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| Plaintiff L.A. McMahon Window Washing (McMahon) sought administrative review in the circuit court of Cook County of a decision by defendants Illinois Department of Employment Security (IDES) and its director, Jay Rowell (the Director) (together, the Department), which affirmed the decision of IDES that window washers who performed services for McMahon were employees for purposes of the Illinois Unemployment Insurance Act (the Act) (820 ILCS 405/212 (West 2010)). Pursuant to an audit and a fact-finding hearing, the Department determined that McMahon failed to establish that the exemptions from "employment" in section 212 of the Act apply to the workers in question. The circuit court upheld the Director's decision. McMahon appeals, contending the Director and the circuit court erred in their determination that the McMahon workers were "employees" and not "independent contractors" under section 212 of the Act. Affirmed. |
v.
THE DEPARTMENT OF EMPLOYMENT SECURITY, and JAY ROWELL, Director, the Department of Employment Security, Defendants-Appellees. PRESIDING JUSTICE FITZGERALD SMITH delivered the judgment of the Court, with opinion. Justices Howse and Cobbs concurred in the judgment and opinion.
Plaintiff L.A. McMahon Window Washing (McMahon) sought administrative review in the circuit court of Cook County of a decision by defendants Illinois Department of Employment Security (IDES) and its director, Jay Rowell (the Director) (together, the Department), which affirmed the decision of IDES that window washers who performed services for McMahon were employees for purposes of the Illinois Unemployment Insurance Act (the Act) (820 ILCS 405/212 (West 2010)). Pursuant to an audit and a fact-finding hearing, the Department determined that McMahon failed to establish that the exemptions from "employment" in section 212 of the Act apply to the workers in question. The circuit court upheld the Director's decision. McMahon appeals, contending the Director and the circuit court erred in their determination that the McMahon workers were "employees" and not "independent contractors" under section 212 of the Act.
McMahon provides window washing services for clients. In 2009, the Department initiated an audit for the years 2006, 2007, and 2008 (the audit period) to determine whether McMahon was required to make unemployment contributions for its window washers. Following the audit, in January 2010, the Department issued a determination that McMahon's window washers were employees and ordered an assessment against McMahon for $64,051 in unpaid employer contributions for the audit period, as well as $35,773 in unpaid interest.
McMahon then filed a protest to the determination and assessment in February 2010, in which it requested an administrative hearing. In its protest, McMahon described itself as "in the business of window washing." It stated:
McMahon characterizes this service in its appellate brief as "operat[ing] a call center where predominately residential customers call in to request window washing and gutter cleaning services" and independent contractors perform the window washing services. It also states that "McMahon is in the business of connecting customers of window washing with certain workers which it treats as independent contractors to provide window washing." In its protest following the Department's determination that the window washers constituted employees of L.A. McMahon Widow Washing under the Act, however, McMahon characterized its operation as: "McMahon is in the business of window washing. McMahon's customers are residential homeowners. McMahon secures customers through general advertising, word-of-mouth marketing, and repeat business. Customers call McMahon to schedule an appointment for their windows to be washed. In the context of its business, McMahon utilizes the services of certain independent contractors to wash its customer's windows."
"In the context of its business, McMahon utilizes the services of certain independent contractors to wash its customer's windows. In general, McMahon has contractual agreements in place with Workers, specifically identifying the relationship between McMahon and individual Workers as that of 'Employer' and 'Independent Contractor' (the 'Agreements'). The Agreements are non-exclusive, and remain in effect until terminated either by completion of a project, or upon cancellation of a project by any party other than McMahon, or by McMahon if either (i) reasonable notice *** is delivered to the Contractor; or (ii) reasonable evidence exists that the services provided by the Contractor are either unsatisfactory, incompetent, unprofessional, or untimely. McMahon does not prevent the Workers from working with any person or entity in addition to, or instead of, McMahon.
The actual work-relationship of McMahon and the Workers functions as follows: First, Workers who are interested in obtaining work from McMahon either call McMahon or go to McMahon's office to see if there are any appointments set. McMahon does not call any Workers, nor contact Workers in any other manner, to arrange for work to be completed. The Workers solicit McMahon for window washing appointments of their own volition. McMahon will then tell an inquiring Worker of any relevant appointment, and offer the Worker the opportunity to take the appointment. Workers are free to decline any appointment for any reason, whether it be because the Worker does not care for the location of the home, size of the home, the time of the appointment, or any other reason. In fact, Workers often do decline appointments.
When this happens, McMahon offers the appointment to the next inquiring worker. The frequency in which the Workers contact McMahon for work varies by worker; some contact McMahon daily, some contact McMahon weekly, some contact McMahon yearly, and some are more sporadic. McMahon has no requirement for the Workers to contact McMahon at any certain volume or on any certain time table. After agreeing to work at a specific appointment, a Worker travels to the customer's home within the timeframe quoted to the customer. Workers utilize their own vehicles for transportation, and use their own supplies to complete the work. Workers are not reimbursed for any travel or supply costs. McMahon provides no training to the Workers, and does not direct a specific method of cleaning.
Workers are not required to wear a uniform. Workers have their own business cards and advertise their own services in the yellow pages and elsewhere. Workers also hire their own helpers and/or employees, for whom McMahon provides no reimbursement nor supervision or training. When the work is completed, the Worker invoices the customer. If the customer pays the Worker on-site, the Worker submits the payment to McMahon either in person or through the mail. Otherwise, the customer mails payment to McMahon directly. McMahon then generally splits the payment equally (fifty/fifty) with the Worker.
McMahon also employs workers, separate and apart from the Workers at issue, which it classifies as employees [as] office personal. McMahon makes appropriate withholdings with respect to these employees." In September 2010, a representative of the Director conducted an administrative hearing on the protest and objections to the determination and assessment. At the outset of the hearing, the representative told the parties he was looking for answers to three inquiries: (1) the nature of the business; (2) the nature for the services performed by the individuals at issue; and (3) the nature of the relationship between McMahon and the individuals at issue.
McMahon presented evidence and testimony from general manager Mark Crane, as well as from two window washers, Henry Garduno and Leon Juarez. Counsel for McMahon opened his argument saying, "McMahon Window Washing is an Illinois corporation in the business of providing window washing services primarily to residential customers." McMahon general manager and part owner Mark Crane explained that McMahon has a call center in Schaumburg where mostly residential customers call in to request window washing and yard cleaning services. He explained McMahon takes incoming calls from prospective clients and gives out work to "independent contractors" when those contractors call in and are available for work.
There are five employees who work in the Schaumburg office and who are issued W-2 forms, receive employee benefits, vacation, and sick pay. These employees do not perform any window washing. McMahon is a seasonal business, and each year it performs work for 10,000 to 11,000 customers. Crane described the McMahon window washers as independent contractors. The window washers did not receive employee benefits, and their incomes were reported on 1099 forms, used for independent contractors, to the Internal Revenue Service. However, McMahon keeps a workers' compensation and general liability insurance policy that covers the window washers. The cost to McMahon for that policy was based on the amount of work performed by all window washers. Crane explained that the window washers are required to carry their own policies in addition to the policy carried for them by McMahon.
Crane described McMahon's methodology regarding clients: customers who request window washing services from McMahon call the Schaumburg office and are given a two hour time slot that is convenient for the customer during which the window washer and possibly his assistants will arrive and begin work. No specific start or end time for the work is given the customer. When the customer calls, Crane gives a price estimate over the phone based on the customer's description of the work to be done. Upon arrival at the customer's home, the window washer verifies the conditions on site and gives the customer an updated, actual price estimate, which the customer is free to accept or refuse.
The window washer arrives on-site carrying a McMahon business card, on the back of which is a price list. Through this price list, in addition to other price list postings, the window washer knows what price should be charged per window. The price list is set by McMahon. If a window washer is on-site and notices more work that could be done, it is not McMahon's policy that the window washer should drum up more business. However, if, for example, a window washer notices the customer's gutters are full of debris, he might tell the customer the gutters need to be cleaned at some point in the future. If the customer decides he wants the gutters cleaned by the window washer, the customer—not the window washer then calls McMahon, is given the price of the gutter cleaning, and McMahon then adds it to the customer's bill.
Crane explained: "MR. CRANE: Well, if [the window washer is] up on the roof and he looks down and sees there some debris in the gutters, he might say to the customer there's some debris in your gutters, somewhere down the road you're going to need to get your gutters cleaned. But he's not here to tell the customer what to do or offer services, he's just there to complete the work that's been given through the office. If the customer does want to add something like gutter cleaning to the bill, he must be approved through the office and put on the invoice."
During the audit period, McMahon had 15 to 18 window washing crews, each of which would call in to receive work. Crane testified that window washers do not receive special training from McMahon.
They drive their own vehicles and supply their own equipment. They are not required to wear specific uniforms. The company provides company t-shirts, but does not require the window washers to wear them when working.
Customers pay for window washing services via credit card over the telephone or by giving cash or check to the window washer on-site. If by check, the check is made payable to McMahon Window Washing. If by cash, the window washer delivers the cash by hand or mails it to the Schaumburg office. When the window washing work is completed, the window washer fills out an invoice provided by McMahon Window Washing and gives copies to both the customer and the Schaumburg office. Window washers are not required to go to the Schaumburg office at any time, but some do in order to pick up business cards and blank invoices, as well as to drop off cash and check payments.
In order to get paid, the window washer turns in both the invoice and any cash or check payments to the Schaumburg office. McMahon pays the window washers "bi-weekly though a payroll system." Window washers are paid 50% of the total amount billed for the work, based on invoices submitted to the office. Crane explained that McMahon works on a "good faith" system that the homeowners are going to pay. Therefore, if the window washer has submitted the invoices to McMahon, but the customer has not yet paid, McMahon nonetheless pays the window washer.
Additionally, in the "rare" case that a customer refuses to pay the invoice through no fault of the window washer, McMahon nonetheless pays the window washer. If, however, the customer refuses to pay the invoice because he is unhappy with the work done by the window washer, the window washer has the opportunity to return to the site and redo the work on his own time, to the customer's satisfaction, and then get paid. If, however, the customer remains unsatisfied and continues to refuse to pay the invoice, McMahon does not pay the window washer. If a window washer damages something at the customer's property, it is the window washer's responsibility to fix it.
McMahon hires its window washers on a seasonal basis and has them sign an "independent contractor agreement" at the start of each spring window washing season. These agreements remained unchanged during the audit period. McMahon can terminate any window washer with 30 days' written notice. The independent contractor agreements, samples of which are in the appellate record, stipulate that the window washers must obtain their own workers' compensation, general liability, and general automotive insurance.
Crane testified that, if window washers want to procure other window washing jobs while not on McMahon jobs, they are free to do so. Window washers are only barred from soliciting customers met while working for McMahon. Each window washer provides his own transportation and is not reimbursed travel costs. McMahon does not provide its window washers with company vehicles or with special decals.
Crane testified that each window washer can hire any assistant or assistants he needs, without control or input from McMahon. McMahon only pays the window washer who signed the contract, and the window washer is responsible for paying any assistants directly.
Garduno and Juarez also testified at the hearing. Both Garduno and Juarez signed the independent contractor agreement form with McMahon, which form required them to obtain their own workers' compensation, general liability, and general automotive insurance. Nonetheless, neither Juarez nor Garduno carried his own insurance during the audit period. Beginning in 2009, however, a number of window washers obtained their own insurance, designating McMahon as the insurance certificate holder.
Garduno testified he has worked as a window washing subcontractor for McMahon for 10 years. When he first started working for McMahon, he was not provided any job training seminars on how to wash windows or clean gutters, but had learned the skills in prior employment. He described how the work is seasonal, and he calls McMahon to see if there is work available. He testified that McMahon does not require a minimum number of hours from him. Garduno also has other window washing customers beyond those from McMahon, as he has a separate window washing business called Father & Son Window Washing, which he started in 2009. Garduno also worked in a flea market booth doing air brush work and selling tattoo supplies.
Prior to 2009, Garduno referred to his business as Henry's Window Washing. He did not request an employer identification number until 2009, at which time he requested the number "to make [his] company legit," because he had heard from other workers that he should do so. Garduno keeps a list of his own window washing customers, advertises for his own business in the newspaper, and has his own business cards. His company was started in 2009, and Garduno did not testify to whether he actually had business cards or advertised during the audit period. Also in 2009, Garduno began to carry liability insurance for his own company's window washing work.
Garduno testified that, when he does jobs for McMahon, he drives his own vehicle with no special "McMahon" markings on it, is not reimbursed for travel expenses, does not wear a uniform, and brings his own equipment. He explained he knows the McMahon pricing for window washing jobs because it is marked on the McMahon business cards, which he gets from the office. During the busy season, he goes to the McMahon office every week or two, but there is no requirement that he do so.
Juarez testified that he, too, works as a window washer for McMahon. He also has his own window washing business called Leon Juarez Window Washing, for which he has business cards. He purchased his own liability insurance in 2009. He testified he uses his own equipment and does not get reimbursed for travel expenses when on jobs for McMahon.
A recommended decision was issued in March 2011, recommending that the determination be affirmed. In September 2011, the Department issued a final decision of the Director, adopting the recommended decision. McMahon filed a complaint for administrative review in the circuit court. After briefing and oral argument, the court entered an order in September 2013 affirming the Director's decision and entering a final judgment.
McMahon appeals.
CONCLUSION: For all of the foregoing reasons, we find no clear error in the Director's conclusion that the window washers were employees rather than independent contractors. Accordingly, we affirm the circuit court's judgment upholding the Director's decision.
