People ex rel. Department of Labor v. MCC HOME HEALTH CARE

• Decision Date: 05 May 2003
• Docket Number: No. 1-02-1408.,1-02-1408.
• Parties: The PEOPLE ex rel. The DEPARTMENT OF LABOR, Plaintiff-Appellant, v. MCC HOME HEALTH CARE, INC., an Illinois Corporation, and Eduardo Cortez, Indiv. and in His Official Capacity as President, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

790 N.E.2d 38

339 Ill. App.3d 10

273 Ill.Dec. 896

The PEOPLE ex rel. The DEPARTMENT OF LABOR, Plaintiff-Appellant, v. MCC HOME HEALTH CARE, INC., an Illinois Corporation, and Eduardo Cortez, Indiv. and in His Official Capacity as President, Defendants-Appellees.

No. 1-02-1408.

Appellate Court of Illinois, First District, First Division.

May 5, 2003.

James E. Ryan, Attorney General, and Carl J. Elitz, Assistant Attorney General, Office of the Attorney General; Joel D. Bertocchi, Solicitor General, Chicago, for Appellant.

Irving M. Geslewitz, Much Shelist Freed Denenberg Ament & Rubenstein, P.C., Chicago, for Appellee.

Presiding Justice GORDON delivered the opinion of the court:

Following an informal investigative conference, plaintiff-appellant the People of the State of Illinois ex rel. Illinois Department of Labor (Department), concluded that nurses working for defendants-appellees MCC Home Health Care, Inc. (MCC) and Eduardo Cortez were employees rather than independent contractors. The Department ordered MCC and Cortez to pay the nurses back overtime pursuant to the Illinois Minimum Wage Law (Act) (820 ILCS 105/4(a) (West 2000)) in the amount of $193,560.46. MCC and Cortez withheld payment, and the cause proceeded to trial. The trial court disagreed with the findings of the Department and entered an order granting summary judgment to MCC and Cortez, concluding that the nurses were independent contractors and not employees entitled to overtime pay pursuant to the Act. The Department appeals from the trial court's grant of summary judgment in favor of MCC and Cortez, asking that we reverse the court's order and remand the cause for further proceedings. For the following reasons, we reverse and remand.

BACKGROUND

MCC is a nursing referral agency that contracts with the State of Illinois, the Illinois Department of Public Aid and the University of Illinois of Specialized Care for Children (collectively, the State) to place pediatric nurses in private patient homes to administer home health care. Cortez is the president of MCC, but is not a health care professional. The State reimburses MCC according to the hours its nurses work, and MCC in turn pays the nurses a set hourly rate, taking into consideration its overhead costs.

In 1999, the Department began an investigation based on allegations that MCC and Cortez were in violation of section 4(a) of the Act, which mandates that employers pay their employees a rate of time and one-half their regular hourly wage for hours worked in excess of 40 hours per week. See 820 ILCS 105/4(a) (West 2000). The allegations asserted that between July 1996 and September 1998, MCC and Cortez failed to pay overtime wages to the 65 nurses on its referral roster. A compliance officer from the Department conducted an inspection of MCC's time sheets and pay books and concluded in his audit that MCC and Cortez had violated the Act and were required to pay a total of $193,560.46 in back overtime pay.

On September 23, 1999, an informal investigative conference was held before a Department hearing officer to obtain further evidence and identify the issues in dispute. Although a transcript of that hearing is not included in the record on appeal, the hearing officer's written determination, issued on December 23, 1999, reveals the following.

At the hearing, Cortez testified on behalf of MCC with respect to its daily operations, asserting that the nurses that work for MCC are independent contractors, not employees, and thus, he is not required to pay them overtime pursuant to the Act. In support, Cortez stated that the nurses on MCC's referral roster are free to accept or decline an assignment and that a patient's parent or guardian can accept or decline a specific nurse. Cortez also stated that the nurses record the time they work, and MCC verifies the time and pays the nurses an hourly rate. The nurses maintain their own hours and neither MCC nor Cortez tells the nurses how to perform their duties at the patients' homes. He did state, however, that MCC visits the homes to see if the patient and parent or guardian are satisfied with the services rendered. Cortez testified that these visits are conducted when the assigned nurse is not present at the home. Cortez stated that each nurse is responsible for maintaining his or her own licensing and must provide his or her own uniform. Cortez further testified that nurses do not stay with MCC for "a long time" and that there is no exclusive employment relationship between MCC and the nurses. Ila Rubens, a nurse who worked for MCC and Cortez, also testified at the Department's informal hearing. She stated that she worked full time for MCC and was paid on an hourly basis. She testified that she was assigned to a supervisor and was told that if she had any problems, she was to seek assistance from that supervisor. Rubens also testified that while she was free to choose her assignments, she worked with only one family for over a two-year period. As for her supplies, Rubens testified that although she received the majority of her nursing supplies from the State, MCC told her what supply company to contact if she needed any other supplies. Rubens also stated that MCC had paid her for vacation time in the past, and she had received an "employee manual."

In its written decision, the Department hearing officer determined that the issue was whether the nurses are employees of MCC, and thereby eligible for overtime pay under the Act, or independent contractors, and thereby exempt from receiving overtime pay under the Act. The hearing officer cited section 210.110 of the Illinois Administrative Code (Code) and stated that the Department's regulations under this Code section concerning the Act require the use of the following six-part test to determine whether an individual is an employee or an independent contractor:

"The Director [of the Department] will consider the following factors as significant when determining whether an individual is an employee or an independent contractor:

[ (1) ] the degree of control the alleged employer exercised over the individual;

[ (2) ] the extent to which the services rendered by the individual are an integral part of the alleged employer's business;

[(3)] the extent of the relative investments of the individual and alleged employer;

[ (4) ] the degree to which the individual's opportunity for profit and loss is determined by the alleged employer;

[ (5) ] the permanency of the relationship;

[and (6)] the skill required in the claimed independent operation." 56 Ill. Adm.Code § 210.110 (1996).

The hearing officer applied this test, reviewing each of the six factors with respect to the evidence presented. The hearing officer found that the first and sixth factors indicated an independent contractor status because MCC and Cortez do not control the nurses in the performance of their work and because MCC and Cortez require the nurses to maintain their own licensing on an independent basis. However, the hearing officer concluded that the second, third and fourth factors favored an employee-employer relationship: because MCC refers only nurses and no other professionals, the nurses' health care services are "integral" to MCC's business; because the nurses do not have to "expend monies" to purchase supplies, they do not have financial control; and because the nurses lack financial control and are paid hourly, MCC controls their opportunity for profit and loss. As for the fifth factor, the hearing officer found this to be neutral because of a lack of conclusive evidence. The hearing officer also addressed the additional information provided by Rubens about receiving paid vacation and an employee manual and found that this evidence was not indicative of the nurses' status with respect to MCC. In her conclusion, the hearing officer stated that "since 3 of the 6 factors supported [an] employer-employee relationship, one factor was neutral * * * and 2 factors supported an independent contractor association," the compliance officer's findings that the nurses are employees and, as such, fall under the overtime pay requirements of the Act should be upheld.

MCC and Cortez held back payment of the $193,560.46 sum upheld by the Department hearing officer. On March 15, 2001, pursuant to section 12(b) of the Act, the Department filed a complaint at law against MCC and Cortez. See 820 ILCS 105/12(b) (West 2000). MCC and Cortez filed their answer, asserting that the nurses were not employees under the Act but, rather, independent contractors. MCC and Cortez thereupon moved for summary judgment,¹ alleging that the Department's hearing officer should have applied the common law "right of control" test, rather than the six-part test pursuant to the Code, to determine whether the nurses are employees or independent contractors.

In support of their motion for summary adjudication, MCC and Cortez attached a copy of the hearing officer's written decision and an affidavit from Cortez. Cortez's affidavit restated much of the testimony he gave at the informal investigative conference, but also included the following new details. Cortez stated that the nurses on MCC's referral roster do not have to work any specific amount of hours to remain on the roster and may remove their names from the roster whenever they wish. MCC does not send other nurses or health care professionals to the patients' homes to supervise the nurses, and while the nurses may create patient notes, they are not required to submit any kind of oral or written report to Cortez or MCC. Moreover, while MCC maintains a place of business as an office staffed by in-house employees, the nurses do not work there. Cortez also explained in his affidavit that the nurses are expected to provide their own "tools of the trade, such as uniforms, lab coats, stethoscopes, blood pressure cuffs, and nursing shoes." In addition to providing their own professional liability insurance, the...