Michael v. Pella Products, Inc.
14 N.E.3d 533
Ill. App. Ct.2014Background
- Robert J. Michael incorporated a residential contracting business, Robert J. Michael Homes, Inc. (RJM), in Illinois in 2007; RJM issued stock, kept corporate records, maintained corporate accounts, filed corporate tax returns, and remained in good standing.
- RJM employed 14 people (including Michael), paid wages from its corporate account, withheld taxes, issued W-2s, and carried liability, workers’ compensation, and unemployment insurance.
- In 2008–2009 RJM contracted with Pella Products, Inc. to perform window/door installation services; contracts were executed in RJM’s name and Pella paid RJM directly.
- Under the agreements RJM provided labor, tools, and employees; Pella required training, quality checks, scheduling, branded apparel, and adherence to Pella protocols for installations.
- Michael sued Pella under the Illinois Employee Classification Act alleging misclassification as an independent contractor; Pella moved for summary judgment arguing the Act excludes "bona fide corporations" per Department of Labor regulations.
- The trial court granted summary judgment for Pella; the appellate court affirmed, finding RJM was a bona fide corporation that performed the services and thus the Act did not apply to Michael as an "individual."
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Illinois Employee Classification Act applies when services are provided through an incorporated business | Michael: despite corporate contract, he personally performed services for Pella and may bring an individual misclassification claim | Pella: Department regulation excludes bona fide corporations from Act’s definition of an "individual," and RJM meets that standard | Act does not apply; RJM was a bona fide corporation and performed the services, so Michael cannot sue Pella as an "individual" |
| Whether the Department’s "bona fide corporation" regulation is valid and binding | Michael: regulation’s application here would frustrate Act’s purpose and limit individual rights | Pella: regulation is within agency rulemaking authority and is entitled to deference | Regulation is valid and controlling; agency rules have force of law and are not challenged as invalid here |
| Whether Pella’s control over work (training, inspections, scheduling, apparel) makes Michael an employee of Pella | Michael: Pella’s supervision and specification of work show control sufficient under the Act | Pella: control related to quality and contract performance does not convert RJM’s employees into Pella’s employees when services were provided by RJM | Court focused on who actually performed services (RJM) and found those indicia insufficient to treat Michael as Pella’s individual employee |
| Potential for circumvention (contractors contracting only with corporations to avoid Act) | Michael: allowing corporate contracts could let contractors evade the Act | Pella: bona fide-corporation test prevents sham incorporations; here RJM was formed before Pella and operated independently | Court: possibility of evasion addressed by regulation; where corporation is bona fide, Act’s concerns are not implicated |
Key Cases Cited
- Schultz v. Illinois Farmers Insurance Co., 237 Ill. 2d 391 (summary judgment standard and de novo review)
- Williams v. Manchester, 228 Ill. 2d 404 (summary judgment appropriate where undisputed facts fail to establish necessary element)
- Provena Covenant Medical Center v. Department of Revenue, 236 Ill. 2d 368 (deference to agency interpretations of statutes they administer)
- People ex rel. Madigan v. Illinois Commerce Comm’n, 231 Ill. 2d 370 (administrative regulations have force and effect of law)
- American Federation of State, County & Municipal Employees v. Department of Central Management Services, 288 Ill. App. 3d 701 (standard for invalidating agency regulations)