Garland v. Department of Labor

• Decision Date: 30 November 1984
• Docket Number: 60039,Nos. 59844,s. 59844
• Citation: 472 N.E.2d 434,84 Ill.Dec. 474,104 Ill.2d 383
• Parties: , 84 Ill.Dec. 474, 53 USLW 2315 Sandra GARLAND, Appellee, v. The DEPARTMENT OF LABOR et al., Appellants. Paul E. SCOTT, Appellee, v. The DEPARTMENT OF LABOR, Appellant.
• Court: Illinois Supreme Court

Page 434

472 N.E.2d 434

104 Ill.2d 383, 84 Ill.Dec. 474, 53

USLW 2315

Sandra GARLAND, Appellee, v. The DEPARTMENT OF LABOR et al., Appellants.

Paul E. SCOTT, Appellee, v. The DEPARTMENT OF LABOR, Appellant.

Nos. 59844, 60039.

Supreme Court of Illinois.

Nov. 30, 1984.

Neil F. Hartigan, Atty. Gen., Chicago, for appellants; Rosalyn B. Kaplan, Asst. Atty. Gen., Chicago, of counsel.

Irvin L. Masching, Gomien, Root & Masching, Dwight, for appellee Paul E. Scott.

Anthony C. Raccuglia & Associates, Peru, for appellee Sandra Garland; Cynthia M. Raccuglia, Peru, of counsel.

THOMAS J. MORAN, Justice:

In these consolidated cases, defendant, the Illinois Department of Labor, Bureau of Employment Security, Division of Unemployment Insurance (Department), appeals from two decisions of the appellate court.

Plaintiff Sandra Garland filed a complaint in the circuit court of Bureau County, seeking judicial review of an administrative decision rendered by the Board of Review (Board) which affirmed the determinations of a claims adjudicator and a referee. The Board held that plaintiff, as an officer of a closely held family-owned corporation, was able to control the terms of her own employment and, therefore, was presumed not to be an "unemployed individual." Accordingly, she was found to be ineligible for benefits, for the period of November 9, 1980, through August 8, 1981, under the provisions of section 239 of the Illinois Unemployment Insurance Act (Act) (Ill.Rev.Stat.1981, ch. 48, par. 349). The circuit court of Bureau County found that there was no evidence that plaintiff had performed any services or received any wages, with the exception of one week, and reversed the decision of the Board as being against the manifest weight of the evidence. The appellate court affirmed the order of the circuit court. (121 Ill.App.3d 562, 77 Ill.Dec. 29, 459 N.E.2d 1125.) We granted the Department's petition for leave to appeal (87 Ill.2d R. 315).

Plaintiff Paul E. Scott filed a petition for judicial review of an administrative ruling, in the circuit court of Livingston County. The decision of the Board also determined that plaintiff was not an "unemployed individual" within the meaning of section 239 of the Act. In adopting the findings of fact and the decisions of the claims adjudicator and a referee, the Board found that the plaintiff, as corporate secretary of a closely held family corporation retained control of his employment "and is rendering valuable services to the corporation and the continuation of the corporation." As such, he was found to be in continuing full-time service and was denied unemployment insurance benefits for the period of January 3, 1982, through March 13, 1982. The circuit court found that plaintiff had neither received remuneration nor performed any services for the corporation during the relevant period, and it reversed the decision of the Board as being against the manifest weight of the evidence. The appellate court affirmed the order of the circuit court. (123 Ill.App.3d 187, 78 Ill.Dec. 682, 462 N.E.2d 801.) We granted the Department's petition for leave to appeal (87 Ill.2d R. 315) and consolidated these two causes for the purpose of review.

The sole issue before this court is whether the appellate court erred in finding that the plaintiffs, corporate officers of closely held family-owned corporations, were "unemployed individuals" as defined in the Act.

The record reveals that Garland Construction Company is a small, family-owned general construction business. The company was incorporated in 1978. At the time of incorporation, plaintiff Sandra Garland was the secretary-treasurer of the corporation, while her husband, Darwin Garland, was the corporation's president and owner of all of the stock. Plaintiff was an employee of the corporation from the time of incorporation until November 7, 1980. She performed general office tasks and received weekly wages during that period. Contributions were paid by Garland Construction Company to the unemployment insurance fund on her behalf. Following her layoff in November of 1980, plaintiff filed a claim for unemployment insurance benefits, indicating that she was the corporate secretary and owned no stock in the company. A claims adjudicator, based on this information, determined that plaintiff was entitled to the requested weekly benefits.

On May 20, 1981, plaintiff became the president of the corporation as well as the sole stockholder. In a written statement, submitted by plaintiff, she claimed that the changeover was effected so that the company would receive female minority status. As a result of that status, plaintiff accepted a bid for Garland Construction Company during the week of May 20, 1981. There is no evidence in the record to indicate that plaintiff performed any other services for the corporation during the period in question.

However, on October 8, 1981, a claims adjudicator concluded that plaintiff, due to her status as a corporate officer, was not an "unemployed individual." Rather, she was considered to be in continuing full-time service to the corporation and, therefore, ineligible for the benefits. On appeal, at a hearing before a referee, the plaintiff submitted evidence of substantial efforts on her part to secure employment during her term of unemployment. Nevertheless, the referee affirmed the claims adjudicator's decision and the Board affirmed the referee's decision.

Plaintiff Scott, like Garland, was a corporate officer of a closely held family-owned corporation, engaged in a general contracting business. His testimony at a hearing before a referee indicates that he is the secretary of Scott Brothers Contractors and "believes" that he is a director. Plaintiff Scott has worked as a laborer for the company for 20 years, receiving wages only when he works in that capacity. Plaintiff acknowledged that it was customary for general contractors to have a slack period during the winter. A written statement, submitted by the plaintiff, was read into the record. The statement reveals that Scott Brothers shut down on the first of January, 1982, due to a lack of work. Plaintiff described his status as corporate secretary to be merely an "honorary title" for which he received no remuneration. He also stated that he was a member of a union and was on their work list but acknowledged that he usually procured his work through Scott Brothers.

As we observed with respect to Garland, there is nothing in the record to indicate that Scott performed any services for his employer or received any wages during the period for which he sought unemployment benefits. Yet, Scott, like Garland, was found to be ineligible for the claimed benefits, because he was a corporate officer during the relevant period. It would appear, therefore, that the Department denied unemployment benefits to the plaintiffs merely because they retained the status of corporate officer during the period of claimed unemployment. The Act, however, contains no exclusionary provision which would deny benefits to an otherwise eligible claimant merely because he is an officer of a corporation. On the contrary, the relevant provisions of the Act indicate that, under the circumstances presented, the plaintiffs were entitled to unemployment benefits.

Under the Act an employer is required to make contributions "with respect to wages payable for employment." (Ill.Rev.Stat.1981, ch. 48, par. 550.) Wages are defined as "every form of remuneration for personal services, including salaries, commissions, bonuses, and the reasonable money value of all remuneration in any medium other than cash. * * *" (Ill.Rev.Stat.1981, ch. 48, par. 344.) The definition of employment includes "all services performed by an officer of a business corporation, without regard to whether such services are executive, managerial, or manual in nature, and without regard to whether such officer is or is not a stockholder or a member of the board of directors of the corporation." Ill.Rev.Stat.1981, ch. 48, par. 316.

Pursuant to these provisions, contributions were made on behalf of the plaintiffs during the periods when they were employed. When the plaintiffs were laid off, they applied for the unemployment benefits which the Act makes available to an "unemployed individual" whose employer has made contributions to the fund for him. An employee is "deemed unemployed in any week with respect to which no wages are payable to him and during which he performs no services * * *." (Ill.Rev.Stat.1981, ch. 48, par. 349.) Further, the Act's declaration of public policy makes it clear that the compulsory unemployment insurance program established is for the benefit of those involuntarily unemployed. Ill.Rev.Stat.1981, ch. 48, par. 300; Mohler v. Department of Labor (1951), 409 Ill. 79, 86, 97 N.E.2d 762; Grobe v. Board of Review (1951), 409 Ill. 576, 582, 101 N.E.2d 95.

The Department contends that the plaintiffs' ability to control their own employment requires a finding that they are not unemployed individuals within the meaning of the Act. This position, however, is based on the tenuous theory that, as corporate officers, the plaintiffs were in a position to continue rendering valuable services to the corporations. Yet, with the exception of the bid accepted by plaintiff Garland, the record is devoid of evidence which would demonstrate that the plaintiffs performed any services on behalf of their respective businesses during the relevant periods. Clearly, their unemployment was a result of the seasonal nature of the construction business rather than the affirmative action of the plaintiffs.

Adherence to the Department's...