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01/30/89 Sally A. Ward, Director of v. Sally A. Ward

January 30, 1989




535 N.E.2d 3, 179 Ill. App. 3d 920, 128 Ill. Dec. 789

Appeal from the Circuit Court of Cook County; the Hon. Harold A. Siegan, Judge, presiding

Rehearing denied March 27, 1989


Plaintiff, Itasca Public School District No. 10 (the District), appeals from the decision of the trial court on administrative review which affirmed the imposition of a penalty by defendant, the Director of Illinois Department of Employment Security (the Director), on the District for its failure to timely file quarterly reports (UC-40 forms) with the Director as required by section 1800 of the Unemployment Insurance Act (the Act) (Ill. Rev. Stat. 1985, ch. 48, par. 630). For the following reasons, we reverse the judgment of the trial court and remand the cause for further administrative proceedings.

The underlying facts are undisputed. On January 18, 1978, the District filed a form entitled "Election by Local Governmental Entity to Reimburse Benefits in Lieu of Paying Contributions" with the Bureau of Employment Security, Division of Unemployment Insurance, which stated, in pertinent part:

"The undersigned Local Governmental Entity does hereby elect, pursuant to the provisions of Sections 1404 and 1405 of the Illinois Unemployment Insurance Act, to pay when due, in lieu of contributions, an amount equal to the amount of regular benefits and the amount of extended benefits paid to its workers or former workers for any weeks beginning on or after the effective date of this election, on the basis of wages for insured work paid to them by it during the period this election is in effect.

3. At the close of each calendar quarter, the undersigned local governmental entity will receive a Statement of the amount due from it for the benefits paid to its workers or former workers during the calendar quarter, and will pay the amount due to the Director within 30 days after the date of mailing of the Statement; in the event that it fails to make any payment when due, or fails to file, when due, any quarterly report of the wages paid to its workers, it shall be subject to the interest or penalty provisions of the law, as the case may be."

Despite the above provisions as well as regulations promulgated by the Director requiring the quarterly filing of UC-40 forms, the District failed to file the reports. On November 7, 1984, more than six years after the District had elected to become a reimbursing employer, the Director notified the District of its determination that the District had failed to make payment in lieu of contribution in the amount of $ .38 and that it had failed to file quarterly UC-40 forms since its election. As a result, the Director assessed the District $ .38 for unpaid contributions and $4,235 in penalties for the period from March 1980 through April 1983.

On November 27, 1984, the District filed a protest and a petition for hearing on the penalty assessment. The District did not dispute the fact that it owed $ .38 or that it had not filed quarterly reports. However, the District claimed that it was unaware of its obligation to file the reports until notified by the Director in November 1984. The District further emphasizes that as soon as it was notified of its obligation to file quarterly reports, it did so.

On appeal, the District contends that: (1) the Director lacks the statutory authority to require the filing of UC-40 forms and to impose penalties based upon the failure to file those forms; and (2) in the alternative, the imposition of penalties against the District was improper. During oral argument, the appellate court also raised the issue, sua sponte, of whether the Director has discretion to waive the penalty and interest imposed by section 1402 of the Act for good cause.

Initially, the District argues that because administrative agencies can be given only those powers necessary to execute the duties of that agency and the UC-40 forms serve no useful purpose other than to calculate penalties, the Director has no authority to require the filing of the UC-40 forms. This argument fails as a result of several faulty premises upon which the Conclusion is based.

First, with respect to the Director's statutory authority to require the filing of UC-40 forms, section 1700 of the Act provides that: "It shall be the duty of the Director to administer this Act. . . [and to] determine all questions of general policy, promulgate rules and regulations and be responsible for the administration of this Act." (Ill. Rev. Stat. 1985, ch. 48, par. 610.) Section 1701 further provides that: "Regulations may be adopted, amended, or rescinded by the Director and shall become effective ten days after filing with the Secretary of State, and such filing shall be public notice of such regulation, amendment thereto, or rescission thereof, as the case may be." Ill. Rev. Stat. 1985, ch. 48, par. 611.

With respect to the filing of quarterly UC-40 forms, regulation 12 of the State of Illinois Department of Labor, effective September 22, 1977, states, in pertinent part:

"1. Every employer, including employers electing payments in lieu of contributions under the provisions of Section 1404 or Section 302 of the Act, shall file a report with respect to each calendar quarter, listing the name and Social Security Account Number of each worker, and providing the information with respect to each worker required by ...

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