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08/08/89 Farmers Insurance Exchange v. the Department of Labor Et

August 8, 1989





542 N.E.2d 538, 186 Ill. App. 3d 493, 134 Ill. Dec. 359 1989.IL.1215

Appeal from the Circuit Court of Kane County; the Hon. Michael Colwell, Judge, presiding.


JUSTICE INGLIS delivered the opinion of the court. UNVERZAGT, P.J., and NASH, J., concur.


Defendants, the Department of Employment Security, Board of Review (Board), and the Department of Labor (Department), appeal from the judgment of the circuit court of Kane County which reversed the Board's decision finding claimant, Johnnie T. Leithoff, eligible for unemployment insurance benefits. On appeal, defendants contend that the Board correctly determined that (1) claimant was an employee and not an independent contractor; (2) claimant did not voluntarily leave his job without "good cause"; and (3) claimant was not paid solely by commission and, as such, an exclusion from benefits would not apply to him. We reverse.

In June 1983, plaintiff, Farmers Insurance Exchange (Farmers), hired claimant, a licensed insurance agent, to work as a part-time insurance agent. In November 1983, after claimant successfully completed Farmers' training program, he signed an "appointment agreement" (agreement) and became a full-time agent. The agreement provided that Farmers would pay claimant a commission based on the sale of insurance policies. At the same time, claimant entered into a "guaranteed income plan" (plan) with Farmers. The plan provided that Farmers would guarantee claimant an income of $1,300 per month, provided that claimant met certain sales production requirements. The plan was set up to cover claimant in those months in which claimant's commissions totalled less than $1,300. In such a situation, Farmers would provide claimant with the difference between his actual commissions and $1,300. However, claimant would have to reimburse Farmers 50% of any amounts advanced to him under the plan.

Claimant set up an office in his home. He furnished the office, bought supplies and paid all utility bills without reimbursement from Farmers. Farmers did reimburse claimant for 50% of the cost of placing an advertisement in the local telephone book. In addition, Farmers supplied claimant with insurance applications and forms. Claimant's business card identified him as an agent for Farmers.

Farmers did not regulate the number of hours claimant would work, but did require him to meet with the district sales manager on a weekly basis. Claimant was also obligated to submit all applications for insurance to Farmers, thus giving Farmers the opportunity to accept or reject any particular application. Claimant was permitted to submit an application to other insurance companies only if Farmers declined the opportunity to issue a policy.

In February 1984, Farmers terminated the income plan because claimant failed to maintain his sales quota. Claimant requested that he be allowed to return to part-time status with Farmers. Farmers denied claimant's request in a letter in which the district sales manager wrote:

"I checked with the Region as to whether we would allow you to go to a part-time contract, they said no.

Therefore it appears logical to me for you to send me a letter of resignation and I'll stop by and pick up your manual, files and etc.

Unless something has changed favorably in your production in the last few weeks, I would not recommend that you attend the district meeting Wed. I'll be waiting to hear from you. Regards, Duane.

P.S. I am sincerely sorry that this letter doesn't have better news in it."

Shortly thereafter, claimant resigned and filed for unemployment insurance benefits. The claims adjustor determined that claimant was eligible for benefits. Farmers challenged the adjustor's decision, and three administrative hearings were held. Following the third hearing, the hearing referee issued his written findings agreeing with the adjustor, stating:

"Here, the claimant's placing of business was controlled by the company. The claimant was not free to place business with other companies until he had first offered it to this company. The company had control over the acceptance or refusal of the contracts.

Also, the terms of his contract obligated him to make a certain number of client contacts each week. This was at ...

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