McKinley Foundation at University of Illinois v. Illinois Department of Labor

936 N.E.2d 708, 404 Ill. App. 3d 1115
CourtAppellate Court of Illinois
DecidedSeptember 10, 2010
Docket4-09-0512
StatusPublished
Cited by6 cases

This text of 936 N.E.2d 708 (McKinley Foundation at University of Illinois v. Illinois Department of Labor) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McKinley Foundation at University of Illinois v. Illinois Department of Labor, 936 N.E.2d 708, 404 Ill. App. 3d 1115 (Ill. Ct. App. 2010).

Opinions

JUSTICE POPE

delivered the opinion of the court:

In April 2009, plaintiff, the McKinley Foundation at the University of Illinois (McKinley), filed a motion for summary judgment against defendants the Illinois Department of Labor (Department) and its Director, Catherine Shannon (herein referred to collectively as the Department), seeking an order that the Prevailing Wage Act (Act) (820 ILCS 130/1 through 12 (West 2008)) is inapplicable to its construction project because McKinley is not a “public body” for purposes of the Act. That same month, defendant Stevens Construction Corporation (Stevens), the construction company hired by McKinley to complete its project, also moved for summary judgment on the same ground as McKinley or, alternatively, if McKinley was a “public body,” for damages on the ground that McKinley failed to give Stevens notice it would have to pay its employees the prevailing wage rate. Stevens’s subcontractors, defendants A&B Drywall; Chris Green, Inc.; and Electri-Tec, joined in Stevens’s motion. Following a May 2009 hearing, the circuit court granted summary judgment in favor of McKinley, Stevens, and the subcontractors.

The Department appeals, arguing the circuit court erred in granting McKinley’s and Stevens’s motions for summary judgment because McKinley constitutes a “public body” for purposes of the Act since it financed its project with tax-exempt bonds issued under the Illinois Finance Authority Act (20 ILCS 3501/801 — 1 et seq. (West 2008)). We agree and reverse.

I. BACKGROUND

A. Factual Background

McKinley is a not-for-profit corporation functioning as a Presbyterian ministry for college students. In June 2007, McKinley contracted with Stevens to construct student housing and parking on its property located at 405 East John Street in Champaign.

Although private donations fund McKinley, financing for its construction project, in part, stemmed from tax-free bonds issued through the Illinois Finance Authority (Authority). The bonds were sold to private investors and backed by a letter of credit from KeyBank, N.A., which paid the investors and then received reimbursement from McKinley. In the event of a default, KeyBank’s sole recourse would have been against McKinley, and the private investors’ sole recourse would have been against KeyBank. At no point would the State of Illinois be obligated or liable on the bonds. The only connection between the State and McKinley was that McKinley paid the Authority a fee for acting as the accommodator for the bonds’ issuance.

In April 2008, a Department conciliator wrote McKinley, requesting information concerning the construction project to evaluate its conformance with the Act, which, in certain circumstances, requires contractors pay workers employed on public-works construction projects a minimum hourly wage based on pay for work of a similar character in the county where the work is performed. In written correspondence between the Department and McKinley’s counsel, McKinley acknowledged the project was a “public work” pursuant to the Act but denied being a “traditional public body” or “an institution supported in whole or [in] part by public funds.” McKinley maintained both factors must exist to trigger application of the Act. The Department disagreed. In a letter to McKinley, the Department’s chief legal counsel noted as follows:

“[I]t is the opinion of [the Department] that because the fixed[-]work construction is a ‘public work,’ as explicitly defined in the Act, [McKinley] is, for purposes of that fixed[-]work construction, a ‘public body[ ]’ within the meaning of the Act. Accordingly, as provided in [s]ection 3 of the Act, all laborers, workers[,] and mechanics employed by or on behalf of [McKinley] engaged in the construction of that public work must be paid the prevailing wage.” (Emphasis in original.)

In August 2008, after receiving payroll forms from Stevens and several subcontractors, the Department (1) informed them “certain employees were paid less than the prevailing rate of wage,” (2) ordered them to pay the total difference in wages, and (3) assessed penalties amounting to 20% of the total underpayment.

B. Procedural History

The following month, McKinley filed a complaint naming the Department, Director Shannon, Stevens, several subcontractors, and “unknown subcontractors” as defendants. The complaint sought declaratory judgment that the Act was inapplicable to its construction project, which would thereby eliminate the obligation of Stevens and the subcontractors to pay their employees the prevailing wage rate. In response, Stevens filed an answer, a counterclaim against McKinley, and a cross-claim against the Department and Director Shannon, requesting, inter alia, (1) a declaratory judgment stating the project fell outside the Act’s scope or, alternatively, (2) damages from McKinley in the event the project fell under the Act’s purview because McKinley failed to give Stevens and the subcontractors notice they would have to pay their employees the prevailing wage rate. Stevens’s subcontractors filed various cross-claims and answers containing affirmative defenses, none of which are pertinent to this appeal.

In October 2008, the Department filed a motion to dismiss McKinley’s and Stevens’s complaints pursuant to sections 2 — 615 and 2 — 619 of the Code of Civil Procedure (735 ILCS 5/2 — 615, 2 — 619 (West 2008)), but the circuit court denied both motions. The Department then filed counterclaims against Stevens and several subcontractors, seeking underpaid wages, statutory penalties, and punitive damages. Stevens filed an answer, and the subcontractors filed answers containing various counterclaims against Stevens and affirmative defenses to the Department’s complaint.

In April 2009, McKinley filed a motion for summary judgment, alleging that although its construction project fell within the Act’s definition of “public work,” McKinley is not a “public body” and thus the Act is inapplicable to its project. To its motion, McKinley attached an affidavit from its executive director, Reverend Heidi Weatherford, stating McKinley is (1) a 501(c)(3) tax-exempt foundation; (2) supported entirely by private funds; and (3) not supported in any way by public funds, including those from federal or state governments. The affidavit further stated McKinley’s project was partly financed by tax-free bonds issued by the Authority but that McKinley paid a fee to the Authority in exchange for issuance of the bonds and, in the event of a default, the State would never be liable or obligated on the bonds. Stevens filed a summary-judgment motion, which also alleged the Act was inapplicable to McKinley’s construction project because McKinley was not a “public body.”

In May 2009, after hearing arguments on both motions, the circuit court granted summary judgment in favor of McKinley and Stevens and dismissed all counterclaims and cross-claims. During the hearing, the court reasoned as follows:

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Bluebook (online)
936 N.E.2d 708, 404 Ill. App. 3d 1115, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mckinley-foundation-at-university-of-illinois-v-illinois-department-of-illappct-2010.