COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Fitzpatrick, Judges Elder and Overton
Argued at Richmond, Virginia
VIRGINIA EMPLOYMENT COMMISSION
OPINION BY
v. Record No. 1373-97-2 JUDGE LARRY G. ELDER
APRIL 21, 1998
PORTER-BLAINE CORPORATION
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
Theodore J. Markow, Judge
John B. Purcell, Jr., Assistant Attorney
General (Richard Cullen, Attorney General, on
brief), for appellant.
Thomas F. Hennessy, III (SuAnne L. Hardee;
Hardee & Hennessy, P.C., on brief), for
appellee.
The Virginia Employment Commission ("Commission" or "VEC")
appeals the circuit court's orders (1) overruling its motion to
dismiss Porter-Blaine Corporation's petition for judicial review
and (2) reversing its decision that the service performed for
Porter-Blaine Corporation by several drywall installers
constituted "employment" under Code § 60.2-212. The Commission
contends the circuit court erred when it (1) concluded that
Porter-Blaine Corporation's service of its petition for judicial
review upon the Commissioner of the VEC satisfied the "service"
requirement of Code § 60.2-500(B) and (2) concluded that
Porter-Blaine Corporation had met its burden of proof to qualify
for the exemption from tax liability found in Code § 60.2-212(C).
For the reasons that follow, we reverse and remand.
I.
FACTS
Porter-Blaine Corporation ("Porter-Blaine") is in the
business of installing drywall for general contractors engaged in
the construction of residential and commercial buildings. It has
twenty-eight employees, including "laborers, secretarial staff,
superintendents, [and] repair people." In some of its
residential projects, Porter-Blaine uses between twenty and
thirty workers on a job-by-job basis to hang and finish drywall
boards and to apply plaster to walls ("drywall installers").
Porter-Blaine considered these drywall installers to be
independent contractors. As such, it excluded the remuneration
paid to these workers from its calculation of its tax liability
under the Unemployment Compensation Act ("Act").
In 1994, the Commission conducted an audit of
Porter-Blaine's payroll for the years 1991, 1992, and 1993. On
November 10, 1994, the Commission determined that the work
performed by the drywall installers was "employment" under Code
§ 60.2-212 and that Porter-Blaine was required to pay taxes on
the remuneration it paid to these workers. Porter-Blaine
appealed this determination. Following a hearing, a special
examiner made extensive factual findings and concluded that the
service performed by the drywall installers for Porter-Blaine was
"employment" under Code § 60.2-212. Specifically, the special
examiner concluded that Porter-Blaine failed to prove that the
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drywall installers were either free from its control as required
by Code § 60.2-212(C)(1) or independently established businesses
under Code § 60.2-212(C)(2). Regarding the issue of control, the
special examiner found that Porter-Blaine possessed the right to
terminate the services of drywall installers "at will."
On June 13, 1996, Porter-Blaine filed a timely petition for
judicial review of the special examiner's decision. The petition
contained a certificate of service signed by Porter-Blaine's
counsel stating that "two copies of the [petition were] sent via
overnight delivery, this 12th day of June, 1996 to Dr. Thomas J.
Towberman, Commissioner, Virginia Employment Commission . . . ."
(Emphasis in original). The Commission concedes that the
Commissioner received these copies of the petition within the
statutorily prescribed time period. On August 13, William D.
Hester, Sr., who was an authorized process server, personally
delivered two copies of Porter-Blaine's petition to the
Commission. On October 3, the Commission moved to dismiss
Porter-Blaine's petition for judicial review on the ground that
Porter-Blaine had failed to comply with the "service" requirement
of Code § 60.2-500(B)(1). The circuit court overruled the
Commission's motion.
The circuit court then reversed the decision of the special
examiner. It first concluded that "all of the Commission's
findings of fact are supported by the record." However, it then
held that the special examiner's legal analysis was erroneous.
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The circuit court concluded that the evidence offered by
Porter-Blaine was sufficient as a matter of law to prove that "it
[did] not control the installers in their performance of their
work" and that the drywall installers were engaged in
independently established businesses.
II.
"SERVICE" UNDER CODE § 60.2-500(B)(1)
The Commission first contends the circuit court erred when
it refused to dismiss Porter-Blaine's petition for judicial
review due to insufficient service. It argues that
Porter-Blaine's mailing of two copies of its petition to the
Commissioner, although timely, was not sufficient to effect
"service" under Code § 60.2-500(B)(1). It also argues that,
although it was eventually served with two copies of the petition
by a statutorily authorized process server, this personal service
was untimely because it was effected more than two months after
Porter-Blaine filed its petition with the circuit court. Because
two copies of Porter-Blaine's petition reached the Commissioner
within the time prescribed by law, we conclude that the circuit
court did not err when it denied the Commission's motion to
dismiss for insufficient service.
Under Code § 60.2-500(B)(1), an employer may seek judicial
review of a determination by the Commission regarding the
employer's tax liability for particular services. 1 Because the
1
Code § 60.2-500(B)(1) states in relevant part:
4
proceedings for judicial review of the Commission's decisions are
governed by statute, the mandatory requirements for perfecting a
judicial review must be met in order to confer jurisdiction upon
the circuit court. See 73A C.J.S. Public Administrative Law and
Procedure § 208 (1983); cf. Mayo v. Dept. of Commerce of the
Commonwealth, 4 Va. App. 520, 522-23, 358 S.E.2d 759, 761 (1987).
Regarding the requirement for service of an employer's
petition upon the Commissioner, Code § 60.2-500(B)(1) does not
prescribe any particular method of delivery. Instead, the
statute merely states that "[s]ervice of two copies of such
petition upon the Commissioner shall be deemed completed
service . . . ." Code § 60.2-500(B)(1). Moreover, the language
of the statute regarding the service requirement is ambiguous.
That statute refers only to "service," a term that is capable of
Judicial review of [the Commission's
decisions regarding the tax liability of an
employer] may be initiated within thirty days
after mailing notice of such findings and
determination to the employing unit or, in
the absence of mailing, within thirty days
after delivering such notice and
determination, in the Circuit Court of the
City of Richmond. Such judicial review shall
be commenced by the filing of a petition,
which need not be verified but which shall
state the grounds upon which a review is
sought. Service of two copies of such
petition upon the Commissioner shall be
deemed completed service and such petition
shall be filed with the clerk of the court
within five days after service thereof.
(Emphasis added).
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being reasonably understood as permitting various modes of
delivery. See Black's Law Dictionary 1368-69 (6th ed. 1990)
(stating that, in the procedural context, "service" can refer to
personal service, substituted service, service by publication, or
service by mail).
Although Code § 60.2-500(B)(1) does not prescribe the
permissible methods for serving petitions for judicial review
upon the Commissioner, Code § 8.01-287 does. Code § 8.01-287
states that "[u]pon commencement of an action, process shall be
served in the manner set forth in [Chapter 8 of Title 8.01 of the
Code] and by the Rules of the Supreme Court." (Emphasis added).
The General Assembly defined "action" when used in Title 8.01 to
"include all civil proceedings whether at law, in equity, or
statutory in nature and whether in circuit courts or district
courts." Code § 8.01-2 (emphasis added). Petitions for judicial
review under Code § 60.2-500(B) are statutory creations and, as
such, they are included among the "actions" covered by Code
§ 8.01-287. Thus, the "service" of a petition for judicial
review under Code § 60.2-500(B)(1) must comply with the
requirements of Chapter 8 of Title 8.01 of the Code and Rule 2A
of the Rules of the Supreme Court.
Although Chapter 8 of Title 8.01 imposes restrictions upon
how personal service of civil proceedings may be validly
effected, the Chapter also contains a "curing statute." Garritty
v. Virginia Dept. of Soc. Services, 11 Va. App. 39, 42 n.2, 396
6
S.E.2d 150, 151 n.2 (1990) (citing Code § 8.01-288). Code
§ 8.01-288 states:
[e]xcept for process commencing actions for
divorce or annulment of marriage or other
actions wherein service of process is
specifically prescribed by statute, process
which has reached the person to whom it is
directed within the time prescribed by law,
if any, shall be sufficient although not
served or accepted as provided in this
chapter.
(Emphasis added). Code § 8.01-288 applies to the service of
petitions for judicial review under Code § 60.2-500(B)(1)
because, as previously discussed, Code § 60.2-500(B)(1) does not
"specifically prescribe" a particular method of service.
Applying these principles to this case, we hold that the
circuit court did not err when it denied the Commission's motion
to dismiss Porter-Blaine's petition for judicial review due to
insufficient service. Although Porter-Blaine's service of its
petition upon the Commissioner by overnight mail failed to comply
with the requirements for personal service set forth in Chapter 8
of Title 8.01, the Commission conceded in its brief that the
Commissioner actually received the two copies of the petition "by
mail within the time limits prescribed by law." Thus, because
the two copies of Porter-Blaine's petition reached the
Commissioner in a timely fashion, its service of the petition was
2
"sufficient" under Code § 8.01-288.
2
Because we hold that Porter-Blaine effected sufficient
service of its petition upon the Commissioner in June 1996, we
need not address whether the personal service of the petition by
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III.
"EMPLOYMENT" UNDER CODE § 60.2-212
The Commission contends the circuit court also erred when it
concluded that the work performed by the drywall installers for
Porter-Blaine was not "employment" under Code § 60.2-212(C). We
agree.
A.
Code § 60.2-212(C) delineates the services that are
considered "employment" for the purpose of calculating an
employer's tax liability under the Act. Code § 60.2-212(C)
states that:
Services performed by an individual for
remuneration shall be deemed to be employment
subject to this title unless:
1. 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;
and
2. Such service is either outside the usual
course of the business for which such service
is performed, or such service is performed
outside of all the places of business of the
enterprise for which service is performed; or
such individual, in the performance of such
service, is engaged in an independently
established trade, occupation, profession or
business.
Service that satisfies both Code § 60.2-212(C)(1) and (C)(2) does
not constitute "employment" under the Act, and employers are not
an authorized process server more than two months after it was
filed in the circuit court was "untimely."
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required to include the remuneration paid for such service as
"wages payable for employment" when calculating their tax
liability to the Unemployment Compensation Fund.
In a proceeding to determine whether particular service
performed by an individual is "employment" for tax purposes under
the Act, the burden is initially on the Commission to prove that
service was performed for remuneration. See Virginia Employment
Comm'n v. Thomas Regional Directory, Inc., 13 Va. App. 610, 612,
414 S.E.2d 412, 414 (1992). Once the Commission satisfies this
burden, the burden shifts to the alleged employer to prove that
the service falls outside the statutory definition of employment.
See id.; Life & Casualty Ins. Co. of Tennessee v. Unemployment
Compensation Comm'n, 178 Va. 48, 57, 16 S.E.2d 357, 361 (1941).
The alleged employer must "establish that it meets both the
criteria of subsections (C)(1) and one of the three exceptions of
subsection (C)(2)." Thomas Regional Directory, Inc., 13 Va. App.
at 612, 414 S.E.2d at 414. If the employer fails to meet this
burden of proof, then "an 'employment' relationship exists." Id.
at 612, 414 S.E.2d at 414-15.
On appeal, the Commission's findings of fact are conclusive
"if supported by the evidence and in the absence of fraud." Code
§ 60.2-500(B)(1). In addition, we view the evidence in the light
most favorable to the findings made by the Commission. See
Virginia Employment Comm'n v. Peninsula Emergency Physicians,
Inc., 4 Va. App. 621, 626, 359 S.E.2d 552, 554 (1987). Unless
9
the Commission's factual findings are erroneous, our jurisdiction
is confined to questions of law. Code § 60.2-500(B)(1).
In considering whether Code § 60.2-212 was correctly applied
in a particular case, we are guided by several well established
tenets of our jurisprudence under the Act. First, because the
Act is a public welfare measure intended "to assure a measure of
security against the hazard of unemployment in our economic
life," it is liberally construed. Unemployment Compensation
Comm'n v. Collins, 182 Va. 426, 438, 29 S.E.2d 388, 393 (1944).
In accordance with this rule of construction, employment is found
to exist in "borderline cases," id., and "[e]xemptions in the Act
should be strictly construed against the alleged employer."
Virginia Employment Comm'n v. A.I.M. Corp., 225 Va. 338, 346, 302
S.E.2d 534, 539 (1983). Second, the statutory definition of
employment under the Act is "broader and more inclusive than in
the common-law context of master and servant." Id. (citing
Life & Casualty Co., 178 Va. at 57, 16 S.E.2d at 361). Finally,
whether a particular relationship constituted employment is
determined more from the actual practice of the parties in their
day-to-day interactions than by any formal understanding between
them. Collins, 182 Va. at 434, 29 S.E.2d at 391. "[T]he
individual's status in relation to the alleged employer is to be
determined from all the facts and circumstances adduced by the
evidence, including the provisions of any written agreement."
A.I.M. Corp., 225 Va. at 347, 302 S.E.2d at 539.
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B.
Turning to the facts of this case, we hold that the circuit
court erred when it concluded that the evidence offered by
Porter-Blaine was sufficient as a matter of law to prove that the
service performed by the drywall installers fell outside the
statutory definition of "employment." Specifically,
Porter-Blaine's evidence did not prove that the work performed by
the drywall installers was free from its control or direction.
See Code § 60.2-212(C)(1).
In determining whether an alleged employer has proven that
an alleged employee is "free from control or direction" under
Code § 60.2-212(C)(1), we consider whether the alleged employer
had either "actual" or "potential" power of control over the
performance of the services. A.I.M. Corp., 225 Va. at 347, 302
S.E.2d at 539-40. Under the statute, an alleged employer had the
"right of control" and an alleged employee was not "free" from
control if the evidence regarding the parties' contract or their
daily interactions indicates that the alleged employer had both
(1) the power to specify the result to be accomplished and (2)
power "over the performance" of the work. See id. at 347, 302
S.E.2d at 540 (quoting former version of Code § 60.2-212(C)(1));
see also Brothers Constr. Co. v. Virginia Employment Comm'n, 26
Va. App. 286, 295, 494 S.E.2d 478, 483 (1998). Because the
result to be accomplished is specified in most contracts, the
power over how the work is performed is frequently the
11
dispositive element.
If the party for whom the work is to be done
has the power to direct the means and methods
by which the other does the work, an
employer-employee relationship exists; if the
latter is free to adopt such means and
methods as he chooses to accomplish the
result, he is not an employee but an
independent contractor.
A.I.M. Corp., 225 Va. at 547, 302 S.E.2d at 540 (citing Richmond
Newspapers, Inc. v. Gill, 224 Va. 92, 93, 294 S.E.2d 840, 843
(1982)). An alleged employee is not "free from control or
direction over the performance of such services" if the record
indicates that the alleged employer may instruct the alleged
employee regarding the means and methods chosen to accomplish the
result and such instructions "have to be obeyed." Id. at 547,
302 S.E.2d at 540 (citing Texas Co. v. Zeigler, 177 Va. 557, 565,
14 S.E.2d 704, 707 (1941)). Similarly, if the alleged employer
had the power to discharge the alleged employee from its service
because of disobedience, then the alleged employer had the legal
right of control and the service is "employment" under the
statute. See Zeigler, 177 Va. at 569, 14 S.E.2d at 709 (citation
omitted).
The evidence offered by Porter-Blaine was insufficient as a
matter of law to prove that it was completely without power to
designate the manner in which the drywall installers performed
their work. Although Samuel L. Porter, the president of
Porter-Blaine, testified that Porter-Blaine had no "right to
direct the manner or the [means] in which the [drywall installer]
12
performs his services," the evidence in the record regarding the
day-to-day interactions between Porter-Blaine and the drywall
installers proved otherwise. The Commission expressly found that
Porter-Blaine possessed the right to terminate the services of
drywall installers "at will," and the evidence in the record,
when viewed in the light most favorable to the Commission, is
sufficient to support this finding. Porter testified that
Porter-Blaine told at least one drywall installer that "he didn't
. . . need [to] finish" a particular project because he "wasn't
doing a good job." Because, in practice, Porter-Blaine had the
potential right to discharge installers for disobedience with the
company's standards while work was in progress, it legally had
the "right to control" the performance of the drywall installers'
work. See Zeigler, 177 Va. at 569, 14 S.E.2d at 709.
On the issue of control, this case is virtually
indistinguishable from Brothers Constr. Co., a case decided after
the circuit court reviewed the Commission's decision in this
case. Like the alleged employer in Brothers Constr. Co.,
Porter-Blaine had the power to terminate the drywall installers
at will, dictated the materials they used, and retained authority
after the job was finished to scrutinize the quality of the work
and require improvements. See Brothers Constr. Co., 26 Va. App.
at 296, 291, 494 S.E.2d at 483, 481 (applying Code § 60.2-212(C)
to arrangements between a company who obtained contracts to
install siding on buildings and "siding installers" who performed
13
the actual installation). The dispositive element in both of
these cases is the potential power to terminate the installers
prior to the completion of the work that was the subject of the
parties' contract, which is a mechanism that has the effect of
regulating the performance of the installers' work. As the
Supreme Court stated in Zeigler, "'[the] power of discharge made
obligatory any instructions given, for it gave to [the employer]
the power to require obedience to those instructions and insured
their being carried out.'" See Zeigler, 177 Va. at 565, 14
S.E.2d at 707 (citations omitted).
Because Porter-Blaine failed to prove as a matter of law
that the drywall installers were "free from [its] control or
direction," the service performed by these installers was within
the Act's definition of employment, and Porter-Blaine was
required to pay taxes on the remuneration it paid to them. For
this reason, we need not consider whether Porter-Blaine proved
that these installers were independently established businesses
under Code § 60.2-212(C)(2).
For the foregoing reasons, we reverse the order of the
circuit court reversing the Commission's decision and remand for
further proceedings consistent with this opinion.
Reversed and remanded.
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