & COMPANY, PLAINTIFF-APPELLEE AND CROSS-APPELLANT

v.

THE DEPARTMENT OF EMPLOYMENT SECURITY, SALLY A. WARD, DIRECTOR, DEFENDANT-APPELLANT AND CROSS-APPELLEE



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FOURTH DIVISION

518 N.E.2d 161, 164 Ill. App. 3d 530, 115 Ill. Dec. 636 1987.IL.1248

Appeal from the Circuit Court of Cook County; the Hon. Earl Arkiss, Judge, presiding.

APPELLATE Judges:

JUSTICE JOHNSON delivered the opinion of the court. JIGANTI, J., concurs. PRESIDING JUSTICE McMORROW, Dissenting.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE JOHNSON

Defendant, State of Illinois Department of Employment Security (hereinafter referred to as the Department), presents for decision the construction and interpretation of section 1508 of the Unemployment Insurance Act (Act) (Ill. Rev. Stat. 1981, ch. 48, par. 578) as a matter of first impression. This appeal arises after plaintiff, Carson Pirie Scott & Company (hereinafter referred to as Carson) obtained judicial review in the trial court of a final decision of the Director of Labor (now the Director of Employment Security and hereinafter referred to as the Director), denying Carson's application for cancellation of 56 benefit wage charges. The circuit court set aside the administrative decision and the Department appeals.

We reverse.

The Unemployment Insurance Act (Ill. Rev. Stat. 1981, ch. 48, par. 300 et seq.) (hereinafter referred to as the Act) provides, in general summary, that contributions assessed from employers within the State are the primary source of income to the State's Unemployment Trust Fund account (hereinafter referred to as the Fund). Each employer initially contributes to the Fund according to a specified statutory rate. After a specified time, the Department will determine that employer's individual, variable contribution rate through use of an experience rating system. This system allocates the cost of fund replenishment among employers on the basis of their experience with the risk of unemployment. In other words, an employer whose current or former employees have received proportionately more benefits will have to pay contributions at a higher rate than an employer whose employees have made few or no claims against the Fund.

To obtain a variable contribution rate for a given calendar year, an employer must have incurred liability for the payment of contributions in each of the three calendar years (or two calendar years as of 1984) immediately preceding the year for which the variable rate is to be determined. His contribution rate is determined annually, and he receives notification of the rate in March of the applicable year. The formula used to determine an employer's variable contribution rate is as follows:

Benefit Wage x State Experience Emergency = Contribution

Ratio Factor Rate Rate

In the instant case, only the benefit wage ratio need be examined.

An individual's "benefit wages" may be defined as a statutorily set portion of the wages which were paid by an employer to him during his base period (for definitions see Ill. Rev. Stat. 1981, ch. 48, pars. 347 through 352). An employer's benefit wages are the total benefit wages assigned for each of its former employees who receives regular or extended benefits. The total of an employer's benefit wages for 12 consecutive calendar quarters becomes the numerator of a fraction called the benefit wage ratio.

Thus, the amount of benefit wages attributed to an employer for any particular quarter will be part of the calculation of his contribution rates; if the employer is able to reduce the amount of benefit wages assigned to his account, he may succeed in reducing his contribution rate for the subsequent years. When benefits are paid, the benefit wage charges accrue immediately against the employer, even if it is eventually concluded that the claimant was ineligible to receive them. The employer continues to carry the benefit wage charges unless and until there is a reversal of the claimant's eligibility for the benefits. Therefore, if the employer is successful in his appeal, be it before a referee, the Board of Review, the circuit court, or a higher court, the benefit wages charged to his account are removed and no longer used for purposes of the employer's rate calculations. A statement listing all the benefit wage charges on an employer's account is furnished by the Director annually. It is from an objection to this statement that this appeal arises.

The record reveals that on March 13, 1981, the Department mailed to Carson a statement of benefit wages covering the period from October 1, 1980, until December 31, 1980. The statement consisted of 484 benefit wage charges. By letters, dated April 20 and 21, 1981, Carson submitted its application for revision of the statement and requested cancellation of 246 of those charges. In an order dated February 26, 1982, the Director cancelled, in part or in their entirety, 75 benefit wage charges and said that eight additional charges would be cancelled in the future. The Director denied Carson's application for revision as to the remaining charges.

On March 18, 1982, Carson acknowledged receipt of the Director's order and resubmitted its application for revision, requesting either additional consideration of the first application or to schedule a hearing. By order dated April 8, 1982, the Director refused to cancel three benefit wage charges which she had not addressed earlier, and on April 28, 1982, Carson withdrew its request on two of these charges and otherwise reasserted its position. A further order of the Director was entered on September 1, 1982, canceling certain additional charges and denying the balance of Carson's renewed request. These denied requests were deemed to be protests and petitions for hearing. Thus, a hearing was scheduled as to the remaining challenges; however, Carson withdrew its petition for revision of 44 of the charges prior to the hearing.

On October 21, 1982, a representative of the Director conducted an evidentiary hearing on the merits of Carson's application for revision. The hearing officer subsequently issued a report recommending cancellation of 21 charges and affirmance of the balance. Carson objected to the hearing officer's report and challenged the refusal to cancel 57 of the 58 remaining charges. The Director, after considering the hearing officer's recommendations and Carson's objections, issued a final decision on April 12, 1983, canceling the charges as recommended by the hearing officer plus one additional charge, and otherwise affirming the order of September 1, 1982. Therefore, 56 charges remained at issue following the Director's final order.

Carson filed a complaint in the circuit court of Cook County for administrative review on May 17, 1983. The circuit court issued its memorandum of decision on October 5, 1985, setting aside the final order of the Director and concluding that Carson was entitled to cancellation of the remaining 56 charges. Carson then filed a motion for an award of reasonable expenses of litigation, including attorney fees, pursuant to the Illinois Administrative Procedure Act (Ill. Rev. Stat. 1985, ch. 127, par. 1014.1(b)). The trial Judge denied this motion. The Department appeals the October 5 decision; however, in its brief before this court, it concedes to the cancellation of five of the benefit wage charges and contests only the remaining 51 charges. This appeal raises two issues: (1) whether the trial court correctly construed section 1508 of the Act; and (2) whether Carson was entitled, as a matter of law, to cancellation of the remaining 51 benefit wage charges in accordance with statutory and regulatory criteria. Carson cross-appeals, contending that the trial court erred in denying its motion for an award of reasonable expenses of litigation. I

The gravamen of this appeal is the construction of section 1508 of the Act (Ill. Rev. Stat. 1981, ch. 48, par. 578). The parties present vastly differing interpretations of the intent of this section. The Department, through the Director, construes section 1508 to provide an employer with a second chance for a hearing on the eligibility of a claimant and resultant propriety of a benefit wage charge when that employer has been deprived of his first chance due to lack of notice. Carson, on the other hand, views the focus of section 1508 as addressing the failure of the Department to give the employer the requisite notice as prescribed by those sections governing the processing of claims for benefits.

Although this appeal arises from the administrative review of an agency decision, it presents issues of statutory construction, which are questions of law. (Johnson v. City of Evanston (1976), 39 Ill. App. 3d 419, 423, 350 N.E.2d 70, 74.) Thus, we are not bound to give the same deference to the agency's Conclusions as we would be if they were Conclusions of fact, but must exercise independent review. (Flex v. Department of Labor, Board of Review (1984), 125 Ill. App. 3d 1021, 1023-24, 466 N.E.2d 1050, 1053.) "'While we might affirm a factual Conclusion as not against the manifest weight of the evidence although we would have reached the opposite Conclusion, we cannot let stand a decision based upon an erroneous construction of a statute.'" 125 Ill. App. 3d 1021, 1024, 466 N.E.2d 1050, 1053, quoting Dunaway v. Department of Labor, Bureau of Employment Security, Division of Unemployment Insurance (1982), 109 Ill. App. 3d 63, 68, 440 N.E.2d 231, 234.

Since the key focus of statutory construction is to ascertain the intent of the legislature (see People ex rel. Dickey v. Southern Ry. Co. (1959), 17 Ill. 2d 550, 162 N.E.2d 417; Morris v. The Broadview, Inc. (1944), 385 Ill. 228, 52 N.E.2d 769), we are directed to section 100 of the Act (Ill. Rev. Stat. 1981, ch. 48, par. 300). There, our legislators have specifically declared the public policy underlying the Act as the alleviation of the effects of involuntary unemployment. Clearly, the words of the legislators themselves are the most reliable source from which to ascertain legislative intent. (See Coryn v. City of Moline (1978), 71 Ill. 2d 194, 374 N.E.2d 211.) This intent, therefore, must serve as a guide to our interpretation and application of the Act's ...


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