No. 14899
IN THE SUPREME COURT OF THE STATE OF MONTANA
KIRBY CO. OF BOZEMAN, INC.,
A Montana corporation,
Petitioner and Appellant,
VS.
EMPLOYMENT SECURITY DIVISION
OF THE MONTANA STATE DEPARTMENT
OF LABOR AND INDUSTRY,
Respondent and Respondent.
Appeal from: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin
Honorable W. W. Lessley, Judge presiding.
Counsel of Record:
For Appellant:
Poore, Roth, Robischon and Robinson, Butte, Montana
For Respondent:
Robert Campbell, Helena, Montana
Submitted on briefs: April 3, 1980
Decided: July 22, 1980
Filed: jUL23
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Clerk
Mr. J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of
t h e Court.
A p p e l l a n t Kirby Company of Bozeman ( h e r e i n Kirby) i s a
Montana c o r p o r a t i o n w i t h i t s p r i n c i p a l p l a c e of b u s i n e s s i n
Bozeman, Montana. A p p e l l a n t Kirby i s a s s o c i a t e d w i t h Kirby
Company, a d i v i s i o n of S c o t t and F e t z e r Company, a s a d i r e c t
f a c t o r y d i s t r i b u t o r of vacuum c l e a n e r s and r e l a t e d p r o d u c t s
manufactured by Kirby Company. In t h a t capacity, appellant
i s a u t h o r i z e d t o p u r c h a s e Kirby Company p r o d u c t s d i r e c t from
t h e m a n u f a c t u r e r and w h o l e s a l e them t o " a r e a d i s t r i b u t o r s "
and " d e a l e r s . " Kirby i s a l s o a u t h o r i z e d t o r e t a i l t h e
products t o t h e general public.
K i r b y ' s f a c i l i t y i n Bozeman c o n s i s t s of a s m a l l s t o r e
c o n t a i n i n g two o f f i c e s and a r e p a i r shop. Ninety-eight
p e r c e n t of K i r b y ' s r e t a i l s a l e s a r e made by door-to-door
salespersons referred t o a s "dealers." The d e a l e r s a r e
r e c r u i t e d by Kirby o r come t o t h e o r g a n i z a t i o n on t h e i r own
initiative. S a l e s p e r s o n s s i g n a one-year w r i t t e n agreement
when t h e y become d e a l e r s . The agreement i s a u t o m a t i c a l l y
renewable a n n u a l l y and s u b j e c t t o t e r m i n a t i o n on t h i r t y
days' notice. A s a l e s p e r s o n must be a u t h o r i z e d through a
w h o l e s a l e o u t l e t l i k e Kirby t o s e l l Kirby p r o d u c t s .
Kirby p r e s i d e n t , David Sward, g i v e s p r o d u c t demonstra-
t i o n s t o new d e a l e r s and p r o v i d e s them w i t h a s a l e s g u i d e
booklet. Sward a l s o c o n d u c t s s a l e s c l i n i c s f o r t h e d e a l e r s ,
b u t a t t e n d a n c e a t t h e c l i n i c s i s n o t mandatory. New d e a l e r s
sometimes accompany e x p e r i e n c e d d e a l e r s on t h e i r i n i t i a l
sales calls. Kirby f u r n i s h e s l e a d s t o t h e d e a l e r s f o r a
$5.00 f e e . Kirby d o e s n o t s e t t h e h o u r s of t h e d e a l e r s o r
impose t e r r i t o r i a l r e s t r i c t i o n s upon them. Dealers a r e n o t
reimbursed f o r expenses, g u a r a n t e e d minimum e a r n i n g s , o r
p r o v i d e d w i t h any f r i n g e b e n e f i t s such a s v a c a t i o n pay o r
s i c k leave. The d e a l e r s a r e f r e e t o s e l l competing prod-
u c t s , b u t a p p a r e n t l y few do. Kirby e n c o u r a g e s d e a l e r s t o
use business cards. The c a r d i n t r o d u c e d i n t o e v i d e n c e i n
t h i s c a s e i n c l u d e d K i r b y ' s name, a d d r e s s and phone number a s
w e l l a s t h e d e a l e r ' s name and phone number. Kirby d o e s n o t
provide o f f i c e space f o r t h e dealers. However, i t d o e s n o t
a p p e a r t h a t any of t h e d e a l e r s m a i n t a i n s e p a r a t e o f f i c e
s p a c e f o r s e l l i n g t h e Kirby p r o d u c t s . The d e a l e r s a p p a r e n t l y
work door-to-door o r o u t o f t h e i r homes.
The d e a l e r s buy p r o d u c t s from Kirby f o r c a s h o r on a
t h i r t y - d a y open a c c o u n t . Kirby g i v e s t h e d e a l e r s t h e sug-
gested r e t a i l p r i c e f o r t h e products. The d e a l e r s g e n e r a l l y
adhere t o t h e set p r i c e s , although they a r e n o t required t o
do so. The d e a l e r s s e l l t h e p r o d u c t s t o c u s t o m e r s f o r c a s h
o r on a c o n d i t i o n a l s a l e s c o n t r a c t . The d e a l e r s n e g o t i a t e
t h e i r own t e r m s on t h e c o n t r a c t s . Kirby i s n o t r e q u i r e d t o
p u r c h a s e c o n d i t i o n a l s a l e s c o n t r a c t s n e g o t i a t e d by d e a l e r s
b u t d o e s s o on o c c a s i o n . Dealers a r e n o t required t o col-
l e c t d e l i n q u e n t a c c o u n t s on purchased c o n t r a c t s and a r e p a i d
f u l l commission on s a l e s made even i f t h e p r o d u c t s a r e
u l t i m a t e l y repossessed. D e a l e r s a l s o n e g o t i a t e t h e k i n d and
v a l u e o f any t r a d e - i n s t a k e n i n c o n n e c t i o n w i t h a s a l e .
Kirby i s o b l i g a t e d under t h e w r i t t e n agreement w i t h t h e
d e a l e r s t o p u r c h a s e any vacuums t a k e n a s t r a d e - i n s . ~irby
i s n o t , however, o b l i g a t e d t o pay t h e d e a l e r t h e s a m e amount
t h e d e a l e r gave t h e customer f o r t h e t r a d e - i n s o r t o p u r -
c h a s e i t e m s o t h e r t h a n vacuums t a k e n i n t r a d e .
Kirby r e q u i r e s t h e d e a l e r s t o keep r e c o r d s of t h e s a l e s
t h e y make and t o p r o v i d e t h e customer i n f o r m a t i o n n e c e s s a r y
f o r t h e w a r r a n t i e s on t h e p r o d u c t s s o l d . Kirby w a r r a n t s t h e
products sold and performs all service and repair work under
the warranty. Dealers also customarily submit all sales
receipts to Kirby. Customer checks are sometimes made out
to Kirby rather than to the dealer. Kirby does not require
this procedure but does so to enable the dealers to keep a
more accurate record of their sales. Under this method,
Kirby pays the dealers the amount their receipts exceed the
wholesale price of merchandise sold every week to ten days.
In February 1977 a tax examiner of the Employment
Security Division of the Montana Department of Labor and
Industry determined Kirby's dealers were employees within
the meaning of Montana unemployment insurance law. Kirby
would, therefore, be required to make contributions to the
unemployment compensation division on the earnings of the
dealers. Kirby appealed the decision to the tax appeals
referee of the Employment Security Division who affirmed the
decision of the tax examiner. Kirby then appealed the
decision to the Board of Labor Appeals. The Board sustained
the decision of the referee.
Kirby then filed a petition for judicial review of the
Board's decision in District Court, Gallatin County. The
District Court, the Honorable W. W. Lessley presiding, held
a hearing at which the parties presented arguments on the
legal issues involved in the case. Judge Lessley subse-
quently entered findings of fact and conclusions of law
upholding the decision of the Board of Labor Appeals. his
appeal followed.
Kirby raises the following issues on appeal:
1. Did the District Court err in entering findings of
fact different from the findings of fact made by the ~ o a r d
of Labor Appeals?
2. Did t h e D i s t r i c t C o u r t err i n c o n c l u d i n g K i r b y ' s
d e a l e r s are employees w i t h i n t h e meaning o f Montana's unem-
ployment i n s u r a n c e law?
S e c t i o n 39-51-2410(5), MCA, sets o u t t h e scope of
j u d i c i a l r e v i e w o f d e c i s i o n s of t h e Board of Labor Appeals.
That section reads i n p e r t i n e n t p a r t :
" I n any j u d i c i a l p r o c e e d i n g s under 39-51-2406
t h r o u g h 39-51-2410, t h e f i n d i n g s of t h e board
a s t o t h e f a c t s , i f s u p p o r t e d by e v i d e n c e and
i n t h e absence of f r a u d , s h a l l be conclusive
and t h e j u r i s d i c t i o n o f s a i d c o u r t s h a l l be
c o n f i n e d t o q u e s t i o n s of l a w . . ."
Under t h e p l a i n meaning of t h i s s t a t u t e and t h e case
l a w i n t e r p r e t i n g i t , t h e D i s t r i c t C o u r t must t r e a t t h e
f i n d i n g s o f t h e Board as c o n c l u s i v e , i f t h e f i n d i n g s a r e
s u p p o r t e d by t h e e v i d e n c e and i n t h e a b s e n c e of f r a u d .
Noone v. Reeder ( 1 9 6 8 ) , 1 5 1 Mont. 248, 252, 4 4 1 P.2d 309.
The D i s t r i c t C o u r t s h o u l d , t h e r e f o r e , l i m i t i t s r e v i e w of
t h e f i n d i n g s of t h e Board t o a c o n s i d e r a t i o n of whether t h e y
a r e s u p p o r t e d by t h e e v i d e n c e . The D i s t r i c t C o u r t s h o u l d
n o t e n t e r f i n d i n g s d i f f e r e n t from t h e B o a r d ' s w i t h o u t f i r s t
d e t e r m i n i n g t h e B o a r d ' s f i n d i n g s a r e n o t s u p p o r t e d by t h e
evidence.
Here, t h e D i s t r i c t C o u r t a f f i r m e d t h e d e c i s i o n of t h e
Board. I n d o i n g s o , however, t h e c o u r t e n t e r e d f i n d i n g s of
f a c t d i f f e r e n t from t h o s e a d o p t e d by t h e Board. The D i s -
t r i c t C o u r t d i d n o t s t a t e t h a t i t f e l t t h e f i n d i n g s of t h e
Board w e r e n o t s u p p o r t e d by t h e e v i d e n c e . In fact, the
D i s t r i c t C o u r t f i l e d a memorandum i n s u p p o r t of t h e f i n d i n g s
and c o n c l u s i o n s i t r e a c h e d . I n t h e memorandum, t h e D i s t r i c t
C o u r t s e t o u t a s t h e o n l y i s s u e on a p p e a l whether t h e r e was
s u b s t a n t i a l e v i d e n c e t o s u p p o r t t h e d e c i s i o n of t h e Board.
Under t h i s s t a n d a r d t h e c o u r t l i s t e d e v i d e n c e from t h e
record to support the Board's decision that Kirby exercised
sufficient control over the dealers to warrant the finding
of an employer-employee relationship between Kirby and the
dealers.
~irbynow attacks the procedure employed by the Dis-
trict Court in deciding the case as improper because the
court entered findings different from those adopted by the
Board. Kirby argues it was error for the lower court to
enter the different findings under section 39-51-2406, MCA,
unless the court first determined the Board's findings are
not supported by the evidence. Kirby asks this Court to
reverse the decision of the District Court because of this
procedural error.
Under section 39-51-2410, MCA, it is not proper for the
District Court to enter findings of fact different from
those affirmed by the Board without first determining the
findings are not supported by the evidence. Therefore, we
agree with Kirby that the District Court erred in doing so
here. We do not, however, agree with Kirby's contention
that this procedural error requires reversal of the District
Court' s decision.
This Court will not reverse or remand a decision of the
District Court when the eventual result in the ~istrict
Court must be the same. Green v. Green (1978), 176 Mont.
532, 579 P.2d 1235, 35 St.Rep. 800, 803. Here, reversing
and remanding because the District Court entered its own
findings without first declaring the Board's findings were
not supported by the evidence would undoubtedly result in
the District Court once again affirming the ~oard'sdecision.
The District Court made it clear that it found the
Board's findings were supported by the evidence in the
memorandum the court filed. In the memorandum the District
Court stated the only issue it was considering was whether
there was substantial evidence in the record to support the
decision of the Board. The court then listed evidence from
the record supporting the Board's conclusion that ~ i r b y
exercised sufficient control over the dealers to warrant the
finding of an employer-employee relationship between Kirby
and the dealers. If we reversed the case and remanded it to
the District Court, the court would simply withdraw its
findings of fact and redeclare its decision based on the
memorandum filed. Such an action would be a needless exer-
cise on the part of the District Court and would ultimately
do no good for Kirby. We will not, therefore, reverse on
this issue.
The second issue involves the determination of whether
the dealers are employees or independent contractors as a
matter of law. We recently discussed the distinction be-
tween employees and independent contractors in the context
of unemployment insurance contributions in Standard Chem.
Mfg. Co. v. Employment Sec. (1980), Mont. , 605
P.2d 610, 37 St.Rep. 105. In Standard Chemical we recog-
nized that two tests are used to determine whether an employ-
ment or independent contract relationship exists. Standard
Chemical, 605 P.2d at 612, 37 St.Rep. at 107. The first
test is the statutory "ABC" test, which is set out in sec-
tion 39-51-203(4), MCA:
"(4) Service performed by an individual for
wages is considered to be employment subject
to this chapter unless and until it is shown
to the satisfaction of the division that:
"(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 and in fact;
" ( b ) such s e r v i c e i s e i t h e r o u t s i d e t h e u s u a l
c o u r s e of t h e b u s i n e s s f o r which s u c h s e r v i c e
i s performed o r t h a t such s e r v i c e i s performed
o u t s i d e of a l l t h e p l a c e s of b u s i n e s s of t h e
e n t e r p r i s e f o r which s u c h s e r v i c e i s performed;
and
" ( c ) s u c h i n d i v i d u a l i s c u s t o m a r i l y engaged i n
an independently e s t a b l i s h e d t r a d e , occupation,
profession, o r business."
The second t e s t i s t h e common-law t e s t . W stated the
e
common-law t e s t i n S t a n d a r d Chemical a s f o l l o w s :
"'"An i n d e p e n d e n t c o n t r a c t o r i s one who r e n d e r s
s e r v i c e i n t h e c o u r s e of a n o c c u p a t i o n , and
r e p r e s e n t s t h e w i l l o f h i s employer o n l y a s t o
t h e r e s u l t of h i s work, and n o t a s t o t h e means
whereby i t i s accomplished, and i s u s u a l l y n o t
p a i d by t h e job. (And s e e Neyman v. P i n c u s ,
82 Mont. 467, 267 P. 8 0 5 . ) "
" ' T h e v i t a l t e s t i n d e t e r m i n i n g whether a p e r -
s o n employed t o do a c e r t a i n p i e c e of work i s
a contractor o r a m e r e servant, i s the control
o v e r t h e work which i s r e s e r v e d by t h e employer.
S t a t e d a s a g e n e r a l p r o p o s i t i o n , i f t h e con-
t r a c t o r i s under t h e c o n t r o l of t h e employer,
h e i s a s e r v a n t ; i f n o t under such c o n t r o l , h e
i s an independent c o n t r a c t o r . ' " 605 P.2d a t
613, 37 St.Rep. a t 108, q u o t i n g from P a t G r i f -
f i n Co. v. Employment S e c u r i t y Comm'n ( 1 9 7 4 ) ,
1 6 3 Mont. 529, 519 P.2d 147.
The s c o p e of o u r r e v i e w i s l i m i t e d i n a p p l y i n g t h e s e
tests. S t a n d a r d Chemical, 605 P.2d a t 613, 37 S t - R e p . a t
108. W e w i l l n o t o v e r t u r n t h e d e c i s i o n of t h e D i s t r i c t
C o u r t t o uphold t h e d e c i s i o n of t h e Board u n l e s s i t can b e
shown t h e lower c o u r t abused i t s d i s c r e t i o n i n d o i n g s o .
S t a n d a r d Chemical, 605 P.2d a t 613, 37 St.Rep. a t 109.
Under t h i s s t a n d a r d , w e f i r s t c o n s i d e r t h e amount of
c o n t r o l Kirby e x e r c i s e d o v e r t h e d e a l e r s h e r e , a s c o n t r o l i s
t h e most c r u c i a l f a c t o r which d i s t i n g u i s h e s employees from
independent c o n t r a c t o r s . S t a n d a r d Chemical, 605 P.2d a t
613, 37 St.Rep. a t 109. H e r e , a s i n S t a n d a r d Chemical, t h e
r i g h t of c o n t r o l i s a c l o s e q u e s t i o n . However, a t a x examiner,
a t a x a p p e a l s r e f e r e e , t h e Board of Labor Appeals and t h e
~ i s t r i c C o u r t have a l l reviewed t h e f a c t s a s set o u t above
t
and r e a c h e d t h e c o n c l u s i o n t h a t Kirby e x e r c i s e d s u f f i c i e n t
c o n t r o l o v e r t h e d e a l e r s t o form a n employer-employee r e l a -
t i o n s h i p f o r t h e p u r p o s e s of t h e unemployment i n s u r a n c e
statutes. Although t h e q u e s t i o n may be c l o s e , w e a g r e e .
Kirby t r a i n e d t h e d e a l e r s i n t h e method of m a r k e t i n g
Kirby p r o d u c t s by g i v i n g them i n i t i a l d e m o n s t r a t i o n s of t h e
p r o d u c t s , p r o v i d i n g them w i t h a sales g u i d e b o o k l e t , and
conducting s a l e s c l i n i c s . Kirby r e g u l a t e d t h e p r i c e d e a l e r s
c h a r g e d f o r t h e p r o d u c t s by s u g g e s t i n g r e t a i l p r i c e s which
t h e d e a l e r s g e n e r a l l y adhered t o . Kirby c u s t o m a r i l y re-
c e i v e d t h e d e a l e r s ' sales r e c e i p t s and p a i d t h e d e a l e r s
t h e i r commissions. F i n a l l y , and p o s s i b l y most i m p o r t a n t l y ,
d e a l e r s had t o be a u t h o r i z e d t h r o u g h a w h o l e s a l e o u t l e t l i k e
Kirby t o s e l l Kirby p r o d u c t s and Kirby c o u l d t e r m i n a t e t h e
contract granting t h e dealers t h a t authorization without
c a u s e on t h i r t y d a y s ' n o t i c e . Under S t a n d a r d Chemical, t h i s
s e t u p r e p r e s e n t s t h e k i n d o f c o n t r o l , a l t h o u g h i n some
a s p e c t s i n d i r e c t , t h a t i s s u f f i c i e n t t o e s t a b l i s h an employer-
employee r e l a t i o n s h i p w i t h i n t h e meaning of o u r unemployment
insurance s t a t u t e s . Given t h e s e f a c t s , w e c e r t a i n l y c a n n o t
s a y t h e D i s t r i c t C o u r t abused i t s d i s c r e t i o n i n a f f i r m i n g
t h e d e c i s i o n of t h e Board of Labor Appeals f i n d i n g t h e
d e a l e r s w e r e employees of Kirby. Therefore, we a f f i r m t h e
d e c i s i o n of t h e D i s t r i c t C o u r t h o l d i n g t h e d e a l e r s t o be
employees of Kirby f o r unemployment i n s u r a n c e p u r p o s e s .
I n so holding, w e note t h a t t h i s d e c i s i o n i s i n accord
w i t h t h e m a j o r i t y of o t h e r j u r i s d i c t i o n s t h a t have con-
s i d e r e d t h e q u e s t i o n of whether vacuum c l e a n e r s a l e s p e r s o n s
a r e employees o r i n d e p e n d e n t c o n t r a c t o r s f o r unemployment
compensation purposes under similar fact situations. Kirk-
patrick v. Peet (1967), 247 Or. 204, 428 P.2d 405; Beaman v.
Superior Products, Inc. (1961), 89 Ariz. 119, 358 P.2d 997;
Bevan v. California Employment Stabilization Commission
(1956), 139 Cal.App.2d 668, 294 P.2d 524; Sudduth v. Cali-
fornia Employment Stabilization Commission (1955), 130
Cal.App.2d 304, 278 P.2d 946; Murphy v. Daumit (1944), 387
Ill. 406, 56 N.E.2d 800; In Re Electrolux Corp. (1942), 288
N.Y. 440, 43 N.E.2d 480; Electrolux Corp. v. Board of Review
(1942), 129 N.J.L. 154, 28 A.2d 207; cf. Electrolux Corp. v.
Danaher (1941), 128 Conn. 342, 23 A.2d 135.
Kirby attempts to distinguish the above cases by
pointing out facts in each which vary from the facts here.
However, the distinctions Kirby attempts to make are far
less significant than the similarities between the cases.
We, therefore, adopt the above-cited cases as additional
authority for affirming the decision of the District Court
on this issue.
Affirmed.
We concur:
I
~,A.P.
Chief Justice