text:
    CHAS. A. STEVENS AND COMPANY, Petitioner-Appellant, v. THE HUMAN RIGHTS COMMISSION et al., Respondents-Appellees.
    First District (3rd Division)
    No. 1—88—2138
    Opinion filed March 30, 1990.

      Ashman & Associates, of Chicago, for petitioner.
    Neil E Hartigan, Attorney General, of Springfield (Robert J. Ruiz, Solicitor General, and William H. London, Assistant Attorney General, of Chicago, of counsel), for respondent Human Rights Commission.
    Carey, Filter, White & Boland, of Chicago (Edward. M. White and Daniel R. Harper, of counsel), for respondent Dorothy Green.
   JUSTICE RIZZI

delivered the opinion of the court:

Appellant, Chas. A. Stevens (Stevens), appeals from the order of the Illinois Human Rights Commission (Commission) which found that Stevens had discriminated against Dorothy Green (Green) on the basis of her age.

On appeal, Stevens argues that (1) the Commission should not have reversed the recommended decision and order of the administrative law judge (ALJ) because the complainant failed to establish age discrimination and (2) the Commission abused its discretion with respect to the damage award. We affirm and modify the Commission’s order.

The hearing before the ALJ revealed that Stevens was an Illinois corporation engaged in the business of retail sales of women’s apparel and accessories. For a number of years Stevens suffered decreased sales and profits such that the directors and officers implemented various merchandising and marketing strategies in order to make the company profitable. From 1982 until February of 1986, Bernard Zindler was the president and chief executive officer. In 1982, John Edmondson held the office of general merchandise manager and in 1986 led a group which purchased Stevens in February 1986, at which time he became president and chief executive officer. On June 21, 1988, Stevens filed a petition in bankruptcy in the United States District Court for the Northern District of Illinois, and in March 1989, Stevens closed its stores.

Stevens hired Green in January 1961 and promoted her within the merchandising division from assistant buyer to buyer and in 1972 to divisional merchandise manager (DMM), the position she occupied until her discharge in November 1982. At the time of discharge, she was 61 years of age and earned $63,497.72 per year.

A divisional merchandise manager is responsible for a group of buyers in a particular division within the store and functions under the store’s general manager. The general manager reports to the president. In 1974, Stevens appointed Green vice-president based upon her performance.

Green testified that she properly performed her duties. Green introduced her department’s profit and loss reports, which showed a profit for each of the years from January 31, 1976, through January 31, 1981. The sales figures for the years January 31, 1977, through January 31, 1983, reveal a sales decline for Green’s group, group 2, only during the year ending January 31, 1983, of 4.7%. Sales for groups 3 and 4 declined a greater amount during this period.

Stevens’ evaluation of Green in April 1978 rated her performance good to very good in most categories and concluded that she “should prove to be most productive for many years in her current assignment.”

Sue Dillon, a buyer reporting to Green for approximately five years until April 1982, testified that she received appropriate and good direction from Green and that Green implemented Zindler’s policies.

On November 1, 1982, Zindler informed Green that she was to resign or be fired. Green refused to resign, and Zindler immediately terminated her employment. Don Johnson, age 38, replaced Green and began working on the same day.

Stevens’ written personnel policies enumerate progressive disciplinary procedures that must be adhered to when an employee fails to meet job requirements. Specifically, the supervisor should first attempt to correct unacceptable behavior through counselling prior to issuing a written warning. The discussions are to be supported by documentation to the personnel director. The second step provides that, the supervisor should conduct a warning interview and submit a warning form signed by the employee and supervisor in the employee’s file.

According to step three, a final warning must be given with the personnel director present and a mandatory listing of necessary action in order to improve behavior provided. In cases of involuntary separation, the final step requires notification to the personnel director of the intention to terminate and presentation of the mandatory written warning. Stevens did not follow any of the involuntary separation procedures in Green’s case. Stevens failed to generate or place in Green’s file any supporting written documentation. Neither Green’s supervisor nor the personnel director participated in the termination process. No oral or written warnings of dismissal were given prior to her discharge.

According to Stevens, early in 1982, Zindler and Edmondson adopted a plan to redirect the business, reposition its market share and continue growth in a new marketing area. The major thrust of the reorganization consisted of switching from a “vendor oriented” to a “consumer oriented” approach as well as decreasing the number of DMMs to reduce costs. The plan emphasized the employment of individuals capable of applying the analytical, consumer-driven approach to merchandising.

Zindler afforded all of the DMMs, including Green, appropriate training and opportunities to learn and apply the new marketing approach. Zindler conducted a series of informational meetings during which he imparted the elements of the new strategy and the changes necessary for its implementation. Thereafter, Zindler replaced the DMMs who would not or could not accommodate the shift in market approach. By September 1986, three of the four original DMMs, including Green, were no longer in their positions. The remaining DMM was Rose Ann Cummins, who was 64 years old.

Zindler testified that he explained the new marketing approach to Green and concluded that she did not fully agree with the new approach. Zindler required that Green teach the buyers in her division the new approach and, in the summer of 1982, informed Green that the departments under her supervision were not performing well. According to Zindler, buyers trained by Green were not sufficiently analyzing their departments.

Stevens provided Green with outplacement counseling with Kinzer Corporation. As of April 1983, Green had submitted six employment inquiries during the six-month period. During the next 44 months, Green inquired about employment at the Apparel Center and distributed less than two resumes per month. In 1984, Green resigned from a teaching position with the International Academy of Design.

On July 24, 1986, the Commission reversed the ALJ’s recommended decision and order and remanded the case to the ALJ for a determination of damages. The ALJ determined that Green was entitled to back pay up to February 24, 1986, plus front pay through April 12, 1991, in addition to attorney fees. The Commission affirmed the order awarding damages.

On administrative review, this court is not to reweigh the evidence or determine the credibility of the witnesses. Rather, the function of the court is limited to ascertaining whether the final decision of the administrative agency is against the manifest weight of the evidence. (Department of Corrections v. Adams (1986), 146 Ill. App. 3d 173, 180, 496 N.E.2d 1138, 1143.) Thus, the issue before this court is whether the Commission’s decision is against the manifest weight of the evidence.

When reviewing employment discrimination actions initiated pursuant to the Human Rights Act (Ill. Rev. Stat. 1985, ch. 68, par. 1 — 101 et seq.), this court utilizes the three-step analysis espoused by the Supreme Court in McDonnell Douglas Corp. v. Green (1973), 411 U.S. 792, 36 L. Ed. 2d 668, 93 S. Ct. 1817. (Adams, 146 Ill. App. 3d at 181.) Under this approach, the complainant must first prove, by a preponderance of the evidence, a prima facie case of unlawful discrimination. This creates a rebuttable presumption that the employer unlawfully discriminated against the employee. After the submission of proof of the prima facie case of unlawful discrimination, the burden of persuasion shifts to the employer to clearly set forth a legitimate, nondiscriminatory reason for the employment decision. Then, the complainant must prove by a preponderance of the evidence that the reason proffered by the employer was pretextual. Department of Corrections v. Adams (1986), 146 Ill. App. 3d 173, 181, 496 N.E.2d 1138,1144.

Green established a prima facie case of discrimination given the submission of evidence that she was a member of the protected class and was performing her responsibilities at a level which met Stevens’ legitimate expectations. The division under Green’s control and responsibility consistently generated profits from 1976 through 1981. Moreover, the division’s sales were comparable to, if not greater than, the other divisions in 1977 through 1983. Stevens promoted Green to the position of vice-president. After Green’s discharge, she was immediately replaced by a 38-year-old.

Stevens articulated as its legitimate, nondiscriminatory reason for Green’s discharge, the reorganization plan to decrease the number of DMMs and to employ individuals capable of applying the analytical, consumer-driven approach to merchandising. In addition, Zindler asserted that Green was not prepared during meetings to analytically discuss the department and did not sufficiently supervise and train the buyers in order to ensure that they analyzed their departments and were totally prepared.

Stevens discharged Green and Johnson replaced her in November 1982. Zindler testified that the department improved in 1983. However, Stevens discharged Johnson, Green’s replacement, in November 1983, and Johnson’s periodic evaluation revealed that the buyers under his direction were not properly motivated or challenged and that the buyers who were successful had accomplished their success through their own determination and high level of professionalism. Green trained three of the four buyers characterized as highly professional, determined and motivated.

At the time of hearing, two buyers who worked in Green’s department were still employed by Stevens, and one of the former buyers, Sue Dillon, testified that she had received adequate and proper direction from Green.

Specifically, the Commission found:

“[T]he complainant had been a valued employee who had worked successfully for [Stevens] for approximately twenty-one years. She had been consistently promoted, and the complainant’s exhibit 3 demonstrates a pattern of consistent increase of volume of sales within her department up until the time of her discharge. There was no evidence of any negative written evaluations. *** [Tjhere is further evidence of pretext in the failure of the respondent to present specific evidence regarding the way in which the complainant was failing to implement Zindler’s new buying policy. Zindler stated that a consequence of a failure to follow the new buying philosophy would be the purchase of too many items from long time vendors which were not selling at the retail level. No evidence was produced by the respondent to show what purchases were made under the complainant’s supervision which resulted in substantial monetary loss to the respondent. *** In fact, if the complainant’s exhibit 3 is believed, the sales volume of the complainant’s department was increasing.”

Moreover, Stevens had a termination policy which required written warnings and meetings prior to termination. There was absolutely no effort to comply with any of the policy requirements. Accordingly, the Commission found the reasons articulated “unworthy of belief,” and that the “overwhelming weight of the evidence” supported the contention that the supposed performance problems articulated were merely a pretext for age discrimination and concluded that the respondent had not pursued the discharge in good faith. We conclude that the Commission’s decision that Green proved by a preponderance of the evidence that the reasons articulated by Stevens were pretextual is amply supported by the record and not against the manifest weight of the evidence.

Next, Stevens argues that the Commission awarded damages far in excess of any possible injury Green may have suffered, stating that Green would not have remained in the service of Stevens after February 1986. In support thereof, Edmondson testified that lack of buyer competence is attributable to the DMM and that as of September 26, 1986, Stevens had terminated due to lack of competence the employment of six buyers who previously reported to Green. Edmondson further testified that as of February 1986, Stevens would have no longer employed Green. Thus, according to Stevens, back pay for any period after February 1986 and front pay through April 12, 1991, was clearly erroneous.

The record is void of any facts supporting Edmondson’s assertion that Green would have been terminated in February 1986. Rather, the record indicates that Edmondson’s assertions are speculative since he joined Stevens on November 22, 1982, as executive vice-president and general merchandise manager, subsequent to Green’s discharge.

In November 1982, there were four DMMs. In January 1984, Edmondson became president of Stevens, and on February 24, 1986, he and others purchased Stevens’ capital stock. After the February 1986 acquisition, one of the DMM positions was eliminated. Edmondson contended that Green would not have been one of the remaining three, but admitted that he had never worked with her and the extent of his knowledge regarding her capabilities was based upon what he had been told.

This testimony contradicts Edmondson’s earlier statements that upon his arrival in 1982, he supervised at least three buyers who had been trained by Green and considered them competent and professional despite the shortcomings of their immediate supervisor, Green’s successor. .Green responded that while none of the buyers who were employed in 1982 were employed in 1986, there was no evidence presented as to why they left Stevens’ employ.

The law requires that any uncertainty with respect to Green’s continued employment be resolved in Green's favor because it is improper to resolve the uncertainty created by Stevens’ unlawful discrimination against the victim of the discrimination, especially where there is no factual basis for doing so. (Clark v. Human Rights Comm’n (1986), 141 Ill. App. 3d 178, 183, 490 N.E.2d 29, 33.) The burden is on the employer to demonstrate by a preponderance of the evidence that the employee would have been discharged for other causes. Mt. Healthy City School District Board of Education v. Doyle (1977), 429 U.S. 274, 50 L. Ed. 2d 471, 97 S. Ct. 568.

Section 8 — 108 of the Illinois Human Rights Act provides in pertinent part that the Commission may provide for any relief to “make the individual complainant whole.” (Ill. Rev. Stat. 1985, ch. 68, par. 8—108(J).) Front pay is a remedy available to compensate an individual who has been wronged by an employer’s violation of the Age Discrimination in Employment Act, and it is appropriate to look to Federal decisions applying the parallel Federal law. (City of Cairo v. Fair Employment Practices Comm’n (1974), 21 Ill. App. 3d 358, 363, 315 N.E.2d 344, 348.) Front pay may be appropriate, especially when the plaintiff has no reasonable prospect of obtaining comparable employment. McNeil v. Economics Laboratory, Inc. (7th Cir. 1986), 800 F.2d 111, 118.

Here, the Commission stated that “it would be sheer speculation to conclude that the Complainant would have been discharged after February of 1986, even if there had been no discrimination” and concluded that Stevens failed to make a strong enough showing to justify a cutoff of damages in February 1986. We see no reason to disturb this finding of the Commission and affirm the back pay award through February 24, 1986. We modify the front pay award and order that damages be computed up to and including March 1989, when Stevens closed its stores. Parenthetically, we note that reinstatement was not ordered because Stevens refused to rehire her.

In addition, Stevens asserts that Green’s failure to make a reasonable effort to mitigate damages precluded an award of back pay. The complainant is required to take reasonable efforts in seeking subsequent employment. Orzel v. City of Wauwatosa Fire Department (7th Cir. 1983), 697 F.2d 743.

Specifically, Stevens argues that six employment inquiries during the first six months after termination and the circulation of 20 resumes and visits to 30 or 40 manufacturers or sales organizations within the Apparel Center over a 44-month period did not constitute reasonable efforts. Additionally, Stevens asserts that because Green resigned from a teaching position, the back pay award should be reduced by earnings Green would have received from that position. Stevens further contends that the back pay award should be reduced so as to reflect Green’s unavailability for seven to eight months and that the attorney fee award was improper.

Green was 61 years of age at the time of discharge, and a vice-president, divisional merchandise manager earning $63,497.72 per year. Subsequent to her discharge, Green participated in a career counselling program sponsored by Kinzer Corporation. The program, however, did not result in any employment opportunities for Green. In 1983, Green attended real estate classes and after obtaining a real estate sales license, worked for American Invesco Corporation from March through July 1983, earning a total of $355.

In 1983, Green worked four days a week, eight or nine hours a day, for Schwab, Taylor and Gavender as a merchandise manager consultant at an annual salary of $10,400. She continued to work for Schwab, Taylor and Gavender until May 1985, when she left to personally care for her mother since the cost of her care exceeded $8,000 a year.

While at Schwab, Taylor and Gavender, Green conferred with from 30 to 40 ladies’ apparel manufacturers and/or sales organizations located in the Apparel Center regarding employment. While Green worked at Schwab, Taylor and Gavender, she worked part time in the morning at the International Academy of Merchandising, but discontinued teaching in 1984. During this period, from February 1983 through and including the hearing on damages, Green was registered with an employment agency. In February 1986, Green applied for an office manager position.

Stevens has the burden of proving that Green failed to mitigate her damages. (People ex rel. Bourne v. Johnson (1965), 32 Ill. 2d 324, 329, 205 N.E.2d 470, 473.) The Commission found that Stevens failed to meet that burden. That determination was not against the manifest weight of the evidence, and, therefore, we decline to overturn it.

Accordingly, we affirm the Commission’s order, finding age discrimination and awarding back pay, front pay and attorney fees. We modify the front pay award and order that front pay shall terminate as of March 1989.

Affirmed and modified.

CERDA, P.J., and WHITE, J., concur.


source: Caselaw Access Project

author: JUSTICE RIZZI

license: Public Domain

text:
    ARNOLD PERMAN, Plaintiff-Appellant, v. ARCVENTURES, INC., Defendant-Appellee.
    First District (3rd Division)
    No. 1—88—3238
    Opinion filed March 30, 1990.

      Asher, Pavalon, Gittler & Greenfield, Ltd., of Chicago (Donald W. Cohen, of counsel), for appellant.
    Edward D. Jepson, Jr., and David J. Rice, both of Chicago, for appellee.
   JUSTICE RIZZI

delivered the opinion of the court;

Plaintiff-appellant, Arnold Perman (Perman), appeals from the circuit court’s order granting summary judgment in favor of the defendant, ArcVentures, Inc. (ArcVentures), as to counts I and II of his complaint.

Count I alleges that the nondisclosure and confidentiality agreement between the parties created a right to continued employment and that ArcVentures breached that agreement when it terminated Perman’s employment. Count II alleges that Perman relied upon procedures contained in ArcVentures’ manual of personnel policies and procedures as conditions of employment and an inducement to his acceptance of the job. In addition, Perman alleges that ArcVentures failed to administer progressive discipline in accordance with the policies and procedures and thereby treated him unfairly and in bad faith.

ArcVentures is a for-profit subsidiary of Rush-Presbyterian-St. Luke’s Medical Center (referred to herein as Rush or Medical Center) which sells prescription services to public entities and private corporations through its Home Pharmacy division (HP). In March 1982, Bioservice, Inc. (BO), ArcVentures’ corporate predecessor, hired Per-man as director of the Chicago operations for bioservices. At that time, Perman did not sign an employment agreement and no promises were made as to his period of employment. As director, Perman’s prisicians billing system and its Medicaid management system. During Perman’s orientation, he received Rush’s personnel policies and procedures manual and understood that he would have to administer the policies and procedures with respect to his employees.

In July 1983, Perman’s responsibilities changed and he began assisting Bob Bogash, executive director of extended pharmacy services. In early 1984, after Bogash was discharged, Perman accepted his position and understood that the development of new business constituted an important aspect of his position. Initially, Perman reported to Marie Sinioris, president of ArcVentures, but within a few months reported to Thomas Dunlap, vice-president of ArcVentures.

In March 1984, Sinioris requested that ArcVentures’ directors sign a nondisclosure and confidentiality agreement. On March 21, 1984, Perman signed the agreement. At this time, Perman understood that he had to satisfactorily perform his job responsibilities. The agreement contained the following language:

“WHEREAS, BSC employs Employee in connection with the identification, development and marketing of BSC products and services to various participants in the health care industry;
WHEREAS, BSC desires to protect confidential information which is essential to the continued existence of its business;
WHEREAS, BSC wishes to continue the employment of Employee so long as Employee abides by the terms and conditions of this agreement;
WHEREAS, Employee wishes to continue its employment with BSC;
NOW, THEREFORE, in consideration of BSC’s continuing the employment of Employee, the Employee hereby agrees as follows:
1. NON-DISCLOSURE OF CUSTOMER LISTS. *** The Employee will not, during or after the term of his employment, disclose the list of BSC’s customers or any part thereof to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever. In the event of a breach or threatened breach *** BSC shall be entitled to seek an injunction restraining the Employee from disclosing, in whole or part, the list of the employer’s customers ***.
2. NON-DISCLOSURE OF BSC’S BUSINESS ASSETS AND INFORMATION RELATED TO CONDUCT OF ITS BUSINESS. The Employee acknowledges that financial costs, sales data and other information including, but not limited to formulas, processes, research, studies, compilations, devices, computer software, supply sources, knowledge gained from market research *** are valuable, special and unique assets of BSC’s business. The Employee will not, during or after the term of his/her employment disclose or in any way exploit any information relating to such assets to any person, firm, ***. Employee will not be subject to non-disclosure of information where such information is within the public domain ***.
3. CONFLICT OF INTEREST. During the term of employment, Employee shall devote his/her best efforts and his/her total time commitment * * * to advance the interests of Employer, and Employee shall not without written consent of Employer, directly or indirectly, *** be engaged in or concerned with any other corporation, *** related commercial duties or pursuits that remotely resembles that which is conducted by Employer.”

Perman expended a substantial portion of time in late 1984 trying to secure a contract with the City of Chicago. Dunlap and several other employees participated in these efforts. In April 1985, ArcVentures and the city formed a contract, and city employees began utilizing HP’s services in July of 1985.

Perman and Dunlap discussed Perman’s obligation to develop new business on numerous occasions in late 1984, in 1985 and 1986. During a July 1985 annual review conference, Dunlap stressed the importance of Perman’s development of new business and established his performance goals for the coming year.

The prescription volume goals per day were as follows:

August 15, 1985, 300 prescriptions
October 1, 1985, 500 prescriptions
January 1, 1986, 650 prescriptions
April 1, 1986, 800 prescriptions
June 30, 1986, 1,000 prescriptions

Perman did not achieve the August 15, 1985, prescription goal. In a September 1985 meeting with Perman, Dunlap articulated his dissatisfaction that HP was dispensing only 200 prescriptions per day and urged him to obtain additional accounts as soon as possible. In this meeting, Dunlap stated that he wondered whether Perman was “the guy that can sell this product.”

During the last quarter of 1985, the prescription volume increased due to the City of Chicago retirees’ utilization of HP as previously arranged. No new contracts were executed. Consequently ArcVentures did not meet the prescription goals for October 1, 1985, or January 1, 1986.

In January 1986, Perman and Dunlap met and reduced the prescription goal for June 30, 1986, from 1,000 to 800 since Perman had failed to generate any new accounts. In February 1986, Dunlap and Sinioris informed Perman that they were extremely distressed that the volume of prescriptions had not increased and that no new accounts had been generated.

On or about April 1, 1986, Dunlap directed Perman to expend 100% of his time on marketing, and advised him that he was expected to secure one contract each month in April, May and June in addition to meeting the prescription volume goals.

In April 1986, Perman did not secure any new contracts and the prescription volume goal was not achieved. On May 1, 1986, Dunlap discharged Perman for his failure to meet specific sales goals and to generate new accounts.

ArcVentures utilized Rush’s manual of personnel policies and procedures. The manual’s introduction states the following:

“The Personnel Policies and Procedures which follow, and which may be modified from time to time by the Medical Center, are meant to provide managers and supervisors with guidance as to how the above-discussed employee relations policy of the Medical Center should be implemented. The Personnel Policies and Procedures do not constitute, modify, or otherwise alter the terms and conditions of employment of any Medical Center employee, do not limit or restrict the right of management to terminate or otherwise discipline any Medical Center Employee, and do not constitute an employment contract with any Medical Center Employee.”

The manual provides an employee code of conduct, disciplinary procedures and grievance procedures. The code of conduct section. provides that employees are subject to immediate dismissal, even for a first time offense, for major policy violations including, but not limited to, theft, violation of patient privacy or patient-physician confidentiality, forgery, falsification of records, indecent, disruptive or unlawful conduct, assault, fighting, the unauthorized use, possession, or sale of drugs, alcohol and firearms and neglect of duty.

This section provides that for rule violations, the Medical Center may employ any of the following disciplinary actions: verbal warning, written reprimand, suspension, or discharge. The manual provides that “such discharges must be approved in advance by the director of employee relations, or designee, and are subject to employee appeal through established grievance procedures.”

The employee grievance procedure section provides that, “It is the policy of the Medical Center to assure every employee of the right of appeal through an established grievance procedure from an unfavorable decision affecting his employment.” The grievance procedure for nonunion employees includes a four-step process, with the employee first discussing the problem or complaint with the immediate supervisor. If there is no satisfactory resolution, the second and third steps provide for the presentment of the issue to the next higher supervisor or manager and the department of employee relations, respectively. The department will initiate a conference, investigate, make findings and issue a decision.

Step four provides the employee with an opportunity to have the director of employee relations present the findings to the assistant vice-president of human resources, who will review the grievance with the vice-president for administrative affairs. During the third and fourth steps, “an employee has the right to support his position with evidence, testimony of others, and third party representation if he or she so desires.” This section concludes that the “entire purpose *** is to provide a uniform, methodical system of securing justice for an employee.”

Perman submitted his grievance regarding his discharge to Sinioris, who responded that the discharge was justified because Per-man had failed to obtain new business other than the City of Chicago. Sinioris further explained that Perman should have anticipated the discharge since he had been repeatedly reminded that the development of new business was imperative to his success at ArcVentures.

Perman appealed Sinioris’ decision to James Hill, personnel director of the Sheridan Road Hospital of Rush-Presbyterian-St. Luke’s Medical Center. Hill upheld the discharge, finding as sufficient grounds Herman’s failure to meet 1985 and 1986 sales goals. In addition, Hill determined that Perman had sufficient notice that he would be discharged if he failed to meet performance expectations.

Pursuant to step four of the grievance procedures, Perman appealed the decision to Wayne Lerner, vice-president of administrative affairs, and Robert Lewandowski, assistant vice-president of human resources. Lerner notified Perman by a September 17, 1986, letter that Perman had adequate notice that if he did not increase sales, he would be discharged and that because there was no significant increase in sales, excluding the increase in volume due to the City of Chicago contract, Perman’s discharge was appropriate.

On appeal, Perman first argues that the trial court erred in its summary judgment determination that the nondisclosure and confidentiality agreement between the parties did not establish an enforceable right of continued employment. We disagree.

Covenants not to compete must arise in one of two ways to be enforceable. The agreement may be ancillary to an employment contract or collateral to a sale of property. (Marathon Petroleum Co. v. Chronister Oil Co. (C.D. Ill. 1988), 687 F. Supp. 437, 438.) Such covenants are to be carefully scrutinized by the courts. (Marathon, 687 F. Supp. at 439.) The starting point for any discussion must be the terms of the agreement itself, and the intent of the parties cannot alone determine the restriction’s compliance with the State’s public policy. Marathon, 687 F. Supp. at 439.

A restrictive covenant entered into between an employer and employee is not favored by the courts. (Jefco Laboratories, Inc. v. Carroo (1985), 136 Ill. App. 3d 793, 797, 483 N.E.2d 999, 1001.) It is well settled that a covenant must be reasonable as to time, geographic scope and activity. An unlimited geographic restraint is patently unreasonable. (Jefco, 136 Ill. App. 3d at 799.) Here, the nondisclosure and confidentiality agreement is unreasonable and unenforceable given its unlimited geographic and time dimensions.

Additionally, the language does not establish any right to continued employment. The plain meaning of the contract terms required that confidentiality and nondisclosure were the terms of employment. If Perman was to be employed, he would have to agree to the nondisclosure and confidentiality terms. The language did not include any other terms or conditions of employment. Searight v. Kaiser Aluminum & Chemical Corp. (N.D. Ill. 1984), 625 F. Supp. 17, 19.

Accordingly, we affirm the trial court’s summary judgment ruling that the nondisclosure and confidentiality agreement did not confer upon Perman a right to continued employment. In addition, we modify that order and find that the nondisclosure and confidentiality agreement was unenforceable as a matter of law.

Perman next argues that the trial court erred in granting summary judgment in favor of ArcVentures, finding that the personnel policies and procedures did not create a binding contract. Perman asserts that the disclaimer contained in the policy manual which was not set off from the rest of the text, printed in capital letters or titled, created a genuine issue of material fact as to whether it was effective to preclude a reasonable person from believing the policy manual to be an offer.

The majority of courts interpret the general “employment-at-will rule” as a rule of construction, mandating only a presumption that a hiring without a fixed term is at will, a presumption which can be overcome by demonstrating that the parties contracted otherwise. (Duldulao v. St. Mary of Nazareth Hospital Center (1987), 115 Ill. 2d 482, 489, 505 N.E.2d 314, 318.) “[A]n employment handbook or other policy statement creates enforceable contractual rights if the traditional requirements for contract formation are present.” (Emphasis added.) (Duldulao, 115 Ill. 2d at 490.) The language must contain a promise clear enough that an employee would reasonably believe that an offer had been made. The statement must be disseminated to the employee in such a manner that the employee is aware of its contents and reasonably believes it to be an offer. The employee must accept the offer by commencing or continuing to work after learning of the statement. When these conditions are present, the employee’s continued work constitutes consideration for the promises contained and a valid contract is formed. Duldulao, 115 Ill. 2d at 490.

In Duldulao, the employee handbook created an enforceable right to the particular disciplinary procedures described therein given its mandatory terms. For example, the handbook included the following language, “[A]t the end of 90 calendar days from employment the employee becomes a permanent employee and termination contemplated by the hospital cannot occur without proper notice and investigation. (Duldulao, 115 Ill. 2d at 490-91.) In addition, permanent employees are never dismissed without prior written admonitions and/or an investigation that has been properly documented and three warning notices within a twelve-month period are required before an employee is dismissed, except in the case of immediate dismissal. Duldulao, 115 Ill. 2d at 490-91.

We are mindful that in Duldulao the handbook did not contain a disclaimer and that a contract claim may be difficult to maintain when the employee handbook expressly provides that the employment relationship is at will. (Sitek v. Forest City Enterprises, Inc. (E.D. Mich. 1984), 587 F. Supp. 1381, 1384.) Nonetheless, we find that the language in Rush’s manual of personnel policies and procedures created enforceable contractual rights despite its disclaimer.

Specifically, the manual provided, that “[S]uch discharges must be approved in advance by the director of employee relations or designees, and are subject to employee appeal through established grievance procedures.” (Emphasis added.) The manual further asserts that, “It is the policy of the Medical Center to assure every employee of the right of appeal, through an established grievance procedure from an unfavorable decision affecting his employment.” (Emphasis added.) Perman received the manual during his orientation and commenced work after learning of its provisions. Given the unequivocal language, we reverse the trial court’s summary judgment ruling and find as a matter of law that Perman’s employment could not be terminated at will insofar as the manual provided for an established grievance procedure for an unfavorable decision affecting employment.

We find, however, that Rush accorded Perman his contractual rights as provided by the grievance procedures when Sinioris, Hill, Lerner and Lewandowski reviewed the termination decision. We further find as a matter of law that there was just cause for Perman’s termination.

Modified and affirmed.

CERDA, P.J., and FREEMAN, J., concur.


author: JUSTICE JOHNSON

text:
    A. KENT FERGUSON et al., Plaintiffs-Appellants, v. NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY et al., Defendants-Appellees.
    First District (4th Division)
    No. 1—88—2112
    Opinion filed March 30, 1990.

      Milton Yondorf, of Chicago, for appellants.
    Sweeney & Riman, of Chicago (Georgene M. Wilson, of counsel), for appellee Thomas L. Stone.
   JUSTICE JOHNSON

delivered the opinion of the court:

This is an appeal from an order of the circuit court of Cook County dismissing two counts of a three-count amended complaint filed by plaintiffs, A. Kent Ferguson and Marilyn Ferguson, his wife. The trial court found that counts II and III of plaintiffs’ amended complaint failed to state a cause of action for breach of contract pursuant to section 2 — 615 of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2—615). Count I directed against New England Mutual Life Insurance Company, also a named defendant, was not dismissed. New England Mutual Life Insurance Company is not a party to this appeal. The following issues are presented for review: (1) whether plaintiffs stated a cause of action against defendant, Thomas L. Stone, M.D.; and (2) whether the trial court erroneously dismissed plaintiffs’ declaratory action.

We reverse.

A. Kent Ferguson worked for the Village of St. Charles (hereinafter Village) in 1981 and 1982. The Village provided medical insurance, through New England Mutual Life Insurance Company, for their employees and the families of their employees. While employed by the Village, plaintiffs were covered by New England Mutual Life Insurance Company.

Plaintiffs allege that in 1981 they consulted with defendant Stone and his staff concerning medical problems suffered by Marilyn Ferguson. Marilyn had described her condition as a hernia and obesity. Defendant diagnosed her condition as pancreatic insufficiency, folic acid insufficiency, and multiple food and inhalant allergies.

Plaintiffs allege that, prior to receiving treatment, defendant Stone, through his staff, had assured plaintiffs that the prescribed treatment would be covered by their insurance policy.

During the period of treatment, plaintiffs received a number of invoices from defendant Stone. Plaintiffs paid the invoices but were later reimbursed by the insurer. A second set of invoices was then received by plaintiffs from defendant Stone. Plaintiffs also paid these invoices, but the insurance company refused to reimburse plaintiffs.

In a letter dated January 21, 1981, the insurer, in rejecting plaintiffs’ claim for reimbursement, stated that the treatment received was not medically appropriate or customary for the type of illness claimed by plaintiffs. The insurer referred to a clause in its policy which precludes coverage for “services, treatment and supplies which are not reasonably necessary for the care and treatment of the illness and injury.”

A third set of invoices was submitted by defendant Stone but plaintiffs refused to pay or to submit the invoices to the insurance company as they felt it would be ineffectual. Instead, plaintiffs and a representative from the Village sent letters to defendant Stone requesting that he send the insurer further information concerning Marilyn’s treatment for purposes of reconsideration of the rejected claim. Plaintiffs allege that defendant Stone failed to respond to their requests.

Plaintiffs then filed a complaint against defendant Stone and the insurance company for failing to pay the claim made by plaintiffs. Defendant Stone filed a counterclaim against plaintiffs for libelous statements made in plaintiffs’ complaint. Defendant Stone’s counterclaim was dismissed by the trial court. This court later affirmed the trial court’s decision.

Subsequently, defendant Stone filed a motion to dismiss plaintiffs’ complaint. However, before the court ruled on defendant Stone’s motion, plaintiffs filed an amended complaint. Defendant Stone then moved to dismiss counts II and III of the amended complaint. The trial court dismissed these counts for failure to state a cause of action for breach of contract. Count I of the amended complaint, which is directed against the insurance company, is still pending. Plaintiffs appeal from that portion of the court order dismissing counts II and III of their amended complaint.

Plaintiffs first contend that the trial court erred in dismissing counts II and III of their amended complaint for failure to state a cause of action pursuant to section 2 — 615 of the Code of Civil Procedure. (Ill. Rev. Stat. 1983, ch. 110, par. 2—615.) In Payne v. Mill Race Inn (1987), 152 Ill. App. 3d 269, the following principles were set forth in determining the sufficiency of a complaint:

“Appeal from dismissal of a complaint for *** failure [to state a cause of action] preserves for review only the question of legal sufficiency of the complaint. [Citation.] For purposes of a motion to dismiss, all well-pleaded facts must be taken as true, as well as all reasonable inferences favorable to the nonmoving party which may be drawn from the facts. [Citation.] A motion to dismiss, however, does not admit conclusions of law or conclusions of fact which are not supported by allegations of specific facts which form the basis for such conclusions. [Citation.] In determining whether a complaint states facts or conclusions, the complaint must be considered in its entirety and not in its disconnected parts. [Citation.] In ruling on a motion to dismiss, allegations of the complaint are to be interpreted in the light most favorable to the plaintiff.” Payne, 152 Ill. App. 3d at 273.

In determining the adequacy of a complaint based upon a breach of contract, the court in Payne stated the following:

“An adequate complaint based upon breach of contract must allege the existence of a contract between plaintiff and defendant, performance by plaintiff of the conditions imposed on him by the contract, breach of the contract by defendant, and the existence of damages as a result of the breach. [Citation.] ***
Allegations of the existence of a contract must contain facts indicating an offer, acceptance, and consideration. [Citation.]” Payne, 152 Ill. App. 3d at 273.

After reviewing plaintiffs’ amended complaint, we find that plaintiffs have alleged sufficient facts to state a cause of action for breach of contract.

Plaintiffs allege that in the autumn of 1981 they consulted with defendant Stone and his staff concerning treatment for Marilyn’s medical condition; that during the consultation, there was an express or implied representation or promise by defendant Stone that he could provide treatment which would be medically appropriate and reasonably necessary; that Marilyn underwent this treatment on the condition that the treatment was appropriate and reasonably necessary; that defendant Stone or his staff represented to plaintiffs that the expenses for said treatment would be covered by plaintiffs’ insurance policy; that plaintiffs reasonably relied upon the representation that the treatment would be covered under the policy; that Marilyn underwent the prescribed treatment on the condition that it was covered by their insurance policy; and that said treatment was not covered under plaintiffs’ insurance policy, as promised by defendant Stone, resulting in plaintiffs becoming liable for the costs of the treatment.

We find that plaintiffs’ amended complaint sufficiently states a cause of action for breach of an express contract and for breach of an implied in fact contract. Sufficient facts were alleged for the formation of an express contract when plaintiffs stated that defendant Stone, through his employees, agreed that the treatment would be covered by plaintiffs’ insurance policy; plaintiffs performed under the contract when Marilyn underwent defendant Stone’s prescribed treatment for her condition; the contract was allegedly breached by the failure of the insurance company to cover the treatment and the subsequent demands by defendant Stone for payment from plaintiffs for the services rendered; and damages were alleged as the result of the breach by defendant Stone.

We also find that an implied in fact contract was adequately alleged when plaintiffs stated that defendant Stone did not give treatment that was medically appropriate and reasonably necessary. In Zostautas v. St. Anthony De Padua Hospital (1961), 23 Ill. 2d 326, our supreme court stated:

“Actions in contract may be based upon an express promise by the physician *** or may be based upon the implied obligation arising out of defendant’s employment as a physician to use proper skill and care [citation], or to furnish proper medical aid. [Citation.] In such actions liability is predicated on the failure to perform an agreed undertaking rather than upon negligence, and the damages are restricted to the payments made, the expenditure for nurses and medicines, or ‘other damages that flow from the breach thereof ***.” (Zostautas, 23 Ill. 2d at 329.)

An implied contract, therefore, can be found by the implied obligation by a physician that he will treat the patient with requisite skill and care.

In the instant case, plaintiffs allege that because of defendant Stone’s representation, express or implied, that he could provide appropriate and reasonably necessary medical care, Marilyn underwent the prescribed treatment. Plaintiffs further allege that the services rendered by defendant Stone were not medically appropriate for her specific medical problem. Whether the services were medically appropriate is a question of fact which cannot be resolved on defendant Stone’s motion to dismiss for failure to state a cause of action. (See Hofner v. Glenn Ingram, & Co. (1985), 140 Ill. App. 3d 874.) We find that plaintiffs sufficiently alleged a cause of action for breach of an implied contract by defendant Stone.

Next, plaintiffs argue that they have a right to seek a declaratory judgment as to whether they are obligated to pay defendant Stone. Section 2—701 of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2—701) provides that a declaratory judgment action is available for the “construction of a *** contract or other written instrument.”

Defendant Stone maintains that a declaratory action is not appropriate when there is no contract which could be interpreted by the court. As previously decided, we found sufficient allegations of the formation of a contract between the parties. Defendant Stone’s argument is, therefore, without merit with respect to this issue.

For the foregoing reasons, the judgment of the trial court is reversed.

Reversed.

LINN and JIGANTI, JJ., concur.


author: JUSTICE LINN

text:
    THE DEPARTMENT OF REVENUE, Plaintiff-Appellant, v. WILLIAM J. WALSH, Indiv. and as General Partner of Three Fountains East Development, Ltd., Defendant-Appellee.
    First District (4th Division)
    No. 1—88—3625
    Opinion filed March 30, 1990.

      Neil E Hartigan, Attorney General, of Springfield (Robert J. Ruiz, Solicitor General, and Karen Michels Caille, Assistant Attorney General, of Chicago, of counsel), for appellant.

      Hopkins & Sutter, of Chicago (Lawrence M. Dubin, P.C., William E. Rattner, and Garland H. Allen, of counsel), for appellee.
   JUSTICE LINN

delivered the opinion of the court:

The Illinois Department of Revenue (Department) instituted an action against William Walsh, the taxpayer, individually and as general partner of Three Fountains East Development, Ltd., seeking a judgment in the amount of $113,433.68 in unpaid tax, penalties, and accrued interest through August 31, 1987, plus additional interest accruing at the daily rate of $15.33 per day. At issue was the taxpayer’s partnership return for the year ending in 1980. On that return the partnership claimed a subtraction modification of its taxable income. The Department disallowed the claimed modification under the “mathematical error” provision of the Illinois Income Tax Act (Act) (WALSH. Rev. Stat. 1979, ch. 120, par. 15-1501 (a)(12)).

The issue, as posed by the trial court, is:

“Whether the mathematical error provisions of Section 1501(a)(12)(D) of the Act apply to the facts in the instant case thereby allowing the Department to send a correction notice rather than a notice of deficiency.”

Because we conclude that they do, we reverse.

Background

Under State law, a personal property tax replacement income tax is imposed on partnerships at the rate of 1.5% of net income for each taxable year. (Ill. Rev. Stat. 1979, ch. 120, pars. 2—201(c), (d); see Continental Ilinois National Bank & Trust Co. v. Zagel (1979), 78 Ill. 2d 387, 401 N.E.2d 491.) Taxpayers are allowed to take certain “subtraction adjustments” or modifications to taxable income, where applicable, which reduce the amount of tax that must be paid. The adjustment in issue relates to appreciation on real estate sold by the partnership during 1980. Three Fountains East Development, Ltd., acknowledged a tax liability in the amount of $2,588. In August 1981 the Department sent a correction notice stating that the amount of tax was understated on the return, due to an incorrect line adjustment, and that the return should indicate a tax liability of $64,637.

A correction notice is to be distinguished from a deficiency notice because the purpose of each is separate and the legal consequences flowing from each are substantially different. In brief, the correction notice is sent to notify the taxpayer that his return is “facially” defective, and cannot be .processed, because of an error in computation or other “mathematical” error. In such a situation the taxpayer must pay the amount due, without the right to contest it before paying. He or she may then file for a refund. Ill. Rev. Stat. 1979, ch. 120, pars. 9-903(a)(l), 9-909(d).

A deficiency notice is sent when the Department disagrees with the taxpayer’s interpretation of the substantive tax laws, leading to the assessment of a deficiency that the taxpayer may contest before paying the government. (Ill. Rev. Stat. 1979, ch. 120, par. 9— 904.) If the underpayment of tax is classified under the deficiency procedures, the Department has three years in which to send notice to the taxpayer. Ill. Rev. Stat. 1979, ch. 120, par. 9—903(b).

In the pending case, the taxpayer moved to dismiss the Department’s action as feeing time barred, because the 1987 action was initiated well beyond the three-year limitations period.

The Department, however, contended that because the defect in the 1980 tax return was a mathematical error, the statutory limitation period for deficiency assessments is inapplicable.

The trial court held in favor of the taxpayer and dismissed the action. The Department appeals.

Opinion

Section 1501(a)(12) of the Illinois Income Tax Act provides as follows:

“Mathematical error. The term ‘mathematical error’ includes the following types of errors, omissions, or defects in a return filed by a taxpayer which prevents acceptance of the return as filed for processing:
(A) arithmetic errors or incorrect computations on the return or supporting schedules;
(B) entries on the wrong lines;
(C) omission of required supporting forms or schedules or the omission of the information in whole or in part called for thereon; and
(D) an attempt to claim, exclude, deduct, or improperly report, in a manner directly contrary to the provisions of the Act and regulations thereunder any item of income, exemption, deduction, or credit.” (Emphasis added.) Ill. Rev. Stat. 1979, ch. 120, par. 15-1501(a)(12).

The issue is whether the taxpayer’s chosen subtraction adjustment can be classified as a mathematical error under subsection D.

Under the Department’s income. tax regulations section 100.9050(a)(2)(E), the errors referred to in section 1501(a)(12) of the Act “include but are not necessarily limited to a failure to report, as modifications to the taxpayer’s federal adjusted gross or taxable income [provided in Section 203 of the Act], the additions provided for representing amounts excluded from federal taxation but taxable by Illinois or attempts to report subtractions other than those expressly provided for.” (Emphasis added.) 86 Ill. Adm. Code §100.9050(a)(2)(E) (1985).

The taxpayer took a subtraction adjustment based on what it termed “Pre 7/1/79 Appreciation,” which was not otherwise explained or supported by a schedule. Section 203 of the Act expressly allows for the “pre-August 1, 1969” appreciation date to be used in “the valuation limitation amount.” (Ill. Rev. Stat. 1979, ch. 120, par. 2—203(f).) Subsections 203(a), (b), (c), and (d) govern the computation of the base income and modifications for individuals, corporations, trusts and estates, and partnerships, respectively. Section 203 does not expressly provide for any other “valuation limitation amount” than the August 1969 date. Furthermore, subsection 203(h) states the legislative intention that “[ejxcept as expressly provided by this Section, there shall be no modifications or limitations on the amounts of income, gain, loss or deduction taken into account in determining *** taxable income *** whether in respect of property values as of August 1, 1969 or otherwise.” (Emphasis added.) Ill. Rev. Stat. 1979, ch. 120, par. 2—203(h).

The August 1969 date is the effective date of the Illinois Income Tax Act (Ill. Rev. Stat. 1969, ch. 120, par. 1—101 et seq.). In that year the Illinois Supreme Court recognized a valuation limitation on capital assets, for purposes of calculating the taxpayer’s basis in the property and the resulting tax. The court further determined that this valuation limitation was one that was intended by the legislature. (Thorpe v. Mahin (1969), 48 Ill. 2d 36, 250 N.E.2d 633.) The legislature subsequently amended the Act to allow for this valuation limitation to extend to individuals, estates and trusts, but not corporations. See Mitchell v. Mahin (1972), 51 Ill. 2d 452, 283 N.E.2d 465.

The taxpayer, in the 1980 return, specified “Pre 7-1-79 Appreciation” as the valuation limitation the partnership used to calculate a modification to its taxable income. The July 1979 date is the effective date of the “Personal Property Tax Replacement Income Tax,” which was added to the Act to replace the constitutionally abolished ad valorem personal property tax. (See Continental Illinois National Bank & Trust Co. v. Zagel (1979), 78 Ill. 2d 387, 401 N.E.2d 491.) With the 1979 amendments, partnerships were expressly included in the scheme of taxable entities. (Ill. Rev. Stat. 1979, ch. 120, par. 2— 201(c).) Because partnership income was not subject to the tax until 1979, taxpayer Walsh in the pending case asserts that he should have been able to assert a valuation limitation based on the effective date of the new tax. The merits of this position, he argues, should have been adjudicated through the deficiency procedures rather than the summary mathematical error section. Accordingly, the Department’s 1987 lawsuit is time barred by the three-year limitations period.

A threshold question, then, is whether the taxpayer’s position is one that goes to “substantive” interpretation of the tax laws, which would give the taxpayer its prepayment contest rights under the deficiency procedures, or a “mechanical” error that would trigger the Department’s summary assessment of the additional amounts owed.

HISTORY OF THE ILLINOIS ACT

To understand the genesis of the pending dispute, it is necessary to review briefly the history of the Illinois Act and its relationship to the Federal Income Taxation Code (26 U.S.C. 1 et seq. (1988)). Before 1969, Illinois did not have a State income tax. When the Act was enacted, the Illinois Supreme Court was called upon to consider its constitutionality. In Thorpe v. Mahin (1969), 43 Ill. 2d 36, 250 N.E.2d 633, a taxpayer filed a declaratory judgment action challenging several aspects of the new law. Among other things, the taxpayer argued that the taxes imposed under the new law operated as a tax upon property rather than income; that the different rates of taxation between corporations and individuals violated equal protection and due process principles; and that the treatment and valuation of capital assets provided for in the Act would retroactively tax gains that had accrued before the August 1, 1969, effective date of the Act.

The supreme court upheld the constitutionality of the new Act on all challenges. Regarding the application of the Act to realization of the increased value of capital assets accruing prior to the effective date of the Act, however, the court did impose a limitation. The court ruled that the legislative intent regarding pre-August 1, 1969, appreciation of property subsequently sold was as follows: in the computation of capital gains and losses, the value of property acquired before August 1, 1969, must be limited by its value as determined as of August 1, 1969. This would avoid the unfair result of allowing the capital gains tax to be imposed on accretions in value from years prior to the effective date of the new State income tax act. The court summarized its findings by stating, “In short, in computing taxable gain on property acquired prior to August 1, 1969, the basis is date of acquisition value or the August 1, 1969, value, whichever is greater; in computing a deductible loss on property acquired prior to August 1, 1969, the basis is the date of acquisition value or the August 1, 1969, value, whichever is less.” Thorpe v. Mahin, 43 Ill. 2d at 54, 250 N.E.2d at 642.

The August 1, 1969, limitation thus set out was codified, with modifications, in a 1971 amendment to the Illinois Act. (Ill. Rev. Stat. 1973, ch. 120, pars. 2—203(a)(2)(F), (c)(2)(F), (e).) By its terms, this limitation applied to “individuals, trusts, and estates,” as distinguished from corporations. Corporate taxpayers’ challenges to the different treatment for corporations and noncorporate entities were unavailing. See Warren Realty Co. v. Department of Revenue (1978), 62 Ill. App. 3d 450, 379 N.E.2d 100; National Realty & Investment Co. v. Department of Revenue (1986), 144 Ill. App. 3d 541, 494 N.E.2d 924.

In 1979 “the valuation limitation” that the Act allowed as a modification of base income was expressly extended to partnerships, as newly taxable entities under the personal property tax replacement income tax. (Ill. Rev. Stat. 1979, ch. 120, par. 2—203(d)(2)(E).) However, the provision of section 203 that set out the August 1, 1969, date for calculating the “valuation limitation” referred by its terms only to the subsections in which the valuation limitation was granted to individuals and trust and estates. (Ill. Rev. Stat. 1979, ch. 120, par. 2—203(f).) It is the omission of an express reference to the partnerships in this provision that the taxpayer in the pending case apparently bases the argument that the Act did not directly bar partnerships from using July 1, 1979, as the date for computing a valuation limitation.

Taxpayer Walsh in the pending case contends that he has legitimate grounds to claim the July 1, 1979, effective date of the personal property replacement income tax as the operative valuation limitation for partnership property sold in 1980. Use of this date would give him the benefit of reducing the partnership’s taxable income by calculating the valuation limitation from the later date, thus giving him a higher basis in the property upon which to calculate the taxable gain. He argues that since partnerships were not expressly limited to the August 1, 1969, date in amendments to the Act, his attempt to use the July 1, 1979, date was not “directly contrary” to the provisions of the Illinois Act and regulations. As such, it was not a “mathematical error” and he should not have been deprived of the deficiency assessment procedures under section 903. Since the Department did not comply with the statutory notice of deficiency assessment, therefore, its action to collect the tax is untimely. He points to the potential abuse that may occur if the Department is allowed to circumvent taxpayer’s rights under the deficiency procedures and classify everything as a mathematical error, allowing the Department to summarily assess and collect tax that may well involve a substantive dispute as to the application of the tax laws and regulations.

We do not wish to diminish, in any way, taxpayers’ rights to a prepayment contest under the deficiency procedures where appropriate. We agree that individuals may suffer substantial hardship if required to pay first and then seek a refund when contesting substantive issues of tax interpretation. Our statutory scheme, like the Federal one, provides protections to taxpayers against improper or premature collections. It also preserves the strong government interest in fiscal policy by preventing taxpayer abuse through provisions for jeopardy assessments, payment of interest and penalties, and sanctions for fraud. The legislative balance thus struck appears to accommodate the interests of both sides in an income tax dispute.

The court is therefore required to evaluate the specific facts before us in light of the terms of section 1501(a)(12)(D). Too broad a construction may dilute taxpayers’ rights because of the risk that the Department may categorize deductions or credits on returns as mathematical errors when in fact they involve substantive disputes. Too restrictive an interpretation, however, risks the impairment of the Department’s ability to collect under the summary procedures of math error provisions, taxes that the legislature intended to be “unequivocally due” by the terms of the Act and regulations.

PLAIN MEANING

The term “mathematical error” by itself denotes mistakes in computation, the type of error that is most clearly capable of summary correction without a deficiency proceeding. In section 1501(a)(12), the term is defined to include “errors, omissions or defects in a return *** which prevent acceptance of the return as filed for processing.” (Emphasis added.) (Ill. Rev. Stat. 1979, ch. 120, par. 15—1501(a)(12).) This reference to processing is not further explained, except by implication in the four categories of mathematical error that follow: “(A) arithmetic error or incorrect computations on the return or supporting schedules” (for example, incorrect addition of two lines of a return, in which the inaccurate total is entered on a third line); “(B) entries on the wrong line” (physically misplacing an entry, so that the entry on an applicable line is missing or incorrect); “(C) omission of required supporting forms or schedules or the omission of the information in whole or in part called for thereon” (for example, failure to set out in the return the information, form, or schedule that is being used by the taxpayer in calculating his tax); and “(D) an attempt to claim, exclude, deduct, or improperly report, in a manner directly contrary to the provisions of the Act and regulations thereunder any item of income, exemption, deduction, or credit.” Ill. Rev. Stat. 1979, ch. 120, par. 15—1501(a)(12).

Initially, the language of subsection D gives rise to a question: “What is left?” This example of mathematical error seems different in kind from the preceding categories. The first three categories presume an error of the type that may be considered “inarguable," “unequivocal,” or “indisputable,” in the sense that no reasonable minds could differ because no interpretation of tax law is required. In fact, Federal interpretations of the Federal counterpart to the Illinois Act strongly suggest that the scope of the mathematical error concept is narrowly limited to just such situations. See, e.g., Repetti v. Jamison (N.D. Cal. 1955, 131 F. Supp. 626, aff’d (9th Cir. 1956), 239 F.2d 901 (Taxpayer’s claimed credit on a return for overpayment of tax in prior year and government’s claim of unauthorized credit was not a mistake in arithmetic or inadvertent entry); Farley v. Scanlon (E.D. N.Y. 1964), 64—1 T.C. par. 9371, at 91, 964 (Mathematical error “means an error in computing the tax on what the return itself concedes to be income. Disclosed exclusions from gross income, even if they seem *** to be wrong and wrongheaded, cannot be treated as mathematical error so as to abridge the taxpayers’ rights in deficiency procedure”).

THE FEDERAL EXPERIENCE WITH MATHEMATICAL ERROR

The Illinois Act provides a rule of construction, in section 102, which refers to the Federal tax code:

“Except as otherwise expressly provided or clearly appearing from the context, any term used in this Act shall have the same meaning as when used in a comparable context in the United States Internal Revenue Code of 1954 or any successor law or laws relating to federal income taxes ***.” Ill. Rev. Stat. 1979, ch. 120, par. 1—102.

The trial court reviewed the history of the Federal versions of mathematical error and quoted from the Senate Finance Committee Report accompanying the Tax Reform Act of 1976, which proposed a change in the law to better define what types of errors should be viewed as mathematical ones. The Senate report summarized the existing law:

“The term, mathematical error, has been interpreted by the [Internal Revenue] Service to include several types of error which are broader in nature than literal errors of arithmetic. The Service position is that mathematical error includes the following: errors in arithmetic (such as 2 + 2 = 5); errors in transferring amounts correctly calculated on a schedule, form, or another page of Form 1040 to either page 1 or page 2 of Form 1040; missing schedules, forms, or other substantiating information required for inclusion with Form 1040; inconsistent entries and computations (such as cases where the total exemptions claimed do not agree with the total used in computing the tax); and errors where the entry exceeds a statutory numerical or percentage limitation (such as a standard deduction claimed in excess of the maximum allowed by the Code).
Court opinions, however, generally have limited the scope of the term, mathematical error, to arithmetic errors involving numbers which are themselves correct.” S. Rep. 94 — 938, 94th Cong., 2d Sess. 374-75 (1976).

The Senate report noted that the Internal Revenue Code provision then in effect allowed summary assessment of additional tax only to permit such correction of “a mathematical error appearing on the return.” The above-quoted examples were cited as the Department’s expansion of the term. The Committee, expressing concern that the Service might be abusing the mathematical error provision, recommended a change in the law “(1) to provide greater protection for taxpayers who wish to contest Internal Revenue Service summary assessments in mathematical error cases, by restricting the Service’s powers in such cases, and (2) to clarify the kinds of cases in which the Service could use this restricted summary assessment authority.” S. Rep. 94-938, 94th Cong., 2d Sess. 375 (1976).

The resulting provision that Congress enacted was section 6213(g)(2) of the Internal Revenue Code, which states:

“The term ‘mathematical or clerical error’ means—
(A) an error in addition, subtraction, multiplication, or division shown on any return,
(B) an incorrect use of any table provided by the Internal Revenue Service with respect to any return if such incorrect use is apparent from the existence of other information on the return.
(C) an entry on a return of an item which is inconsistent with another entry of the same or another item on such return,
(D) an omission of information which is required to be supplied on the return to substantiate an entry on the return, and
(E) an entry on a return of a deduction or credit in an amount which exceeds a statutory limit imposed by a subtitle A or B, or chapter 41, 42, 43, or 44, if such limit is expressed—
(i) as a specified monetary amount, or
(ii) as a percentage, ratio, or fraction, and if the items entering into the application of such limit appear on such return.” 26 U.S.C.A. 6213(g)(2) (West 1989) (as amended).

The Federal experience is not ultimately conclusive in construing the Illinois Act’s language because the Federal provision does not include a category similar to our subsection D. Nevertheless, the Federal experience suggests that Illinois’ mathematical error provision should not be so broadly defined as to decimate its purpose in the scheme of tax assessment procedure. We believe that the Illinois legislature is free to expand its definition of mathematical error to cover some situations not considered part of the Federal concept, as long as the legislative enactment is not arbitrary and as long as an expanded definition does not undercut the deficiency procedures to the point that it repeals them sub silento. To evaluate the Illinois provision, therefore, we consider first the “plain” meaning of the words and consider the context in which they are found.

The taxpayer’s attempt to “exclude” income or “improperly report” it is prohibited in this section as a mathematical error, provided that such attempted claim, exemption, credit or deduction is made “in a manner directly contrary to the provisions of the Act and regulations thereunder.” They key term is “directly contrary.” If not for that qualifier, subsection D would appear to cover virtually all tax disputes, substantive or otherwise. Since we find no persuasive indication that the legislature intended to do away with the taxpayer’s right to contest substantive law in a deficiency assessment proceeding, we must focus on an interpretation of “directly contrary” that may be of some guidance to the Department and taxpayers of this State.

Dictionary definitions of “directly” include: “in a straightforward manner without hesitation, circumlocution, or equivocation”; “plainly and not by implication;” “in unmistakable terms;” “unqualifiedly.” (Webster’s Third New International Dictionary 641 (1981).) The literal meaning suggests that the supposed mathematical error in question must be so clearly and inarguably contrary to the Act and regulations that it is expressly prohibited as a deduction, exemption, credit, or item of income. If there is reasonable doubt that the Act and regulations clearly prohibit the claimed item, it should not be treated under the mathematical error provisions of the Act and the taxpayer should be accorded the deficiency notice proceedings.

In the pending case, we find that the taxpayer’s attempt to use “pre 7-1-79 Appreciation” is, in fact, “directly contrary to the provisions of the Act and regulations thereunder.” Despite the taxpayer’s arguable issues on the underlying merits that may or may not succeed in a tax refund proceeding, we cannot agree that the taxpayer’s attempted subtraction adjustment should be excluded from classification under subsection D as a mechanical error. The reasons in support are as follows: (1) The expressed legislative intent in section 203(h) of the Act specifically bars taxpayers from taking modifications other than those expressly provided for, “whether in respect of property values as of August 1, 1969 or otherwise”; (2) the only subtraction modification to taxable income deriving from a limitation on the appreciation of property “expressly provided for” in the Act is the August 1, 1969, valuation limitation; (3) this valuation limitation was specifically given to partnerships in the 1979 amendments, and no other has ever been granted; and (4) regulation section 100.9050(a)(2)(E) bars the taxpayer from attempting to claim a subtraction adjustment that is not “expressly provided for” in the Act. The Act has never granted a valuation limitation other than August 1, 1969, and when partnership entities were subjected to the Income Tax Act in 1979, the legislature granted to partnerships “the” valuation limitation. Accordingly for purposes of construing the tax dispute in the pending case as one falling within the mathematical error provision or deficiency notice provisions of the Act, we conclude that the taxpayer’s election of a different valuation limitation was “directly contrary” to the provisions of the Act and regulations.

The taxpayer in the pending case does not suggest that subsection D is unconstitutional or invalid on its face. Courts are bound by legislative pronouncements that are clear, unambiguous, and reasonable. (See Mack v. Seaman (1983), 113 Ill. App. 3d 151, 446 N.E.2d 1217; Heritage Bank & Trust Co. v. Harris (1985), 132 Ill. App. 3d 969, 478 N.E.2d 526.) Courts also defer to Departmental interpretations of their own regulations, as long as they are not unreasonable. (Illinois Consolidated Telephone Co. v. Illinois Commerce Comm’n (1983), 95 Ill. 2d 142, 447 N.E.2d 295.) We do not find the provisions of the Act in issue to be unreasonable, nor do we find the pertinent regulation invalid as exceeding the scope of the statutory grant.

We concede that questions involving the classification of an error as mathematical should not normally involve extensive and complex analysis of substantive tax law. The determination in this case of whether the taxpayer’s claim was directly contrary to the Act and regulations is not so complex, however. Other factual circumstances may be easier or more difficult to fit into the “directly contrary” proviso. We do not expect that the Department will begin to treat all “grey area” cases as mathematical errors to avoid the deficiency procedures, and we find the pending facts more black and white than grey. We hold that the attempt to use “pre-7-1-79 Appreciation” as a subtraction adjustment was “directly contrary” to the provisions of the Act and regulations thereunder, giving rise to the treatment of the error as a mathematical one under subsection D. Therefore, we must reverse the judgment of the trial court that dismissed the Department’s lawsuit as being untimely under the three-year limitations period applicable to deficiency notice proceedings.

Reversed and remanded.

McMORROW, P.J., and JIGANTI, J., concur.

      In Continental Illinois National Bank & Trust Co. v. Zagel (1979), 78 Ill. 2d 387, 401 N.E.2d 491, the Illinois Supreme Court majority upheld the constitutionality of the personal property tax replacement income tax. One of the challenges asserted that imposing a partnership income tax amounted to a double taxation of the individual partners’ income, since they were already obligated to pay the individual income tax on the income generated by the partnership. Three justices dissented from this construction of the Act.

      In 1986, the legislature amended the statute to expressly refer to partnerships in the provision setting out the method of calculating the pre-August 1, 1969, valuation limitation. Ill. Rev. Stat. 1987, ch. 120, par. 2—203(f).

      We are aware that this determination may overlap with the “substantive” issues the taxpayer may claim in a tax refund claim. We cannot, however, decide whether the claimed adjustment is “directly contrary” to the Act and regulations in a vacuum. Our holding is limited to the classification of the taxpayer’s “error” as a “mathematical” one under subsection D. We also note that another division of this court is considering the merits of a tax refund claim made by a partnership which used the July 1, 1979, effective date of the personal property tax replacement income tax. Chen v. Department of Revenue (1990), 196 Ill. App. 3d 583.