Families, Inc. v. Director, Department of Workforce Services Employer Contribution Unit
2016 Ark. App. 475
| Ark. Ct. App. | 2016Background
- Families, Inc. received an unemployment-tax liability determination (Feb. 11, 2015) concluding some mental-health workers were employees subject to unemployment-insurance taxes.
- Families requested a redetermination and a hearing; while the matter was pending, Ark. Code Ann. § 11-10-210 was amended (Apr. 2, 2015) to relax the independent-contractor test (requiring prong 1 and only one of prongs 2 or 3 rather than all three).
- At hearing, several workers and Families’ CEO testified about job duties, assignments, training, required policies (RSPMI manual), approval for outside work, and termination rights.
- The Director found Families failed to prove the three-prong exemption; the Board affirmed the Director’s decision. Families appealed, arguing the amended statute should apply retroactively and that substantial evidence did not support the Board’s control finding.
- The Court of Appeals affirmed: it held the amendment was substantive (not retroactive) and found substantial evidence that Families exercised control and direction over the workers under the pre-amendment test.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the April 2015 amendment to § 11-10-210 should be applied retroactively | Amendment is procedural/fiscal and may be applied retroactively; it relaxes burden and does not create new rights | No express legislative intent for retroactivity; the change substantively alters the test for independent-contractor status | Amendment is substantive; absent express retroactive language, the unamended statute governs (no retroactive application) |
| Whether Families’ workers were free from control and direction under § 11-10-210(e)(1) | Control asserted was merely compliance with Medicaid/RSPMI requirements imposed by the state, not Families’ control | Families exercised control: assignments, training, policies, required agreements, approval for outside work, ability to discharge | Substantial evidence supports Board’s finding that Families exerted control/direction; prong (1) not satisfied |
| Whether failure to satisfy any prong requires affirmance | Families contends overall evidence shows independent-contractor status despite one prong | Board relied on failure of prong (1) and could affirm on that basis alone | If any single statutory prong fails, Board’s decision must be affirmed; here prong (1) failed so appeal denied |
| Applicability of O’Dell precedent | Families argues O’Dell requires rejecting control finding where only minimal guidelines exist | Board distinguishes O’Dell based on more extensive control here (training, termination, mandatory policies, approval for outside work) | O’Dell is distinguishable; greater indicia of control support affirmance |
Key Cases Cited
- Bean v. Office of Child Support Enf’t, 340 Ark. 286 (2000) (remedial/procedural statutes may be given retroactive effect when they do not create new obligations)
- Ark. Dep’t of Human Servs. v. Walters, 315 Ark. 204 (1993) (construction of remedial legislation considers the mischief to be remedied and legislative purpose)
- DuLaney v. Cont’l Life Ins. Co., 185 Ark. 517 (1932) (state may retroactively impose taxes)
- Reinecke v. Smith, 289 U.S. 172 (1933) (tax legislation may be applied retroactively under certain circumstances)
- Johnson v. Director, 84 Ark. App. 349 (2004) (credibility and weight of testimony are for the Board to decide)
- O’Dell v. Director, 442 S.W.3d 897 (Ark. App. 2014) (minimal guidelines and termination rights alone may not establish control; distinguished on facts)