Mamo Transportation, Inc. v. Director, Department of Workforce Services

Josephine Linker Hart, Judge,

dissenting. I agree with Judge Miller that this case must be reversed. However, I write separately to draw attention to an unsettling trend in this area of the law that I believe will have far-reaching consequences that apparently have not been considered by the majority. I submit that ratifying the Board of Review’s construction of the facts of this case has all but completely annulled the status of independent contractor in this state.

At issue in this case is only the second prong of the three-part test set forth in Arkansas Code Annotated section ll-10-210(e), whether the service performed is “outside the usual course of business” or “outside of all the places of business of the enterprise for which the service is performed.” The Board of Review has erred in its findings on both of these factors.

First it errs when it finds that “the course of business for both Mamo and the drivers is providing the delivery of vehicles.” This conclusion can only rest on an absurdly broad view that completely misses essential distinctions. It is rather like saying that the Earth is exactly the same as Saturn because they are both planets. It is obvious to me that while both Mamo and the drivers have a role in moving large vehicles, Mamo’s sole business is matching the owners of large vehicles that need to be moved with drivers capable of moving them. There was not a shred of evidence that Mamo actually moved the vehicles itself. Likewise, the drivers actually moved the vehicles, but, at least in the context of their relationship with Mamo,1 had no role in the matching of their skills to the needs of the owners of the vehicles. These distinctions are pivotal. To ignore them is tantamount to saying that a theatrical agent is in the business of performing on stage, when his only role was to get his client the part.

The Board of Review also erred in finding that “Mamo’s places of business consist not only of its office, but the roadways on which the drivers transport the vehicles.” This finding is remarkable in that the testimony indicated that Mamo performed its role only in its offices, which the drivers did not visit. This finding rests not upon inductive reasoning based upon an examination of the business, but rather on the Board’s circular logic that necessarily originated from its flawed conclusion that the drivers were employees, i.e., that if the drivers were employees, then the place of business was everywhere they transported vehicles. The Board tries to support this dubious conclusion by stating that because Mamo “profits” from the drivers’ efforts, the transport of the vehicles “constitutes the essence ofMamo’s services to its customers.” Again, that conclusion is not a product of logic. The theatrical agent earns his money from the actor’s performance, but it does not make the agent an actor.

The majority’s reliance on Home Care Professionals of Arkansas, Inc. v. Williams, 95 Ark. App. 194, 235 S.W.3d 536 (2006), hereinafter “HCP,” to affirm the Board’s “source of profit” rationale is also troubling. In the first place, I believe that HCP was wrongly decided and I would take this opportunity to overrule it. However, while I can accept the consequences of stare decisis, I cannot accept the extension of the flawed HCP holding that this court has announced today in the instant case. HCP is clearly distinguishable from the case at bar. As the majority notes, HCP originally provided direct home-care services and only later “evolved” into a referral service. The HCP court found it significant that HCP’s Articles of Incorporation declared that its “purpose is to provide home-care for the elderly.” I suppose the State of Arkansas has the right to rely on the official declarations that a business makes to the secretary of state. In the instant case, there is no equivalent declaration of corporate purpose. Additionally, HCP required its independent contractors to sign noncompetition covenants that “protects” its customer list. Mamo imposed no such restriction on the drivers.

The prudent course would be to limit HCP to situations where an entity has held itself out as providing a particular service and restricting access to clients. Instead the majority has written an opinion that is as potentially far-reaching as it is ill-advised. I have already discussed how actors may now potentially be viewed as the employees of their agents. Arguably, this reasoning would apply to all employment agencies as well. However, I believe the reach of this opinion is far greater. There are hundreds of poultry farmers in this state that raise chickens under contract with Tyson Foods. Are they now “employees” of Tyson? Could the rice farmers in this state suddenly be declared “employees” of Riceland? I suspect that the court of appeals has unwittingly opened a Pandora’s Box.

I believe that this case should be reversed and remanded to the Board of Review.

Brian S. Miller, Judge, dissenting.

I. Introduction

This case requires us to determine the meaning of the phrase “places of business,” which is found in Arkansas Code Annotated section 11-10-210, the statute defining “employment,” when determining which work relationships are subject to unemployment taxation. The majority’s determination that Mamo’s places of business include every alley, roadway, highway, and freeway in the United States and Canada is too broad, leading to an unreasonable result that is unsupported by the plain language of the statute.

There is no doubt that Arkansas Code Annotated section 11-10-210 is a very broad statute that requires almost every entity utilizing independent contractors in the State of Arkansas to pay unemployment taxes for those contractors. To reach this result, the statute broadly defines employment as almost any service provided, “irrespective of whether the common law relationship of master and servant exists.” Ark. Code Ann. § ll-10-210(e).1 The statute, however, exempts a small number of work relationships from the definition of “employment,” and that is the issue presented by this case.

II. Background

Appellant Mamo Transportation, Inc. contracts with its customers to deliver large vehicles where conventional hauling is not financially efficient. It then contracts with drivers to deliver the large vehicles for its customers. Sylvia Jones-Alien contracted with Mamo to deliver vehicles for Mamo’s customers. Mamo was not required to assign deliveries to Jones-Alien and she was not required to accept deliveries from Mamo. Jones-Alien was under contract for approximately three months, during which time she made only three deliveries. She had an accident on her third delivery and Mamo decided not to assign any future deliveries to her. Jones-Alien then filed a claim for unemployment benefits.

It is undisputed that Jones-Alien was a common-law independent contractor and was not Mamo’s employee. Jones-Alien wrote that she was an independent contractor on her application for unemployment benefits. She was free to decide when and if she would deliver vehicles for Mamo’s customers and Mamo was free to decide when and if it would use her to deliver vehicles for its customers. She was free to contract with whomever she wanted, whenever she wanted, including Mamo’s competitors. Mamo was free to contract with other independent contractors whenever it wanted and was not required to ever assign a delivery to Jones-Alien. Mamo did not train her or provide her with the tools of her trade. She paid her own taxes and paid her own expenses, including lodging, meals and fuel. Mamo did not direct her as to how to deliver the vehicles and she was free to deliver the vehicles in any manner she chose.

While all of this is true, Arkansas’ unemployment compensation act is not limited by the common law definition of employment. As pointed out by the majority, Arkansas Code Annotated section ll-10-210(e) provides:

(e) Service performed by an individual for wages shall be deemed to be employment subject to this chapter irrespective of whether the common law relationship of master and servant exists, unless and until it is shown to the satisfaction of the director that:
(1) Such individual has been and will continue to be free from control and direction in connection with the performance of the service, both under his or her contract for the performance of service and in fact; and
(2) The service is performed either outside the usual course of the business for which the service is performed or is performed outside of all the places of business of the enterprise for which the service is performed; and
(3) The individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.

Mamo does not dispute that Jones-Alien received wages, a term which is defined broadly as “all remuneration paid for personal services. . . .” Ark. Code Ann. § 11-10-215 (Supp. 2007). Mamo, therefore, had to satisfy this three-prong test to he exempted from paying unemployment taxes for Jones-Alien. The Arkansas Department of Workforce Service determined that Mamo met the first prong of the test as provided in section ll-10-210(e)(l). The Department, however, found that Mamo failed to satisfy the second prong, which required Mamo to show that the service provided by Jones-Alien was “performed outside of all the places of business of the enterprise for which the service is performed,” as required by section ll-10-210(e)(2). Because Mamo was required to satisfy all three prongs of the test, the Department did not address the third prong, which is found in section 11-10-210(e)(3).

The majority, citing Home Care Professionals of Arkansas, Inc. v. Williams, 95 Ark. App. 194, 235 S.W.3d 536 (2006), and a number of cases from other states, found the Department’s logic sound and affirms. I disagree and would reverse.

III. Mamo Transportation, Inc. was not Sylvia Jones-Allen’s Employer

A. The Enterprise For Which Service is Performed

The essential question is, did Jones-Alien perform all of her service “outside of all of the places of business of the enterprise for which the service is performed?” See Ark. Code Ann. § 11-10-210(e)(2). Although it was not addressed by the Board, we must begin by determining what was the “enterprise for which the service [was] performed” by Jones-Alien? See id. Was Mamo the enterprise for which Jones-Alien performed service or was each of Mamo’s customers the enterprise? The record is clear that Mamo contracted to deliver the vehicles for its customers and then contracted with its subcontractors to make the deliveries. Mamo was not a transportation broker but was a licensed carrier, and its obligations to its customers were “farmed out” to its drivers. See Transplace Stuttgart, Inc. v. Carter, 98 Ark. App. 418, 255 S.W.3d 878 (2007). Because Mamo was ultimately responsible to its customers for the service provided by Jones-Alien, Mamo was the enterprise to which Jones-Allen provided service. Had Mamo been a transportation broker, Jones-Allen’s claim for benefits would have been a non-starter because the enterprise to which she provided service would have been the customer, not Mamo.

B. Mamo’s Places of Business

Although Mamo was the enterprise to which Jones-Alien provided service, Mamo was exempt from paying unemployment taxes for her because she did not perform those services for Mamo at any of its places of business. See Ark. Code Ann. § 11 — 10— 210(e)(2). We should not read anything into the statute but we must read the statute literally and give its words their ordinary and usually accepted meaning in common language. Phillips v. Ark. Dep’t of Human Servs., 85 Ark. App. 450, 158 S.W.3d 691 (2004); Brandon v. Ark. Pub. Serv. Comm’n, 67 Ark. App. 140, 992 S.W.2d 834 (1999). Mamo’s places of business, using the usually accepted meaning in common language, are its facilities, which are located in Osceola, Indiana; Little Rock, Arkansas; Charlotte, North Carolina; and Bloomsburg, Pennsylvania. The record is clear that Jones-Alien performed no services for Mamo at any of these facilities. Therefore, her services were performed outside of all of Mamo’s places of business.

The majority’s holding that Mamo’s places of business include every alley, roadway, highway, and freeway in the United States and Canada does not comport with the common meaning of the language found in the statute. Had the legislature intended to cover every conceivable place in which Mamo provided services, the statute would have required Mamo to show that the service is “performed outside of all of the places in which the enterprise performs services,” not “outside of all the places of business of the enterprise.”

In support of its expansive reading of the statue, the majority relies on Home Care Professionals of Arkansas, Inc. v. Williams, supra. In Home Care Professionals, we held that the appellant, HCP, was not exempt from paying unemployment taxes for the in-home caregivers that it assigned to its clients. Id. It is arguable that Home Care Professionals was wrongly decided. See id. (Baker, J., dissenting). We, however, will save that issue for another day, because this case is clearly distinguishable from Home Care Professionals.

As the majority opinion points out, in Home Care Professionals we adopted the Board’s determination that “the caregivers represented HCP’s interest on the client’s premises, thereby making the clients’ premises a place of business.” Home Care Professionals, supra. (Emphasis added.) Although we extended the phrase “places of business” to include the homes of HCP’s clients, we did not extend that phrase to include every conceivable place that the caregivers traveled in an effort to serve HCP’s clients. And that is the rub of the case before us; the majority’s opinion takes the next step of expanding the phrase “places of business” to include a greater number of places, none of which would be considered places of business by the ordinary reasonable person.

The majority extends the phrase “places of business” beyond well defined places such as the homes and business locations of customers. It reaches out and applies it to every conceivable place in which an independent contractor could possibly provide a service for its prime contractor’s customers. In the present case, this specifically includes every alley, roadway, highway, and freeway in the United States and Canada. Although seemingly absurd, the majority’s definition also includes all of the railways and waterways in, and all of the air space above the United States and Canada. This is the case because Mamo’s independent contractors were not restricted in the method by which they could have the vehicles delivered. Although it may have caused financial ruin, Jones-Alien could have arranged to have the vehicles delivered by some method other than driving. Therefore, Mamo’s places of business include every possible shipping route in the United States and Canada. Not only is this unreasonable, it is not what the legislature intended. Indeed, it contradicts the common meaning of the language of the statute.

There is also a secondary distinction between this case and Home Care Professionals. Although Jones-Allen was clearly an independent contractor, it is not clear whether the caregivers in Home Care Professionals were truly independent. For example, in addition to referring its caregivers to its customers, HCP also administered the care-givers’ work schedules. Id. When a caregiver was unable to make a scheduled in-home visit, HCP was responsible for finding a replacement to meet the caregiver’s obligation. Id. Additionally, the caregivers’ contracts with HCP contained non-compete clauses, which restricted the ability of its caregivers to contract for their labor once their relationship with HCP concluded. Id.

The majority also relies on a number of cases from foreign jurisdictions to support its interpretation of section 11 — 10— 210(e)(2). I will not give a detailed analysis of those cases, because I stand firm in deferring to the common meaning of the language of section ll-10-210(e)(2). Moreover, there are cases from other jurisdictions which are in direct opposition to the results reached by the foreign cases cited by the majority. See, e.g., Commissioner of Div. of Unemployment Assistance v. Town Taxi of Cape Cod, Inc., 68 Mass. App. Ct. 426, 862 N.E.2d 430 (2007) (finding that the services provided by taxi drivers occurred outside of the business premises of the taxi company).

IV Conclusion

This court’s interpretation of the phrase “places ofbusiness” should be constrained to the common meaning of that phrase. For this reason, Mamo’s places ofbusiness are its facilities in Osceola, Indiana; Little Rock, Arkansas; Charlotte, North Carolina; and Bloomsburg, Pennsylvania. Because Jones-Alien never provided services to Mamo at these facilities, I would reverse the decision of the Department of Workforce Services.

There is, however, testimony that the drivers were free to make their own arrangements with the owners of large vehicles for subsequent transports. Essentially, the drivers were free to cut out the middleman for subsequent trips.

Citizens, however, remain free to independently contract for their labor and the courts recognize independent contractor relationships when, among other things, determining liability for contract and tort disputes. See, e.g.,Reynolds Health Care Servs., Inc. v. HMNH, Inc., 364 Ark. 168, 217 S.W.3d 797 (2005) (breach of contract); Draper v. Conagra Foods, Inc., 92 Ark. App. 220, 212 S.W3d 61 (2005) (tort).