Appeal from the Circuit Court of Cook County. No. 97-L-50149 Honorable John A. Ward, Judge Presiding.
The opinion of the court was delivered by: Justice Zwick
In this appeal, we must decide whether the administrative agency erred in determining that Carpetland U.S.A., Inc. ("Carpetland"), owed unemployment contributions under the Unemployment Insurance Act ("the Act") (820 ILCS 405/100 et seq. (West 1998)) for its installation contractors and measure services.
Carpetland sought administrative review of a decision by Lynn Quigley Doherty, Director of the Illinois Department of Employment Security ("Director"), which adopted and affirmed an Illinois Department of Employment Security ("Department") representative's determination. The Department found that work performed by installation contractors and measurers for Carpetland's customers was "employment" under the Unemployment Insurance Act (820 ILCS 405/100 et seq. (West 1998)) and, therefore, not exempt under section 212 of the Act. 820 ILCS 405/212 (West 1998). The Director further determined that Carpetland owes $38,977.17 plus interest and $200 in penalties in unpaid unemployment contributions on behalf of 259 installation contractors and 12 measure services. On administrative review, the circuit court affirmed the Director's decision and entered judgment in favor of the Department. Carpetland now appeals from that judgment.
On appeal, Carpetland contends (1) that the Director's decision that the services performed by installation contractors and measurers constituted employment within the meaning of section 206 of the Act (820 ILCS 405/206 (West 1998)) is against the manifest weight of the evidence, (2) the circuit court erred as a matter of law in deciding that Carpetland waived its constitutional claims by not raising them at the administrative level, and (3) Carpetland was denied due process by the procedure leading to the Director's decision. Because we agree with Carpetland's first contention, we need not address its second and third claims.
The following evidence was introduced at the administrative hearing before the Director's representative. Carpetland U.S.A. is a retailer of floor coverings, primarily carpet. During 1991, Carpetland operated 17 retail stores in Illinois. Each customer who requested installation agreed to the following terms which were included in the customer's contract with Carpetland:
"INSTALLATION BY SUBCONTRACTOR
It is understood that Carpetland will not install said materials but that by the acceptance of this proposal you authorize Carpetland to contract with a subcontractor on [your] behalf to make the installation. You authorize Carpetland to issue to said subcontractor on [your] behalf an installation work order with these specifications. You agree to pay to Carpetland the amount specified herein which shall include the price of all materials and the installation charges which are payable to the subcontractor on your behalf."
Next, Carpetland arranged for and contracted with an installer to complete the installation. In 75% of Carpetland's floor covering sales, installation was included in the sale and the price. In these sales, the customer paid Carpetland directly for the installation.
Three installers and one measurer testified at the hearing before the representative describing their relationships with Carpetland as well as the nature of their businesses. Installers and measurers could hire helpers or employees to work for them. Joseph Smith, an installer, testified during the hearing that he was president of a company called The Tile Works, Inc., which was an installation service that performed floor covering installations for Carpetland and other carpet companies. Smith later changed the name of the business to J. Smith Floors, and Carpetland made payments to this entity. Smith testified that he engaged helpers, both as employees and subcontractors. The representative found that, while there was no record for The Tile Works, Inc., in the Department's files, there was a record for J. Smith Flooring, Inc., in May 1994. The representative concluded that Smith may have created a corporate entity, but he did not truly work for that entity since Smith did not adhere to corporate structure formalities.
Kenneth W. Weiss, a measurer, also testified at the hearing. He stated that for the first part of 1991 he worked for his father's company, G.W. Carpet Service, and through that business entity, he performed carpet measuring for Carpetland as well as for others. There is no information in the record to show that G.W. Carpet Service paid any unemployment contributions on Weiss' behalf. For the second half of the year, Weiss testified that he created his own company called Ken Weiss Measure Service, which had no employees and dealt directly with Carpetland. Weiss stated that he filed an income tax return as a subcontractor of Gary Weiss for the first half of 1991 and of Carpetland for the second half.
James Lawson testified at the hearing that in 1991 he installed carpets, vinyl and some hardwood floors for carpet stores, including Carpetland, under the name Lawson's Carpet Service. Lawson stated that he advertised for a full- or part-time helper and hired a few, but had to fire them because they were not sufficiently qualified. Department records showed that Lawson's Carpet Service had a Department account number and reported having one employee during the first six months of 1991.
Craig Panozzo testified that during 1991 he worked for Craig's Custom Tile where he acted as the sole proprietor, president, worker, and owner. Panozzo performed work for Carpetland installing ceramic and marble flooring in new construction. He stated that he has no employer account number with the Department, he used his own social security number, and that he did not file a corporate federal income tax return in 1991. Payments by Carpetland in 1991 were made to Craig Panozzo. The representative therefore concluded that Panozzo did not truly work for the corporate entity Craig's Custom Tile because he did not adhere to corporate structure formalities.
In reviewing a final decision under the Administrative Review Law (735 ILCS 5/3-101 et seq. (West 1998)), we review the agency's decision and not the circuit court's determination. XL Disposal Corp. v. Zehnder, 304 Ill. App. 3d 202, 207, 709 N.E.2d 293, 297 (1999). Judicial review of the Department's decision extends to all questions of law and fact presented by the record. Cohen Furniture Co. v. Department of Employment Security, 307 Ill. App. 3d 978, 981, 718 N.E.2d 1058, 1061 (1999). The Department's factual findings are held to be prima facie true and a reviewing court may only set aside such decisions if they are contrary to the manifest weight of the evidence. Cohen, 307 Ill. App. 3d at 981. However, the Department's conclusions of law are not entitled to such deference and are subject to de novo review. AFM Messenger Service, Inc. v. Department of Employment Security, 315 Ill. App. 3d 308, 312, 733 N.E.2d 749 (2000).
The facts in this case are not in dispute. As in City of Belvidere v. Illinois State Labor Relations Board, 181 Ill. 2d 191, 205, 692 N.E.2d 295 (1998), "this case involves an examination of the legal effect of a given set of facts, [and therefore] it involves a mixed question of fact and law." As such, the Illinois Supreme Court held that a clearly erroneous standard of review applied. The clearly erroneous standard is "between a manifest weight of the evidence standard and a de novo standard so as to provide some deference to the [agency's] experience and expertise." City of Belvidere, 181 Ill. 2d at 205. We must accept the administrative agency's findings under this standard unless we are "'left with the definite and firm conviction that a mistake has ...