No. 91-530
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993
NORTHWEST PUBLISHING,
Plaintiff and Appellant,
MONTANA DEPARTMENT OF LABOR AND
--
INDUSTRY,UNEMPLOYMENT INSURANCE
DIVISION, CONTRIBUTIONS BUREAU,
Defendant and Respondent.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Michael H. Keedy, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Dana L. Christensen, Kendra L. Kawaguchi; Murphy,
Robinson, Heckathorn & Phillips, Kalispell, Montana
For Respondent:
Melanie A . Symons: Board of Labor Appeals,
Department of Labor and Industry, Helena, Montana
For Amicus Curiae:
Richard M. Baskett; Datsopoulous, MacDonald & Lind,
Missoula,,Montana
FEB B 0 1993
D Submitted on Briefs:
Decided:
~ p r i l15, 1992
February 10, 1993
Filed: la/q,":f!
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STATE 0: iii;Ui.iTAigA
1
Justice Karla M. Gray delivered the Opinion of the Court.
Northwest publishing (Northwest) appeals a decision of the
District Court forthe Eleventh ~udicial~istrict,
Flathead County,
affirming a decision of the Board of Labor Appeals. W e affirm.
The issue is whether the District Court erred in affinning the
decision of the Board of Labor Appeals that traveling salespeople
under contract with Northwest are not Itindependentcontractors" as
defined by 5 39-51-201(14), MCA.
Northwest is a sole proprietorship which prints and publishes
vacation and travel guides in Kalispell, Montana. Its sales
representatives travel throughout the northwestern United States
and Canada soliciting the purchase of advertisements to appear in
Northwest's magazines. These salespeople operate under an
"Independent Contractor Agreement" and receive a set commission
rate for all advertisements sold. They are provided lodging, sales
forms, reporting forms, a company telephone credit card number, and
company gas credit cards; one salesperson occasionally was provided
a car owned by Northwest's owner for use on sales trips.
In January 1990, the Unemployment Insurance Division of the
Montana Department of Labor and Industry determined that commission
sales representatives working for Northwest were employees of
Northwest for purposes of unemployment insurance taxation. Morth-
west unsuccessfully appealed that determination to the Department
of Labor and Industry and the Montana Board of Labor Appeals,
arguing that the salespeople are independent contractors. It then
appealed to the Eleventh Judicial District Court, which affirmed
the decision of the Board of Labor Appeals. This appeal followed.
Did the District Court err in affirming the decision of the
Board of Labor Appeals that traveling salespeople under contract
with Northwest are not "independent contractor st^ as defined by
5 39-51-201(14), MCA?
Under 5 39-51-2410(5), MCA, factual findings of the Board are
conclusive if they are supported by the evidence and there has been
no fraud, and the jurisdiction of a reviewing court is confined to
questions of law. "Supported by the evidence" means supported by
substantial evidence, which is 18somethingmore than a scintilla of
evidence, but may be less than a preponderance of the evidence."
Gypsy Highview Gathering System v. Stokes (1986), 221 Mont. 11, 15,
716 P.2d 620, 623.
Once disputes about the underlying facts are resolved, the
issue of whether salespeople are independent contractors or
employees is a question of law. Carlson v. Cain (1983), 204 Mont.
311, 317, 664 P.2d 913, 916; appeal after remand (1985), 216 Mont.
129, 700 P.2d 607. Our standard of review of a question of law is
whether the conclusion is correct. Steer, Inc. v. Department of
Revenue (1990), 245 Mont. 470, 474, 803 P.2d 601, 603.
Northwest specifically challenges the finding that I8[t]he two
commission sales persons testifying at the hearing did not have an
advertising sales business which they owned or operated either
before or after association with [North~est].~Northwest points
out that one of the salespeople testified that he had published a
paper, for which he sold advertising, prior to working for North-
west. However, the brief reference to the paper indicates that the
business in which the person was engaged was publishing a paper,
not selling advertising. The other salesperson who testified
stated that she worked in sales for another employer after working
for Northwest. Owning or operating a sales business is different
from working in sales for someone else. We conclude that the
finding that the salespeople did not own or operate their own sales
businesses was supported by substantial evidence. Therefore, the
finding is conclusive under 5 39-51-2410(5), MCA.
Northwest's chief arguments relate to the definition of an
"independent c~ntractor~~ forth at 5 39-51-201(14), MCA, and
set
commonly called the "A B test." As stated above, the issue of
whether the salespeople are independent contractors or employees is
an issue of law.
Section 39-51-201(14), MCA, provides:
"Independent contractorn means an individual who renders
service in the course of an occupation and:
(a) has been and will continue to be free from control or
direction over the performance of the services, both
under his contract and in fact; and
(b) is engaged in an independently established trade,
occupation, profession, or business.
Because the conjunctive "andr1 is used in the definition of
"independent contractor," the absence of either the I8A'* the "Brf
or
part of the test results in a conclusion of employment. Thus,
Northwest must establish both "A" and "BN in order to prevail, as
a matter of law, on its contention that the salespeople are
independent contractors. Because we determine that the Board did
not err in concluding that Northwest failed to establish the "B"
part of the test, we need not address whether the "A1' (control)
component was met.
Quoting the definition of a "profession1*from Black's Law
Dictionary, Northwest argues that sales is an independently
established profession within the purview of 5 39-51-201(14)(b),
MCA. It cites no legal authority for such an assertion, and we
have discovered none. Northwest claims that the salespeople's
belief that sales is an independent profession and that the ability
to make a sale is an independent skill, together with the fact that
one of the salespeople was re-employed as a salesperson after
leaving Northwest, are sufficient to establish that its salespeople
are "engaged in an independently established trade, occupation,
profession, or business1'under 5 39-51-201(14) (b) , MCA.
Notwithstanding the trend in recent years for people in many
occupations to prefer the term **professiont* "occupation,
to ''
Northwest's argument boils down to an assertion that because sales
is a recognized occupation or profession involving marketable
skills, it has met the "B" part of the independent contractor test.
Accepting such a premise would equate the '*B1'
test of being engaged
in an independently established business or occupation with merely
rendering services in the course of an occupation, as is already
separately required in the first clause of 5 39-51-201(14), MCA.
requirement a nullity.
Such an interpretation would render the *IBs1
We have previously rejected the notion that possessing a
saleable skill was the equivalent of being engaged in an
independently established business, trade or occupation. In our
leading case on this subject, Standard Chem. Mfg. Co. v. Employment
Sec. (1980), 185 Mont. 241, 605 P.2d 610, Standard Chemical
asserted that its commission salespeople were independent
contractors rather than employees. With specific regard to the
"independently established businessn criterion and based on its
finding that the salespeople had a saleable skill, the district
court determined that they were independent contractors. We
reversed, holding that the salespeople were employees. Standard
Chem., 605 P.2d at 616.
Standard Chem. was the first case in which we interpreted the
"independently established business" component of the statutory
independent contractor test. We surveyed both the case law and
statutes from our sister states and set forth much of that law
before turning our attention to the case before us and the findings
of the district court therein. Our holding that the salespeople
were employees was premised on the following specifics: (1) no
"business" existed independently and apart from the salespeople's
relationship with Standard chemical: (2) the salespeople were
dependent on Standard Chemical for their employment; and (3) should
the relationship with Standard Chemical terminate, the "business"
would terminate as well. a.at 615-16.
The record before us is nearly devoid of evidence in support
of Northwest's position with regard to these fundamental questions
of whether its salespeople were engaged in an independently
established business. Indeed, the fact that one of the salespeople
subsequently was re-employed as a salesperson by a different entity
supports our conclusion that these salespeople are employees, not
independent contractors. When that person's relationship with
Northwest terminated, her 9vbusiness"
terminated as well, until such
time as she could find another job as a salesperson.
We did consider additional criteria in Standard Chem.
Specifically, we determined that the salespeople's right to
terminate their employment and to do so without liability for a
peremptory termination, as well as their lack of authority to hire
subordinates, indicated employment--rather than independent
contractor--status. - at 616.
Id. Similarly here, Northwest's
salespeople retained the right to terminate their employment and to
do so without liability. Of the factors we specifically applied in
Standard Chem. relatingto the "independently established business"
question, the only one which might indicate independent contractor
status here is the ability of Northwest's salespeople to hire
subordinates if they choose to do so. The existence of this one
factor is insufficient to mandate a conclusion that the "B" part of
the independent contractor test is met here.
Northwest contends that both Standard Chem. and Zimmer-Jackson
Assoc. v Dept. of Labor (1988), 231Mont. 357, 752 P.2d 1095, are
.
distinguishable from the case before us. We note that in Zimmer-
Jackson, we also concluded that a sales associate was an employee
rather than an independent contractor. There, we applied five
criteria in reaching our determination; employee status was
indicated by each. Again, as in Standard Chem., one or two of
those criteria might indicate independent contractor status here.
None overcomes the basic and very fundamental fact, however, that
Northwest's salespeople were not "engaged in an independently
established business" of their own. Nor does anything in Zimmer-
Jackson suggest that those five criteria constitute a "bright line
test" for purposes of 5 39-51-201(14)(b), MCA.
Northwest's main argument with regard to both Standard Chem.
and zimmer-Jackson is that our decisions there hinged on the fact
that the "businessu1 which the llemployers"
in were engaged--sales--
was inseparable from the business or occupation in which the
salespeople were engaged. However, the fact that the entities in
both cases were involved, at least in part, in sales did not form
the basis for our holdings relating to the "independently
established business" prong of the independent contractor test. In
Standard Chem., the fact that the employer was a Nebraska
corporation engaged in the manufacturing, distributing and
wholesaling of livestock nutritional products merely was noted in
our recitation of the facts of the case. Standard Chem., 605 P.2d
at 611. And while we did address that matter in Zimmer-Jackson,
our discussion related to the existence of what was then the "B"
part of an "ABC" test: namely, whether the service being performed
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. . . ." Section 39-
51-203(4), MCA (1983); Zimmer-Jackson, 752 P.2d at 1099. As we
noted in ~immer-~ackson,
that prong of the earlier test was deleted
by the 1987 legislature. Id.
Therefore, as we did in standard Chem. on a similar record, so
we conclude here that the I1B" portion of the "A Bll independent
contractor test contained in 5 39-51-201 (14), MCA, was not met. We
hold that the Board did not err in concluding, and the District
Court did not err in affirming, that Northwest's salespeople are
employees for purposes of unemployment insurance taxation.
Northwest also argues that the decision of a hearing examiner
in a case involving a business known as canyon ~ublications
effectively overrules the determination of employee status in this
case. The Canyon Publications case apparently is now on appeal
before the Board of Labor Appeals and Canyon Publications was
permitted to file an amicus brief in this case. Whatever the
status or ultimate outcome of the Canyon Publications case, this
Court cannot consider that matter unless and until it is properly
before us.
Af finned.
We concur:
Chief Justice
for Justice Terry N..~rieweiier
Justice John Conway Harrison dissenting.
As noted in the majority's opinion, the leading case on this
subject is Standard Chem. M f g . Co. v. Employment Sec. (1980), 185
Mont. 241, 6 0 5 P.2d 610. I would have difficulty disagreeing with
Standard Chem. in view of the fact that I am the author of that
opinion, However, the record here discloses a fact situation
which, in my opinion, is different than that set forth in Standard
Chem. Further, the fact situation herein is different enough that
I believe the Unemployment Insurance ~ivision of the Montana
Department of Labor and Industry is hunting for contributions
rather than attempting to be perfectly fair to the independent
contractors in this matter, the traveling salespeople under
contract with Northwest Publishing. For that reason, I would
reverse.