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Perry & Associates, LLC v. Illinois Department of Employment Security

Court of Appeals of Illinois, First District, Fourth Division

February 2, 2017

PERRY & ASSOCIATES, LLC, Plaintiff-Appellant,

         Appeal from the Circuit Court of Cook County No. 14 L 50442 Honorable Robert Lopez Cepero, Judge Presiding.

          McBRIDE JUSTICE delivered the judgment of the court, with opinion.

          Justices Howse and Burke concurred in the judgment and opinion.



         ¶ 1 Plaintiff Perry & Associates, LLC appeals from the circuit court's order affirming the administrative decision of defendants, the Illinois Department of Employment Security (Department) and the Director of Employment Security (Director), holding that the raise in plaintiff's rate for contributions to the Illinois Unemployment Insurance Trust Fund (Fund) for calendar year 2013 was proper. On appeal, plaintiff argues that the Department cannot retroactively change the contribution rate for an employer midyear because (1) this change violates the terms of section 1509 of the Unemployment Insurance Act (Act) (820 ILCS 405/1509 (West 2012)), (2) the unilateral ability to increase the rate at any time on any year violates public policy, (3) the retroactive application of the rate and imposition is improper, (4) the Department caused delays in proceedings by failing to provide a fair hearing such that it is inequitable to assess interest, and (5) the refusal to address the benefits to the claimaint as a defense to the rate was improper.

         ¶ 2 Plaintiff is an architectural and structural engineering firm located in Chicago, Illinois, with Christopher J. Perry as the principal. In November 2011, plaintiff, through Perry, terminated the employment of the claimant Clarence Passons. Passons filed a claim for unemployment benefits with the Department. Plaintiff contested Passons unemployment claim, contending that Passons was ineligible due to misconduct.

         ¶ 3 The administrative proceedings over the benefits claim were complicated and lasted multiple years. Three hearings were conducted before two different referees. In December 2012, following the third hearing, the referee found that the claimant was terminated for misconduct and ineligible for benefits. Passons appealed to the Board of Review (Board), which reversed the referee's decision in April 2013. The Board concluded that the evidence did not support a finding of misconduct. Plaintiff sought review in the circuit court. In December 2013, the circuit court remanded the case back to the Board with instructions to assess credibility in making its decision. In February 2014, the Board issued its new decision with credibility determinations and set aside the referee's decision. Plaintiff again filed for administrative review in the circuit court. In September 2014, the circuit court affirmed the Board's decision finding it was not clearly erroneous. Plaintiff filed an appeal with this court. We affirmed the Board's decision, finding the Board's determination that Passons was not terminated for misconduct under section 602A of the Act was not clearly erroneous and Passons was eligible for benefits. See Perry & Associates, LLC v. Illinois Department of Employment Security, 2016 IL App (1st) 143344-U. Plaintiff filed a petition for leave to appeal with the Illinois Supreme Court, which the court denied on September 28, 2016. Perry & Associates, LLC v. Illinois Department of Employment Security, No. 120799 (Sept. 28, 2016) (petition for leave to appeal denied). Thus, our decision affirming the Board's finding that Passons was eligible for benefits is the final decision on the benefits case.

         ¶ 4 As a result of the December 2012 determination by the referee that Passons was ineligible for unemployment benefits, the benefit charges incurred by plaintiff due to payments made to Passons were cancelled. The Department reduced the rate at which plaintiff was required to make contributions to the Fund for the calendar year 2013 to the minimum rate of 0.55% of taxable wages. In April 2013, the Board issued its decision setting aside the referee's finding and found Passons eligible for benefits. In July 2013, the benefit charges were restored to plaintiff's account based on the Board's decision. The Department revised the contribution rate for calendar year 2013 to 2.85% of taxable wages, retroactive to the beginning of the year.

         ¶ 5 In August 2013, plaintiff filed a protest to the revised contribution rate. Plaintiff asked the Department to reverse the rate increase, arguing that it had a "substantial likelihood of prevailing" on the benefits case in the circuit court. The Director denied plaintiff's protest "unless and until" the circuit court ruled in plaintiff's favor. Plaintiff subsequently filed a protest and petition for hearing with the Department, asserting that "the computed rate is against the weight of the evidence of a chargeable claim due to repeated misconduct on the part of the Department" and the Board was "not authorized" to revise the contribution rate.

         ¶ 6 In October 2013, the Director's representative issued his recommended decision that the Director's decision denying plaintiff's application for review be affirmed. The findings of fact stated that plaintiff's 2013 contribution rate revision from the minimum 0.55% to the "experienced" 2.85% was "solely attributable to the addition to [plaintiff's] account of benefit charges" in the fourth quarter of 2011 and the first two quarters of 2012. All of the benefit charges related to the November 2011 termination of Passons. The Director's representative concluded that under section 1509 of the Act, the Director's orders are considered prima facie correct and the burden is on the protesting employer to prove that the decision is incorrect. The Director's representative found that plaintiff failed to meet its burden and that plaintiff failed to state a basis for relief under the facts or the law.

         ¶ 7 Plaintiff subsequently filed an objection to the recommended decision of the Director's representative. Plaintiff contended that section 1509 provides that the contribution rate is "final and conclusive" in all proceedings, and the Department cannot revise the contribution rate after the rate has been set. In November 2013, the Director remanded the case to his representative to conduct a hearing.

         ¶ 8 In March 2014, the Director's representative conducted a telephone hearing with Perry as the representative for plaintiff. Later in March 2014, following the hearing, the director's representative issued his recommended decision that the Director's order denying plaintiff's objection be affirmed. The second recommended decision is substantially similar to his prior recommendation.

         ¶ 9 In April 2014, plaintiff filed its objection to the recommended decision of the director's representative. Plaintiff raised several reasons for its objection. First, plaintiff argued that the recommended decision results in an unconstitutional retroactive tax. Plaintiff asserted that this was an "extraordinary" situation because it involved events more than two years ago and the extended time frame for adjudication was the fault of the Department. Next, the recommended decision was procedurally incorrect based on the Board's actions on the benefits case in 2013. Finally, the recommended decision is incompatible with the supreme court's decision in Winakor v. Annunzio, 409 Ill. 236 (1951), because in Winakor, the rate revision was made within the same operative tax year, whereas the Department's actions have made the revision years later.

         ¶ 10 In May 2014, the Director issued his decision. The Director found that under section 1509 of the Act (820 ILCS 405/1509 (West 2012)), plaintiff was barred from contesting the amount of benefits charges used to calculate its contribution rate if the statement of benefit charges was served on plaintiff, and the record indicated that it was. The Director found that plaintiff's contentions regarding the benefit charges could be "solely resolved" by the resolution of the benefits case. The Director stated that he had no authority to disregard the decision of the Board and its finding that Passons was eligible for benefits had not been set aside. Accordingly, the contribution rate for 2013 was correct.

         ¶ 11 Further, the Director observed that the Department's authority to issue revised contribution rate determinations was established in Winakor and is not unconstitutional. The Director also noted that interest on additional contributions due to an upwardly revised contribution rate would be waived if the employer pays the additional contributions within 30 days after the notice of the revised contribution rate was mailed. See 56 Ill. Adm. Code 2765.63 (1987). If the employer failed to pay the additional contributions within 30 days, then interest would begin to accrue on the unpaid balance on the account from the date that the original contributions accrued. If the revised contribution rate was later set aside, then employer's remedy was to seek a refund under section 2201 of the Act. 820 ILCS 405/2201 (West 2012). See also Northern Trust Co. v. Bernardi, 115 ...

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