418 P.3d 719
Or.2018Background
- ACN sells telecom and related goods through independent business owners (IBOs) under written contracts; IBOs paid fees, received commissions/bonuses and could sponsor downline IBOs.
- IBO contracts characterized sellers as independent contractors, prohibited cold marketing, restricted solicitation/competition, and required ACN approval for sponsor changes.
- Oregon Employment Department determined IBOs were employees for unemployment-insurance purposes; ALJ and Court of Appeals affirmed, assessing taxes and interest against ACN.
- Key legal tests: (1) independent-contractor definition in ORS 670.600 (must meet four requirements, including being "customarily engaged in an independently established business" proven by at least 3 of 5 factors in ORS 670.600(3)); (2) in-home sales exemption in ORS 657.087(2) (commissions for orders solicited or sales resulting from in-person solicitation of consumer goods in the home).
- ALJ found ACN had proved only two ORS 670.600(3) factors (risk of loss and significant investment) and failed to show IBOs "maintained a business location" or had authority to hire/fire; ALJ also found ACN failed to quantify commissions attributable to in-home sales.
- The Oregon Supreme Court affirmed: IBOs were not independent contractors under ORS 670.600 and did not qualify for the ORS 657.087(2) in-home-sales exemption.
Issues
| Issue | ACN's Argument | Employment Dept.'s Argument | Held |
|---|---|---|---|
| Whether IBOs are "customarily engaged in an independently established business" under ORS 670.600(2)(b) by meeting ≥3 factors in ORS 670.600(3) | ACN: IBOs met a third factor via (a) maintaining separate business locations or (e) authority to hire/fire; thus they are independent contractors | Dept.: ACN failed to prove a third factor; IBOs did not maintain business locations and lacked hiring/firing authority | Held: ACN failed its burden; IBOs are not independent contractors (did not "maintain" a business location and lacked hiring/firing authority) |
| Meaning of "maintains a business location" in ORS 670.600(3)(a) | ACN: "maintains" means merely to have or use a separate location (e.g., meet clients at coffee shops) | Dept.: "maintains" requires affirmative acts (rent, hold out, primary use), not transient use | Held: "Maintains" requires more than mere use; ACN did not show IBOs affirmatively maintained business locations |
| Scope of ORS 670.600(3)(e) — authority to hire/fire to provide the services for which remunerated | ACN: Paragraph 20 of contract doesn't bar hiring to perform non-sales tasks; IBOs can hire assistants so factor satisfied | Dept.: The statute concerns hiring assistants to perform the very services for which the worker is paid (i.e., selling); Paragraph 20 conditions hiring/sponsorship on ACN approval | Held: IBO contracts restrict hiring/selling without ACN approval; IBOs lack the requisite authority to hire/fire for the sales services, so (e) not satisfied |
| Scope of in-home sales exemption ORS 657.087(2) — whether it applies if selling activity is primarily in-home or only to compensation attributable to in-home sales | ACN: exemption should apply if sellers primarily solicit/sell in-home (or operate as direct sellers generally) | Dept.: Exemption applies only "to the extent that" compensation results from orders solicited or sales made in the home | Held: Exemption applies only to the portion of compensation attributable to orders/sales made in the home; ACN failed to show what portion of IBOs' commissions derived from in-home sales |
Key Cases Cited
- Broadway Cab LLC v. Employment Dept., 358 Or. 431 (interpreting independent-contractor criteria and applying ORS 670.600 factors)
- Compressed Pattern, LLC v. Employment Dept., 253 Or. App. 254 (construing "maintains a business location" under ORS 670.600(3)(a))
- S-W Floor Cover Shop v. Natl. Council on Comp. Ins., 318 Or. 614 (legislative background on harmonizing independent-contractor definitions across statutes)
- Timberland Sales v. Employment Div., 20 Or. App. 192 (context for 1977 enactment of in-home sales exemption aimed at Tupperware-style home parties)