Lead Opinion
This is an appeal by Bon Appetit from a decision of the Industrial Commission holding that certain independent contractors are nevertheless covered employees of Bon
The facts are not at issue, and are in effect stipulated. Bon Appetit operates a gourmet food business, and contracts with independent agents to market its products on a door-to-door basis. The contracts between Bon Appetit and its agents are not contested, and clearly delineate a principal-agent relationship. Following an audit of Bon Appetit by the Department of Employment, the Department held that the independent agents were nevertheless “covered employees” and hence Bon Appetit was required to pay unemployment compensation tax. An appeals examiner held that although the agents met requirements to be denominated independent contractors, nevertheless the above statute required their inclusion in covered employment. On appeal to the Industrial Commission it was held and concluded that the intent of the parties as expressed in the contracts, required a holding that the agents were independent contractors, but nevertheless that such independent agents fell within the I.C. § 72-1316(d)(2) definition of covered employment. This appeal results.
The pertinent provisions of I.C. § 72-1316(d) provide:
(d) Services performed by an individual for remuneration shall, for the purposes of the Employment Security Law, be covered employment:
(1) Unless it is shown: (A) that the worker has been and will continue to be free from control or direction in the performance of his work, both under his contract of service and in fact, and (B) that the worker is engaged in an independently established trade, occupation, profession, or business;
(2) Even though such individual meets the exemption of subsection (d)(1)(A) and (B) but performs services;
(A) As an agent-driver or commission-driver engaged in distributing meat products, vegetable products, fruit products, bakery products, beverages, or laundry or dry cleaning services for his principal;
Thus, under the statute otherwise independent contractors engaged in distributing meat, vegetables, fruit, bakery or beverage products, or conducting laundry or dry cleaning businesses are conclusively held to be “covered employees” and the principals to the principal-agency contract are required to pay “unemployment tax.” We are cited to no statute which imposes “employee” status on those who are otherwise independent contractors in such well known fields as the door-to-door vending of cosmetics, magazine and other publications, vacuum cleaners, home cleaning products, or the solicitation of charitable contributions, to mention only a few examples. Clearly, otherwise independent agents who market food or beverage products, or laundry or dry cleaning services on a door-to-door basis, are singled out by the statute from all others in the business of marketing door-to-door. The Department of Employment offers no rationale for such categorization, and we find no rationale therefore expressed in any legislation.
As noted above, Bon Appetit asserts the denial of equal protection under both the fourteenth amendment to the United States Constitution, and art. 1 § 2 of the Idaho Constitution. An act of the legislature is presumed to be constitutional, but whether the act is reasonable or arbitrary or discriminatory is a question of law for determination by this Court. Weller v. Hopper,
This Court, in the application of the rational basis test, utilized a two-step analysis in reviewing a classification made for tax purposes. Evans v. Idaho State Tax Commission,
The statute in question here singles out those who contract with agents for the distribution of “meat products, vegetable products, fruit products, bakery products, beverages or laundry or dry cleaning services,” and denominates them as employers who are required to pay unemployment compensation tax. Insofar as we are informed by the parties here, for all other purposes like parties are denominated independent contractors.
We are cited to and find no legislative statement of policy or public purpose for this particular classification. The respondent Department of Employment offers no explanation or justification for such legislative distinction. We are not cited nor have we discovered any reason or rationale stated or furnished in any portion of the Congressional enactments.
We have engaged in our own independent analysis to ascertain a legitimate basis for what on its face is a discriminatory tax. We find no such rational basis. We find the particular provisions of I.C. § 72-1316 to be unconstitutional on its face, and as applied, since it denies Bon Appetit equal protection of the laws in violation of the fourteenth amendment of the United States Constitution and art. 1 § 2 of the Idaho Constitution.
The cause is reversed and remanded to the Industrial Commission for the entry of appropriate orders.
Notes
SHEPARD, J. authored this opinion prior to his untimely death.
Dissenting Opinion
dissenting:
The majority opinion concludes, correctly, that the rational basis test, the most lenient of all tests for equal protection analysis, is applicable to this case. Accordingly, the appropriate formulation of that test is as stated by the United States Supreme Court in Minnesota v. Clover Leaf Creamery Co.,
But States are not required to convince the courts of the correctness of their legislative judgments. Rather, “those challenging the legislative judgment must convince the court that the legislative facts on which the classification is apparently based could not reasonably be conceived to be true by the governmental decisionmaker.” ...
Although parties challenging legislation under the Equal Protection Clause may introduce evidence supporting their claim that it is irrational, [citing cases] they cannot prevail so long as “it is evident from all the considerations presented to [the legislature], and those of which we may take judicial notice, that the question is at least debatable.” Id. [U.S. v. Carolene Products Co.,304 U.S. 144 ], at 154, 58 S.Ct. [778] at 784 [82 L.Ed. 1234 (1938)]. Where there was evidence before the legislature reasonably supporting the classification, litigants may not procure invalidation of the legislation merely by tendering evidence in court that the legislature was mistaken.
The decisions of the United States Supreme Court are clear that the regulation of economic activity and the distribution of economic benefits are the types of legislation which are given the broadest discretion under an equal protection clause analysis. If there is any conceivable rational basis for the legislature taking the action which it did, then we must reject the equal protection violation claim. Minnesota v. Clover Leaf Creamery Co.,
For all we know, the legislature had before it testimony from witnesses, or information gathered by individual legislators, that there was a high degree of unemployment in the agent-driver or commission-driver business involving food or dry cleaning products. That would certainly be a rational basis for the legislature creating the exception from the general rule of non-liability for taxation for services performed by independent contractors engaged in an independently established trade or business. That would be a rational basis for the statute and would be sufficient for the statute to withstand an equal protection challenge. Minnesota v. Clover Leaf Creamery Co.,
Just ten years ago, in another Department of Employment case in which we were proven wrong, this Court also held an act of the legislature unconstitutional as a violation of the equal protection clause. In Smith v. Department of Employment,
It was surely rational for the Idaho Legislature to conclude that daytime employment is far more plentiful than nighttime work and, consequently, that attending school during daytime hours imposes a greater restriction upon obtaining full-time employment than does attending school at night.
Idaho Department of Employment v. Smith,
Today’s case could well be paraphrased in the language of the Smith case. “It was surely rational for the Idaho legislature to conclude that” agent-drivers engaged in distributing food products were far more susceptible to unemployment than other agent-drivers, and therefore were in need of greater protection, and the state unemployment fund in need of contributions from the principals who employ those agent-drivers. Such a determination by the legislature, even if it were incorrect, an issue which we don’t have before us because we have no factual record, nevertheless would be a rational basis for the legislature to make its determination “if the question is at least debatable.” Minnesota v. Clover Leaf Creamery Co.,
Accordingly, I would affirm the decision of the Industrial Commission.
Dissenting Opinion
dissenting (dissent written prior to his resignation on August 7, 1989).
I must respectfully dissent from the opinion of the majority because its last two paragraphs and its result are premised
Those paragraphs state that we find no legislative statement of policy for the classification involved and that we have not discovered any reason or rationale. The majority opinion further states that we have engaged in our own independent analysis and we find, no rational basis. WHERE DID WE LOOK TO FIND THAT WHICH WE DID NOT FIND?
The truth of the matter is, there is no basis for either this Court to make any findings or the Industrial Commission to make any findings because no one has taken any evidence on the issue. The Industrial Commission took no evidence on the issue because it has been of the belief that it did not have the power to pass upon constitutional matters. Therefore, had the Department offered testimony in support of a “rational basis,” the Commission would properly have excluded the evidence as being irrelevant as to any issue before the Commission.
This Court did not take any evidence directly, nor did we appoint a Special Master to take evidence for us on what might or might not have been the rational basis for the legislative classifications. Thus, I know not where the majority looked to make its “findings” other than in its genes and hormones.
What I do know is that both the House of Representatives and the Senate of Idaho, by majority vote, concluded that there was a reason and purpose for the classifications which they put into the statute and the incumbent Governor apparently agreed. Upon what foundation is this Court entitled to decide, without the taking of any evidence by any judicial body, that the legislature and the Governor were wrong in determining the classifications provided in I.C. § 72-1316(d)?
I would remand to the Industrial Commission with directions to it to provide a forum for the parties to present testimony on whether the classifications are grounded in some rational basis.
ADDENDUM ON REHEARING TO THIS COURT’S ORIGINAL OPINION FILED AUGUST 31, 1989
In this unemployment compensation tax case we are called upon to determine whether employers are required by Idaho law to pay unemployment compensation tax on independent contractors.
Appellant challenges the provisions of Idaho Code § 72-1316(d)(2) on the grounds that requiring employers to pay tax for unemployment compensation for independent contractors is facially unconstitutional.
Appellant, Bon Appetit operates a gourmet food business which contracts with independent contractors to market its products. Following an audit by the Department of Employment, the Department held that the independent contractors were “covered employees” under Idaho Code § 72 — 1316(d)(2) and required Bon Appetit to pay the requisite unemployment compensation tax. The appeals examiner held that although the independent agents were clearly independent contractors, the provisions of I.C. § 72-1316(d)(2) required their inclusion as covered employees. On appeal to the Industrial Commission, the holdings of the appeals examiner were adopted.
Under Idaho Code § 72-1316(d)(2), otherwise independent contractors engaged in distributing meat, vegetables, fruit, bakery or beverage products, or conducting laundry or dry cleaning business are held to be “covered employees” and as such are singled out from all others in the business of door-to-door marketing, and as such their employers are required to pay unemployment compensation tax for each independent contractor.
Bon Appetit asserts that such treatment denies it equal protection under both the fourteenth amendment to the United States Constitution, and art. 1 § 2 of the Idaho Constitution. We agree.
In Minnesota v. Clover Leaf Creamery Co.,
Although parties challenging legislation under the Equal Protection Clause may introduce evidence supporting their claim that it is irrational, (citation deleted) they cannot prevail so long as “it is evident from all the considerations presented to [the legislature], and those of which we may take judicial notice, that the question is at least debatable.”
Id.,
In the original decision filed August 31, 1989, this Court correctly applied the rational basis test to the statute in question and found the particular provisions of I.C. § 72-1316 to be unconstitutional on its face. We continue to adhere to the views expressed in the original opinion authored by the late Chief Justice Shepard. Bon Appetit Gourmet Foods, Inc., v. State of Idaho, Department of Employment, # 17122, Slip Op. # 128 (filed August 31, 1989).
The order of the Industrial Commission is reversed and remanded. Costs to appellant. No fees allowed.
Dissenting Opinion
dissenting:
I dissent from the opinion released by the majority today, entitled an “Addendum on Rehearing to this Court’s Original Opinion.” Before discussing the substantive aspects of the opinion, I would note that today’s opinion is somewhat unusual. Customarily, on rehearing, our practice has been to either affirm our original opinion or withdraw it and issue a new one in its stead. Today, the majority both affirms our initial opinion and offers a new opinion that seems to supplement, and perhaps, modify our original opinion. In light of today’s opinion, I too continue to adhere to the opinions expressed in my dissent to the original opinion in this matter, but would also supplement that dissent by responding to the majority opinion today.
The majority opinion quotes from Minnesota v. Clover Leaf Creamery Co.,
In Clover Leaf, the Supreme Court held the evidence was conflicting and properly resolved the conflict in favor of upholding the constitutionality of the Minnesota statute. In the case before us, however, we find no conflicting evidence. In fact, as stated in this Court’s original opinion, we are cited to and find no legislative statement of policy or public purpose nor explanation or justification for such legislative distinction. (Emphasis added.)
This statement reveals the error in the Court’s reasoning and ultimate conclusion in today’s case.
First, as to the statement that “we find no conflicting evidence,” that is quite true. However, the reason there is no evidence, or record explaining the legislature’s actions, is because this case came to us on appeal from the Industrial Commission, which had no authority to hold unconstitutional an act of the Idaho legislature. Lynn v. Kootenai County Fire Protection Dist.,
The Industrial Commission took no evidence on the issue because it has been of the belief that it did not have the power to pass upon constitutional matters. Therefore, had the Department offered testimony in support of a “rational basis,” the Commission would properly have excluded the evidence as being irrel*1008 evant as to any issue before the Commission.
It is unfair for this Court to rule on a constitutional question on appeal, and condemn the State for not making a record of any legislative statement of policy or purpose, or explain and justify a legislative distinction, when no such record could or should have been made.
Second, as to the majority’s statement that “we are cited to and find no legislative statement of policy or public purpose nor explanation or justification for such legislative distinction,” the majority plainly indicates its belief — erroneously, I believe— that the State had the burden of “citing to” a “legislative statement of policy or public purpose” and explaining and justifying the “legislative distinction.” This was the cardinal error of the Court’s original opinion and it carries over into the opinion today. The burden of explaining and justifying the rationality of the legislative classification is not the burden of the State. There is no requirement that the State offer any evidence or explanation upholding the rationality of this statute. In the United States Supreme Court case of Vance v. Bradley,
In an equal protection case of this type, however, those challenging the legislative judgment must convince the court that the legislative facts on which the classification is apparently based could not reasonably be conceived to be true by the governmental decision maker.
Under these and numerous other cases, it is clear that it was the respondent’s burden of demonstrating that there could have been no conceivable facts to justify the classification made by the legislature. Minnesota v. Clover Leaf Creamery Co.,
The majority should have upheld this statute even in the absence of evidence or explanation in the record because we are required to uphold a statutory classification if any rational basis can be hypothesized for upholding the statute. As noted by the United States Supreme Court in Dandridge v. Williams,