Blue Lake Rancheria v. United States
653 F.3d 1112
| 9th Cir. | 2011Background
- Blue Lake Rancheria is a federally recognized Indian tribe in California with 53 members.
- In May 2003 the Tribe formed Mainstay Business Solutions as a tribally owned for-profit entity.
- Mainstay provided employee leasing and temporary staffing to clients, hiring clients’ employees and leasing them back to the clients.
- Clients supervised leased employees daily; Mainstay paid wages, provided benefits, and handled HR functions.
- During 2003–2004 Mainstay paid wages for about 39,000 workers and remitted FUTA taxes; it sought refunds claiming exemption under 26 U.S.C. § 3306(c)(7); the district court granted summary judgment for the United States, and the Tribe appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of § 3306(c)(7) exemption from employment | Blue Lake argues the exemption covers statutory employers. | United States argues exemption applies only when the tribe is the common-law employer. | Exemption applies only where the tribe is the common-law employer. |
| Whether Mainstay was the tribe’s common-law employer of leased workers | Mainstay was the common-law employer of the leased employees. | Mainstay was not the common-law employer; only others (clients) controlled day-to-day work. | Mainstay was the common-law employer of the leased employees. |
| Relation of Otte and the phrase 'in the employ of' to statutory employers | Otte and its progeny support treating statutory employers as within the exemption. | Otte governs employer definitions for withholding, not the scope of § 3306(c)(7). | Otte does not expand § 3306(c)(7) to cover statutory-employer status; the phrase is interpreted within FUTA context. |
| Use of CCNV factors to determine employment status | CCNV factors show control by Mainstay over employment terms indicates common-law employment. | Traditional two-party framework applies; need for common-law employer status. | Mainstay meets the CCNV/Treasury factors to be a common-law employer of leased workers. |
Key Cases Cited
- Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989) (multifactor test for common-law employment)
- Otte v. United States, 419 U.S. 43 (1974) (employer defined for withholding context; not extending 'in the employ of')
- Winstead v. United States, 109 F.3d 989 (4th Cir. 1997) (statutory employer bears tax responsibilities under FUTA/FICA)
- Evans v. IRS (In re Sw. Rest. Sys., Inc.), 607 F.2d 1237 (9th Cir. 1979) (statutory employer payments of taxes extended to FUTA/FICA)
- Melamed v. United States (In re Laub Baking Co.), 642 F.2d 196 (6th Cir. 1981) (extending statutory-employer concepts to tax payments)
- Green v. Comm'r, 707 F.2d 404 (9th Cir. 1983) (statutory interpretation principle; plain meaning controls)
- Cencast Servs., L.P. v. United States, 62 Fed. Cl. 159 (2004) (limits extending §3401(d)(1) to common-law employer context)
- S. Ct. v. Catawba Indian Tribe, Inc., 476 U.S. 498 (1986) (canon of resolving ambiguities against Indians when statute unambiguous)