Court of Appeals of Illinois, First District, Sixth Division
C.R. ENGLAND, INC., a Foreign Corporation, Plaintiff-Appellee,
THE DEPARTMENT OF EMPLOYMENT SECURITY, an Administrative Agency of the State of Illinois, MAUREEN T. O'DONNELL, DIRECTOR OF EMPLOYMENT SECURITY, an Administrative Agency of the State of Illinois; RONALD S. RODGERS, Representative of the Director of Employment Security, an Administrative Agency of the State of Illinois, Defendants-Appellants. C.R. ENGLAND, INC., a Foreign Corporation, Plaintiff-Appellee,
THE DEPARTMENT OF EMPLOYMENT SECURITY, an Administrative Agency of the State of Illinois; THE DEPARTMENT OF EMPLOYMENT SECURITY, BOARD OF REVIEW, an Administrative Agency of the State of Illinois; MAUREEN T. O'DONNELL, Director of Employment Security, an Administrative Agency of the State of Illinois, Defendants-Appellants.
Appeal from the Circuit Court of Cook County. Nos. 11 CH 16972 11 CH 14681 Honorable Margaret Ann Brennan, Judge Presiding.
PRESIDING JUSTICE ROCHFORD delivered the judgment of the court, with opinion. Justices Hall and Reyes concurred in the judgment and the opinion.
ROCHFORD PRESIDING JUSTICE
¶ 1 In case number 11 CH 16972, plaintiff, C.R. England, Inc. (CRE), sought administrative review of a decision by the Director of the Illinois Department of Employment Security (the Department) finding that CRE was the chargeable last employer for William Park's claim for unemployment insurance benefits. In case number 11 CH 14681, CRE also sought administrative review of a decision by the Department's board of review (Board of Review) finding that Mr. Park was eligible for unemployment insurance benefits under section 602(A) of the Unemployment Insurance Act (the Act) (820 ILCS 405/602(A) (West 2010)) because he was discharged by CRE for reasons other than employment-related misconduct. The circuit court reversed both decisions. Defendants, the Board of Review, Maureen T. O'Donnell, Director (Director) of the Department, and Ronald S. Rodgers, representative of the Director of the Department, filed this consolidated appeal from the circuit court's orders reversing the Director and the Board of Review. We reverse the circuit court's orders in both case number 11 CH 16972 and case number 11 CH 14681 and affirm the Director and the Board of Review.
¶ 2 Mr. Park, an over-the-road truck driver, hauled freight for CRE, a national trucking company, pursuant to an "independent contractor operating agreement" (agreement) entered into between them on March 2, 2010. On May 13, 2010, Mr. Park was hauling a trailer for CRE's customer, Walmart, and as he turned from the highway into a parking lot, he struck a utility pole causing thousands of dollars of damage to Walmart's trailer for which CRE had to pay. As a result of the accident, on May 14, 2010, CRE's safety department disqualified Mr. Park from further driving for CRE, and CRE terminated the agreement with him. Mr. Park thereafter applied for unemployment insurance benefits.
¶ 3 A Department claims adjuster found that CRE was the chargeable last employer for Mr. Park's claim for unemployment insurance benefits. CRE protested, contending it was not the chargeable last employer because Mr. Park's services for CRE were excluded from the Act's definition of "employment, " given that Mr. Park's relationship with CRE was that of an independent contractor, not an employee. CRE also contended Mr. Park was ineligible for unemployment insurance benefits because he was discharged for employment-related misconduct under section 602(A) of the Act (820 ILCS 405/602(A) (West 2010)).
¶ 4 The administrative proceedings on the "chargeable last employer" issue were separate from those on the employment-related-misconduct issue. The facts relative to each issue are as follows.
¶ 5 I. The "Chargeable Last Employer" Issue
¶ 6 A. Evidence Adduced During the Administrative Hearing
¶ 7 CRE administratively appealed the claims adjustor's decision that it was the chargeable last employer for Mr. Park's claim for unemployment insurance benefits and the matter was heard by the Director's representative during a January 2011 hearing. At the beginning of the hearing, the Director's representative explained that the issues relevant to determining whether CRE was the chargeable last employer for Mr. Park's claim for unemployment insurance benefits included: (1) whether Mr. Park's services for CRE constituted "employment" under section 206 of the Act (820 ILCS 405/206 (West 2010)); and (2) whether Mr. Park's services for CRE were excluded from the Act's definition of "employment" under the exemptions in section 212 of the Act (820 ILCS 405/212 (West 2010)), relating to independent contractors, or section 212.1 of the Act (820 ILCS 405/212.1 (West 2010)), relating to truck owner-operators.
¶ 8 The hearing proceeded and CRE presented one witness, Tricia O'Neal, then-Director of CRE's independent contractor division. The following evidence was adduced during the hearing via Ms. O'Neal's testimony and admitted exhibits.
¶ 9 CRE, a Utah corporation headquartered in Salt Lake City, is a freight-hauling trucking company that operates in 48 states, as well as Canada and Mexico. CRE is a motor carrier with an authority issued by both the United States Department of Transportation and the Illinois Commerce Commission, and is licensed by the Federal Motor Carrier Safety Administration. As such, CRE is an authorized carrier in Illinois. In December 2010, CRE opened an Illinois office in the Chicago area.
¶ 10 In mid-November 2009, Mr. Park entered into a student training agreement with CRE in order to learn how to drive a truck and haul freight. During his training period, which lasted until March 2, 2010, CRE acknowledged him as its employee, as it hired and trained him, and paid and issued him a W-2 tax form.
¶ 11 The training program consisted of two phases. During phase one, Mr. Park had on-the-job training, under the auspices of a certified driving trainer, and completed a road evaluation and certification program. Mr. Park completed phase one in mid-December 2009.
¶ 12 During phase two, Mr. Park was assigned as a second seat to an "independent contractor" driver and was paid by CRE on a per mile basis. The student training agreement specified that at the conclusion of phase two, Mr. Park could choose one of the following career paths: (1) become an independent contractor and begin his own business; (2) become an independent contractor and a trainer in the second phase of CRE's training program; (3) remain a CRE employee as a second seat with an independent contractor; or (4) remain a CRE employee with a company truck.
¶ 13 Mr. Park completed phase two of his training in late February 2010 and then resigned his position as a CRE employee to become an independent contractor under the first "career path" designated in the student training agreement. On March 2, 2010, Mr. Park entered into the independent contractor operating agreement (agreement). Ms. O'Neal confirmed that the agreement was prepared "by or at the behest of [CRE]" and that she went over its provisions and ensured that it was executed. She explained that CRE has a computer program that produced the agreement, and the agreement entered into between CRE and Mr. Park was the same one CRE enters into with any driver who wishes to become an independent contractor, with the driver's specific information inserted therein. For example, the agreement named Mr. Park and included his personal information, including his address in Glendale Heights, Illinois. The agreement referred to Mr. Park as "YOU" or "CONTRACTOR, " and CRE as "WE" or "OUR." Its preamble provided that CRE "wish[es] to utilize independent contractors to assist in OUR motor carrier business"; that Mr. Park possesses equipment "which is suitable for use in OUR business"; and that Mr. Park is "willing to perform personally certain functions related to the operation of the equipment in OUR business."
¶ 14 The agreement provided that it could be terminated by either CRE and Mr. Park at any time and for any reason upon 30 days' written notice to the other. The agreement also contained a choice of law provision, stating: "This Agreement shall be interpreted under the laws of the United States and the State of Utah, without regard to the choice-of-law rules of such State or any other jurisdiction."
¶ 15 In order to drive for CRE, Mr. Park needed to lease or buy a truck that complied with CRE's weight, length and age requirements. On March 2, 2010, Mr. Park leased a truck from Opportunity Leasing, Inc., d/b/a Horizon Truck Sales and Leasing (Horizon). Ms. O'Neal confirmed that CRE and Horizon have the same street address and post office box mailing address in Salt Lake City. Ms. O'Neal acknowledged that a 2001 decision from the Utah Department of Workforce Services stated that Horizon was "a company owned and operated by [CRE]." Ms. O'Neal testified that to the best of her knowledge nothing changed relative to the relationship between CRE and Horizon from 2001 to the time Mr. Park leased his truck from Horizon in 2010. However, she subsequently testified that she had no knowledge as to whether CRE owns Horizon and she testified that CRE and Horizon are separate corporations.
¶ 16 Under federal law (see 49 CFR § 376.1 et seq. (2012)), in order to operate the truck on behalf of CRE, Mr. Park had to lease the truck back to CRE, as the licensed carrier that has the federal and state issued motor carrier authority. Accordingly, the agreement contained a provision noting that Mr. Park leased the truck to CRE and would operate under CRE's motor carrier authority. However, Mr. Park could contract with other motor carriers and drive for them in addition to CRE.
¶ 17 Once Mr. Park executed the agreement with CRE, leased the truck from Horizon, and leased the truck back to CRE, he began hauling freight for CRE. Mr. Park worked for CRE's "dedicated division, " driving a "dedicated route" for CRE's "dedicated account, " Walmart, five to six days each week. Walmart would inform CRE about the load to be transported and the times at which it was to be picked up and then delivered, which a CRE driver manager would communicate to Mr. Park when offering him the load. Mr. Park would report to the Walmart distribution center in Sterling, Illinois, where he attached his truck to a Walmart trailer and then transported it to an assigned transportation point, either another Walmart distribution center or a Walmart retail store in Illinois or another state.
¶ 18 Ms. O'Neal testified that Mr. Park set his own work hours by being available for loads and then either accepted or rejected them when offered by CRE. Once Mr. Park accepted a load, he chose his own route between the pickup and delivery points, and was paid per mile based on an industry-standard rate. The agreement contained certain requirements that Mr. Park had to abide by in terms of loading and unloading freight, such as when he could and could not use the services of a "lumper, " someone to help load and unload freight.
¶ 19 CRE's independent contractors, including Mr. Park, were paid $0.80 to $1.53 per mile, while its acknowledged employee drivers were paid $0.25 to $0.49 per mile. Independent contractors were paid more per mile than acknowledged employee drivers because they were not entitled to company benefits (i.e., insurance, paid vacations, retirement plan) and were responsible for certain business expenses.
¶ 20 Various provisions of the agreement described the expenses for which Mr. Park was responsible, including workers' compensation insurance, vehicle insurance, vehicle maintenance and repairs, drivers license fees and permits, and costs related to operating and licensing the truck. However, CRE provided Mr. Park with certain financial assistance and equipment. Specifically, under the agreement, CRE reimbursed Mr. Park 100% for tolls he paid while operating in Illinois and other specified states. Also, Mr. Park participated in CRE's "fuel cap program, " which allowed him to pay a discounted price for fuel used in hauling freight for CRE. And, CRE provided and installed satellite communications equipment in Mr. Park's truck and paid all messaging usage charges so that he could communicate with CRE's driver managers.
¶ 21 In addition, CRE put programs in place to assist Mr. Park in securing health insurance, truck and liability insurance, and occupational accident insurance. CRE offered a truck investment fund, where it would take out funds from Mr. Park's weekly check in order for him to put a down payment on a truck should he wish to buy one. CRE also advised Mr. Park about a business consulting and tax preparation company for independent contractors called Owner-Operator Solutions, Inc., and pursuant to the agreement he authorized deductions from his weekly check for business consulting, bookkeeping and tax preparation services.
¶ 22 CRE issued Mr. Park a 1099 tax form and he was responsible for filing his own self-employment tax forms as an independent contractor.
¶ 23 After the accident, CRE's safety department disqualified Mr. Park from further driving for it, and then on May 14, 2010, CRE terminated the agreement. That same day, Mr. Park terminated the vehicle lease with Horizon and relinquished possession of the truck.
¶ 24 B. The Administrative Decision
¶ 25 The Director's representative issued his recommended decision in which he concluded: (1) Illinois law applied to determine whether CRE was the chargeable last employer for Mr. Park's claim for unemployment insurance benefits; and (2) for purposes of the Act, Mr. Park was an employee of CRE, not an independent contractor or a truck owner-operator and, therefore, CRE was the chargeable last employer for Mr. Park's claim for unemployment insurance benefits. The Director then issued her decision, adopting and affirming the recommended decision. We will more fully discuss the Director's decision later in this opinion.
¶ 26 II. Employment-Related-Misconduct Issue
¶ 27 A. Initial Determination and Evidence Adduced During the Administrative Hearing
¶ 28 CRE protested that Mr. Park was ineligible for unemployment insurance benefits under section 602(A) of the Act (820 ILCS 405/602(A) (West 2010)) because he was discharged for employment-related misconduct. A Department claims adjuster determined that Mr. Park was eligible for unemployment insurance benefits because he was discharged by CRE for an accident, not for employment-related misconduct. CRE administratively appealed that decision and the matter was heard by a Department referee during a December ...