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11/17/95 BARBARA MARCO D/B/A MARCO DATA SERVICE v.

November 17, 1995

BARBARA MARCO D/B/A MARCO DATA SERVICE, PLAINTIFF-APPELLEE,
v.
LYNN QUIGLEY DOHERTY, DIRECTOR OF EMPLOYMENT SECURITY OF THE STATE OF ILLINOIS, AND THE DEPARTMENT OF EMPLOYMENT SECURITY, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Madison County. No. 94-MR-105. Honorable David Herndon, Judge, presiding.

Presiding Justice Maag delivered the opinion of the court: Kuehn, J., and Welch, J., concur.

The opinion of the court was delivered by: Maag

PRESIDING JUSTICE MAAG delivered the opinion of the court:

The defendants, the Department of Employment Security (Department) and the Director of Employment Security (Director), appeal from a Madison County circuit court order reversing a decision of the Director. The circuit court ordered the Department to refund $4,835.14 in unemployment insurance contributions paid by the plaintiff, Barbara Marco, which the Director had refused to refund.

The single issue on appeal is whether section 2200 of the Unemployment Insurance Act (Act) (820 ILCS 405/2200 (West 1994)) authorizes the Director of Employment Security to retroactively increase an employer's contribution amount after having issued a final decision that adjudicated the contribution amount based upon the findings of fact and recommendations of the Director's representative in an administrative hearing.

According to the record, on May 24, 1991, the Director made a determination and assessment against the plaintiff for unpaid unemployment insurance contributions, penalties, and interest in the amount of $7,225.41 for the period between 1986 and 1991. On May 29, 1991, the plaintiff paid $7,225.41 to the Department of Employment Security under protest. The plaintiff then filed a timely objection and petitioned for an administrative hearing pursuant to section 2200 of the Act.

On April 15, 1992, the Director's representative presided over the plaintiff's hearing, and on July 24, 1992, he issued his findings of fact and recommendations. The Director's representative found that prior to 1989 the plaintiff was an employee of American Redemption Services, Inc., and therefore was not an employer required to contribute to the unemployment insurance fund. The Director's representative further found that the plaintiff was an employer required to contribute to the fund for the period between 1989 and 1991. The Director's representative then recommended that the Director modify her determination and assessment to charge the plaintiff $869.69 for unpaid contributions and penalties. The plaintiff filed a untimely objection to the findings and recommendation. Because the objection was untimely, the findings and recommendation stood unchallenged.

On July 9, 1993, the Director adopted her representative's findings of fact and recommendation and issued a "Final Decision" requiring the plaintiff to pay $869.69. Although the plaintiff had a right to seek review of the Director's final decision pursuant to section 2205 of the Act (820 ILCS 405/2205 (West 1994)), she did not appeal to the circuit court.

On July 14, 1993, the plaintiff requested a refund of $6,355.72. This amount represented the difference between her $7,225.41 payment under protest and the Director's final assessment of $869.69. On August 10, 1993, the Director refunded $1,520.58 to the plaintiff. The Director refused to refund the remaining $4,835.14. The Director stated that the reason for her partial denial of the refund was her retroactive adjustment of the plaintiff's contribution rate for 1989 through 1991.

According to the record, when the Director issued her final decision, she computed the amount of the plaintiff's contributions due at the favorable rate of 0.6% of taxable wages. This is apparently the rate applied to experienced employers. According to the Director, the plaintiff was not eligible for the favorable rate because she was not an experienced employer. The Director determined that plaintiff's contributions should have been determined at the higher rate of 3.3% of taxable wages. The Director then relied upon section 2200 of the Act to recalculate the contribution amount owed by the plaintiff using the higher rate. This amount equaled $4,835.14, the refund amount denied by the Director.

On the August 20, 1993, the plaintiff filed an objection to the Director's partial denial of refund, and the Director's representative held a hearing on the matter on January 6, 1994. The Director's representative affirmed the Director's unilateral retroactive contribution rate adjustment, and the plaintiff filed her objections to this finding on January 27, 1994. On March 2, 1994, the Director adopted her representative's findings of fact and recommendations and sustained her partial denial of the plaintiff's refund.

The plaintiff appealed the Director's partial denial of refund to the Madison County circuit court on March 15, 1994, pursuant to section 2205 of the Act. After hearing arguments on the issue, the circuit court held that the Director's July 9, 1993, "Final Decision" was final and binding on all parties pursuant to section 2204 of the Act (840 ILCS 405/2204 (West 1994)), and therefore, neither the Director nor the Department could retroactively increase the amount of the plaintiff's contribution which was due for the period 1989 through 1991. On August 15, 1994, the circuit court entered an order reversing the Director's decision to partially deny plaintiff's refund request and ordered the Department to pay the plaintiff $4,835.14 plus interest. The defendants appeal.

The defendants argue that section 2200 authorized the Director to determine whether all contributions payable by an employer were included in the final assessment and, if not, to make a determination and assessment of the proper contribution amount due despite any finality of an earlier "final" decision.

The defendants rely on Winakor v. Annunzio (1951), 409 Ill. 236, 99 N.E.2d 191, to support their position. In Winakor, the Illinois Supreme Court noted, "while the statute [section 18(c)(7)(C) of the Unemployment Compensation Act (Ill. Rev. Stat. 1947, ch. 48, par. 234(c)(7)(c) (now codified as 820 ILCS 405/1509 (West 1994)))] specifically makes a rate determination binding upon the employer, it does not make it binding upon the Director, either expressly or by implication." ( Winakor, 409 Ill. at 249, 99 N.E.2d at 197.) We find that Winakor is inapplicable because it does not address the binding effect of a Director's "Final Decision" issued following an adjudicatory administrative hearing. Winakor involved the assignment of a contribution rate by the Director. This rate was not determined at an administrative hearing. Later, the Director changed the assigned rate, and the ...


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