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09/20/89 Carson Pirie Scott & v. the State of Illinois

September 20, 1989




Before examining the statute, we note that the fundamental principle of statutory construction is to give effect to the intent of the legislature. (American Country Insurance Co. v. Wilcoxon (1989), 127 Ill. 2d 230, 238; People v. Parker (1988), 123 Ill. 2d 204, 209.) Courts should first look to the statutory language as the best indication of the intent of the drafters. (American Country Insurance Co., 127 Ill. 2d at 238; County of Du Page v. Graham, Anderson, Probst & White, Inc. (1985), 109 Ill. 2d 143, 151.) Although it is generally recognized that courts will give substantial weight and deference to an interpretation of an ambiguous statute by the agency charged with the administration and enforcement of the statute, agency interpretations are not binding on the courts (Geary v. Dominick's Finer Foods, Inc. (1989), 129 Ill. 2d 389, 414), and agency action that is inconsistent with the statute or regulations must be overturned (Illinois Consolidated Telephone Co. v. Illinois Commerce Comm'n (1983), 95 Ill. 2d 142, 152, citing Shepard v. Merit Systems Protection Board (D.C. Cir. 1981), 652 F.2d 1040, 1043). For these reasons, we are not bound by the Department's view of section 1508, and exercise independent review. See Flex v. Department of Labor, Board of Review (1984), 125 Ill. App. 3d 1021, 1023-24; Johnson v. City of Evanston (1976), 39 Ill. App. 3d 419, 423.


544 N.E.2d 772, 131 Ill. 2d 23, 136 Ill. Dec. 86 1989.IL.1453

Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County, the Hon. Earl Arkiss, Judge, presiding.


JUSTICE STAMOS delivered the opinion of the court. JUSTICE CALVO took no part in the consideration or decision of this case.


Plaintiff, Carson Pirie Scott & Company (Carson), filed suit in the circuit court of Cook County seeking review of a final decision of the Director of Labor (now the Director of Employment Security) (the Director) denying its application for cancellation of certain benefit wage charges to its account under the Unemployment Insurance Act (Ill. Rev. Stat. 1981, ch. 48, par. 300 et seq.) (the Act). The circuit court reversed the administrative decision and the Director appealed, and Carson cross-appealed. The appellate court, with one Justice Dissenting, reversed the decision of the circuit court and reinstated the final administrative decision. (164 Ill. App. 3d 530.) We allowed Carson's petition for leave to appeal (107 Ill. 2d R. 315) and granted the Illinois Retail Merchants Association, Illinois State Chamber of Commerce and Association of Unemployment Tax Organizations leave to file a consolidated brief as amici curiae.

The main issue on appeal concerns the scope of relief available under section 1508 of the Act (Ill. Rev. Stat. 1981, ch. 48, par. 578) to employers who have been deprived of statutorily mandated notice of certain findings, determinations and decisions of the Department of Labor (now the Department of Employment Security) (the Department).

The purpose of the Act is to afford relief to those who are involuntarily unemployed and to ameliorate the economic insecurity incident to involuntary unemployment. (Ill. Rev. Stat. 1981, ch. 48, par. 300; see Bernstein, The Illinois Unemployment Insurance Act, Ill. Ann. Stat., ch. 48, at XX (Smith-Hurd 1986) (hereinafter cited as Bernstein).) To this end, the Act establishes a system to collect contributions from employers and to pay benefits to eligible unemployed persons. The primary source of income to the Illinois Unemployment Trust Fund is contributions assessed from Illinois employers. Although initially each employer must contribute to the fund according to a statutory rate, the Department, after a prescribed time, determines an employer's individual, variable contribution rate through use of an experience rating system. Under this system, the cost of fund replenishment among employers is allocated on the basis of their experience with the risk of unemployment. (Bernstein, at XLI.) For these reasons, an employer whose current or former employees received proportionately more benefits will pay contributions at a higher rate than an employer whose former employees received fewer benefits from the fund.

The formula used to determine the experience-rated unemployment tax is:

benefit state emergency contribution

wage X experience rate = rate

ratio factor

The case at bar concerns only the benefit wage ratio.

An individual's "benefit wages" are a statutorily set portion of the wages which were paid by an employer to him during his base period (Ill. Rev. Stat. 1981, ch. 48, par. 571), while an employer's "benefit wages" are the total benefit wages assigned for all its former employees who received unemployment benefits (Ill. Rev. Stat. 1981, ch. 48, par. 572).

The total of an employer's benefit wages for 12 consecutive calendar quarters becomes the numerator of a fraction known as the benefit wage ratio. The benefit wage ratio is the first element of the formula used to calculate the employer's contribution rate. A new contribution rate is calculated for each year, using a benefit wage ratio based upon the 12 calendar quarters ending six months prior to the rate year in question. (Ill. Rev. Stat. 1981, ch. 48, par. 573.) The amount of benefit wages attributed to an employer for any particular quarter, therefore, will be part of the calculation of its contribution rates for three years.

For these reasons, there is a direct relationship between an increase in an employer's benefit wages and an increase in the employer's tax. A high amount of benefit wages will increase the employer's contribution rates; conversely, a reduction of benefit wages will reduce the employer's contribution rate for subsequent years.

The employer continues to carry the benefit wage charges unless and until there is a reversal of the claimant's eligibility for the benefits. The fact that benefits are paid causes benefit wage charges to accrue immediately against the employer, even if it is eventually concluded that the claimant was ineligible to receive benefits. Ill. Rev. Stat. 1981, ch. 48, par. 571.

Section 1508 of the Act (Ill. Rev. Stat. 1981, ch. 48, par. 578) requires the Director to "periodically furnish each employer with a statement of the wages of his workers or former workers which became his benefit wages." Section 1508 further provides a method for employers to contest a statement of benefit wages by making an "application for revision." The case at bar concerns Carson's application for revision of a statement of benefit wages mailed to it by the Department.

On March 13, 1981, the Department mailed to Carson a statement of benefit wages, as required by section 1508, covering the period from October 1, 1980, until December 31, 1980. The statement listed 484 benefit wage charges. By letters dated April 20 and 21, 1981, Carson submitted an application for revision of the statement of benefit wages, requesting cancellation of 246 of the benefit wage charges. The Director allowed the application in part and denied it in part, canceling 75 charges entirely or in part, adjusted Carson's tax accordingly, and indicated that eight additional charges would be cancelled in the future.

On March 18, 1982, Carson acknowledged receipt of the Director's order and requested that the Director reconsider the remaining contested charges listed in the application or schedule a hearing on the matter. The Director issued an order denying cancellation of three benefit wage charges which were previously unaddressed and Carson withdrew its request on two of those charges and renewed its request for further consideration of the remaining charges. By an order dated September 1, 1982, the Director cancelled certain additional charges and denied Carson's request for cancellation of others. The Director subsequently authorized a hearing to be held on the remaining charges; Carson withdrew its protest to 44 charges prior to the hearing.

On October 21, 1982, a representative of the Director conducted an evidentiary hearing and received evidence and testimony concerning the remaining contested charges. The hearing officer subsequently recommended cancellation of 21 more charges and affirmance of the balance of the Director's previous orders denying requested cancellation. Carson appealed the hearing officer's refusal to cancel 57 of the 58 remaining charges. In an order dated April 12, 1983, the Director issued a final decision adopting most of the hearing officer's recommendations, and cancelled the recommended charges plus one additional charge. Fifty-six charges, therefore, remained at issue following this order.

On May 17, 1983, Carson filed a complaint for administrative review of the Director's final order. The circuit court issued its memorandum of decision on October 3, 1985, reversing the Director's final order, holding that Carson was entitled to cancellation of all remaining charges at issue. Carson then filed a motion for an award of reasonable expenses of litigation including attorney fees, based upon the Illinois Administrative Procedure Act (Ill. Rev. Stat. 1985, ch. 127, par. 1014.1(b)). The trial court denied the motion. The Department appealed the circuit court's decision and Carson cross-appealed the circuit court's denial of Carson's motion for expenses. On appeal, the Director agreed to cancel five of the contested benefit wage charges; the 51 remaining charges were the subject of the appeal.

The appellate court, with one Justice Dissenting, reversed the decision of the circuit court as to Carson's complaint, finding that Carson did not have standing to rely on section 1508 for relief. The court held that to be eligible to object to benefit wage charges under section 1508, employers must establish that: (1) they were entitled to notice of the findings, reconsidered findings, determinations or reconsidered determinations of hearing officers and claims adjudicators concerning the claims-processing sections of the Act, sections 701 through 703 (Ill. Rev. Stat. 1981, ch. 48, pars. 451 through 453); (2) ...

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