Donaldson v. Gordon

• Decision Date: 18 September 1947
• Docket Number: No. 29646.,29646.
• Citation: 397 Ill. 488,74 N.E.2d 816
• Parties: DONALDSON v. GORDON.
• Court: Illinois Supreme Court

397 Ill. 488

74 N.E.2d 816

DONALDSON

v.GORDON.

No. 29646.

Supreme Court of Illinois.

Sept. 18, 1947.

Appeal from Circuit Court, Winnebago County; William R. dusher, judge.

Proceedings by George J. Donaldson, doing business as Donaldson Floor Company, against Robert L. Gordon, Director of Labor, to review a determination of the Director that George J. Donaldson, doing business as Donaldson Floor Company, was liable for the payment of unemployment contributions for the years 1937 and 1938. From an order sustaining the determination of the Director, Donaldson appeals.

Reversed and remanded with directions.

James Berry, of Rockford, for appellant.

George F. Barrett, Atty.Gen., of Springfield (Albert E. Hallett, of Chicago, of counsel), for appellee.

GUNN, Justice.

The Director of Labor made a determination that George J. Donaldson, doing business as Donaldson Floor Co., was liable for the payment of unemployment contributions for the years 1937 and 1938, and upon review by the circuit court of Winnebago county the determination of the Director of Labor was sustained. Donaldson appeals directly to this court under the provisions of section 25 of the Unemployment Compensation Act. Ill.Rev.Stat.1945, chap. 48, par. 242.

The facts in the case are substantially as follows: Donaldson had a franchise for the sale of the products of the Flexotile Floor Co. of Rockford, Illinois. His territory consisted of the State of Iowa, a substantial portion of the State of Michigan, and all of Illinois outside of the city of Rockford. He kept his office with the Flexotile Floor Co., but was not an employee of the company. The Floor company manufactured a floor covering, which was attached by cement and leveled and polished into shape by certain equipment owned by Donaldson. His arrangement with the company was to go through the territory assigned to him, finding persons who desired such a floor, make an estimate of the costs of installation, purchase and pay for the product manufactured by the Flexotile Floor Co., and, with his own men, install it and collect the purchase price.

After a time the territory became too large for him to handle alone, and from time to time he made arrangements for the assistance of P. W. Hopkins, Henry Arndt, Earl L. Sandy and Stanley Wahlstrom. His relation to these men is the subject matter involved in this case. If these four men come within the provisions of the statute defining ‘employment,’ Donaldson would have more than eight employees, and be subject to the payment of contributions.

The evidence discloses that Donaldson entered into a written contract with each of these four men. The arrangement with them was identical, so we will examine the contract made with P. W. Hopkins, which will determine the construction of all. This contract provided that Hopkins have an exclusive license for a certain part of the State of Iowa, Chicago, and part of Cook county, and permission to make sales in Rockford. He was declared to be an independent contractor. Hopkins would find a customer, make a survey of the premises, and offer to do the job for so much money, which offer was then submitted to Donaldson, who had the right to accept or to reject it. Hopkins also had the right to sell any other noncompetitive house installations. No certain hours or days of work were required, and he made no reports, bore all of his own expenses, transportation, meals, advertizing, telephone, and wages of assistants or salesmen, and was to receive no allowance whatsoever from Donaldson for such expenses; he was not to be controlled or directed in the solicitation of business, and could call upon customers at his discretion. He could make no false promises with respect to the floor material, or damaging statements as to a competitive product, and would pay for all samples furnished to him. He also had the right to employ assistantsor salesmen, to be under his exclusive control, and their salaries and expenses were borne exclusively by him.

Under this contract the first party (Donaldson) was to carry out and perform the contracts proposed by Hopkins, when accepted by Donaldson. The installations were under the exclusive control of Donaldson, and Hopkins had no obligation whatsoever in that respect. After the floors were finished, and the money collected, it was disposed of as follows: The costs of installation, including labor, material, transportation and all other costs, were deducted from the gross amount received from the sale. Among these costs was an allowance of three cents per mile for the use of Donaldson's truck. After these items had all been deducted from the sales price the remaining amount was divided equally between Donaldson and Hopkins, and if there was a loss in the installation, under the contract it was shared equally by each of them.

The evidence shows this arrangement was carried out. Each party paid one half of the social security and unemployment contributions for the men hired by Donaldson to lay the floors. After they had been in operation for some little time the Flexotile Floor Co., required Donaldson to pay sales tax that had accrued in the past, which was paid equally by Donaldson and his associate who had made the sales in Illinois. The evidence shows that during all of the time he worked at this business Hopkins carried out this arrangement implicitly. From time to time losses occurred, and these were shared by Donaldson and the individual procuring the contract under which the loss accrued. The Director of Labor held that Donaldson was liable to make unemployment contributions for the services of these men, working under these contracts.

Appellant takes the position that the contract arrangement between himself and Hopkins, and others, was such that he, Donaldson, was not an employer, and Hopkins was not rendering service for wages, or under a contract for hire. Employment means ‘service * * * performed for wages or under any contract of hire, written or oral, express or implied.’ (Ill.Rev.Stat.1937, chap. 48, par. 218, sec. 2(f)(1).) The term ‘service’ is not defined in the act. The term ‘wages' means ‘every form of remuneration payable for personal services whether payable directly or indirectly, including salaries, commissions, bonuses, and the reasonable money value of all remuneration payable in any medium other than cash.’ (Ill.Rev.Stat.1937, chap. 48, par. 218, sec. 2(g).) The service must be rendered to an employing unit, which differs from an employer principally in the number of employees. Par. 218, sec. 2(d).

To be liable to make the contributions it is necessary that there be an employing unit. New York Life Ins. Co. v. Murphy, 388 Ill. 316, 58 N.E.2d 182. ‘Employing unit’ is defined as ‘any * * * type of organization * * * which has or subsequent to January 1, 1936, had in its employ one or more individuals performing services for it within this State.’ There is more to the paragraph, but it has nothing to do with the definition of an ‘employing unit.’ In the present case, in order to create a liability for contributions, Donaldson must be an employing unit with eight individuals rendering service, which would require Hopkins, Arndt, Sandy and Wahlstrom to make that number. Ill.Rev.Stat.1937, chap. 48, par. 218, sec. 2(e)(1).

The briefs contain considerable discussion as to whether the relationship between ...