Commonwealth Life & Acc. Ins. Co. v. Board of Review of Dept. of Labor

• Decision Date: 23 March 1953
• Docket Number: No. 32663,32663
• Citation: 414 Ill. 475,111 N.E.2d 345
• Court: Illinois Supreme Court
• Parties: COMMONWEALTH LIFE & ACCIDENT INS. CO. v. BOARD OF REVIEW OF DEPARTMENT OF LABOR et al.

Page 345

111 N.E.2d 345

414 Ill. 475

COMMONWEALTH LIFE & ACCIDENT INS. CO. v. BOARD OF REVIEW OF DEPARTMENT OF LABOR et al.

No. 32663.

Supreme Court of Illinois.

March 23, 1953.

Ivan A. Elliott, Atty. Gen. (William C. Wines, Raymond S. Sarnow, and A. Zola Groves, Chicago, of counsel), for appellants.

Henry X. Dietch, of Chicago, for appellee.

DAILY, Justice.

Max Cooper, one of the appellants in this cause, filed a claim on October 26, 1946, for unemployment benefits under the Unemployment Compensation Act. A deputy in the Department of Labor made a finding that he was not eligible to receive benefits because the services he had performed in the year 1945, for appellee, the Commonwealth Life and Accident Insurance Company, were excluded from the definition of 'employment' by the provisions of section 2(f)(6)(M). Ill.Rev.Stat.1945, chap. 48, par. 218. The content of the section, the application of which is the crux of this proceeding, is as follows: 'The term 'Employment' shall not include * * *. Services performed by an individual as an insurance agent or insurance solicitor, if all such services performed by such individual are performed for remuneration solely by way of commission.' It is appellee's contention, apparently adopted by the deputy, that the claimant was an insurance agent and was remunerated solely by way of commission, and thus excluded from the provisions of the act.

Claimant appealed from the deputy's finding to the referee of the Department, contending that appellee had paid him a guaranteed salary in 1945 and that consequently he was not remunerated for his services solely by way of commissions. A hearing was held before the referee, following which, the decision of the deputy was set aside on the ground that the services claimant performed for appellee were not exempted by section 2(f)(6)(M) and, consequently, were 'insured work.' Appellee then appealed to the Board of Review, which body, after further hearing, affirmed the decision of the referee. Following this, appellee instituted administrative review proceedings in the superior court of Cook County, with the result that the court entered an order reversing the decision of the Board of Review. The Director of the Department of Labor, the Board of Review, and the claimant have prosecuted the appeal to this court. The issues raised here resolve themselves into two inquiries: First, were claimant's services performed as an insurance agent or solicitor, and, second, if so, were all of such services performed for remuneration solely by way of commission?

The facts relating to these issues show that claimant was hired by appellee's office manager, Frank H. Clark, after responding to a newspaper advertisement. Since appellee was in the process of establishing itself in the Chicago area, it had a policy which permitted its agents to draw against future commissions as a part of a plan to enable them to earn a fair living while building up their debits, a debit being a list of insurance premiums in force in a particular area which the agent was charged with collecting. If an agent made an excellent record, the amount of his draw was increased, whereas, if the draw consistently exceeded the agent's earnings, it was either decreased or his services were dispensed with. In the latter case, appellee made no attempt to collect the overdraft but merely took the loss. The weekly draw or advance was charged by the appellee against a reserve built upon on the basis of a computation of twenty times the net increase in an agent's insurance sales.

When claimant was employed he was given a debit to collect, upon which he would receive 20 per cent commission, and, in addition was expected to build up his debit by selling new insurance upon which he would receive the regular commission for net increase. Clark guaranteed claimant minimum earnings of $45 a week, in the form of a draw or advance on future commissions for new business, and the record leaves little doubt that claimant was to receive his weekly draw, in addition to his commissions on collections from his debit, whether he sold any new insurance in a particular week or not. As a practical matter, however, if any agent got too far overdrawn, his services were dispensed with.

On the day claimant was hired he signed a one-year contract with appellee which set forth the commissions the company would pay him both for new business and collections. It further provided that the company 'may, in its sole discretion, advance to the Agent against commissions earned by him, or partially earned by him, an account up to but not exceeding * * * dollars per week, the amount of such advance to be left solely in the discretion of the company.' In this case it was the office-manager, Clark, who fixed the amount of claimant's weekly advance. The amount fixed was not inserted in the space provided in the contract with claimant because, as Clark explained, the amount would be varied according to an agent's ability and would be raised or lowered as the occasion demanded. The contract mentioned nothing of claimant's liability for overdrafts caused by advances in the event he left the company's employ.

Claimant worked for appellee from December 13, 1944, to January 7, 1946, having signed a new contract at the conclusion of his first year's service. He devoted his entire time to the work and reported to appellee's office each morning, Monday through Friday. His collections from his debit for the year 1945, averaged about $150 a week and for the same period his pay averaged $75 a week. Some weeks he earned the $45 advance and in others he did not. It took him a number of weeks before he earned the $45 advance and by that time he was considerably overdrawn. When claimant left appellee's employ, apparently at its request, he was several hundred dollars overdrawn but the company did nothing to try to collect, a policy that was normally followed.

Before determining whether claimant comes within the exclusionary provisions of section 2(f)(6)(M), it should be reasserted that the Unemployment Compensation Act is an exertion of the police power of the State, remedial in nature, and has as its purpose the alleviation of the evils flowing from widespread unemployment and the provision of benefits to those workers coming within the act, as at least a partial reimbursement for loss of income during periods of unemployment. Zehender & Factor, Inc. v. Murphy, 386 Ill. 258, 53 N.E.2d 944; Oak Woods Cemetery Ass'n v. Murphy, 383 Ill. 301, 50 N.E.2d 582. Generally speaking, statutes of this character, enacted in the interest of the public welfare, are to be liberally construed to the end that their basic purpose may be achieved. Specifically, we have held that the Unemployment Compensation Act is remedial legislation which should be liberally construed to the end that the benefits intended under its provisions are received by employees. Zelney v. Murphy, 387 Ill. 492, 56 N.E.2d 754; Lindley v. Murphy, 387 Ill. 506, 56 N.E.2d 832. Another well established rule in this jurisdiction is that exemptions from the application of the act are to be strictly construed against the party asserting the exemption and the burden is on such party to prove that it is exempt, under the exclusionary provisions. American Medical Ass'n v. Board of Review, 392 Ill. 614, 65 N.E.2d 350; Crouch v. Murphy, 390 Ill. 112, 60 N.E.2d 879; Grant Contracting Co. v. Murphy, 387 Ill. 137, 56 N.E.2d 313.

Although there seems to have been little controversy over the question in the proceedings below, appellants make the contention that the claimant was not an 'insurance agent' or an 'insurance solicitor' within the meaning of the controverted section and, thus, not exempt. They argue that the legislature, by the terms employed, intended to remove from coverage only those agents or solicitors who sold new insurance exclusively and who had no territory or debit, were not engaged in the collection of premiums, received no advances and were compensated solely on a commission basis. This, in effect, is the holding in Capital Life & Health Ins. Co. v. Bowers, 4 Cir., 186 F.2d 943, wherein the court interpreted a provision of the Federal Unemployment Tax Act, 26 U.S.C.A. § 1607(c)(14), identical with the Illinois provision. We do not impute such a narrow construction to the Illinois provision for several reasons.

The exclusionary provision was incorporated into the Federal Unemployment Tax Act by an amendment passed by Congress in 1940. Subsequently, Illinois and thirty-eight other States adopted identical or similar provisions in their own Unemployment Compensation Act. The history of the Federal legislation, which is fully discussed in Washington National Ins. Co. v. Employment Security Comm., 61 Ariz. 112, 144 P.2d 688, and Home Beneficial Life Ins. Co. v. Unemployment Compensation Comm., 181 Va. 811, 27 S.E.2d 159, shows that the exclusionary provision was enacted because of disagreements among courts as to the coverage of industrial insurance agents who collect premiums, as well as life insurance agents paid solely by commission. In explaining the purpose of the amendment, the chairman of the congressional committee stated: '* * * Several states have exempted insurance salesmen from coverage, and your committee believes that it would be wise to exclude from the Federal Unemployment (compensation) Tax insurance salesmen whose sole pay is by way of commission. This would, or course, still leave the states free to cover this employment when they choose to do so, but it would eliminate the present situation, where the entire federal tax, without any offset for state unemployment contributions, comes to the federal government where the state exempts this employment. The principal class of insurance salesmen which would be affected, is that class engaged in what is generally called industrial insurance.' 61 Ariz. 112, 144 P.2d 692. The Arizona and Virginia...