SINCLAIR BUILDERS, INC. v. UNEMPLOYMENT INSURANCE COMMISSION.
Docket No. Han-13-10.
Supreme Judicial Court of Maine.
Argued: June 11, 2013. Decided: Aug. 20, 2013.
2013 ME 76 | 77 A.3d 1061
[¶ 20] In a divorce, the parties’ responsibility for marital debt is subject to allocation or division in accordance with
[¶ 21] The amended divorce judgment orders Michael to be “solely responsible for any and all debt and monies owed to the Internal Revenue Service for any and all previous, current or future tax years, free and clear of any responsibility of Laurel.” The divorce judgment can be read as making Michael solely and indefinitely responsible for paying Laurel‘s post-divorce federal tax debts. Such an order would exceed the court‘s statutory authority to allocate assignment of debt. See Laqualia, 2011 ME 114, ¶¶ 13, 15, 19, 30 A.3d 838.6 However, it is more likely that the court‘s intent was only to ensure that Michael remained fully responsible for the tax debts for the 2009-2011 tax years that have not yet been finally paid. Such an order regarding the as-yet-unpaid tax liability for tax years during the term of the parties’ marriage would be well within the court‘s authority.7
[¶ 22] The court‘s amended order does state, “All debts of the parties since the date of separation ... shall be the responsibility of the party incurring said debt,” suggesting that indeed the court‘s reference to future obligations means only those obligations arising for underpayment of taxes in tax years 2009-2011. On remand, the court should clarify the tax years to which it intended its order regarding tax payments to apply.
The entry is:
The portion of the judgment awarding spousal support, including health insurance coverage, and the portion of the judgment ordering payment of future tax debts is vacated and remanded for further proceedings or clarification consistent with this opinion. The remainder of the divorce judgment is affirmed.
Frank T. McGuire, Esq., and John K. Hamer (orally), Esq., Rudman Winchell, Bangor, for appellant Sinclair Builders, Inc.
Janet T. Mills, Attorney General, and Elizabeth J. Wyman, Assist. Atty. Gen. (orally), Office of Attorney General, Augusta, for appellee Maine Unemployment Insurance Commission.
JABAR, J.
[¶ 1] Sinclair Builders, Inc., appeals from a judgment entered in the Superior Court (Hancock County, Cuddy, J.) pursuant to
I. BACKGROUND
[¶ 2] Sinclair Builders, Inc., is a general construction company located in Ellsworth. In 2010, the Maine Department of Labor Bureau of Unemployment Compensation conducted a random audit of Sinclair‘s business to verify the relationship between Sinclair and a list of twenty-four individuals that Sinclair had claimed were independent contractors. See
[¶ 3] Sinclair is in the business of residential construction and renovation, and between 2007 and early 2010, the company employed some individuals who were undisputedly employees and who were not listed in the Bureau‘s decision.2 The Bureau‘s list of workers whose status was disputed contained three categories of individuals: two salesmen, a bookkeeper, and twenty-one skilled subcontractors who performed various construction tasks.
[¶ 4] The two salesmen and Sinclair‘s president would locate construction and renovation projects in the greater Ellsworth area. When the salesmen found a project, they would offer to sell the customer retail products including windows, doors, fixtures, and other items related to Sinclair‘s construction or renovation business. Sinclair controlled the terms of the sales and paid the salesmen by fixed commissions, and the salesmen could not negotiate the commission rate. The salesmen occasionally worked from Sinclair‘s office, but they typically worked from various locations in a defined territory around Ellsworth.
[¶ 6] Sinclair acted as the general contractor for customers and hired workers to perform general carpentry services and specific services, such as plumbing, heating, and electrical work, that Sinclair‘s ordinary employees could not perform. Sinclair paid these workers the standard market rate for their services.
[¶ 7] Sinclair did not provide training or equipment to the workers that it hired, but it did instruct the individuals to follow the specifications on Sinclair‘s contract with the customer. The workers provided their own separate liability insurance. Sinclair also required that all of the individuals who worked on its projects follow safety protocols, regardless of whether it considered them independent contractors or employees.
[¶ 8] The Commission held a hearing on December 15, 2010, and on August 10, 2011, it affirmed the Bureau‘s determination as to the bookkeeper, the salesmen, and nineteen of the subcontractors. The Commission vacated the Bureau‘s decision as to two of the remaining subcontractors, for whom it found there was no evidence in the record to support a finding of employment by Sinclair. Sinclair sought review of the Commission‘s determination in the Superior Court, see
II. DISCUSSION
[¶ 9] “When, as in this case, the Superior Court sits as an intermediate appellate court and reviews an agency decision, we review the administrative tribunal‘s decision directly.” Vector Mktg. Corp. v. Me. Unemployment Ins. Comm‘n, 610 A.2d 272, 274 (Me.1992). We review the Commission‘s judgment “to determin[e] whether the Commission correctly applied the law and whether its fact findings are supported by any competent evidence [in the record].” McPherson Timberlands, Inc. v. Unemployment Ins. Comm‘n, 1998 ME 177, ¶ 6, 714 A.2d 818. “We will not overrule findings of fact supported by substantial evidence, defined as ‘such relevant evidence as a reasonable mind might accept as adequate to support the resultant conclusion.‘” Lewiston Daily Sun v. Unemployment Ins. Comm‘n, 1999 ME 90, ¶ 7, 733 A.2d 344 (quoting Crocker v. Me. Emp‘t Sec. Comm‘n, 450 A.2d 469, 471 (Me.1982)).
[¶ 10] With respect to the law, we review de novo issues of statutory interpretation. Carrier v. Sec‘y of State, 2012 ME 142, ¶ 12, 60 A.3d 1241. However, “we defer to an agency in those areas within its expertise unless a statute or regulation compels a contrary result.” Schwartz v. Unemployment Ins. Comm‘n, 2006 ME 41, ¶ 9, 895 A.2d 965 (quotation marks omitted). “We first look to the plain meaning of the statute, interpreting its language to avoid absurd, illogical or inconsistent results.” Carrier, 2012 ME 142, ¶ 12, 60 A.3d 1241 (quotation marks omitted). “[A] misapplication of the law to the facts will constitute reversible error, and if an agency fails to make adequate findings of fact, the Court may remand for findings that would permit meaningful judicial review.” Nancy W. Bayley, Inc. v. Me. Emp‘t Sec. Comm‘n, 472 A.2d 1374, 1377 (Me.1984) (citations omitted).
[¶ 12] If the Bureau established that the employer paid wages in exchange for an individual‘s services, there was a presumption of an employment relationship between that employer and the individual. See
([A]) Such individual has been and will continue to be free from control or direction over the performance of such services, both under his contract of service and in fact;
([B]) Such service is either outside the usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
([C]) Such individual is customarily engaged in an independently established trade, occupation, profession or business.
[¶ 13] With respect to part A, which requires the employer to demonstrate that an individual is free from the employer‘s direction and control over the performance of that individual‘s services “both under his contract of service and in fact,” see
[¶ 14] With respect to part B of the ABC test, the employer must demonstrate that the individual provides a service that is “outside the usual course of the business” of the employer or “outside of all the places of business of the enterprise for which such service is performed.”
[¶ 15] In order to demonstrate that an individual‘s services are not within the employer‘s usual course of business, the employer must show that the service is not an “integral part of” the employer‘s business, but is rather “merely incidental to” it. See id. ¶¶ 9-15 (quotation marks omitted). For example, we have held that the repair and maintenance of real estate properties were incidental to the usual course of business of a bank, see Me. Unemployment Comp. Comm‘n v. Me. Sav. Bank, 136 Me. 136, 140-41, 3 A.2d 897 (1939), but those same services were an integral part of the business of a property owner and landlord, see Me. Unemployment Comp. Comm‘n v. Androscoggin Jr., Inc., 137 Me. 154, 164, 16 A.2d 252 (1940).
[¶ 16] Alternatively, the employer could demonstrate that the individual‘s “service is performed outside of all the places of business of the enterprise” in order to satisfy part B. See
[¶ 17] Moreover, we are mindful that the rapid progress in technology and the changing demands of the workplace may require a flexible interpretation of this part of the test. As the Vermont Supreme Court recently observed in applying that state‘s identical statute, “The demands of parenthood, communications-technology advances, issues of energy consumption, and other circumstances have created a new type of employee—one who works from her home or car, enjoying flexibility in the time and place of performance.” Fleece on Earth v. Dep‘t of Emp‘t & Training, 181 Vt. 458, 923 A.2d 594, 600 (2007). Defining an employment relationship solely based on the individual‘s presence in or absence from the employer‘s place of business may be more difficult given the nature of today‘s workers.
A. Bookkeeper
[¶ 18] The Commission determined that Sinclair failed to satisfy both parts A and B of the ABC test with respect to the bookkeeper. Sinclair does not dispute that its office, where the bookkeeper performed her services, is the company‘s place of business. See
B. Salesmen
[¶ 20] The Commission similarly determined that Sinclair failed to meet its burden for both prongs A and B with respect to its two salesmen. Sinclair argues that the Commission‘s finding that the salesmen were not free from the company‘s direction and control is not supported by the evidence in the record because Sinclair provided only certain leads and did not instruct them on how to make sales. Further, Sinclair argues that the salesmen were not located in Sinclair‘s place of business for the purpose of part B.
[¶ 21] In Hasco Manufacturing Company, we addressed whether salespeople were free from the direction or control of a company that was in the business of fabricating and selling aluminum products “in the form of windows, doors, storm sash[es], combination windows and garages.” 158 Me. at 416, 185 A.2d 442. Despite the absence of a written contract between Hasco and its salespeople, we affirmed findings that the salespeople received a commission from the sales that they made of Hasco products, and that Hasco set the terms of all sales and ultimately accepted or rejected all transactions initiated by its salespeople. Id. at 416-17, 185 A.2d 442. We concluded that, based on these factual findings, the court was correct in concluding that the salespeople were not free from Hasco‘s direction or control over the performance of their services. Id. at 418, 185 A.2d 442.
[¶ 22] Similarly, the evidence in the record supports the Commission‘s findings that Sinclair had the right to control the performance of the salesmen‘s services. Sinclair dictated the terms of their sales, provided a set commission, without negotiation from either salesman, and gave the salesmen business cards bearing Sinclair‘s name and logo. See id. at 416-18, 185 A.2d 442. Additionally, Sinclair‘s president testified that he would ultimately choose which sales to make, taking the most potentially lucrative clients. See id. Therefore, we conclude that the Commis-
C. Skilled Workers
[¶ 23] Finally, the Commission again found that Sinclair failed to meet its burden of satisfying both parts A and B of the ABC test with respect to the skilled workers that it employed as subcontractors. See
1. Part A: Control or Direction
[¶ 24] The Commission found that Sinclair failed to meet its burden of showing that the workers were “free from control or direction over the performance of such services, both under [their] contract[s] of service and in fact.” See
[¶ 25] In contrast, Sinclair‘s president testified that none of the workers worked exclusively for Sinclair during the years covered by the Bureau‘s audit. Sinclair hired them on a job-by-job basis and they often worked for competing contractors in the area providing the same services. The workers would occasionally turn down an offer to work with Sinclair if they were unavailable for that job, and Sinclair‘s president testified that the company would need to turn to “[its] employee base or somebody else” to complete its projects.
[¶ 26] For most of the skilled workers, Sinclair provided the Bureau with copies of certifications that it had obtained from the Workers’ Compensation Board stating that those individuals were predetermined and presumed to be independent contractors for workers’ compensation purposes. See
[¶ 27] Despite the evidence outlined above, the Commission found that Sinclair failed to demonstrate that the workers were free from Sinclair‘s “control or direction over the performance of [their] services ... in fact.” See
[¶ 28] First, the Commission‘s conclusion was based, in part, on a finding that Sinclair “mandated the safety measures required for all job sites and communicated that if [its] safety guidelines or training was not adhered to, termination was possible.” However, the Commission‘s finding with regard to safety measures is not relevant to the finding of an employment relationship. Cf. Allied Res. for Corr. Health v. Me. Unemployment Ins. Comm‘n, 680 A.2d 456, 458 (Me.1996) (affirming the Commission‘s determination that employees were subject to the employer‘s direction or control where they were required to follow detailed policies of the employer and its clients). Sinclair‘s president testified that he holds safety meetings and enforces safety measures for every worker because he believed that Sinclair was required to do so pursuant to the Occupational Safety and Health Administration regulations. See
[¶ 29] If a business is required by law to comply with state or federal regulations, we do not require that business to face penalties for violating those regulations or to endanger the health or safety of its workers in order to avoid being characterized as an employer for unemployment insurance purposes. See
[¶ 30] Second, although the Commission found that Sinclair was responsible for “fixing the problem” if the customer was not satisfied with the workers’ performance, the evidence in the record compels the opposite finding—that the workers bore the burden of “fixing the problem” if the customer was not satisfied. In the responses to the Bureau‘s two-page questionnaires regarding the employment relationship with the disputed workers, to the question “Who pays for work the worker performs that must be done over?” the box next to “[t]he worker,” was marked, rather than the boxes next to “[t]he company,” “[t]he customer,” or “[o]ther.” Further, there is no evidence in the record that Sinclair bore the financial burden of redoing the work. For many services, such as heating, plumbing, electrical, or roofing, Sinclair did not have employees who could perform the same tasks. Sinclair could not have been responsible for “fixing the problem[s]” related to those services as the Commission found. Thus, the evidence in the record does not support the Commission‘s finding. See Lewiston Daily Sun, 1999 ME 90, ¶ 7, 733 A.2d 344; Hasco Mfg. Co., 158 Me. at 414, 185 A.2d 442.
[¶ 31] Third, with respect to Sinclair‘s direction of the workers, the Commission‘s finding that Sinclair “controlled the nature and scope of the workers’ work” is not supported by the evidence in the record. See
[¶ 32] We agree with the reasoning of the First Division of the Indiana Appellate Court in Alumiwall Corporation v. Indiana Employment Security Board, explaining why roofers and siding installers were independent contractors:
the [workers] were free to perform the services when and in such manner as they saw fit. They provided their own tools and equipment, and could, if they so desired, hire helpers and determine the wage scale of such helpers. The only restriction was that they perform such services in a good and workmanlike manner. Such restriction is inherent in all services performed by one for another. To hold that such a restriction is the retention of direction and control over such service so as to exclude it from [part] (A) is against good reasoning and common sense.
130 Ind.App. 535, 167 N.E.2d 60, 62 (1960); see also N. Am. Builders, Inc. v. Unemployment Comp. Div., 22 Utah 2d 338, 453 P.2d 142, 145 (1969).
[¶ 33] Here, Sinclair‘s president testified that he would visit the jobsites “once or twice, depending on the length of it,” unless the project was the construction of an entire home, in which case he would visit “once a week.” Sinclair did not employ a foreman or on-site boss who supervised how services were performed. Cf. Steel Pier Amusement Co. v. Unemployment Comp. Comm‘n, 127 N.J.L. 154, 157, 21 A.2d 767 (N.J.1941) (finding that an employer failed to establish that the employees were free of its direction or control where it also employed someone who “was for all practical purposes, a foreman“). Instead, Sinclair created a list of the customer‘s specifications and provided a copy to
[¶ 34] There is no competent evidence in the record to support the Commission‘s finding that Sinclair exercised control or direction over the disputed workers. See Lewiston Daily Sun, 1999 ME 90, ¶ 7, 733 A.2d 344. Rather, all of the evidence in the record demonstrates that Sinclair met its burden with regard to part A of the ABC test. Cf. Me. Auto Test Equip. Co., 679 A.2d at 81.
2. Part B: Place of Employment
[¶ 35] Sinclair stipulates that the workers’ services were within Sinclair‘s usual course of business but disputes that they were performed within Sinclair‘s places of business. Sinclair argues that the construction jobsites were not “places of business” pursuant to part B of the test.
[¶ 36] Although we have held that a woodlot constitutes a place of business for a timber harvester, where the employer has a “significant and business-related presence,” see McPherson Timberlands, Inc., 1998 ME 177, ¶¶ 17-18, 714 A.2d 818, we have declined to call customers’ homes a place of business for salespeople, despite the fact that they made sales there, see Hasco Mfg. Co., 158 Me. at 418, 185 A.2d 442.
[¶ 37] Several other states have declined to call a construction jobsite a “place of business” within the meaning of part B of the ABC test because it “precludes any construction company from ever meeting the requirements of [the ABC test] with regard to tradespeople hired for construction work.” See Metro Renovation, Inc. v. State Dep‘t of Labor, 249 Neb. 337, 543 N.W.2d 715, 722 (1996), disapproved on other grounds by State v. Nelson, 274 Neb. 304, 739 N.W.2d 199, 204 (2007). See also Matter of BKU Enters., Inc., 513 N.W.2d 382, 385 (N.D.1994) (“The fact that the contract must be performed at a specific location, such as a building site, does not, by itself, constitute furnishing a place to work if the nature of the work to be done precludes a separate site or is the customary practice in the industry.” (quotation marks omitted)); Barney v. Dep‘t of Emp‘t Sec., 681 P.2d 1273, 1275 (Utah 1984).
[¶ 38] The Commission‘s determination that a construction jobsite is a place of business within the meaning of
[¶ 39] Such an illogical reading of part B is not consistent with the intent of the Legislature. See Carrier, 2012 ME 142, ¶ 12, 60 A.3d 1241 (stating that we interpret statutes to avoid illogical results).
[W]e cannot permit the letter of the law to transcend the spirit of the law.... [W]hether a person performing services is an employee or an independent contractor is the question before us, and statutes [applicable to] such determinations must not be distorted to allow persons who are truly independent in their operation to be held employees merely for tax purposes and resulting benefits derived from an employer-employee relationship.
Johnson v. Mont. Dep‘t of Labor & Indus., 240 Mont. 288, 783 P.2d 1355, 1357-58 (1989) (quotation marks omitted). Thus, we do not defer to the Commission‘s determination with respect to part B and conclude that Sinclair has met its burden. See
[¶ 40] Because the Commission erred in determining that Sinclair failed to meet its burden with respect to parts A and B of the ABC test with respect to eighteen of the disputed workers, we vacate the Commission‘s judgment with regard to those individuals. Having concluded that Sinclair met its burden of demonstrating that those eighteen workers met all three criteria of the ABC test, we remand the case for a redetermination of the appropriate taxes and penalties consistent with this opinion.
The entry is:
Judgment vacated as to the eighteen individuals identified in footnote 4 of this opinion, and affirmed in all other respects. Remanded to the Superior Court for remand to the Unemployment Insurance Commission for further proceedings consistent with this opinion.