Needle Inc. v. Department of Workforce Services, Workforce Appeals Board
2016 UT App 85
| Utah Ct. App. | 2016Background
- Needle, Inc. operates a proprietary online chat platform it licenses to retailers and recruits "advocates"—enthusiastic online consumers—to answer customer chats on retailer sites.
- Advocates are identified by prior online activity, provide their own computers/internet, work remotely and part‑time on flexible schedules, are paid per chat by Needle, and receive 1099 forms annually.
- Needle treated advocates as independent contractors; the Department audited and determined advocates were employees for unemployment‑contribution purposes.
- An ALJ affirmed the auditor; the Workforce Appeals Board adopted the ALJ’s findings (with minor changes) and ruled the advocates were employees, not independently established contractors.
- Needle appealed, arguing the Board’s factual findings lacked substantial evidence and that the Board misapplied Utah’s independent‑contractor rules.
Issues
| Issue | Plaintiff's Argument (Needle) | Defendant's Argument (Dept. of Workforce) | Held |
|---|---|---|---|
| Whether advocates are employees or independent contractors under Utah Code §35A‑4‑204 | Advocates are independent contractors: they supply tools (computer/internet), work remotely, receive 1099s, and sell their expertise. | Advocates are not "customarily engaged in an independently established trade" and lack indicia of independence. | Board decision affirmed: advocates are employees; Needle failed to meet its burden to show independent‑business status. |
| Separate place of business factor (R994‑204‑303(b)(i)) | Board misread the factor; absence of a dedicated office shouldn't defeat independence because advocates work from locations separate from Needle. | Advocates had no established business location; working from home/internet does not show a separate business. | Board’s factual finding that advocates lacked a separate established place of business was reasonable and supported. |
| Tools/equipment and profit/loss (R994‑204‑303(b)(ii),(iv)) | Advocates made a substantial investment (computer/internet, product purchases) and can realize profit, so factor favors independence. | Needle’s platform is the indispensable tool; advocates’ computers/internet are ordinary household items likely acquired for other reasons; advocates face no real risk of loss. | Board reasonably weighed Needle’s proprietary platform as a necessary tool and concluded investment/risk evidence did not support independent‑business status. |
| Other indicia: clients, advertising, business records (R994‑204‑303(b)(iii),(v),(vii)) | Advocates’ online presence (blogs/Facebook), occasional outside work, and receipt of 1099s show they market services and keep business records. | Online posts were product enthusiasm, not solicitations; no evidence advocates regularly performed similar services for other clients or maintained business records/filings. | Board properly required evidence of regularly performed similar work, targeted advertising, and business recordkeeping; absence of such evidence supported employee classification. |
Key Cases Cited
- BMS Ltd. 1999 Inc. v. Department of Workforce Servs., 327 P.3d 578 (Utah Ct. App.) (deference and factor‑based independent‑contractor analysis)
- Petro‑Hunt LLC v. Department of Workforce Servs., 197 P.3d 107 (Utah Ct. App.) (conjunctive prongs for independent‑contractor test and profit/loss analysis)
- Evolocity Inc. v. Department of Workforce Servs., 347 P.3d 406 (Utah Ct. App.) (weight of tools/records and ‘‘regularly perform[]’’ other‑clients requirement)
- Tasters Ltd. v. Department of Employment Security, 863 P.2d 12 (Utah Ct. App.) (investment in tools can be essential even if household items)
- Carbon County v. Workforce Appeals Bd., 308 P.3d 477 (Utah) (fact‑intensive inquiry and Board deference)
- North Am. Builders Inc. v. Unemployment Comp. Div., 453 P.2d 142 (Utah) (substance over form in employment relationship)