ACCEPTED 06-15-00078-cv SIXTH COURT OF APPEALS TEXARKANA, TEXAS 12/30/2015 7:05:47 PM DEBBIE AUTREY CLERK NO. 06-15-00078-CV ______________________________________________ FILED IN 6th COURT OF APPEALS IN THE COURT OF APPEALS FOR THE TEXARKANA, TEXAS SIXTH DISTRICT OF TEXAS AT TEXARKANA 12/31/2015 9:24:00 AM ______________________________________________ DEBBIE AUTREY Clerk TOCHRIL INCORPORATED, Appellant VS. TEXAS WORKFORCE COMMISSION, Appellee ______________________________________________ ON APPEAL FROM 53rd JUDICIAL DISTRICT COURT OF TRAVIS COUNTY, TEXAS ______________________________________________ BRIEF OF APPELLANT ______________________________________________ JULIANN H. PANAGOS State Bar No. 06861100 jpanagos@craincaton.com MICHAEL D. SEALE State Bar No. 00784938 mseale@craincaton.com 1401 McKinney Street, Suite 1700 Houston, Texas 77010 Telephone: 713-752-8696 Facsimile: 713-658-1921 Counsel for Appellant ORAL ARGUMENT REQUESTED 084891/000006 375 - 1842976v1 Identity of Parties and Counsel The following is a complete list of all parties to the trial court judgment, and the names and addresses of all trial and appellate counsel: Parties Counsel Appellant Tochril Incorporated Juliann H. Panagos Michael D. Seale Crain, Caton & James, P.C. 1401 McKinney Street Suite 1700 Houston, Texas 77010 Appellee Texas Workforce Peter E. Laurie Commission Assistant Attorney General Financial and Tax Litigation PO Box 12548 Austin, Texas 78711-2548 i 084891/000006 375 - 1842976v1 Table of Contents Identity of Parties and Counsel ...................................................................................i Table of Contents ...................................................................................................... ii Table of Authorities ................................................................................................... v Statement of the Case.............................................................................................. vii Statement Regarding Oral Argument .................................................................... viii Statement Regarding Record References and Hyperlinks ..................................... viii Issues Presented ........................................................................................................ix Issue 1 Health Force included a lenghtly summary of evidence to its response to the motion for summary judgment pursuant to Texas Rule of Evidence 1006, which allows for presentation of summary evidence when the underlying evidence is too voluminous. The underlying sumarized evidence supporting Health Force’s summary judgment response was also attached to the response. The TWC filed a motion to strike this summary judgment evidence. The trial court sustained the TWC’s objections and struck the evidence. Did the trial court err by excluding Health Force’s summary evidence? Issue 2 Did the trial court err in finding the twenty worker classification factors weighed in favor of the TWC? Issue 3 In a 2007 Memorandum of Understanding, the Internal Revenue Service (the “IRS”), Department of Labor (the “DOL”) and a number of state workforce agencies (including Texas) agreed to work towards achieving consistent worker classification determinations across state and federal agencies. ii 084891/000006 375 - 1842976v1 Both the IRS and DOL conducted worker classification audits of the workers offered work opportunities by Health Force and determined the nurses and other professional healthcare providers were independent contractors. In this case, the trial court granted summary judgment for the Texas Workforce Commission finding these same workers were employees of Health Force. Did the trial court erroneously grant summary judgment for the TWC on the issue of worker classification? Overview .................................................................................................................... 1 Statement of Facts ...................................................................................................... 1 1. Background of the Parties................................................................................ 1 A. Tochril Incorporated (“Health Force”).................................................. 1 B. Texas Workforce Commission .............................................................. 2 2. Texas Workforce Commission Investigation and Decision ............................ 3 3. Procedural History ........................................................................................... 5 A. Suit is filed............................................................................................. 5 B. The motion for summary judgment....................................................... 6 C. Objections to Health Force’s summary judgment evidence ................................................................................................. 7 D. Rulings on evidence and motion for summary judgment ..................... 8 Summary of the Argument......................................................................................... 8 Argument.................................................................................................................. 10 1. Standard of Review........................................................................................ 10 2. The trial court erred in excluding Health Force’s summary chart and by ignoring the underlying evidence. ............................................................ 11 A. Use of Summary Evidence for Alonzo and Pappillion Testimony was Proper in this Case. .................................................... 12 iii 084891/000006 375 - 1842976v1 B. Alonzo and Pappillion Provided Proper Witness Statements. ........................................................................................ 16 C. Alonzo and Pappillion had Personal Knowledge of Relevant Facts. .................................................................................... 17 3. The Twenty Factor Test Demonstrates Genuine Issues of Material Fact 18 A. Prior Precedent Indicates the Workers are Independent Contractors .......................................................................................... 18 B. Review of Health Force’s Evidence Demonstrates the Workers were Independent Contractors ............................................................. 20 4. The Memorandum of Understanding between the IRS, DOL and State Agencies Favors a Finding that the Health Force Workers are Independent Contractors. ............................................................................... 33 A. The IRS Audit of the Workers ............................................................35 B. The DOL Audit of the Workers ..........................................................36 Conclusion ............................................................................................................... 37 Certificate of Compliance ........................................................................................ 38 Certificate of Service ............................................................................................... 39 Index to Appendix .................................................................................................... 40 iv 084891/000006 375 - 1842976v1 Table of Authorities Cases Avchen v. Kiddo, 200 Cal. App.3d 532 (Cal. 1988) ................................................18 C.M. Asfahl Agency v. Tensor, Inc., 135 S.W.3d 768 (Tex. App.– Houston [1 Dist.] 2004, no pet.) ....................................................................13 Cascade Nursing v. Employment Security Department, 856 P.2d 421 (Wash. 1993)..................................................................................................18 Champlin Oil & Ref. Co. v. Chastain, 403 S.W.2d 376 (Tex.1965) .......................13 Contract Management Services, Inc. of Texas v. State of Louisiana, 745 So.2d. 194 (La. Ct. App. 1999) ..............................................................18 Cooper Petroleum Co. v. LaGloria Oil & Gas Co., 436 S.W.2d 889 (Tex.1969) .....................................................................................................13 Elgin Nursing & Rehabilitation Center v. U.S. Department of Human Health Services, 718 F.3d 488 (5th Cir. 2013) ...............................................20 Flutobo, Inc. v. Holloway, 419 S.W.3d 622 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) .......................................................................11 Ford Motor Company v. Auto Supply Company, Inc., 661 F.2d 1171 (8th Cir.1981) ................................................................................................13 Goodyear Tire & Rubber Co. v Mayes, 236 S.W.3d 754 (Tex.2007) .....................10 Guevara v. Lackner, 447 S.W.3d 566 (Tex. App.-Corpus Christi 2014), reh’g overruled (Dec. 11, 2014) .........................................................14 Health Care Associates, Inc. v. Oklahoma Employment Security Commission, 26 P.3d 112 (Okla. 2001) .........................................................18 HRP of Tennessee, Inc. d/b/a Hospital Resources Personnel v. State of Tennessee, Department of Employment Security, No. E2005- 01176-COA-R3-CV (Tenn. June 28, 2006) ..................................................18 McAllen State Bank v. Linbeck Construction Corp., 695 S.W.2d 10 (Tex.App.–Corpus Christi 1985, writ ref'd n.r.e.) .........................................13 v 084891/000006 375 - 1842976v1 Mississippi Employment Security Commission v. PDN, Inc., 586 So.2d 838 (Miss. 1991) ............................................................................................18 Rosenberg v. Collins, 624 F.2d 659 (5th Cir.1980) .................................................13 Speier v. Webster College, 616 S.W.2d 617 (Tex. 1981) ........................................13 Trucks, Inc. v. Tamez, 206 S.W.3d 572 (Tex. 2006) ...............................................10 Statutes/Regulations/Other 20 C.F.R., Section 639.3 ..........................................................................................34 40 Tex. Admin. Code, Section 815.134 ............................................ 7, 11, 20, 21, 40 40 Tex. Admin. Code, Section 821.5 .......................................................................33 Rev. Rul. 87-41, 1987-1 C.B. 296 ...........................................................................33 Revenue Act of 1978, Section 530 ..........................................................................36 Small Business Job Protection Act of 1996, Section 1122......................................36 Tex. Labor Code, Section 201.029 ............................................................................6 Tex. Labor Code, Section 212.021 ............................................................................5 Tex. Labor Code, Section 213.073 ........................................................................... 5 Tex. R. Civ. P., Rule 166a ................................................................................. 16-17 Tex. R. Evid. 1006 .................................................................................. 11-13, 16-17 TUCA Section 201.041 ..................................................................................... 15, 18 vi 084891/000006 375 - 1842976v1 Statement of the Case Nature of the Case: Worker classification dispute under the Texas Labor Code (the Texas Unemployment Compensation Act). Trial Court: The Honorable Stephen Yelenosky, 53rd Judicial District Court, Harris County, Texas Course of Proceedings: Appellant Tochril Incorporated (“Health Force”) filed a petition in district court challenging the administrative decision of the Texas Workforce Commission (the “TWC”) classifying certain workers offered work opportunities by Health Force as employees (C8). Health Force sought a declaratory judgment that the workers were independent contractors and made a claim for reimbursement of the unemployment taxes it paid to the TWC under protest (C8). The TWC answered the suit (C3) and filed a motion for summary judgment in response to Health Force’s claims (C41). Health Force responded to the motion for summary judgment and attached supporting evidence for its claims to the response (C503). The parties exchanged supplemental summary judgment statements (C931 and C1226). The TWC filed objections and motion to strike Health Force’s summary judgment evidence (C1394). Health Force filed a response to the TWC’s objections and motion to strike its summary judgment evidence (C1417). Trial Court’s Disposition: The trial court sustained most of the TWC’s objections and struck most of Health Force’s summary judgment evidence (C1505-1517) and granted summary judgment in favor of the TWC (C1518). vii 084891/000006 375 - 1842976v1 Statement Regarding Oral Argument Appellant believes oral argument will assist the Court in dealing with the issues of law raised in this appeal, as well as clarify any factual or procedural questions that arise from this record. Statement Regarding Record References and Hyperlinks The Clerk’s Record in this case is one volume labeled Original Clerk’s Record. Each page is numbered sequentially. References to the Original Clerk’s Record will be shown by “C page number.” Record references to items in the Appendix are hyperlinked (shown by blue underlining), as are two non-Westlaw authorities included in the Appendix. viii 084891/000006 375 - 1842976v1 Issues Presented Issue 1 Health Force included a lenghtly summary of evidence to its response to the motion for summary judgment pursuant to Texas Rule of Evidence 1006, which allows for presentation of summary evidence when the underlying evidence is too voluminous.1 The underlying sumarized evidence supporting Health Force’s summary judgment response was also attached to the response. The TWC filed a motion to strike this summary judgment evidence. The trial court sustained the TWC’s objections and struck the evidence. Did the trial court err by excluding Health Force’s summary evidence? Issue 2 Did the trial court err in finding the twenty worker classification factors weighed in favor of the TWC? Issue 3 In a 2007 Memorandum of Understanding, the Internal Revenue Service (the “IRS”), Department of Labor (the “DOL”) and a number of state workforce agencies (including Texas) agreed to work towards achieving consistent worker classification determinations across state and federal agencies. Both the IRS and DOL conducted worker classification audits of the workers offered work opportunities by Health Force and determined the nurses and other professional healthcare providers were independent contractors. In this case, the trial court granted summary judgment for the Texas Workforce Commission finding these same workers were employees of Health Force. Did the trial court erroneously grant summary judgment for the TWC on the issue of worker classification? 1 Eight witnesses were deposed in the underlying case and 5 witnesses testified in the Rule 13 administrative hearing. ix 084891/000006 375 - 1842976v1 Overview This dispute is an appeal of a Texas Workforce Commission (the “TWC”) worker classification decision. The issue arose when the TWC conducted an audit of Tochril Incorporated (“Health Force”)’s records and business medel to determine if workers offered work opportunities by Health Force were “employees” under the Texas Labor Code. The TWC found the workers to be “employees” and assessed unemployment taxes against Health Force for the workers. Health Force paid the taxes under protest and challenged the TWC’s finding and tax assessment in trial court. The TWC filed a motion for summary judgment which the trial court granted. Health Force appealed because the trial court (i) improperly excluded evidence, (ii) ignored the abundant fact issues raised by Health Force in the summary judgment proceeding and (iii) ignored and acted inconsistently with findings made by two federal agencies regarding the same workers. Statement of Facts 1. Background of the Parties A. Tochril Incorporated (“Health Force”) Health Force is a multi-faceted provider of healthcare related services on a state wide basis and, on a relatively small scale, a provider of ancillary 1 084891/000006 375 - 1842976v1 medical/nursing staff relief for its health care and other business clients. Health Force has always maintained unemployment compensation coverage for each of its acknowledged employees. Health Force is comprised of several business segments within the healthcare industry, including the following: (1) Health Force Comprehensive Outpatient Rehabilitation Facility emphasizing unique pediatric rehabilitation services (approximately 20 employees), (2) Health Force Home Health Care (approximately 40 employees) and (3) Health Force Medical Staff Relief (approximately 10 employees). For its medical/nursing staff relief business component, Health Force does business as “Health Force Medical Staff Relief” operating as a referral or placement agency for this purpose. Through an independent contractor relationship, Health Force Medical Staff Relief provides healthcare professionals, specifically Registered Nurses, Licensed Vocational Nurses and Certified Nurse Assistants with opportunities for contract work at healthcare institutions, including hospitals and health care facilities. (C8-C9, C29- 30). B. Texas Workforce Commission The TWC is a state agency established to operate an integrated workforce development system in Texas through the consolidation of job training, employment and employment-related educational programs and to administer the unemployment compensation insurance program in Texas. (C9). 2 084891/000006 375 - 1842976v1 2. Texas Workforce Commission Investigation and Decision On October 9, 2008, at the request of the TWC, Health Force submitted (1) a TWC Form C-1 (Amended Status Report) and (2) a TWC Form C-102 (Pre-Audit Questionnaire). (C809-C818). Three weeks later, on October 31, 2008, TWC auditor Mary Zerda concluded her “investigation” and the TWC issued its letter setting forth the results of the purported investigation finding the workers were employees. (C926). In her February 23, 2010 deposition, Ms. Zerda concedes she interviewed only three (3) workers after she made her October 31, 2008 determination in preparation for the February 19-20, 2009 Rule 13 administrative hearing. (C570). The following additional events occurred prior to filing suit in the district court: On October 14 and 16, 2008, the TWC issued its TWC Form C-7 Wage List Adjustment Schedules for the period April 1, 2007 through September 30, 2008) (6 quarters). (C819-C913). On October 16, 2008, the TWC issued its TWC Form C-5 Adjustment Reports for the period October 1, 2005 through September 30, 2008) (12 quarters). (C914-C925). On November 14, 2008, the TWC issued its Employer’s Default Notice stating Health Force owed a total of $25,677.99 of which approximately $20,291.06 was assessed taxes and approximately $5,386.93 was interest assessed on the taxes. (C927). On November 25, 2008, Health Force requested an administrative Rule 13 hearing regarding the miscalculated and incorrect assessment of unemployment taxes for its independent contractors. (C928-C929). 3 084891/000006 375 - 1842976v1 On December 3, 2008, the TWC issued its administrative determination that unemployment taxes were owed for Health Force's independent contractors. (C930). On December 15, 2008, the TWC issued its Statement of Employer Account insisting the assessment of unemployment taxes for Health Force’s contractors was due and owing. (C546). On December 29, 2008, Health Force paid under protest, duress and business compulsion, the miscalculated and incorrect amounts for taxes (including interest) for 12 calendar quarters from October 1, 2005 through September 30, 2008. Health Force simultaneously requested a refund of all such tax payments and interest payments it made. (C547- C548). Health Force appealed to the TWC for a refund, but the refund request was denied through the TWC’s May 13, 2009 decision. (C928- C929 and C552-C563). On May 13, 2009, the TWC Commissioners issued their decision making an administrative finding approximately 600 workers for whom Health Force was compelled to pay taxes for 12 calendar quarters from October 1, 2005 through September 30, 2008 were employees and not independent contractors. (C552- C563). The May 13, 2009 decision also denied Health Force’s request for a refund and adjustment of miscalculated taxes Health Force was compelled to pay by stating “[Health Force, Inc.] has paid outstanding taxes due on all workers, including Debra Franklin, and asks for a refund of the taxes paid” and “[u]nemployment insurance contributions, plus penalties accrued and incurred, are payable to the Texas Workforce Commission.” (C555 and C562). 4 084891/000006 375 - 1842976v1 The May 13, 2009 decision was a split decision, with TWC Chairman Tom Pauken issuing a dissent in favor of independent contractor status stating: I dissent from the decision of the majority in this case. The nurses in question are not subject to the direction and control of the company, may determine their own shifts, and pay for their own professional licenses. They are already experienced professionals and do not require training. Further, it is important to note that any supervision of these professionals by doctors or charge nurses is more for the appearance under specific state practice laws than a reflection of practical reality. Finally, the company's role was that of a broker of services, rather than as an employer of these licensed professionals. Given that other states have found that similar professionals are not employed by such services, and that there is no published Texas court decision on this issue, I believe the Tax Department position is without clear legal basis. Under these circumstances, I do not believe that the registered nurses, licensed vocational nurses, and the certified assistants are in the company’s employment. For the above reasons, I respectfully dissent from the decision of my fellow Commissioners. (C563). Health Force subsequently challenged the decision of the TWC in an Austin district court. (C8-C40). 3. Procedural History A. Suit is filed On November 12, 2010, Plaintiff Health Force filed its First Amended Original Petition. (C8). The petition alleged a suit under (a) Section 213.073 of the Texas Labor Code to recover a refund of miscalculated taxes Health Force was compelled to pay and (b) Section 212.021 of the Texas Labor Code to obtain 5 084891/000006 375 - 1842976v1 declaratory relief (i) for violation of the United States and Texas Constitutions and the Texas Administrative Code, and (ii) to require the TWC to properly classify Health Force’s independent contractors and refrain from assessing miscalculated taxes. The TWC answered the suit (C3). B. The motion for summary judgment The TWC filed a Motion for Summary Judgment on October 25, 2013. (C41). It sought to dismiss Health Force’s claims and award judgment for the TWC. The TWC alleged three grounds for why Health Force’s claims should be dismissed: (i) Health Force is a “temporary help firm” required to pay unemployment taxes under Section 201.029 of the Texas Labor Code, (ii) Health Force cannot overcome the presumption that the workers are employees under the Texas Labor Code, and (iii) Health Force’s common law claims are redundant of its statutory causes of action and such common law claims are barred by sovereign immunity. On December 12, 2013, Health Force responded to the motion for summary judgment. (C503). In conjunction with its response, Health Force attached worker declarations, deposition testimony, IRS documents, the TWC hearing transcript and other evidence to demonstrate the TWC did not meet its burden of showing that there was no genuine issue of material fact. The body of the response also contained a summary chart of the TWC Rule 13 hearing where, pursuant to Texas 6 084891/000006 375 - 1842976v1 Rule of Evidence 1006, Health Force summarized the testimony of a Health Force employees Holly Alonzo and Lita Pappillion. The parties exchanged supplemental briefing in late July and early August of 2015. (C931 and C1226). In Health Force’s supplemental response, it attached additional worker testimony and another chart summarizing the testimony of five additional workers deposed in the case after the initial motion for summary and response were filed. (C1226). Health Force relied on this testimony to demonstrate material fact issues existed under application of the Twenty Factor Test mandated under Section 815.134 of the Texas Administrative Code. C. Objections to Health Force’s summary judgment evidence The TWC filed objections to and motion to strike Health Force’s summary judgment evidence on August 18, 2015. (C1395). The objections focused on striking the summary chart used by Health Force in its response and striking the testimony of Holly Alonzo, Chief Operating Officer of Health Force and Lita Pappillion, President of Health Force, on various grounds including a failure to include detailed citations to their testimony. Other objections included striking alleged conclusory statements in the twenty worker affidavits attached to Health Force’s response and striking portions of counsel for Health Force, Michael Seale’s affidavit. Health Force responded to the objections on August 19, 2015. (C1417). 7 084891/000006 375 - 1842976v1 D. Rulings on evidence and motion for summary judgment The trial court ruled of the objections in late August 2015. (C1505). In its ruling, the trial court struck the summary charts, the testimony of Alonzo and Pappillion, portions of the 20 declarations, and portions of Michael Seale’s affidavit. Without such evidence, the court also ruled on the TWC’s motion for summary judgement, granting the motion and dismissing Health Force’s suit. (C1518). This appeal followed. (C1519). Summary of the Argument The decision of the trial court should be reversed because the trial court (i) improperly excluded evidence, (ii) ignored the abundant fact issues raised by Health Force in the summary judgment proceeding and (iii) ignored and acted inconsistently with findings made by two federal agencies regarding the same workers. Texas law mandates summary judgment should only be granted if there is no genuine issue of material fact. When reviewing a determination of an administrative agency, the court should provide a certain level of deference to the agency, however, this deference is not absolute. If it was, an administrative agency would allow an agency to function not only as judge, but jury and executioner. Health Force’s response to the TWC’s motion for summary judgment contains a chart summarizing the testimony of the President and Chief Operating 8 084891/000006 375 - 1842976v1 Officer of Health Force. The chart walked the trial court through the testimony of these executives at a TWC hearing and applied the executives’ testimony to the Twenty Factor analysis required to be examined in a worker classification case. The TWC objected to the evidence on numerous grounds, but essentially because the summary chart did not contain proper citations to record testimony. The trial court sustained the objections. The Texas Rules of Civil Procedure only require a nonmovant to point the evidence and the Texas Rules of Evidence allow for the summary of testimony. Therefore, this evidence should have been considered and the TWC’s motion for summary judgment should have been denied. Even if this court determines that the summary chart evidence should be excluded, Health Force presented further evidence in its supplemental response after the deposition of five additional workers. This evidence was not struck by the trial court. This worker testimony on each of the Twenty Factors alone demonstrates that there is a genuine issue of material fact. Apart from the testimonial evidence presented by Health Force, Health Force attached audit investigation findings from two federal agencies, the IRS and DOL. Both of these agencies found the workers to be independent contractors. Based upon a Memorandum of Understanding between Texas, the IRS and DOL which notes the importance of consistency in tax determinations, the trial court should have made a closer examination at the TWC’s decision (made after a three 9 084891/000006 375 - 1842976v1 week investigation) that is inconsistent with the IRS and DOL investigations collectively lasting 49 months. The failure to do so is a failure to recognize genuine issues of material fact. For these reasons, the TWC’s motion for summary judgment should have been denied. Argument 1. Standard of Review Summary judgments are reviewed de novo and this Court must consider all the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not.2 The evidence raises a genuine issue of fact if reasonable and fair-minded jurors could differ in their conclusions in light of all of the summary judgment evidence.3 In a traditional motion for summary judgment, if the movant’s motion and summary judgment evidence factually establish its right to judgment as a matter of law, the burden shifts to the nonmovant to raise a genuine, material fact issue sufficient to defeat summary 2 Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006). 3 Goodyear Tire & Rubber Co. v Mayes, 236 S.W.3d 754, 755 (Tex.2007). 10 084891/000006 375 - 1842976v1 judgment.4 The non-movant “is not required to marshal [his] proof; [his] response need only point out evidence that raises a fact issue on the challenged elements.”5 2. The Trial Court Erred in Excluding Health Force’s Summary Chart and by Ignoring the Underlying Evidence. In both its response to the TWC’s motion for summary judgment and its supplemental brief, Health Force incorporated charts summarizing the testimony of 13 witnesses under Texas Rule of Evidence 1006. (C503 and C1226). The charts demonstrate the testimony of these witnesses is consistent with an independent contractor classification when compared to the twenty worker classification factors found in Section 815.134 of the Texas Administrative Code (“Twenty Factor Test”). The TWC and the trial court were required to review the Twenty Factor Test as part of their inquiry into the relationship between Health Force and its worker. The TWC did not dispute the accuracy of Health Force’s summaries. Instead, the TWC filed an objection to the use of the first summary chart arguing the following: 4 Flutobo, Inc. v. Holloway, 419 S.W.3d 622, 629-30 (Tex. App.—Houston [14th Dist.] 2013, pet. denied). 5 Tex. R. Civ. P. 166a(i) cmt.1. 11 084891/000006 375 - 1842976v1 Statements attributed to Alonzo and Pappillion do not reference summary judgment evidence. Objections to summary of testimony under Tex. R. Evid. 1006. Alonzo and Pappillion have not provided proper witness statements. Alonzo and Pappillion have not demonstrated that they have personal knowledge of relevant facts. (C1394). The trial court sustained the TWC’s objections and struck the summary evidence (C1505). Texas Rule of Evidence 1006 allows for the use of summary evidence (even a summary of testimony), the trial court erred in excluding this vital evidence. A. Use of Summary Evidence for Alonzo and Pappillion Testimony was Proper in this Case. Texas Rule of Evidence 1006 states: The proponent may use a summary, chart, or calculation to prove the content of voluminous writings, recordings, or photographs that cannot be conveniently examined in court. The proponent must make the originals or duplicates available for examination or copying, or both, by other parties at a reasonable time and place. And the court may order the proponent to produce them in court. 12 084891/000006 375 - 1842976v1 Texas courts recognize the value in allowing the use of summary evidence especially when the underlying records supporting the summary are voluminous.6 Many courts have found charts and diagrams that summarize, or perhaps emphasize, testimony are admissible if the underlying information is admissible.7 As illustrated above, the main requirement for a summary chart under Texas Rule of Evidence 1006 is that the underlying records must be available for inspection by the opposing counsel. The court may require the party presenting the summary to produce all of the underlying records.8 (In this case, Health Force attached the summarized testimony the TWC already had it in its possession long before the summary judgment hearing.) 6 See Speier v. Webster College, 616 S.W.2d 617, 618–19 (Tex.1981) (charts and diagrams that summarize testimony are admissible if the underlying information has been admitted into evidence); Ford Motor Company v. Auto Supply Company, Inc., 661 F.2d 1171, 1176 (8th Cir.1981) (trial court properly admitted into evidence product line profitability analyses made annually and compiled from numerous “spread sheets”); Rosenberg v. Collins, 624 F.2d 659, 665 (5th Cir.1980) (trial court properly admitted a summary of the commodity firm's yearly trading activities); C.M. Asfahl Agency v. Tensor, Inc., 135 S.W.3d 768, 800 (Tex. App.–Houston [1 Dist.] 2004, no pet.) (one page summary of eighty-seven pages of supporting data was admissible if it upheld the standards of TRE 1006 and was prepared by a qualified individual); c.f. McAllen State Bank v. Linbeck Construction Corp., 695 S.W.2d 10, 16 (Tex.App.–Corpus Christi 1985, writ ref'd n.r.e.) (trial court admitted into evidence two computer printout summary breakdowns, each a summary of underlying labor and material records; the court held that the printouts were entitled to be treated as business records, a not just as summaries of business records). 7 See Speier v. Webster College, 616 S.W.2d 617, 618–19 (Tex.1981); Cooper Petroleum Co. v. LaGloria Oil & Gas Co., 436 S.W.2d 889, 891 (Tex.1969); Champlin Oil & Ref. Co. v. Chastain, 403 S.W.2d 376, 389 (Tex.1965). 8 See id. 13 084891/000006 375 - 1842976v1 To defeat a motion for summary judgment, the non-movant “is not required to marshal [his] proof; [his] response need only point out evidence that raises a fact issue on the challenged elements.”9 Attaching an entire document or deposition to a response to a motion for summary judgment and referencing them only generally does not relieve the party of the need to point out to the trial court where in the documents the issues set forth in the response are raised.10 The requirement to point out portions of evidence prevents parties from casually referring to voluminous evidence (e.g. see attached deposition testimony) and creates a level of efficiency for the court to make its decision. In this case, Health Force’s response went well beyond a casual reference to hearing testimony as the TWC implies. Health Force prepared two summary charts to assist the trial court in examining the Twenty Factor Test.11 The first chart contained both direct quotations and summary of the testimony of Health Force’s President and Chief Operating Officer from the February 19, 2009 administrative hearing before the TWC. Health Force also attached the hearing testimony to its response in order to make the document available to the TWC. 9 Tex. R. Civ. P. 166a(i) cmt.1. 10 Guevara v. Lackner, 447 S.W.3d 566, 572 (Tex. App.-Corpus Christi 2014), reh’g overruled (Dec. 11, 2014). 11 See Appendix 1 and 2. 14 084891/000006 375 - 1842976v1 The TWC’s objection focused on the fact that Health Force did not provide direct citations to the pages and lines where the quoted and other summarized testimony is found in the attached transcripts.12 Texas Rule of Civil Procedure 166a(i) at its comment 1 simply requires a party point to the testimony. This rule was not intended to provide a party with the ability to escape the substance of testimony on a mere technicality. Health Force’s summary chart meets the spirit of Texas Rule of Civil Procedure 166a and the trial court erred in excluding it. The chart provided in Health Force’s supplemental response did contain direct citations to the testimony of five worker witnesses.13 While this chart was challenged in the TWC’s objections and motion to strike, it appears the trial court ignored this evidence. As will be discussed in Section 3 below, both of the charts overwhelmingly demonstrate a genuine issue of material fact existed with regard to the issue of workers classification on each of the Twenty Factors.14 12 The TWC does not contest any transcript quotation or point to any transcript quotation to be an inaccurate quotation. The transcripts are in the possession of the TWC and are searchable. 13 See Appendix 2. 14 Application of the Twenty Factors to a particular worker or class of workers is intended to determine whether such worker (or class of similarly situated workers) “has been and will continue to be free from control or direction under the contract and in fact” and therefore not an employee under Section 201.041 of the Texas Unemployment Compensation Act. 15 084891/000006 375 - 1842976v1 B. Alonzo and Pappillion Provided Proper Witness Statements. The witness statements of Alonzo and Pappillion are proper evidence and are authenticated by the Declaration of Juliann H. Panagos. (C737-C739). As stated, Health Force provided a summary chart in its response pursuant to Texas Rule of Evidence 1006. The entire transcribed record of the February 19, 2009 hearing was also attached to the response along with the court reporter’s certificate. Juliann H. Panagos authenticated these records by making the following statement in her affidavit attached to the response: 7. I attended the February 19, 2009 TWC Rule 13 hearing before Hearing Officer Thomas Mann. A copy of the February 19-20, 2009 hearing transcript (the “Transcript”) is attached to this Declaration as Exhibit D(S). I prepared a summary of (a) the hearing testimony given by witnesses [Pappillion, Alonzo and TWC auditor Mary Zerda] on the Twenty Factors and (b) the TWC discovery responses regarding the Twenty Factors. In accordance with Rule 1006 of the Texas Rules of Evidence, this summary is necessary because the “voluminous underlying materials” (the Transcript) cannot conveniently be examined by the Court. A copy of the summary is attached to this Declaration as Exhibit D(6). A copy of the TWC's March 18, 2010 Letter Responses to Health Force’s Discovery Requests is attached to this Declaration as Exhibit D(7). In addition, Health Force complied with Texas Rule of Civil Procedure 166a(d) providing: Appendices, References and Other Use of Discovery Not Otherwise on File. Discovery products not on file with the clerk may be used as summary judgment evidence if copies of the material, appendices containing the evidence, or a notice containing specific references to the discovery or specific references to other instruments, are filed and served on all 16 084891/000006 375 - 1842976v1 parties together with a statement of intent to use the specified discovery as summary judgment proofs: (i) at least twenty-one days before the hearing if such proofs are to be used to support the summary judgment; or (ii) at least seven days before the hearing if such proofs are to be used to oppose the summary judgment. The TWC did not allege that the first summary chart was inaccurate. The TWC is merely trying to create a technicality in order to exclude critical evidence that creates clear fact issues in this case. Because the spirit of both Texas Rule of Civil Procedure 166a and Texas Rule of Evidence 1006 were met, the trial court erred in excluding the summary chart and testimony of Alonzo and Pappillion. C. Alonzo and Pappillion had Personal Knowledge of Relevant Facts. At the February 19, 2009 Rule 13 hearing, both Alonzo and Pappillion were placed under oath and testified to their personal knowledge, experience and operations of Health Force.15 In sum, for the above described reasons, the testimony and summary chart containing the testimony of Alonzo and Pappillion were improperly excluded in this case. Such evidence was important evidence to Health Force’s claims. The trial court erred in excluding this evidence and such error caused the rendition of an incorrect judgment in favor of the TWC. 15 See C593-C643 (Pappillion Rule 13 hearing transcript pp. 107-12 et seq.; See Pappillion Rule 13 hearing transcript pp. 45-47 et seq.). 17 084891/000006 375 - 1842976v1 3. The Twenty Factor Test Demonstrates Genuine Issues of Material Fact As stated above, summary judgment should not be granted if there is a genuine issue of material fact. Through its various responses and associated evidence, Health Force demonstrated that genuine issues of material fact existed under each of the Twenty Factors with regard to the workers offered work opportunities by Health Force. A. Prior Precedent Indicates the Workers are Independent Contractors Courts finding hospital workers to be independent contractors is not without precedent. There are at least seven states that have addressed cases involving nurse workers, unemployment tax and the application of the “control or direction” standard under virtually identical statutes to the TUCA Section 201.041.16 In most or all circumstances, the judicial courts overturned the state unemployment commission’s assessment of unemployment tax against the referral/placement agency and classification of the workers as employees. 16 HRP of Tennessee, Inc. d/b/a Hospital Resources Personnel v. State of Tennessee, Department of Employment Security, No. E2005-01176-COA-R3-CV (Tenn. June 28, 2006); Mississippi Employment Security Commission v. PDN, Inc., 586 So.2d 838 (Miss. 1991); Health Care Associates, Inc. v. Oklahoma Employment Security Commission, 26 P.3d 112 (Okla. 2001); Contract Management Services, Inc. of Texas v. State of Louisiana, 745 So.2d. 194 (La. Ct. App. 1999); Avchen v. Kiddo, 200 Cal. App.3d 532 (Cal. 1988); Cascade Nursing v. Employment Security Department, 856 P.2d 421 (Wash. 1993). 18 084891/000006 375 - 1842976v1 Indeed, three of the workers the TWC determined were employees and for whom Health Force paid associated taxes under protest had been previously determined to be independent contractors by the TWC: On January 14, 2009, the TWC issued its Appeal Tribunal Decision in Appeal No. 10897280102 regarding worker Debra Franklin. After an evidentiary hearing, the TWC found Ms. Franklin was an independent contractor and thus, not entitled to unemployment benefits. (C575- C580). On September 11, 2009, the TWC issued its Appeal Tribunal Decision in Appeal No. 1122881-1-1 regarding worker Lucy Reyna. After an evidentiary hearing, the TWC found Ms. Reyna was an independent contractor and thus, not entitled to unemployment benefits. (C582- C585). On October 29, 2009, the TWC issued its Appeal Tribunal Decision in Appeal No. 1206651-1-1 involving worker Maria Guzman. After an evidentiary hearing, the TWC found Ms. Guzman was an independent contractor and thus, not entitled to unemployment benefits. (C587- C589). (C513-C514). The TWC collected unemployment taxes from Health Force for these three nurses. However, when the nurses filed for unemployment benefits, after three evidentiary administrative hearings, the TWC found the nurses to be independent contractors. These three workers are identically situated to the approximately 600 hospital staff workers that were found to be “employees” by the TWC on October 31, 2009. 19 084891/000006 375 - 1842976v1 B. Review of Health Force’s Evidence Demonstrates the Workers were Independent Contractors The trial court was imbued with the power to review the TWC’s decision to classify all approximately 600 workers as “employees.” As stated by the Fifth Circuit Court of Appeals regarding a Texas state agency’s interpretation of its own statute: …granting deference to [the agency]’s interpretation…would leave no role for the courts—taken to its logical conclusion, it could effectively insulate agency action from judicial review. It is not within the province of the Executive Branch to determine the final meaning of a vague document…any more than it would be to interpret the final meaning of a contract entered into by the Executive Branch…[and] would allow agencies to punish “wrongdoers” without first giving fair notice of the wrong to be avoided. *** Affording deference to agency interpretations…would allow the agency to function not only as judge, jury, and executioner...17 In all instances, the TWC must satisfy the Twenty Factor Test found in Section 815.134 of the Texas Administrative Code. There is no presumption of employment, rebuttable or otherwise, under TUCA or Texas case law upon payment alone to a worker.18 In all instances, the TWC must satisfy the Twenty Factor Test and the trial court must verify the TWC correct applied the Twenty Factor Test. 17 Elgin Nursing & Rehabilitation Center v. U.S. Department of Human Health Services, 718 F.3d 488 (5th Cir. 2013) found at http://www.ca5.uscourts.gov/opinions/pub/12/12-60086- CV0.wdp.pdf. 18 If there was such a presumption, simply paying an individual to mow a lawn would make the worker an employee of the homeowner. 20 084891/000006 375 - 1842976v1 It appears, however, when granting summary judgment, the trial court overlooked or discounted many of the genuine fact issues raised by Health Force’s evidence. For example, the second summary chart above contains testimony from five workers.19 This testimony creates genuine issues of material facts, since many of the factors point to an independent contractor relationship. In the testimony of Kay Strahan alone (C1251-C1264 and C1339-C1366), the following factors favored a finding of independent contractor relationship: Factor Kay Strahan 40 TAC Section 815.134 Testimony 1. Instructions: LVNs are subcontractors. They An Employee receives instructions work when they want, if they want, about when, where and how the and where they want.20 work is performed. An Independent Contractor does the job his or her own way with few, if any, instructions as to the details or methods of the work. 1. Instructions: An employee must comply with instructions about when, where, and how to work. Even if no instructions are given, the control factor is present if the employer has the right to give instructions. 2. Training: Doesn’t recall any training provided by Health Force.21 19 See Appendix 1. 20 See Appendix 2 (Kay Strahan Testimony, Tr. p. 69). 21 084891/000006 375 - 1842976v1 Factor Kay Strahan 40 TAC Section 815.134 Testimony Employees are often trained by a more experienced Employee or are required to attend meetings or take training courses. An Independent Contractor uses his or her own methods and thus need not receive training from the purchaser of those services. 2. Training: An employee is trained to perform services in a particular manner, independent contractors ordinarily use their own methods and receive no training from the purchasers of their services. 3. Integration: Did not spend much time at the Services of an Employee are Health Force office. Mainly, would usually merged into the firm’s stop by to drop off time sheets or overall operation; the firm’s success pick up a check.22 depends on those Employee services. An Independent Contractor’s services are usually separate from the client’s business and are not integrated or merged into it. 3. Integration: An employee’s services are integrated into the 21 See Appendix 2 (Kay Strahan Testimony, Tr. p. 97). 22 See Appendix 2 (Kay Strahan Testimony, Tr. pp. 63-65). 22 084891/000006 375 - 1842976v1 Factor Kay Strahan 40 TAC Section 815.134 Testimony business operations because the services are important to the success or continuation of the business. This shows that the employee is subject to direction and control. Integration of worker’s services in the business operation of Health Force generally indicated that the worker is subject to control or direction. The corporation Health Force is principally engaged in a nurse placement business. 4. Services Rendered Personally: An Employee’s services must be rendered personally; Employees do not hire their own substitutes or delegate work to them. A true Independent Contractor is able to assign another to do the job in his or her place and need not perform services personally. 4. Services Rendered Personally: An employee renders services personally. This shows that the employer is interested in the methods as well as the results. 5. Hiring, Supervising & Paying Helpers: An Employee may act as a foreman for the employer but, if so, helpers are paid with the employer’s funds. Independent Contractors select, hire, pay and supervise any helpers used and are responsible for the results of the helpers’ labor. 23 084891/000006 375 - 1842976v1 Factor Kay Strahan 40 TAC Section 815.134 Testimony 5. Hiring Assistants: An employee works for an employer who hires, supervises, and pays assistants. An independent contractor hires, supervises, and pays assistants under a contract that requires him/her to provide materials and labor and to be responsible only for the results. Nurses cannot hire assistants to do patient care for them. 6. Continuing Relationship: Could have worked for other An Employee often continues to placement companies or hospitals.23 work for the same employer month after month or year after year. Declined employment opportunities An Independent Contractor is at hospitals because he would lose usually hired to do one job of the independence he had at Health limited or indefinite duration and Force.24 has no expectation of continuing work. 6. Continuing Relationship: An employee has a continuing relationship with an employer. A continuing relationship many exist where work is performed at frequently recurring although irregular intervals. 23 See Appendix 2 (Kay Strahan Testimony, Tr. pp. 77-78). 24 See Appendix 2 (Kay Strahan Testimony, Tr. pp. 77-78). 24 084891/000006 375 - 1842976v1 Factor Kay Strahan 40 TAC Section 815.134 Testimony 7. Set Hours of Work: “[I] provide my own schedule. They An Employee may work “on call” [Health Force] do not provide a or during hours and days as set by schedule for me.”25 the employer. A true Independent Contractor is the master of his or her own time and works the days and hours he or she chooses. 7. Set Hours of Work: An employee has set hours or work established by an employer. An independent contractor is the master of his or her own time. 8. Full Time Required: LVNs are subcontractors. They An Employee ordinarily devotes work when they want, if they want, full-time service to the employer, or and where they want.26 the employer may have a priority on the employee’s time. Could have worked for other A true Independent Contractor placement companies or hospitals.27 cannot be required to devote full- time service to one firm exclusively. 8. Full Time Work: An employee normally works full time for an employer. An independent contractor can work when and for whom he or she chooses. Nurses are worker 30, 40, and even 60 hours a week this constitutes full 25 See Appendix 2 (Kay Strahan Testimony, Tr. pp. 38, 43-44). 26 See Appendix 2 (Kay Strahan Testimony, Tr. p. 69). 27 See Appendix 2 (Kay Strahan Testimony, Tr. pp. 77-78). 25 084891/000006 375 - 1842976v1 Factor Kay Strahan 40 TAC Section 815.134 Testimony time. 9. Location where services LVNs are subcontractors. They performed. work when they want, if they want, Employment is indicated if the and where they want.28 employer has the right to mandate where services are performed. Independent Contractors ordinarily work where they choose. The workplace may be away from the client’s premises. 9. Work Done on Premises: An employee works on the premises of an employer, or works on a route or at a location designated by an employer. 10. Order or Sequence Set: Health Force does not direct LVNs An Employee performs services in how to do their job.29 the order or sequence set by the employer. This shows control by the employer. A true Independent Contractor is concerned only with the finished product and sets his or her own order or sequence of work. 10. Order or Sequence Set: Employee must perform services in the order or sequence set by an employer. This shows that the employee is subject to direction and control. Nurses are not permitted to 28 See Appendix 2 (Kay Strahan Testimony, Tr. p. 69). 29 See Appendix 2 (Kay Strahan Testimony, Tr. pp. 131-132). 26 084891/000006 375 - 1842976v1 Factor Kay Strahan 40 TAC Section 815.134 Testimony follow his/her own pattern of work but rather must follow the established routines/schedules of the facilities. 11. Oral or Written Reports: An Employee may be required to submit regular oral or written reports about the work in progress. An Independent Contractor is usually not required to submit regular oral or written reports about the work in progress. 11. Reports: Employee submits reports to an employer. This shows that the employee must account to the employer for his or her actions. 12. Payment by the Hour, Week or Hospitals pay Tochril and Tochril Month: pays the LVNs after taking out a An Employee is typically paid by referral fee.30 the employer in regular amounts at stated intervals, such as by the hour or week. An Independent Contractor is normally paid by the job either a negotiated flat rate or upon submission of a bid. 12. Payments: Employees are paid by the hour, week or month. Nurses are paid through Health Force. 13. Payment of Business & Travel Health Force does not pay for CPR 30 See Appendix 2 (Kay Strahan Testimony, Tr. p. 37). 27 084891/000006 375 - 1842976v1 Factor Kay Strahan 40 TAC Section 815.134 Testimony Expenses: and LVN licenses.31 An Employee’s business and travel expenses are either paid directly or Provides his own transportation. Not reimbursed by the employer. reimbursed for any business Independent Contractors expenses by Health Force.32 normally pay all of their own business and travel expenses without reimbursement. 13. Expenses: An employee’s business and travel expenses are paid by an employer. This shows that the employee is subject to regulation and control. 14. Furnishing Tools & Equipment: Provides his own transportation. Not Employees are furnished all reimbursed for any business necessary tools, materials and expenses by Health Force.33 equipment by their employer. An Independent Contractor ordinarily provides all of the tools and equipment necessary to complete the job. 14. Tools and Materials: An employee is furnished significant tools, materials, and other equipment by an employer. 15. Significant Investment: Invests in business by buying An Employee generally has little or uniforms, cellphone, blood pressure no investment in the business. cuff, stethoscope, and shoes.34 31 See Appendix 2 (Kay Strahan Testimony, Tr. p. 97). 32 See Appendix 2 (Kay Strahan Testimony, Tr. p. 54). 33 See Appendix 2 (Kay Strahan Testimony, Tr. p. 54). 34 See Appendix 2 (Kay Strahan Testimony, Tr. pp. 56-58). 28 084891/000006 375 - 1842976v1 Factor Kay Strahan 40 TAC Section 815.134 Testimony Instead, an Employee is economically dependent on the Provides own transportation to employer. assignments.35 True Independent Contractors usually have a substantial financial investment in their independent business. 15. Investment: An independent contractor has a significant investment in the facilities he/she uses in performing services for someone else. 16. Realize Profit or Loss: Could lose money if hospital An Employee does not ordinarily cancels her shift.36 realize a profit or loss in the business. Rather, Employees are paid for services rendered. An Independent Contractor can either realize a profit or suffer a loss depending on the management of expenses and revenues. 16. Profit or Loss: An independent contractor can make a profit or suffer a loss. 17. Working For More Than One LVNs are subcontractors. They Firm At A Time: work when they want, if they want, An Employee ordinarily works for and where they want.37 one employer at a time and may be prohibited from joining a Could have worked for other competitor. placement companies or hospitals.38 35 See Appendix 2 (Kay Strahan Testimony, Tr. p. 54). 36 See Appendix 2 (Kay Strahan Testimony, Tr. pp. 94-95). 37 See Appendix 2 (Kay Strahan Testimony, Tr. p. 69). 29 084891/000006 375 - 1842976v1 Factor Kay Strahan 40 TAC Section 815.134 Testimony An Independent Contractor often works for more than one client or firm at the same time and is not subject to a non-competition rule. 17. Works For More Than One Person or Firm: An independent contractor gives his/her services to two or more unrelated persons or firms at the same time. 18. Making Service Available to No advertising budget. He will the Public: sometimes buy gifts for coworkers An Employee does not make his or as a form of advertising.39 her services available to the public except through the employer’s company. An Independent Contractor may advertise, carry business cards, hand out a shingle or hold a separate business license. 18. Offer Services to General Public: An independent contractor makes his/her services available to the general public or more unrelated persons or firms at the same time. 38 See Appendix 2 (Kay Strahan Testimony, Tr. pp. 77-78). 39 See Appendix 2 (Kay Strahan Testimony, Tr. pp. 40-41). 30 084891/000006 375 - 1842976v1 19. Right to Discharge Without Liability:40 An Employee can be discharged at any time without liability on the employer’s part. If the work meets the contract terms, an Independent Contractor cannot be fired without liability for breach of contract. 19. Right to Fire: An employee can be fired by an employer. An independent contractor cannot be fired so long as he or she produces a result that meets the specifications of the contract. 20. Right To Quit Without Liability:41 40 At the Rule 13 hearing, Health Force’s CEO Holly Alonzo testified: 13 Q. If you were to discharge a nurse in the middle of the job, could that nurse 14 sue your company and hold you financially liable? 15 A. We don’t discharge, so, they are aware that there is no relationship; just 16 come and go, work as you please. C512; February 19, 2009 Holly Alonzo Rule 13 Hearing Testimony, Tr. p. 39; 2013 Response p. 27. 41 At the Rule 13 hearing, Health Force’s CEO Holly Alonzo testified: 25 Q. If the worker accepts a shift as offered by the hospital, is that worker 1 expected to work that shift? 2 A. They're expected, but, that, at many times, cannot happen, or does not happen. 3 They have the right to accept a shift and cancel it. 4 Q. What happens if they do cancel? 5 A. They don’t get paid, obviously, for the shift, but, there's no repercussions 6 as far as discipline. *** 9 Q. If a nurse quits in the middle of the job, can your company sue that nurse and 10 hold that nurse financially liable? 11 A. No. But, I mean, as a licensed individual, they can get in big trouble; it's 12 abandonment of patients. But, you know, that's through the state. 31 084891/000006 375 - 1842976v1 An Employee may quit work at any time without liability on the Employee’s part. An Independent Contractor is legally responsible for job completion and, on quitting, becomes liable for breach of contract. 20. Right To Quit: An employee can quit his/her job at any time without incurring liability. An independent contractor usually agrees to complete a specific job and is responsible for its satisfactory completion, or is legally obligated to make good for failure to complete it. Health Force counts at least 15 of Twenty Factors listed above weigh in favor of an independent contractor relationship between Health Force and Kay Strahan. The similarly cited testimony of the other four workers demonstrates a similar number of factors weighing in favor of a finding the worker are independent contractors.42 The above testimony and summary chart were not objected to by the TWC (see C1394) and struck by the trial court. Therefore, this uncontested evidence confirms there are genuine issues of material fact in this C512; February 19, 2009 Holly Alonzo Rule 13 Hearing Testimony, Tr. pp. 37-39; 2013 Response p. 28. 42 See Appendix 2. 32 084891/000006 375 - 1842976v1 case. Even if this Court upholds the ruling by the trial court striking other evidence, there are numerous portions of Health Force’s summary charts and the worker declarations that were filed, admissible and weigh heavily in favor of finding the workers were independent contractors. The trial court thus erred in granting summary judgment in favor of the TWC. 4. The Memorandum of Understanding between the IRS, DOL and State Agencies Favors a Finding that the Health Force Workers are Independent Contractors. Beyond the failure to consider important evidence in the summary judgment proceeding, the need to create consistency with other agency interpretations compels a finding that the workers are independent contractors. The IRS and the DOL both audited Health Force’s records and business model. Both agencies determined Health Force workers to be independent contractors for tax purposes. The TWC should be compelled to follow such precedent. It is important to note both the IRS and the TWC use the same Twenty Factors to classify workers as either employees or independent contractors.43 The DOL and state and federal courts use the “economic reality test” which is a partial list of five of the same 43 See Rev. Rul. 87-41, 1987-1 C.B. 296 (providing guidance with respect to Section 530 of the Revenue Act of 1978); 40 Tex. Admin. Code § 821.5. 33 084891/000006 375 - 1842976v1 Twenty Factors with the remaining Twenty Factors collapsed into one factor “the degree of control exercised by the alleged employer.”44 In a November 2007 Information on the Questionable Employment Tax Practices Memorandum of Understanding (the “MOU”), the IRS, the DOL and a number of state workforce agencies agreed to be consistent with worker classification determinations.45 The MOU enables agencies to share information and coordinate enforcement efforts with states in order to “create a level playing for all employers” and ensure employees receive the protections to which they are entitled under federal and state law, e.g., proper overtime compensation, FICA and Unemployment Insurance taxes or workers’ compensation premiums. Twenty-nine states, including Texas, have signed the MOU. The MOU states its important objectives: The IRS and the states will strive to be consistent with their examination results, reducing the chances that states might classify a worker as an employee while the IRS classifies the worker as an independent contractor, or vice versa. *** [F]ocus on reducing taxpayer burden and confusion, promote fairness and confidence in the tax system. 44 20 C.F.R. § 639.3(a)(2) and United States Department of Labor WH Publication 1297 (5 DOL Factors). 45 C543-C545 (See IRS November 2007 Information on the Questionable Employment Tax Practices Memorandum of Understanding). 34 084891/000006 375 - 1842976v1 (Emphasis added). State and federal laws are not designed or intended to foster inconsistencies to financially punish a company. Requiring Health Force, or any business, to treat and classify the same workers differently under the Texas Unemployment Compensation Act (“TUCA”) (i.e., as employees) than under the Fair Labor Standards Act and Internal Revenue Code (i.e., as independent contractors) forces Health Force to maintain two sets of financial and payroll related records and reports.46 Given current governmental policies favoring and encouraging uniformity in the treatment and classification of the same workers by all governing agencies, the TWC’s position that the workers are Health Force’s employees and not independent contractors for purposes of TUCA and unemployment taxes is irrational and wrong. Such a result would require Health Force to treat the same workers differently for purposes of complying with TUCA where employment taxes and wage and hour obligations for the same workers are not required by the IRS, the DOL or any other governmental agency. A. The IRS Audit of the Workers On April 4, 2012, the IRS issued its Summary of Employment Tax Examination (IRS Form 4666). The Form 4666 reflects findings made by IRS agent Maureen Molyneaux regarding her 34 month audit of Health Force. The IRS 46 For example, Health Force is not required to pay Federal Unemployment Tax Contributions (“FUTA”), but is being asked to pay state unemployment taxes for the same workers. 35 084891/000006 375 - 1842976v1 audit reviewed the independent contractor worker classification status of the nurses and other healthcare providers contracting with Health Force for work opportunities. After an investigation using, examining and applying the same or substantially the same Twenty Factors,47 after close to three years, the IRS made the following determination: The examination of [Health Force] employment tax returns as reflected on this report [Form 4666 Summary of Employment Tax Examination] included an examination for employment tax purposes of whether any individuals should be treated as employees of the taxpayer [Health Force] for the purpose of Section 530 of the Revenue Act of 1978, as amended by Section 1122 of the Small Business Job Protection Act of 1996. The examination concluded that the following classes of workers should not be treated as employees: Hospital staffing workers.48 According to the IRS, Health Force properly classifies the Workers as independent contractors. B. The DOL Audit of the Workers In addition to and consistent with the IRS’s determination, on March 29, 2012, the DOL informed Health Force it completed its 15 month wage and hour 47 As opposed to Mary Zerda’s investigation undertaken in large part after she made her October 31, 2008 determination (HF 0011) in preparation for the February 19-20, 2009 Rule 13 hearing. C567-C574 (See November 23, 2010 Deposition of Mary Zerda pp. 36-37, 77 (“Q. And that's something you consider in your investigation, what the...worker considers herself to be? A. Yes” and on January 23, 2009, one of the three workers told Ms. Zerda “self-employed, prefer to be self-employed”)). 48 C538-C545 (See Declaration of Michael D. Seale 3; Form 4666 (HF 753-54)). Note Ms. Molyneaux’s handwritten note on the first page of Form 4666 (C541): “Mike [Seale]. My group manager said this should suffice for informing you or TWC, etc. that we looked at Staff relief Worker, but did not reclassify them. Maureen.” 36 084891/000006 375 - 1842976v1 compliance audit involving the workers provided work opportunities by Health Force. The DOL did not request or demand that Health Force make any changes to the independent contractor status of the workers or any other business or operational practices.49 According to the DOL, Health Force properly classifies the Workers as independent contractors. Conclusion The trial court granted summary judgment for the TWC. In doing so, it the trial judge improperly struck important evidence and ruled without considering the numerous fact issues shown in the testimony of the numerous workers and two Health Force employees. There is no basis for sustaining the grant of a motion for summary judgment in favor of the TWC in this case because it did not establish there are no genuine issues of material fact regarding the Twenty Factors as a matter of law. The proceeding in this Court involves three overlapping issues. Evidence was improperly struck by the trial court and should be considered in determining whether the workers are independent contractors. The Twenty Factor Test the trial court and the TWC are required to apply under the Texas Administrative Code demonstrates that genuine issues of material fact exist. Lastly, the TWC should 49 C538-C545 (Declaration of Michael D. Seale). 37 084891/000006 375 - 1842976v1 maintain consistency with the determinations of the IRS and DOL. As both the IRS and DOL found the workers to be independent contractors, the trial court erred in failing to overturn the TWC’s decision. Each of the above legal principles provides a basis for this Court to reverse and remand this case back to the trial court. Appellant Tochril Incorporated requests that relief and any further relief to which it may be entitled. Respectfully submitted, /s/ Juliann H. Panagos JULIANN H. PANAGOS State Bar No. 06861100 jpanagos@craincaton.com MICHAEL D. SEALE State Bar No. 00784938 mseale@craincaton.com 1401 McKinney Street, Suite 1700 Houston, Texas 77010 Telephone: 713-752-8696 Facsimile: 713-658-1921 Counsel for Appellant Certificate of Compliance Pursuant to TRAP 9.4(i)(3), the undersigned certifies that this document, excluding those parts not counted pursuant to TRAP 9.4(i)(1) contains 8,161 words. /s/ Juliann H. Panagos Juliann H. Panagos 38 084891/000006 375 - 1842976v1 Certificate of Service I certify that a true and correct copy of this document has been served on the following counsel of record through the electronic filing manager on December 30, 2015: Peter E. Laurie Assistant Attorney General Financial and Tax Litigation PO Box 12548 Austin, Texas 78711-2548 /s/ Juliann H. Panagos Juliann H. Panagos 39 084891/000006 375 - 1842976v1 Index to Appendix 1. Twenty Factor Chart – Alonzo and Papillion Testimony (C515-C530). 2. Twenty Factor Chart – Sabala, Sifuentes, Chapman, Strahan and Rojas Testimony (C1251-C1265). 3. Orders on the Texas Workforce Commission’s Objections to Plaintiff’s Summary Judgment Evidence (C1505-C1517). 4. Order Granting Texas Workforce Commission’s Motion for Summary Judgment (C1518). 5. 40 Tex. Admin. Code § 815.134. 6. 40 Tex. Admin. Code § 821.5 7. T.R.C.P. 166a 8. Tex. R. Evid. 1006 9. 20 C.F.R. § 639.3 10. Rev. Rul. 87-41, 1987-1 CB 296 40 084891/000006 375 - 1842976v1 C. Fact Issues Regarding the Twenty Factors In its Motion, and without citation to any authority, the TWC incorrectly states " ... under the plain language ofTUCA [Section 201.041], once workers are paid any remuneration for their services, those workers are presumed to be employees of the remunerating employer." There is no presumption of employment, rebuttable or otherwise, under TUCA or Texas case law upon payment alone to a worker. 28 In all instances, the TWC must satisfy the Twenty Factor test. Health Force creates facts issues on each of the Twenty Factors identified by the TWC in its Motion 29 as follows: 30 Factor Holly Alonzo Lita Pappillion l\1:ary Zerda TWC Discovery 40 TAC Section 815.134 (Bates No.· Indicated Hearing Responses vs .. Tninscript Page No.) (3-18-10 Letter TWC 03•18-10 Letter Responses) 1. Instructions: If a nurse has a problem On a sporadic and informal basis, Facts: The nurses referred An Employee receives while working at a I go out and visit these facilities by Health Force are instructions about when, facility and doesn't that we send the nurses to for instructed as to when and where and how the work know how to handle work. I visit the nurses as well, where there services are is performed. that problem, the nurse but it is nothing set in advance. I required. Once the nurse An Independent will go to someone at see the nurses a little more reports to work they are Contractor does the job the facility to resolve it regularly because they come in supervised in the his or her own way with (e.g. doctor, charge and out of here with wanting to be performance of their few, if any, instructions as nurse, HR, etc.). We paid for their services. services by either a charge to the details or methods have no policies nurse or a house nurse of the work. addressing how the I don't have meetings. I may drop supervisor, both of whom workers are to dress, in there to see a nurse, more for are employees of the 1. Instructions: An where to smoke, drug marketing of home health care medical facility where the employee must comply use, etc. services because our patients services are performed. with instructions about come from these facilities. when, where, and how to The facilities, however, Keeping a good relationship with work. Even if no likely do maintain such the nurses in the facility is my instructions are given, the policies. goal, how are you, whoever's control factor is present if Health Force does not there who I talk to; nothing the employer has the right counsel or provide formal, no meetings. The typical to give instructions. discipline or instruction scenario is I go in there with a bag on any type of work of cookies and drop it off at the 28 If there was such a presumption, simply paying an individual to mow a lawn would make the worker an employee of the homeowner. 29 Motion Section V(C) pp. 24-31. 30 In accordance with Rule 1006 of the Texas Rules of Evidence, the following Twenty Factors chart is a summary of the testimony presented at the February 19-20, 2013 administrative hearing (the "Summary Chart"). The summary is necessary because the "voluminous underlying materials" (the transcript) cannot conveniently be examined by the Court. See Declaration of Juliann H. Panagos~ 7, attached as Exhibit D; February 19-20, 2009 hearing transcript, attached as Exhibit D(5); Summary Chart, attached as Exhibit D(6); TWC's March 18, 2010 Letter Responses to Health Force's Discovery Requests, attached as Exhibit D(7). Page 13 0848911000006 140- 958691vl 515 Factor Holly Alorizo Lita Pappillion Mary Zenia TWC Discovery 40 TAC Section 815.134 (Bates No. Indicated Hearing· Responses vs. Transcript Page No.) (3-18-10 Letter TWC 03-18-10 Letter Responses) performance relating to nurses' station. Pretty much services provided by the whoever is there is who I see. nurse workers. I did not go there to supervise any No hiring process of the independent contracting because they're not nurses. We market to them, as employees. We do well as to their facilities. More have them fill out than anything, we like to see the certain paperwork to patients of those facilities, verify credentials as ultimately, be patients of Health licensed professionals. Force. Paperwork completed consists of health info, e.g. TB questionnaires, immunization records, work references to verify licensure history. We obtain information such as names, addresses, phone numbers, driver's license numbers, Social Security, tax ID numbers for tax purposes and issue l 099s. They're not required to complete anything that they choose not to. They seek our services. For credentialing purposes, they can provide a resume if desired. An application seeks current and prior employment history and references to verify they are licensed professionals. We don't do interviews with them, but we do ask them for their preferences as far as where do they like to go, what shifts do they like to work so we can better fill their needs. Tochril does not have a leave of absence policy for the nurses. If the nurse wants a day off or is ill, he or she does not have to call in or request it, but it is wise to call if cancellation is necessary to maintain Page 14 0848911000006 140- 958691vl 516 Factor Holly Alorizo Lita Pappillion Mazy Zenia TWC Discovery 40 TAC Section 815.134 (Bates No. Indicated Hearing· Responses vs. Transcript Page No.) (3-18-10 Letter TWC 03-18-10 Letter Responses) good business relations. We do not set work related deadlines for the nurses. Unsure about any facility imposed deadlines. They are not subject to the policies and procedures that our employees are subject to. 2. Training: We do not provide any Facts: Nurses are licensed Employees are often kind of training or and have accomplished trained by a more related manuals to the sufficient training and experienced Employee or nurses. I don't know if passed state testing. are required to attend or to what extent the Health Force places nurses meetings or take training hospitals, doctors or in shifts and facilities to courses. nursing homes provide provide nursing services An Independent any training. We do not within the scope of their Contractor uses his or her hold regular meetings authorized practice and as own methods and thus with the nurses or give requested by the health need not receive training instructions to the facility. Nurses may be from the purchaser of workers on how they do provided training at the those services. their work. facilities on facility procedures. 2. Training: An The doctors and charge employee is trained to nurses at the facilities perform services in a provide general particular manner, instructions to the independent contractors nurses, such as location ordinarily use their own oflunchroom, smoking methods and receive no policies, parking training from the policies, general purchasers of their information about the serv1ces. facility, or any strange or uncommon policies within their facility, but instructions on their duties is dictated by the Texas Board of Nursing and licensure rules. I assume (but don't know for sure) the facilities have medical protocols they ask the nurses to follow, including patient care instructions. Tochril does not provide any orientation prior to offering an opportunity for a nurse to work at a particular facility or hospital. Page 15 0848911000006 140- 958691vl 517 3. Integration: If Health Force Medical We regard the staff relief aspect Bates No. 0677 Facts: Integration of Services of an Employee Staff Relief is unable to of Tochril's business primarily as The nurses said they worked workers' services in the are usually merged into work through its a way to market or cross-sell continuously as they were business operation of the firm's overall independent Tochril's primary business called for assignments. They Health Force generally operation; the firm's contractors, there would purpose. Tochril, of course, uses work at a rate set by Health indicated that the worker success depends on those be no significant impact many other methods to market or Force and not the facility. is subject to control or Employee services. on the overall business cross-sell it's business, the direction. Health Force is An Independent ofTochril. business of Health Force. MZ also bases the importance principally engaged in a Contractor's services are Tochril does not For example, we may have home of the staffing unit on the nurse placement business. usually separate from the employ any nurses at health staff cross-sell pediatric wages reported to TWC and the A form provided showing client's business and are Health Force Medical rehab services through the care l 099s provided by the set rates that RN's, LVN's not integrated or merged Staff Relief. The l 0 provided home health services. company. & CNA's are paid. They into it. employees that we have Health Force's business would do not get to negotiate the are non-nurse, which is not be significantly diminished if Bates No. 0716 rate with the facilities. 3. Integration: An clerical staff. Neither! the company no longer provided The fact that Health Force pays Health Force bills the employee's services are nor Lita Pappillion is a staff relief services. money to advertise and exerts facilities for the services integrated into the nurse. efforts in locating these nurses provided by said nurses. business operations State regulations require Our website has an employment also indicates integration. Health Force pays the because the services are nurses to have photo opportunities web page available nurses. Nurses wear a important to the success or identification while to the general public. If one was Bates No. 0718 badge to identify continuation of the working in a medical interested in applying, they could Independent contractors themselves as Health business. This shows that facility. That is their apply online for home health and advertise on their own and Force nurses. Without the the employee is subject to badge with their photo rehab positions. There is nothing negotiate their own contracts. nurses Health Force direction and control. ID on it. about medical staffing on the These nurses are not Medical Staff Relief Integration of worker's Some facilities require employment opportunity page. negotiating their own contracts Division would not be in services in the business they carry their nursing with the facilities. It is clear operation. operation of Health Force license and their CPR that if they did, they would be generally indicated that while working. making a profit, not going the worker is subject to through a third person. control or direction. The corporation Health Force [Comments: Using MZ's is principally engaged in a logic, a nurse dealing directly nurse placement business. with the facilities makes them a contractor whereas they are an employee if they go through Health Force. What happened to the delegation theory i.e. transfer of direction and control?] Bates No. 0688 The integration of the workers into the business, operations of the business, and services were rendered personally, the continuum relationship, employer/employee relationship, set work hours. The work was done at the premises of the facilities that the medical staff relief was instructed to attend. The payments, expenses, tools, materials, investment, profit and loss were rendered personally, whether they offer their services to the general public. Bates No. 0711 They have the right to fire, the Page 16 0848911000006 140- 958691vl 518 right to quit, whether they work for more than one person or firm. Bates No. 0717 The definition that the commission goes by to identify independent contractors are integrated into the common factors. Information was not provided in regards to the integration factor other than what the nurses said they worked and were continuously called for assignments. The integration is clear that Health Force is making a profit, by having the nurses and sending them out for assignments. Bates No. 0683, 0685 Zerda's two witnesses both indicated that they wore badges identifying themselves and they have continuous contact with Health Force. If any changes as far as addresses, phone numbers, or changes in the schedules they contact Health Force. 4. Services Rendered The nurses can The nurses may delegate or The following documents or Facts: Health Force Personally: subcontract or delegate subcontract the work. The nurses information support the nurses render his/her An Employee's services the staff relief work out that come through us to utilize the factor that services were services personally. must be rendered to someone else in place services that we provide to them provided personally: personally; Employees do of the nurse. The are independent contractors. If the not hire their own facility needs a nurse. nurse that chooses to work selects Bates No. 0681 substitutes or delegate They really do not care another nurse to work in her Time sheets submitted to work to them. which agency. They stead, and we have records on that Health Force and signed by the A true Independent need a nurse to take nurse, that nurse can get a check individual nurses stating the Contractor is able to care of their patients. from us. She could also send it dates and times worked. If assign another to do the through another staffing agency. they turn in the time record to job in his or her place and She can contact another nurse someone else they work under need not perform services from any other source. The and report to when they are personally. hospital gets staff from multiple assigned to a facility (i.e. sources. These nurses are able to Health Force), the nurse is an 4. Services Rendered substitute however they desire. If Health Force employee. Personally: An employee the initial nurse and the substitute renders services nurse are both registered with us, Bates No. 0681 personally. This shows then whoever works, we just get Time sheets are submitted and that the employer is told who to pay. If they, copies of the sheets are signed interested in the methods however, substitute that same by individual nurses stating the as well as the results. shift through another agency or dates and times that were through another nurse that's worked. independent, then, that is not our lSSUe. Bates No. 0682 If a person goes to a personnel staffing service or Goodwin Personnel to be sent on an assignment then they would be Page 17 0848911000006 140- 958691vl 519 Goodwin Personnel employee. 5. Hiring, Su11ervising & Some nurse workers Bates No. 0718 Facts: Nurses cannot hire Paying Hel11ers: have assistants or Nurses do not hire staff or assistants to do patient An Employee may act as helpers, some do not. helpers and independent care for them. Nurses a foreman for the For example, they keep contractors advertise on their provide the services employer but, if so, up with all their own. They are not able to themselves. helpers are paid with the information for tax negotiate their own contracts employer's funds. purposes, sort of like with the facilities. Nurses are Independent their own little CPA or not negotiating their own Contractors select, hire, their own little person contracts with the facilities. If pay and supervise any who keeps up with the independent contractors helpers used and are whole business aspect - negotiate the contracts with the responsible for the results bookkeeping, mileage, facilities, they would make a of the helpers' labor. travel expenses, profit. They have a right to business expenses. hire assistance, the nurses, or 5. Hiring Assistants: An staff nnder them to bring in employee works for an revenue for profit and loss. employer who hires, They maintain their own place supervises, and pays of business. assistants. An independent contractor hires, supervises, and pays assistants nnder a contract that requires him/her to provide materials and labor and to be responsible only for the results. Nurses cannot hire assistants to do patient care for them. 6. Continuing The nurse contractors Bates No. 0684-6 Facts: Nurses remain on Relationshii1: do not work exclusively The nurses wear a badge that Health Force list for An Employee often through Tochril or at says Health Force on it, they referrals and are in continues to work for the the same facility month turn in time sheets to Health continued contact with same employer month after month or year after Force and sign independent Health Force and Health after month or year after year. Some of them contractor agreements. The Force with the nurses. year. may work only one shift nurses are being contacted This resembles an An Independent and then they go away by Health Force. They go employer-employee Contractor is usually for a while and come through an initial interview relationship. Nurses are hired to do one job of back. We have no with Health Force. referred for shifts over a limited or indefinite control over it. Backgronnd information is continued period of time. duration and has no Tochril enters into investigated by Health Force. Nurses can be referred to expectation of continuing written contracts with They're not given a choice if multiple shifts and to work. the nurses. they want to be employees or multiple clients. A new Tochril does not enter not, only the choice of whether contract is not signed with 6. Continuing into a new contract each they want taxes deducted. The the nurses with each new Relationshi11: An time a nurse works at a nurses have continuous contact referral. employee has a continuing facility. However, with Health Force and contact relationship with an the relationship between Health Force when there are employer. A continuing Health Force and the any changes in addresses, relationship many exist nurses is based strictly phone numbers or schedules where work is performed on a contractual they're going to work. Health at frequently recurring relationship. We Force also provides workers' although irregular provide numerous comp and liability insurance. intervals. opportnnities for nurses They are not providing it for throughout south Texas themselves. (I do know to provide services at employers and non-employers the facilities. The can volnntarily provide written contract workers' compensation Page 18 0848911000006 140- 958691vl 520 confirms they are insurance to whoever they independent want). contractors, not employees. [Comments: MZ is incorrect- Health Force does not pay for the nurses' liability insurance.] Bates No. 0683 From the two nurses there is a continuing relationship as far as the time sheets, the contract agreement that was signed and the facility's agreement. 7. Set Hours of Work: The workers may work Bates No. 0688 Facts: Nurses are called An Employee may work shift by shift at their Health Force is instructing the by Health Force with "on call" or during hours choosing. We don't nurse that if they take the predetermined and days as set by the assign them to a assignment, to go at a certain time/place/date of where employer. particular shift or series hour or shift and it's going to worker needs to report to. A true Independent of shifts - we give them extend to a certain hour and a This work schedule is set Contractor is the master opportunities to work. certain location. Thus, Health by Health Force clients. of his or her own time and We have no control Force is setting the time, date This factor indicates works the days and hours whether they choose to and the facility where they are control or direction he or she chooses. work a shift, multiple working. The hospitals call because it bars the worker shifts in a row or Health Force. The hospitals are from being master of 7. Set Hours of Work: several days in a row as the ones in need of the nurses his/her own time. The An employee has set hours that is their choice and, and Health Force provides that evidence shows that the or work established by an at times, when they go need to them. medical facilities set the employer. An to facilities, they hours for the workers. independent contractor is schedule themselves. Bates No. 0688 The clients tell Health the master of his or her We don't have Health Force is giving the Force when it needs a own time. knowledge of it, and nurses instruction to take the worker, what shift the that's fine because they assignments or shifts and it worker is needed for, and work for themselves. extends to a certain hour and a the time/place for the certain location. Health Force worker to report. This Work shifts vary, but is setting the time, date, and the shows that through typically 6 A.M. to 6 facility that they are working. delegation to their clients, P.M. There is no Health Force sets the "typical" or average Bates No. 0689 hours of work for the number of hours Health Force can't change the nurses, and also worked; some nurses instructions provided by the constitutes evidence of an work once a year, some hospital. If Health Force employment relationship. work once a week. It changes the instructions from can be anywhere from the hospital the hospital will zero to 60 plus. probably go somewhere else to find someone to work the shift that is needed Health Force has a contract with the hospital. The hospitals call Health Force and are the ones that need nurses. 8. Full Time Reguired: The nurses' work Bates No. 0687 Facts: Nurses work 30, An Employee ordinarily schedule is what they Zerda's interviews with the 40, or even 60 hours a devotes full-time service choose it to be, which nurses where full-time nurses week and constitutes full to the employer, or the could be any number of who were taking assignments. time. The evidence shows employer may have a hours, day or night, and And were working to earn extra that some nurses have full priority on the employee's at one facility or at money. This makes them an time employment and are time. many facilities. employee in this relationship. picking up shifts for extra Page 19 0848911000006 140- 958691vl 521 A true Independent The doctor, hospital or money. Others are just Contractor carmot be nursing home will Bates No. 0712 working on referrals required to devote full- inform us what work is By the restrictions of the hours through Health Force and time service to one firm available. We then call that they can work for Health can picking up as many as exclusively. the nurse and let them Force. 60 hours. Shifts are 12 know what work the hours and nurses can 8. Full Time Work: An facility requests. The reject a shift with Health employee normally works nurses can either choose Force calls but are full time for an employer. to accept what the expected to work if shift is An independent contractor facility offers, be late or accepted. can work when and for even earlier. It's their whom he or she chooses. choice. Nurses are worker 30, 40, and even 60 hours a week this constitutes full time. 9. Location where If the nurses choose, we Bates No. 0690-l Facts: Nurses are services 12erformed. may refer them to the Health Force has a contract expected to show up at the Employment is indicated same client hospital, with the facility to provide the facility for the shift they if the employer has the doctor or nursing home nurses as needed. While Health have accepted to work. right to mandate where more than once. We Force is not a hospital, it is an All work is done at the services are performed. give them the employment agency for these facilities where assigned Independent opportunity. The nurses to go and work and and all work is done in Contractors ordinarily location of work is make extra money. I agree the person. Nurses wear a work where they choose. mandated by location of nurse's can say "no, I'm not badge to identify The workplace may be the patients and patient going," but this is no different themselves with their away from the client's care. than what employees can do if name and Health Force premises. the employer agrees to it. appears on the badge. 9. Work Done on Bates No. 0691 Premises: An employee MZ contends it depends on the works on the premises of understanding or guidelines an employer, or works on whether one can be fired in a a route or at a location traditional employment sense if designated by an the nurse tells Health Force employer. he/she is not coming to work for e.g. a month. MZ believes Health Force can hire a nurse as an employee and provide work hours flexibility to the nurse, allowing the nurse to choose what hours they're going to work. [Comment: MZ does not recognize the greater the work flexibility becomes, the less "direction and control" there is.] Bates No. 0688 Health Force is giving nurses the instruction to take the assignments and to go at a certain hour or shift. It could extend to a certain hour and a certain location. Health Force is in fact setting the time, date, and the facility that they are working. l 0. Order or Sequence Tochril does not set the Facts: Nurses are required Set: order or sequence of the to follows the order and Page 20 0848911000006 140- 958691vl 522 An Employee performs nurse workers' tasks. sequence set by the head services in the order or Not sure about the nurse or facility. The sequence set by the doctors and facilities - order or sequence of work employer. This shows they could. As nurses, is delegated to Health control by the employer. they have to keep their Force clients and is A true Independent license. evidence of control and Contractor is concerned There are certain things direction through only with the finished they have to comply delegation. product and sets his or her with under licensure own order or sequence of laws and I assume the work. facility nurses and doctors will do this to I 0. Order or Seguence comply with the law. Set: Employee must perform services in the order or sequence set by an employer. This shows that the employee is subject to direction and control. Nurses are not permitted to follow his/her own pattern of work but rather must follow the established routines/schedules of the facilities. II. Oral or Written The nurses are not Facts: Nurses submit Reports: required to provide reports to doctor or head An Employee may be reports or logs to nurse as to patient care required to submit regular Tochril, the facilities or provided which would oral or written reports doctors regarding the consist of vitals of patients about the work in work they do. and med's administered to progress. patients during shift. An Independent Contractor is usually not required to submit regular oral or written reports about the work in progress. II. Reports: Employee submits reports to an employer. This shows that the employee must account to the employer for his or her actions. 12. Payment by the Hour, We agree to pay the Bates No. 0694 Facts: Nurses are paid by Week or Month: workers for the work The checks the nurses are the hour and must submit An Employee is typically performed. It's not in receiving are from Health to Health Force time cards paid by the employer in the contract. Once work Force and Health Force bank initialed by charge nurse regular amounts at stated is completed, we accounts. at facilities. Health Force intervals, such as by the verbally agree to pay pays the nurse the next hour or week. them for their work [Comments: MZ does not day or the next week An Independent generally within the understand the money source depending on what the Contractor is normally following hourly rate issues and how the facilities nurse wants to get paid. paid by the job either a ranges (depending on pay Health Force for the Deductions are applied if negotiated flat rate or the facility): nurses' services.] nurse wants deductions upon submission of a bid. RNs- $32.00-$38.00. taken out of the pay. LVNs- $22.00-$28.00. Bates No. 0685 Health Force bills the Page 21 0848911000006 140- 958691vl 523 12. Payments: CNAs- $10.00-$12.00. Nurses are not given a choice if facilities for those nurses Employees are paid by the These rates are they want to be employees or referred to the facilities. hour, week or month. determined through not. They are also given the Nurses are paid through negotiations between choice of whether they want Health Force. the facilities and the taxes to be deducted. nurse contractors based on their experience, Bates No. 0692 specialty areas, etc. Health Force is paying the Both are our clients. nurses who are not getting paid Through this process, directly from the facilities. we negotiate a Bill Rate with the facility clients. Bates No. 0694 The nurses can Checks that the nurses are negotiate the rate receiving are from Health directly with the facility Force and are not from a if they choose, at facility like Detar or Citizens. whatever rate they choose. The facility client pays us directly for the Bill Rate and we in turn pay the negotiated contractor rate to the contracted nurse. The nurses are paid when they choose and when they bring in their service record. Normal practice is to turn in the completed and signed service records to verify the shift was completed. There is no time or date. Some hold them for weeks and some turn them in immediately. No taxes are withheld from the nurses' pay unless they request it. All income is reported on IRS 1099 forms annually. No deductions are taken from the nurses' pay. The workers are not eligible for bonuses, fringe benefits (e.g. sick, vacation, holiday or severance pay, insurance) or pay advances. They are not eligible for 40l(k), PTO, vision, dental, Aflac. 13. Payment of Business Tochril does not Bates No. 0695 Facts: Health Force pays & Travel Ex12enses: reimburse the nurses for While the meals and gas to for Worker Comp An Employee's business any business or travel- travel to the facility is not Insurance and the Nurses and travel expenses are related expenses. The reimbursed by Health Force liability insurance. Nurses either paid directly or nurses can and some do and the nurses buy their own do not pay for their own reimbursed by the carry malpractice uniforms (scrubs), this is no liability insurance or employer. insurance at their different from expenses insurance if they get hurt Independent expense. Tochril carries incurred by an employee. Take on the job. Page 22 0848911000006 140- 958691vl 524 Contractors normally pay professional myself, I go to work, I pay for all of their own business malpractice insurance my own gas to get there. I pay and travel expenses for the for the company for my own meal, and I also without reimbursement. and its employees, but pay for my own business attire. not for the staff relief Due to the nature of the nurses' 13. Ex12enses: An nurse workers. The work, they wear the scrubs and employee's business and nurses claim business pay for their own meals as travel expenses are paid related expenses as anyone else that's employed by an employer. This income tax deductions working outside of the home. shows that the employee is and declare themselves subject to regulation and as self-employed nurses Bates No. 0696 control. on their federal income MZ recognizes an independent tax returns. contractor deducts the above types ofbusiness expenses on their income tax (Schedule C) and receives a l 099 and that this is inconsistent with employee behavior. Bates No. 0685 Health Force is providing workmen's comp insurance and liability insurance. Bates No. 0695 Meals and the gas to travel to the facility are reimbursed by Health Force. Nurses buy their own uniforms and scrubs. This is no different from expenses incurred by an employee. Bates No. 0696 Well, when you are getting a l 099 and you file a Schedule C, then, yes, you're going to deduct certain different expenses. Bates No. 0697 Zerda advised them of different procedures and benefits of being an employee versus being a contract laborer. Both nurses stated they would prefer to be employees. Although, Zerda is not going to tell them they have to amend their l 040. 14. Furnishing Tools & Tools and equipment Our company does not furnish Bates No. 0698 Facts: Nurses provide Egui12ment: that are important to the any tools, equipment and While the nurses have their their own stethoscope, Employees are furnished work include; materials to the contracted nurse own stethoscopes, scissors, scrubs, shoes, gloves, all necessary tools, stethoscope, uniforms, workers for doing the work. The maybe blood pressure cuff, if scissors, and blood materials and equipment medical bags, tablets, doctors, the hospitals, and the they don't take them to the pressure cuffs, however by their employer. scissors, shoes, tape nursing homes furnish anything facility, the facility can provide the facilities prefer nurses An Independent measures, pill crushers, patient specific for the duration of those to them. They initially to use their (facility) Contractor ordinarily blood pressure cuffs, their work stay, but the nurses do purchase equipment in order to equipment for accuracy. provides all of the tools and other things of that bring in much of their own complete their training and Health Force clients and equipment necessary nature, personal vehicle, equipment. schooling (e.g. stethoscope, provide the major tools to complete the job. nursing equipment, blood pressure, etc.). They get and equipment for doing anything else needed to old and they don't need to buy the work. The clients 14. Tools and Materials: do theirjob and provide them again if they are provide the EKG Page 23 0848911000006 140- 958691vl 525 An employee is furnished care for patients. furnished. So, at least some machines, pulse significant tools, Tochril does not would prefer to use equipment oximeters, beds, linen, materials, and other provide any of these at the facilities because they are gloves, wheel chairs, Cat equipment by an things. updated and working correctly. Scan machines, equipped employer. The nurses have their emergency rooms and own equipment, but, Bates No. 0700 equipped operating rooms. there is some equipment The nurses do not carry MRI needed for the patients machines or X-ray or that would be held at cardiovascular machines and the facility, such as IV s, like equipment with them to the hospital bed, hospital. All the expensive wheelchair, CAT scan, machinery investments are some facilities have furnished at the hospital. EKG machines, bed linens, gloves. Some Bates No. 0699 nurses bring Pulse-ox Zerda knows from going to machines. Some nurses different stores that you can have them, some don't. buy scrubs anywhere and doesn't understand why nurses would want scrubs that say Detar Hospital if they're not employees of Detar Hospital. 15. Significant The nurses have Bates No. 0702 Facts: Nurses do not have Investment: financial investment in They do not advertise. They a substantial investment in An Employee generally their own business do not invest in advertising in facilities or equipment. has little or no investment related to newspaper ads, TV ads, which They have a relatively in the business. Instead, Providing nursing are quite expensive. They do small investment in an Employee is services. Some not offer their services to the stethoscope, scrubs, shoes, economically dependent examples are; tools, public. They do not have the gloves, scissors, and blood on the employer. their equipment, their expensive equipment furnished pressure cuffs. By True Independent cars, travel, gas, by the facilities. contrast facilities have Contractors usually have housing when they substantial investment in a substantial financial travel, expenses relating Bates No. 0702 equipment such as EKG investment in their to professional license, MZ recognizes the Texas Nurse machines, pulse independent business. continuing education, Practices Act precludes nurses oximeters, beds, linen, license renewal fees, from advertising nursing gloves, wheel chairs, Cat 15. Investment: An cost of CPR courses, services to the general public. Scan machines, equipped independent contractor has tuberculosis screening. emergency rooms and a significant investment in equipped operating rooms. the facilities he/she uses in performing services for someone else. 16. Realize Profit or Loss: The nurses make a Bates No. 0703 Facts: No profit or loss is An Employee does not profit or suffer a loss The nurses do not invest in suffered by the nurses in ordinarily realize a profit doing the work that they expensive equipment. If the doing the work and no or loss in the business. do. For example, the only loss is they do not take an substantial investment in Rather, Employees are expense of traveling to assignment, there is no profit the business is made by paid for services rendered. a facility that could be there. They're just working to the nurses. Nurses are An Independent far away, the gas make extra money to make paid a predetermined Contractor can either involved. If they have a ends meet and support their amount, which is dictated realize a profit or suffer a 12-hour shift, and they families. by Health Force's client. loss depending on the are sent home after two The nurses do not make a management of expenses hours, that could be a Bates No. 0706 significant financial and revenues. great loss, i.e. expecting These nurses do not have staff investment in equipment to work and it does not under them. They do not have used by him/her in 16. Profit or Loss: An occur for some reason revenues coming in to offset rendering his/her services. independent contractor (e.g. personal issues their expenses. Thus, the All essential equipment is can make a profit or suffer requiring them to leave expense (e.g. gas expense provided by the facilities. a loss. early). incurred when an assignment is cancelled or cut short) would not be classified as a profit and Page 24 0848911000006 140- 958691vl 526 loss. Bates No. 0706 MZ recognizes a nurse can deduct an expense (e.g. apt rent loss when an assignment cancels) on his Schedule C, but she does not consider it a loss because the nurse would have the tax deduction on Schedule C to offset the tax. Bates No. 0707 [MZ Quote - "I don't know what the Schedule C is based on all the expenses he's going to put on there, whether there's going to be a loss or a gain as far as what he's going to gain on the benefits of saving the tax."] 17. Working For More An independent Bates No. 0711-3 Facts: Nurses make their Than One Firm At A contracting nurse can From my interviews with the services available to Time: work for more than one nurses, they had full-time jobs, Health Force, but can also An Employee ordinarily hospital, different and were working to earn extra be on the list for referrals works for one employer at employers, different money. This places restrictions with other firms offering a time and may be agencies on the hours they can work for same type of service. prohibited from joining a Simultaneously, in Health Force. The 90 day However, nurses cannot competitor. sequence, or not work "non-compete" clause of the advertise their services. An Independent at all. The relationship staffing agreement (2.06) also Contractor often works between Tochril and a restricts the nurses from for more than one client or contracting nurse is not working for more than one firm at the same time and permanent or exclusive. facility. is not subject to a non- The nurses work competition rule. through multiple [Comments: Nurse contractors agencies and at more are not parties to the staffing 17. Works For More Than than one facility, or agreement and therefore not One Person or Firm: An with an employer, bound to any restrictions on independent contractor performing similar work or employment at gives his/her services to serv1ces. facilities] two or more unrelated persons or firms at the Bates No. 0713 same time. The non-compete clause says that a facility caunot hire a nurse to work for them unless it's been 90 days. Health Force is excluding nurses from working at the facility or becoming their employee and is penalizing the facility if the nurses are hired on at the facility. Bates No. 0715 Because Health Force is saying by having that restriction in there, they are saying that if the facility is going to hire them, then they are taking a qualified person that they could use elsewhere to work at the facility. Therefore, Health Page 25 0848911000006 140- 958691vl 527 Force would not be making a profit off of them. Bates No. 0716 If you consider them to be contract employees or contract labor, what gives you the right to limit them to where they're going to work full-time and put that clause into the contract? 18. Making Service They seek our services Bates No. 0688 Facts: The Nurses do not Available to the Public: and hire us. It could be Health Force contacts the offer their services to the An Employee does not by working in facilities nurses to see if they want to general public. They can make his or her services or for other agencies. work. The nurses do not work at a health facility by available to the public They come in and seek advertise their services. They referral or by being an except through the our services. I'm not rely on getting calls from employee of that facility. employer's company. sure how they find out Health Force, which is An Independent about us. It is mostly advertising for the nurses (see Contractor may by word of mouth. Factor 3 integration). advertise, carry business They come to us, we cards, hand out a shingle verify credentials, we Bates No. 0702 or hold a separate business verify that they are a Nurses do not advertise license. licensed professional. because they offer their Once that happens, they services to the public. 18. Offer Services to tell us where they want General Public: An to work. They tell us if independent contractor they want to work. makes his/her services The nurses can carry available to the general business cards if they public. choose. The nurses can represent themselves to the public or to others as being in business to provide nursing services, but not sure if they do. They do work at multiple agencies. They have the option to tell people about their services to get more work for their personal business. I don't know whether they do any advertising in the newspapers or the Yellow Pages. There are even occasions where we have been offering opportunities to these nurses by telephone or email and, for extended periods of time, we wouldn't know if you ran into them on the street. They are free and independent workers. Page 26 0848911000006 140- 958691vl 528 19. Right to Discharge We don't discharge, so Bates No. 0707-8 Facts: Health Force has Without Liabili!J'.: the nurses are aware Section 2.02 of the facility the right to discharge a An Employee can be there is no relationship supplemental staffing worker. The right to discharged at any time whereby we can agreement between the facility discharge is a factor of without liability on the discharge them; they and Health Force states that the control or direction employer's part. come and go and work facility can dismiss if they're through the ever-present If the work meets the as they please. unhappy with the work that threat of dismissal. Health contract terms, an they're doing. For whatever Force gives their clients Independent Contractor reason, they can dismiss them. through contract the right carmot be fired without That's a right to fire. It is an to dismiss a nurse and liability for breach of agreement between Health request another to replace contract. Force and the facility whereby the nurse for the shift. Health Force is delegating the 19. Right to Fire: An right to discharge control over employee can be fired by to the facility. an employer. An independent contractor Bates No. 0710 cannot be fired so long as Health Force can also evaluate he or she produces a result the nurses and send a report. that meets the 2.05 says the nurses specifications of the periodically report to Health contract. Force. If it is a negative evaluation, then they will not be sent to that facility or be assigned another assignment. Bates No. 0710 MZ says the nurses she interviewed were not aware of any such evaluations and she is not aware 2.05 has ever been implemented. [Comments: the nurse contractors are not parties to the staffing agreement and are not bonnd by them.] Bates No. 0693 If Health Force is going to hire a nurse, and they're going to have the flexibility of the hours that they work then that flexibility is given to the nurse to choose what hours they're going to work. Bates No. 0707 Right to fire. If you go back to your facility supplemental staffing agreement between the facility and Health Force. The facility can dismiss which is the right to fire. Bates No. 0709 "And the dismissal of staffing personnel will not be assigned to the facility thereafter." That Page 27 0848911000006 140- 958691vl 529 is firing. They do not want them to return. But it's an agreement between Health Force and the facility delegating Health Force is delegating that control over the facility with this agreement. 20. Right To Quit If the worker accepts a Bates No. 0710-l Facts: Nurses can Without Liabili!J'.: shift offered by the The nurses have the right to terminate or quit the work An Employee may quit hospital or facility, they quit and can take their name off without incurring a work at any time without are expected to work it, the list by contact Health Force liability by refusing to liability on the but many times, that and say they no longer want to work the shifts assigned or Employee's part. cannot or does not work additional shifts or they requesting to be removed An Independent happen. They have the no longer want to work, to earn from the list. Also, the Contractor is legally right to accept a shift extra money. contract between Health responsible for job and cancel it. If the Force and its clients the completion and, on nurse cancels, the nurse client is prohibited from quitting, becomes liable worker does not get hiring the nurses referred for breach of contract. paid for the shift, but to the clients by Health there are no disciplinary Force within a 90 day 20. Right To Quit: An repercussions. period after the last employee can quit his/her If a nurse quits in the referral. job at any time without middle of the job, we incurring liability. An carmot sue and hold that independent contractor nurse financially liable. usually agrees to complete But, as a licensed a specific job and is individual, they can get responsible for its in big trouble by the satisfactory completion, or state if they abandon is legally obligated to patients. They make good for failure to necessarily wouldn't complete it. quit since they were not hired in the first place, but they can stop all communication at any time, or not even show up. D. The TWC Cannot Rely on the Temporary Help Firm Statute 1. The Temporary Help Firm Statute Does Not Presume Employee Status Section 201.029 of the Texas Labor Code states: TEMPORARY HELP FIRM. For purposes of this subtitle, a temporary help firm is the employer of an individual employed by the firm as a temporary employee. (the "THF Statute"). Sections 201.011(20) and 201.011(21) of the Texas Labor Code defines "temporary employee" and "temporary help firm" as follows: (20) "Temporary employee" means an individual employed by a temporary help firm for the purpose of being assigned to work for the clients of a temporary help firm. Page 28 0848911000006 140- 958691vl 530 20 FACTOR CHART Deposition Testimony of Worker Witnesses Sabala, Sifuentes, Chapman, Strahan, and Rojas Factor Patricia Sabala Salvador Sifuentes Erika Chapman Kay Strahan Rosa Rojas 40 TAC Section 815.134 ExhibitC ExhibitD ExhibitE Exhibit F Exhibit G 1. Instructions: Licensed Vocational Health Force does not She can work for LVNs are Doctors determine the An Employee receives Nurses ("LVNs") are require a specific other placement subcontractors. services performed by instructions about when, not committed to schedule. 4 companies (like They work when the LVNs orRNs and where and how the work accepting Health Force) they want, if they direct their work. 11 is performed. assignments from Health Force does not wherever she wants. 7 want, and where An Independent Health Force. 1 set the hours they want. 10 Health Force does not Contractor does the job worked. 5 She can apply at have doctors on his or her own way with Instructions regarding hospitals not staff. 12 few, if any, instructions as services performed Health Force does not associated with to the details or methods come from the supervise the work at Health Force. 8 of the work. hospital directly. 2 the hospitals or facilities. 6 Health Force does not l. Instructions: An LVN s can say "yes" supervise the LVN s employee must comply or "no" to a shift or Registered Nurses with instructions about offered by Health ("RNs") work at when, where, and how to Force. 3 facilities or work. Even if no hospitals. 9 instructions are given, the control factor is present if the employer has the right to give instructions. 1 Patricia Sabala Testimony, Tr. pp.43-44, 45. 2 Patricia Sabala Testimony, Tr. pp.48. 3 Patricia Sabala Testimony, Tr. pp.61-62. 4 Salvador Sifuentes Testimony, Tr. p. 79. 5 Salvador Sifuentes Testimony, Tr. p. 79. 6 Salvador Sifuentes Testimony, Tr. p. 80. 7 Erika Chapman Testimony, Tr. pp. 53-54. 8 Erika Chapman Testimony, Tr. p. 54. 9 Erika Chapman Testimony, Tr. pp. 57-58. 10 Kay Strahan Testimony, Tr. p. 69. 11 Rosa Rojas Testimony, Tr. p. 74. 12 Rosa Rojas Testimony, Tr. p. 74. EXHIBIT B 1251 2. Training: Health Force does Health Force has not Never took any Doesn't recall any Health Force would not provide training. 13 given any training to training or classes at training provided by provide an orientation Employees are often RNs. Health Force. 14 Health Force. 15 on some facilities. No trained by a more other training experienced provided. 16 Employee or are required to attend meetings or take training courses. An Independent Contractor uses his or her own methods and thus need not receive training from the purchaser of those services. 2. Training: An employee is trained to perform services in a particular mam1er, independent contractors ordinarily use their own methods and receive no training from the purchasers of their services. 3. Integration: Never performed any Never provided Never performed Did not spend much Services of an LVN services or other services at Health services at Health time at the Health Employee are usually work at Health Force's company Force's office. 19 Force office. Mainly, merged into the firm's Force's office. 17 office. 18 would stop by to drop overall operation; the off time sheets or pick firm's success up a check. 20 depends on those Employee services. An Independent Contractor's services are usually separate from the client's 13 Patricia Sabala Testimony, Tr. p. 58. 14 Erika Chapman Testimony, Tr. pp. 39-40. 15 Kay Strahan Testimony, Tr. p. 97. 16 Rosa Rojas Testimony, Tr. pp. 50-51. 17 Patricia Sabala Testimony, Tr. p. 53. 18 Salvador Sifuentes Testimony, Tr. p. 81. 19 Erika Chapman Testimony, Tr. p. 59. 2 °Kay Strahan Testimony, Tr. pp. 63-65. 0848911000006 375 - 1704437vl EXHIBIT B 1252 business and are not integrated or merged into it. 3. Integration: An employee's services are integrated into the business operations because the services are important to the success or continuation of the business. This shows that the employee is subject to direction and control. Integration of worker's services in the business operation of Health Force generally indicated that the worker is subject to control or direction. The corporation Health Force is principally engaged in a nurse placement business. 4. Services Rendered Could have a Personally: coworker take over An Employee's his shift, if needed. 21 services must be rendered personally; Employees do not hire their own substitutes or delegate work to them. A true Independent Contractor is able to assign another to do the job in his or her place and need not perform services personally. 4. Services Rendered 21 Salvador Sifuentes Testimony, Tr. pp. 46-47. In addition, Health Force's CEO Holly Alonzo testified at the Rule 13 hearing: 5 Q. You said that some do have helpers or assistants? 6 A. They can. 7 Q. Well, do you know if they have them? 8 A. Yes. 9 Q. And how are you aware of that fact? 10 A. The nurses tell us. February 19, 2009 Holly Alonzo Rule 13 Hearing Testimony, Tr. p. 41, attached as Exhibit F; 2013 Response p. 18. 0848911000006 375 - 1704437vl EXHIBIT B 1253 Personally: An employee renders services personally. This shows that the employer is interested in the methods as well as the results. 5. Hiring, Could have a Su11ervising & Paying coworker take over Hel11ers: his shift, if needed. 22 An Employee may act as a foreman for the employer but, if so, helpers are paid with the employer's funds. Independent Contractors select, hire, pay and supervise any helpers used and are responsible for the results of the helpers' labor. 5. Hiring Assistants: An employee works for an employer who hires, supervises, and pays assistants. An independent contractor hires, supervises, and pays assistants under a contract that requires him/her to provide materials and labor and to be responsible only for the results. Nurses caunot hire assistants to do patient care for them. 22 Salvador Sifuentes Testimony, Tr. pp. 46-47. In addition, Health Force's CEO Holly Alonzo testified at the Rue 13 hearing: 5 Q. You said that some do have helpers or assistants? 6 A. They can. 7 Q. Well, do you know if they have them? 8 A. Yes. 9 Q. And how are you aware of that fact? 10 A. The nurses tell us. February 19,2009 Holly Alonzo Rule 13 Hearing Testimony, Tr. p 41; 2013 Response p. 18. 0848911000006 375 - 1704437vl EXHIBIT B 1254 6. Continuing While providing Able to work at other LVNs and RNs can Could have worked Can refuse an Relationshi11: services for Health hospitals other than work for other for other placement assignment from An Employee often Force, she worked for the ones Health Force companies if they companies or Health Force. 33 continues to work for other companies. 23 offered assignments want. 29 hospitals. 31 the same employer at.27 Can work for other month after month or Not committed to LVNs and RNs can Declined employment hospitals that do not year after year. accepting assignments Has worked at places apply for positions at opportunities at have a contract with An Independent from Health Force. 24 other than those hospitals not hospitals because he Health Force. 34 Contractor is usually assignments offered associated with would lose the hired to do one job of Could refuse patient by Health Force. 28 Health Force. 30 independence he had limited or indefinite assignments. 25 at Health Force. 32 duration and has no expectation of Could say "yes" or continuing work. "no" to a shift offered by Health Force. 26 6. Continuing Relationshi11: An employee has a continuing relationship with an employer. A continuing relationship many exist where work is performed at frequently recurring although irregular intervals. 7. Set Hours of Health Force does not Shifts are determined "[I] provide my own Hours for a shift are Work: require a specific by the facility, not schedule. They predetermined by the An Employee may schedule. 35 Health Force; Health [Health Force] do not hospital. 39 work "on call" or Force does not set the provide a schedule for during hours and days Health Force does not LVNs or RNs hours me."3s Can refuse an as set by the set the hours worked in a day. 37 assignment. 40 employer. worked. 36 23 Patricia Sabala Testimony, Tr. p. 50. 24 Patricia Sabala Testimony, Tr. pp. 43-45. 25 Patricia Sabala Testimony, Tr. p. 61. 26 Patricia Sabala Testimony, Tr. p. 62. 27 Salvador Sifuentes Testimony, Tr. p. 77. 28 Salvador Sifuentes Testimony, Tr. p. 77. 29 Erika Chapman Testimony, Tr. p. 53. 30 Erika Chapman Testimony, Tr. p. 54. 31 Kay Strahan Testimony, Tr. pp. 77-78. 32 Kay Strahan Testimony, Tr. pp. 77-78. 33 Rosa Rojas Testimony, Tr. pp. 37-38. 34 Rosa Rojas Testimony, Tr. pp. 63-64. 35 Salvador Sifuentes Testimony, Tr. p. 79. 36 Salvador Sifuentes Testimony, Tr. p. 79. 0848911000006 375 - 1704437vl EXHIBIT B 1255 A true Independent LVNs and RNs are in Contractor is the control of their own master of his or her schedule. 41 own time and works the days and hours he or she chooses. 7. Set Hours of Work: An employee has set hours or work established by an employer. An independent contractor is the master of his or her own time. 8. Full Time While providing Able to work at other Can work for other LVNs are Can refuse an Required: services for Health hospitals other than placement companies subcontractors. They assignment from An Employee Force, she worked for the ones Health Force (like Health Force) work when they want, Health Force. 51 ordinarily devotes other companies. 42 offered assignments wherever she wants. 47 if they want, and full-time service to at.45 where they want. 49 the employer, or the Not committed to Can apply at hospitals employer may have a accepting Has worked at places not associated with Could have worked priority on the assignments from other than those Health Force. 48 for other placement employee's time. Health Force. 43 assignments offered companies or A true Independent by Health Force. 46 hospitals. 50 Contractor carmot be Could say "yes" or required to devote "no" to a shift offered full-time service to by Health Force. 44 one firm exclusively. 37 Erika Chapman Testimony, Tr. pp. 55-57. 38 Kay Strahan Testimony, Tr. pp. 38, 43-44. 39 Rosa Rojas Testimony, Tr. pp. 37-38. 40 Rosa Rojas Testimony, Tr. pp. 37-38. 41 Rosa Rojas Testimony, Tr. pp. 64-65. 42 Patricia Sabala Testimony, Tr. p. 50. 43 Patricia Sabala Testimony, Tr. pp. 43-45. 44 Patricia Sabala Testimony, Tr. p. 62. 45 Salvador Sifuentes Testimony, Tr. p. 77. 46 Salvador Sifuentes Testimony, Tr. p. 77. 47 Erika Chapman Testimony, Tr. pp. 53-54. 48 Erika Chapman Testimony, Tr. p. 54. 49 Kay Strahan Testimony, Tr. p. 69. 5 °Kay Strahan Testimony, Tr. pp. 77-78. 51 Rosa Rojas Testimony, Tr. pp. 37-38. 0848911000006 375 - 1704437vl EXHIBIT B 1256 8. Full Time Work: An employee normally works full time for an employer. An independent contractor can work when and for whom he or she chooses. Nurses are worker 30, 40, and even 60 hours a week this constitutes full time. 9. Location where Could say "yes" or Has worked at places Health Force would LVNs are Can tell Health Force services 12erformed. "no" to a shift offered other than those contact LVNs orRNs subcontractors. They Where she is going to Employment is by Health Force. 52 assignments offered about different work when they want, work.6o indicated if the by Health Force. 54 assignments. 56 Could if they want, and employer has the right Never performed any refuse a shift or where they want. 59 Can refuse an to mandate where LVN services or Never provided assignment. 57 assignment from serv1ces are other work at Health services at Health Health Force. 61 performed. Force's office. 53 Force's company Never performed Independent office. 55 services at Health Can work for other Contractors Force's office. 58 hospitals that do not ordinarily work where have a contract with they choose. The Health Force. 62 workplace may be away from the client's premises. 9. Work Done on Premises: An employee works on the premises of an employer, or works on a route or at a location designated by an employer. 52 Patricia Sabala Testimony, Tr. p. 62. 53 Patricia Sabala Testimony, Tr. p. 53. 54 Salvador Sifuentes Testimony, Tr. p. 77. 55 Salvador Sifuentes Testimony, Tr. p. 81. 56 Erika Chapman Testimony, Tr. p. 19. 57 Erika Chapman Testimony, Tr. pp. 29-30. 58 Erika Chapman Testimony, Tr. p. 59. 59 Kay Strahan Testimony, Tr. p. 69. 60 Rosa Rojas Testimony, Tr. pp. 66. 61 Rosa Rojas Testimony, Tr. pp. 37-38. 62 Rosa Rojas Testimony, Tr. pp. 63-64. 0848911000006 375 - 1704437vl EXHIBIT B 1257 10. Orderor Instructions regarding Health Force does not Health Force does not Health Force does not Doctors at the Seguence Set: a LVN's work come supervise a RN s' supervise the LVN s direct LVN s how to facilities/hospitals had An Employee from the hospital and work.64 or RNs at the do their job. 66 the final say on how performs services in its doctors, not Health facilities. 65 patients are treated. 67 the order or sequence Force. 63 set by the employer. This shows control by the employer. A true Independent Contractor is concerned only with the finished product and sets his or her own order or sequence of work. 10. Order or Seguence Set: Employee must perform services in the order or sequence set by an employer. This shows that the employee is subject to direction and control. Nurses are not permitted to follow his/her own pattern of work but rather must follow the established routines/schedules of the facilities. 11. Oral or Written No requirement that a Only required to Other than time Reports regarding Reports: weekly or monthly report time and sheets, not required to patient status updates An Employee may be report was turned into licensing to Health submit any reports to were provided to required to submit Health Force. 68 Force. 70 Health Force. 71 hospital staff and regular oral or written doctors, not Health reports about the work Only time sheets Force. 72 in progress. were turned in. 69 An Independent Contractor is usually 63 Patricia Sabala Testimony, Tr. pp. 48, 59. 64 Salvador Sifuentes Testimony, Tr. p. 80. 65 Erika Chapman Testimony, Tr. pp. 57-58. 66 Kay Strahan Testimony, Tr. pp. 131-132. 67 Rosa Rojas Testimony, Tr. p. 54. 68 Patricia Sabala Testimony, Tr. p. 58. 69 Patricia Sabala Testimony, Tr. pp. 57-58. 70 Salvador Sifuentes Testimony, Tr. p. 60. 71 Erika Chapman Testimony, Tr. pp. 40-41. 72 Rosa Rojas Testimony, Tr. pp. 54-55. 0848911000006 375 - 1704437vl EXHIBIT B 1258 not required to submit regular oral or written reports about the work in progress. ll. Re11orts: Employee submits reports to an employer. This shows that the employee must account to the employer for his or her actions. 12. Payment by the Hospitals pay Health Hospitals pay Health Hospitals pay Tochril Hour, Week or Force and Health Force and Health and Tochril pays the Month: Force pays the RNs. Force pays the LVN s LVN s after taking out An Employee is Health Force keeps or RNs, after keeping a referral fee. 76 typically paid by the some of the money a fee. 74 employer in regular paid by hospitals. 73 amounts at stated Rate of pay could be intervals, such as by different based on the the hour or week. hospital assignment. 75 An Independent Contractor is normally paid by the job either a negotiated flat rate or upon submission of a bid. 12. Payments: Employees are paid by the hour, week or month. Nurses are paid through Health Force. 13. Payment of Health Force never Registered nurses Deducted business Health Force does not Pays for her own Business & Travel provided uniforms, utilized by Health expenses on federal pay for CPR and business expenses, Ex11enses: equipment, Force pay for their tax returns. 80 LVN licenses. 82 including gas and An Employee's medication, or other own expenses. 78 car. 84 business and travel items that were used Never submitted Provides his own expenses are either to work as a LVN. 77 He has deducted his business expenses for transportation. Not She has deducted paid directly or expenses on federal reimbursement form reimbursed for any expenses on her reimbursed by the tax returns, including Health Force. 81 business expenses by federal tax return, employer. such items as Health Force. 83 including for mileage, Independent uniforms, uniforms, and Contractors normally stethoscopes, cellphone. 85 pay all of their own cellphone, continuing 73 Salvador Sifuentes Testimony, Tr. pp. 74-75. 74 Erika Chapman Testimony, Tr. pp. 67-68. 75 Erika Chapman Testimony, Tr. p. 71. 76 Kay Strahan Testimony, Tr. p. 37. 77 Patricia Sabala Testimony, Tr. p. 54. 78 Salvador Sifuentes Testimony, Tr. pp. 84-85. 0848911000006 375 - 1704437vl EXHIBIT B 1259 business and travel education classes, expenses without CPR certification, reimbursement. license fees, and mileage. 79 13. Ex11enses: An employee's business and travel expenses are paid by an employer. This shows that the employee is subject to regulation and control. 14. Furnishing Tools Health Force never Deducted uniform, Purchased own Provides his own Deducted uniform and & Egui11ment: provided uniforms, cellphone,and equipment, including transportation. Not cellphone on federal Employees are equipment, stethoscope on federal blood pressure cuff, reimbursed for any tax return. 91 furnished all medication, or other tax returns. Health stethoscope, and fax business expenses by necessary tools, items that were used Force does not machine. 88 Health Force. 90 materials and to work as a LVN. 86 provide these items. 87 equipment by their Deducted uniform, employer. stethoscope, and other An Independent expenses on her Contractor ordinarily federal tax return. 89 provides all of the tools and equipment necessary to complete the job. 14. Tools and Materials: An employee is furnished significant tools, materials, and other equipment by an employer. 80 Erika Chapman Testimony, Tr. p. 64. 81 Erika Chapman Testimony, Tr. p. 65. 82 Kay Strahan Testimony, Tr. p. 97. 83 Kay Strahan Testimony, Tr. p. 54. 84 Rosa Rojas Testimony, Tr. p. 47. 85 Rosa Rojas Testimony, Tr. p. 72. 79 Salvador Sifuentes Testimony, Tr. pp. 87-88. 86 Patricia Sabala Testimony, Tr. p. 54. 87 Salvador Sifuentes Testimony, Tr. pp. 87-88. 88 Erika Chapman Testimony, Tr. pp. 38-39. 89 Erika Chapman Testimony, Tr. pp. 64. 9 °Kay Strahan Testimony, Tr. p. 54. 91 Rosa Rojas Testimony, Tr. p. 72. 0848911000006 375 - 1704437vl EXHIBIT B 1260 15. Significant Purchased uniforms, Purchased a Purchased equipment, Invests in business by Pays for her own Investment: equipment (a stethoscope and including blood buying uniforms, business expenses, An Employee stethoscope), and cellphone for work as pressure cuff, cellphone, blood including gas and generally has little or other items that were a registered nurse. 94 stethoscope, and fax pressure cuff, car. 100 no investment in the used to work as a machine. 97 stethoscope, and business. Instead, an LVN. 92 Provides his own shoes. 98 She has deducted Employee is transportation. 95 expenses on her economically She paid for licenses Provides own federal tax return, dependent on the LVN s are required to He has deducted his transportation to including for mileage, employer. have. 93 expenses on federal assignments. 99 uniforms, and True Independent tax returns, including cellphone. 101 Contractors usually such items as have a substantial uniforms, financial investment stethoscopes, in their independent cellphone, continuing business. education classes, 15. Investment: An CPR certification, independent license fees, and contractor has a mileage. 96 significant investment in the facilities he/she uses in performing services for someone else. 16. Realize Profit or If her shift was He would incur a loss If her shift was Could lose money if Took a loss and end Loss: cancelled by a for the day if a shift cancelled, she was hospital cancels her up paying back An Employee does hospital, it could was cancelled. 103 only paid for 2 hours. shift. 105 taxes. 106 not ordinarily realize result in a loss for the She considers this to a profit or loss in the day. 102 be a loss for the business. Rather, day.1o4 Employees are paid for services rendered. 92 Patricia Sabala Testimony, Tr. pp. 39, 54. 93 Patricia Sabala Testimony, Tr. p. 58. 94 Salvador Sifuentes Testimony, Tr. p. 56. 95 Salvador Sifuentes Testimony, Tr. p. 54. 96 Salvador Sifuentes Testimony, Tr. pp. 87-88. 97 Erika Chapman Testimony, Tr. pp. 38-39. 98 Kay Strahan Testimony, Tr. pp. 56-58. 99 Kay Strahan Testimony, Tr. p. 54. 100 Rosa Rojas Testimony, Tr. p. 47. 101 Rosa Rojas Testimony, Tr. p. 72. 102 Patricia Sabala Testimony, Tr. pp. 53-54. 103 Salvador Sifuentes Testimony, Tr. p. 81. 104 Erika Chapman Testimony, Tr. pp. 69-70. 105 Kay Strahan Testimony, Tr. pp. 94-95. 106 Rosa Rojas Testimony, Tr. pp. 32-33. 0848911000006 375 - 1704437vl EXHIBIT B 1261 An Independent Contractor can either realize a profit or suffer a loss depending on the management of expenses and revenues. 16. Profit or Loss: An independent contractor can make a profit or suffer a loss. 17. Working For While providing Has worked at places Can work for other LVNs are Can work for other More Than One Firm services for Health other than those placement companies subcontractors. They hospitals that do not At A Time: Force, she worked for assignments offered (like Health Force) work when they want, have a contract with An Employee other companies. 107 by Health Force. 108 wherever she if they want, and Health Force. 114 ordinarily works for wants. 109 where they want. 112 one employer at a time and may be Can apply at hospitals Could have worked prohibited from not associated with for other placement joining a competitor. Health Force. 110 companies or An Independent hospitals. 113 Contractor often Never worked works for more than exclusively for Health one client or firm at Force.m the same time and is not subject to a non- competition rule. 17. Works For More Than One Person or Firm: An independent contractor gives his/her services to two or more unrelated persons or firms at the same time. 107 Patricia Sabala Testimony, Tr. p. 50. 108 Salvador Sifuentes Testimony, Tr. p. 77. 109 Erika Chapman Testimony, Tr. p. 53-54. 110 Erika Chapman Testimony, Tr. p. 54. 111 Erika Chapman Testimony, Tr. p. 67. 112 Kay Strahan Testimony, Tr. p. 69. 113 Kay Strahan Testimony, Tr. pp. 77-78. 114 Rosa Rojas Testimony, Tr. pp. 63-64. 0848911000006 375 - 1704437vl EXHIBIT B 1262 18. Making Service He could spend his Does not spend No advertising Available to the own money on money on advertising, budget. He will Public: advertising, but but that is her sometimes buy gifts An Employee does chooses not to. 115 decision. 116 for coworkers as a not make his or her form of services available to advertising. 117 the public except through the employer's company. An Independent Contractor may advertise, carry business cards, hand out a shingle or hold a separate business license. 18. Offer Services to General Public: An independent contractor makes his/her services available to the general public or more unrelated persons or firms at the same time. 19. Right to Discharge Without Liability: ill. An Employee can be discharged at any time without liability on the employer's part. If the work meets the contract terms, an Independent Contractor carmot be fired without liability for breach of contract. 19. Right to Fire: An employee can be fired by an employer. An 115 Salvador Sifuentes Testimony, Tr. p. 85. 116 Erika Chapman Testimony, Tr. p. 76. 117 Kay Strahan Testimony, Tr. pp. 40-41. 118 At the Rule 13 hearing, Health Force's CEO Holly Alonzo testified: 13 Q. If you were to discharge a nurse in the middle of the job, could that nurse 14 sue your company and hold you financially liable? 15 A. We don't discharge, so, they are aware that there is no relationship; just 16 come and go, work as you please. February 19, 2009 Holly Alonzo Rule 13 Hearing Testimony, Tr. p. 39, attached as Exhibit F; 2013 Response p. 27. 0848911000006 375 - 1704437vl EXHIBIT B 1263 independent contractor cannot be fired so long as he or she produces a result that meets the specifications of the contract. 20. Right To Quit Once an assignment is Without Liabili!J'.: 119 accepted, a LVN or An Employee may RN is expected to quit work at any time perform. 120 without liability on the Employee's part. An Independent Contractor is legally responsible for job completion and, on quitting, becomes liable for breach of contract. 20. Right To Quit: An employee can quit his/her job at any time without incurring liability. An independent contractor usually agrees to complete a specific job and is responsible for its satisfactory completion, or is legally obligated to make good for failure to complete it. 119 At the Rule 13 hearing, Health Force's CEO Holly Alonzo testified: 25 Q. Ifthe worker accepts a shift as offered by the hospital, is that worker 1 expected to work that shift? 2 A. They're expected, but, that, at many times, cannot happen, or does not happen. 3 They have the right to accept a shift and cancel it. 4 Q. What happens if they do cancel? 5 A. They don't get paid, obviously, for the shift, but, there's no repercussions 6 as far as discipline. *** 9 Q. If a nurse quits in the middle of the job, can your company sue that nurse and 10 hold that nurse financially liable? 11 A. No. But, I mean, as a licensed individual, they can get in big trouble; it's 12 abandonment of patients. But, you know, that's through the state. February 19, 2009 Holly Alonzo Rule 13 Hearing Testimony, Tr. pp. 37-39, attached as Exhibit F; 2013 Response p. 28. 120 Rosa Rojas Testimony, Tr. p. 38. 0848911000006 375 - 1704437vl EXHIBIT B 1264 0848911000006 375 - 1704437vl EXHIBIT B 1265 DC BK15252 PG1272 Filed in The District Court of Travis County, Texas CAUSE NO. D-1-GN-09-001957 TOCHRIL, INC., IN THE DISTRICT COURT Plaintiff, v. 53rd JUDICIAL DISTRICT TEXAS WORKFORCE COMMISSION, TRAVIS COUNTY, TEXAS Defendants. ORDERS ON THE TEXAS WORKFORCE COMMISSION'S OBJECTIONS TO PLAINTIFF'S SUMMARY JUDGMENT EVIDENCE After considering the Texas Workforce Commission's (TWC) objections to Plaintiffs summary-judgment evidence, the Court orders as follows: I. OBJECTIONS TO PAGES 13-28 OF PLAINTIFF'S RESPONSE TO MOTION FOR SUMMARY JUDGMENT. A. Statements attributed to Alonzo and Pappillion do not reference summary judgment evidence. The TWC object to Plaintiffs attempt to introduce evidence in its response to the TWC motion for summary judgment that is not supported by references to admissible summary judgment evidence. No statement by Alonzo or Pappillion include citations to specific supporting evidence. A party cannot rely on factual statements contained in its own motion for summary judgment as proof. 1 A party may not use general citations to support a summary judgment 1 Hidalgo v. Surety S&L Ass 'n, 462 S.W.2d 540, 545 (Tex. 1971 ). /~·-- .. :.-... j_ :.i\ '.) j I _/. 1505 DC BK15252 PG1273 motion. 2 When presenting summary-judgment proof, a party must specifically identify the supporting proof that it wants the court to consider; generally referencing the documents does not relieve the party of pointing out to the court where in the documents the evidence can be found. 3 Courts must not consider summary judgment evidence that is offered without guidance as to where specific support can be found. 4 For summary judgment evidence to be considered, the motion should at least have a substantial number of citations to that evidence. 5 The Alonzo and Pappillion columns do not include any citations to evidence whatsoever. Because the statements contained in those columns do not contain citations to evidence as required, the TWC objects to and move to strike those columns from Plaintiffs response to the TWC's motion for summary judgment. ORDER:_L Sustained Overruled- - - B. Alonzo and Pappillion have not provided proper witness statements. The TWC objects to the Alonzo and Pappillion columns on the grounds that the statements contained therein do not qualify as an affidavit or an unsworn declaration and thus are incompetent summary-judgment evidence. The statements attributed to Alonzo 2 Rogers v. Ricane Enters., Inc., 772 S.W.2d 76, 81 (Tex. 1989). 3 Arredondo v. Rodriguez, 198 S.W.3d 236,238-39 (Tex. App.-San Antonio 2006, no pet.). 4 Guthrie v. Suiter, 934 S.W.2d 820, 826 (Tex. App.-Houston [1st Dist.] 1996, no pet.). 5 Barraza v. Eureka Co., 25 S.W.3d 225, 229-30 (Tex. App.-EI Paso 2000, pet. denied) 2 1506 DC BK15252 PG1274 and Pappillion do not comply with Texas Government Code section 312.011(1), which defines an affidavit as "a statement in writing of a fact or facts signed by the party making it, sworn to before an officer authorized to administer oaths, and officially certified to by the officer under his seal of office. " 6 The statements also fails as an unsworn declaration because it does not comply with Texas Civil Practice & Remedies Code section 132.001 because none are made under penalty of perjury. Because the Alonzo and Pappillion columns are a series of unsworn statements, they are not competent summary-judgment proof. 7 Because the statements are not competent summary-judgment proof, the TWC objects to those statements and moves to strike them. ORDER:_j Sustained Overruled- - - C. Objections to summary of testimony under Tex. R. Evid. 1006 The TWC further objects to Plaintiff's use of summaries instead of specific citations to summary judgment evidence. On page 13, footnote 30, Plaintiff explains that, pursuant to Tex. R. Evid. 1006, it is not providing citations to summary judgment evidence from a hearing on its administrative appeal before the TWC because the transcript is too voluminous. Instead, Plaintiff summarizes Alonzo's and Pappillion's testimony from that hearing and presents that summary in the chart on pages 13-28. 6 Mansions in the Forest, L.P. v. Montgomery Cnty., 365 S.W.3d 314,316-17 (Tex. 2012). 7 Jd; Perkins v. Crittenden, 462 S.W.2d 565, 568 (Tex. 1970). 3 1507 DC BK15252 PG1275 Rule 1006 applies to documents, not testimony. 8 ORDER: I Sustained~ Overruled- - - Also, the evidence Plaintiff attempts to summarize 1s testimony Alonzo and Pappillion provided under oath. Any "summary" of that testimony is hearsay. Hearsay statements are not competent summary-judgment evidence. 9 ORDER: Sustained- - - Overruled- - - In addition, allowing Plaintiff to take advantage of Rule 1006 in this fashion would undermine long-standing rules requiring parties to specifically cite summary judgment evidence. When presenting summary-judgment proof, a party must specifically identify the supporting proof that it wants the court to consider. 10 Summaries do not excuse Plaintiff of its obligation to specifically identify evidence that supports its arguments. ORDER: Sustained _L Overruled- - - 8 United States v. Winn, 948 F .2d 145, 158 (5th Cir. 1991) (Summary of purely testimonial evidence is not within purview of rule which provides that contents of voluminous writings, may be presented in form of chart, summary or calculation.) 9 Kerlin v. Arias, 274 S. W.3d 666, 668 (Tex. 2008); Southland Corp. v. Lewis, 940 S. W.2d 83, 85 (Tex. 1997); Fid & Cas. Co. v. Burts Bros., 744 S.W.2d 219, 224 (Tex. App.-Houston [1st Dist.] 1987, writ denied). 10 Arredondo v. Rodriguez, 198 S.W.3d 236, 238-39 (Tex. App.-San Antonio 2006, no pet.). 1508 DC BK15252 PG1276 Finally, even if Rule 1006 applied to transcripts of testimony, to take advantage of Rule 1006, Plaintiff must prove that records are (1) voluminous; (2) have been made available to the opponent for inspection; and (3) are admissible. II Plaintiff has established none of these elements. Thus it cannot rely on Rule 1006, even if that rule applied to testimony offered as summary judgment evidence. ORDER: Sustained / Overruled- - - / ~ f'o (} l'}oi,.J lL ~? D. Alonzo and Pappillion have not demonstrated that they ave personal J' \' \ knowledge of the relevant facts. fl"ei?J d v The statements by Alonzo and Pappillion fail to establis at the facts related to the ~a-~ providers' work are within Alonzo's and Pappillion' ersonal knowledge. A witnesses' &t ~~o( status cannot establish personal knowled . 2 Neither Alonzo nor Pappillion have ( J\) ."~1'1 \,.,• established that they have any perso knowledge of the provider's working condition. 13 ~? -of \~' (/jt The TWC objects to s ements made by Alonzo and Pappillion on the ground that ovj e.-~~~ the testimony is not b ed on personal knowledge. Testimony is not competent summary- ~0 y Y"vJV nee unless evidence shows that it is based on the witness's personal G 11 Duncan Dev., Inc. v. Haney, 634 S.W.2d 811, 812-13 (Tex. 1982) @ 12 Spradlin v. State, 100 S.W.3d 372,381, (Tex.App.-Houston [1st Dist.] 2002, no pet.). 13 Tex. R. Civ. P. 166a. 14 Tex. R. Civ. P. 166a(f); Tex. R. Evid. 602; Kerlin v. Arias, 274 S.W.3d 666,668 (Tex. 2008); Ryland Grp., Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996); Garner v. Long, 106 S.W.3d 260,267 (Tex. App.-Fort Worth 2003, no pet.); Geiselman v. Cramer Fin. Grp., Inc., 965 S.W.2d 532, 537 (Tex. App.-Houston [14th Dist.] 1997, no writ). 1509 DC BK15252 PG1277 II. OBJECTIONS TO DECLARATION OF MICHAEL SEALE Exhibit A to Plaintiffs response to the TWC's motion for summary judgment is an affidavit of Plaintiffs counsel, Michael Seale. It does not present competent summary judgment evidence for the following reasons. A. The Court should strike the Seale affidavit because a party's attorney cannot act as a witness regarding disputed factual matters. The TWC objects to the Seale affidavit on the grounds that the testimony of Plaintiffs attorney is not proper summary-judgment evidence. A person who is an attorney for one of the parties cannot act as a witness about disputed factual matters. 64 In paragraph 3 of Seale's declaration, he makes statements regarding an Internal Revenue Service audit of Plaintiff. In paragraph 4 of the Seale declaration, he makes statements regarding a Department of Labor investigation of Plaintiff. Based on those paragraphs, Plaintiff argues that there is a fact issue as to whether the TWC properly classified the providers as Plaintiffs employees. Because Seale's statements are not competent summary-judgment evidence, the Court should strike them. ORDER:L sustained B. ~Xicroverruled a.~ -1-o \c. IJ f(l" « H ~ CJ 0 lz\\J_- cHl t J 25. Health Force reported no wages for me because I am not ()() }- a.£.-hJfl,\J)' an employee and did not earn wages. {"G Cc ', Vc::... J, / « ORDER:L b t_ )'\ 'fz:, I Sustained Overruled- - - B. The Declarations contain factual conclusions. The TWC objects to statements made in the Exhibit E declarations on the ground that they contain factual conclusions. A factual conclusion without supporting facts is not competent summary-judgment evidence. 69 Because these statements are not competent summary-judgment evidence, the Court should strike them. 6. I work for myself and consider Health Force to be my agent and marketing tool because Health Force brings me work opportunities without any effort on my part. ORDER:L Sustained Overruled" - - - 69 See Ryland Grp., Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996) (affidavits); Hovorka v. Cmty. Health Sys., Inc., 262 S.W.3d 503,511 (Tex. App.--El Paso 2008, no pet.) (deposition testimony); see, e.g., Haynes v. City of Beaumont, 35 S.W.3d 166, 178 (Tex. App.-Texarkana 2000, no pet.) (affidavit that plaintiff was fired because of unacceptable behavior was factual conclusion and incompetent as summary-judgment evidence); Rizkallah v. Conner, 952 S.W.2d 580,587-88 (Tex. App.-Houston [1st Dist.] 1997, no writ) (affidavit that defendant caused problem with plaintiff's car by steam cleaning engine was factual conclusion and incompetent as summary- judgment evidence). II 1515 DC BK15252 PG1283 8 I am responsible for my own profits and losses. ORDER: (' I\ II , l{ I .r '"'t... :f (IV'l">: ~ ~ """c:. , (\. '> c..' ~ \-r s. 0 • . I Sustained Overruled v/ ; ~ fl"~ .. Y\ ... h-/~Ac_ )'lit"> ~orN.- C{,t, J, b c. md uc.J- +-o C(f-l..-c..c....~- i: nc.o ~ flo+ 10. I did not agree to a set t~e period for providing my :pro~~' J- services to Health Force's clients. ~. ORDER: Sustained- - - Overruled / 0£j 11. I am allowed to perform services as an independent contractor for companies that are not clients of Health Force. I am not required to perform services for clients ORDER: +o a.~ I /i~J~!'t\J~.rt rOverruled L of Heath Force on a full-time basis. Sustaine~ L a~ h.<- f'"v- \ ~ t: e6'"f\-\l ctc:. 't1 r 14. Health Force does not set or require that I work a particular schedule for performing my services. ORDER: Sustained- - - Overruled _L 17. Health Force does not supervise my performances of services. / ORDER: Sustained- - - Overruled___JL_ IZ-- 1516 DC BK15252 PG1284 18. Health Force does not have the right to control the details of or the manner in which I perform my services. Health Force cannot delegate control over the details of or the manner in which I perform my services. ORDER: Sustained I Overruled- - - 21. Health Force does not require me to personally perform my services. I can hire additional or substitute persons to perform services for Health Force's clients or assist me in providing the services. ORDER: Sustained I Overruled I 1517 DC BK15240 PG794 Filed in The D!st;ict Court of Travis County, Texas AUG 2 6 2015 0- CAUSE NO. D-1-GN-09-001957 At__}_///{ ~(I Veiva L. Price, District Clerk TOCHRIL, INC., IN THE DISTRICT COURT Plaintiff, v. 53rct JUDICIAL DISTRICT TEXAS WORKFORCE COMMISSION, TRAVIS COUNTY, TEXAS Defendants. ORDER GRANTING TEXAS WORKFORCE COMMISSION'S MOTION FOR SUMMARY JUDGMENT On August 20, 2015, the Court considered the Texas Workforce Commission's (TWC) Motion for Summary Judgment. After considering the summary judgment evidence, arguments presented, the pleadings, the response, the reply, the affidavits, the objections and other evidence on file, the Court GRANTS the TWC's motion for summary judgment. IT IS THEREFORE, ORDERED, ADJUDGED AND DECREED that the TWC's Motion for Summary Judgment is GRANTED; that Plaintifftakes nothing on any claim against the TWC; and that Plaintiff's case is dismissed, in its entirety, with prejudice. All costs shall be borne by the party incurring same. This is a final judgment disposing of all claims and all parties. All other relief not herein granted is denie SIGNED this day, A., z~ , vn ...:;;.-~;;:,1~~=---J'-+-_ ____,r--- 2_o_Is_. 111111111111111111111111111111111111111111111111111 \Ill 004186315 1518 § 815.134. Employment Status: Employee or Independent..., 40 TX ADC § 815.134 KeyCite Yellow Flag - Negative Treatment Proposed Regulation Texas Administrative Code Title 40. Social Services and Assistance Part 20. Texas Workforce Commission Chapter 815. Unemployment Insurance Subchapter C. Tax Provisions 40 TAC § 815.134 Tex. Admin. Code tit. 40, § 815.134 § 815.134. Employment Status: Employee or Independent Contractor Currentness Subject to specific inclusions and exceptions to employment enumerated in Chapter 201 of the Act, the Commission shall use the guidelines referenced in § 821.5 of this title as the official guidelines for use in determining employment status. Credits Source: The provisions of this § 815.134 adopted to be effective February 19, 2007, 32 TexReg 628. Current through 40 Tex.Reg. No. 9012, dated December 11, 2015, as effective on or before December 18, 2015 40 TAC § 815.134, 40 TX ADC § 815.134 End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works. © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 § 821.5. Employment Status: Employee or Independent Contractor, 40 TX ADC § 821.5 KeyCite Yellow Flag - Negative Treatment Proposed Regulation Texas Administrative Code Title 40. Social Services and Assistance Part 20. Texas Workforce Commission Chapter 821. Texas Payday Rules Subchapter A. General Provisions 40 TAC § 821.5 Tex. Admin. Code tit. 40, § 821.5 § 821.5. Employment Status: Employee or Independent Contractor Currentness The Commission adopts the following form, Form C-8, as its official guideline for use in determining employment status. © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 § 821.5. Employment Status: Employee or Independent Contractor, 40 TX ADC § 821.5 Credits Source: The provisions of this § 821.5 adopted to be effective June 1, 1998, 23 TexReg 5732; amended to be effective March 13, 2007, 32 TexReg 1328. Current through 40 Tex.Reg. No. 9012, dated December 11, 2015, as effective on or before December 18, 2015 40 TAC § 821.5, 40 TX ADC § 821.5 End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works. © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2 Rule 166a. Summary Judgment, TX R RCP Rule 166a Vernon's Texas Rules Annotated Texas Rules of Civil Procedure Part II. Rules of Practice in District and County Courts Section 8. Pre-Trial Procedure (Refs & Annos) TX Rules of Civil Procedure, Rule 166a Rule 166a. Summary Judgment Currentness (a) For Claimant. A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory judgment may, at any time after the adverse party has appeared or answered, move with or without supporting affidavits for a summary judgment in his favor upon all or any part thereof. A summary judgment, interlocutory in character, may be rendered on the issue of liability alone although there is a genuine issue as to amount of damages. (b) For Defending Party. A party against whom a claim, counterclaim, or cross-claim is asserted or a declaratory judgment is sought may, at any time, move with or without supporting affidavits for a summary judgment in his favor as to all or any part thereof. (c) Motion and Proceedings Thereon. The motion for summary judgment shall state the specific grounds therefor. Except on leave of court, with notice to opposing counsel, the motion and any supporting affidavits shall be filed and served at least twenty-one days before the time specified for hearing. Except on leave of court, the adverse party, not later than seven days prior to the day of hearing may file and serve opposing affidavits or other written response. No oral testimony shall be received at the hearing. The judgment sought shall be rendered forthwith if (i) the deposition transcripts, interrogatory answers, and other discovery responses referenced or set forth in the motion or response, and (ii) the pleadings, admissions, affidavits, stipulations of the parties, and authenticated or certified public records, if any, on file at the time of the hearing, or filed thereafter and before judgment with permission of the court, show that, except as to the amount of damages, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law on the issues expressly set out in the motion or in an answer or any other response. Issues not expressly presented to the trial court by written motion, answer or other response shall not be considered on appeal as grounds for reversal. A summary judgment may be based on uncontroverted testimonial evidence of an interested witness, or of an expert witness as to subject matter concerning which the trier of fact must be guided solely by the opinion testimony of experts, if the evidence is clear, positive and direct, otherwise credible and free from contradictions and inconsistencies, and could have been readily controverted. (d) Appendices, References and Other Use of Discovery Not Otherwise on File. Discovery products not on file with the clerk may be used as summary judgment evidence if copies of the material, appendices containing the evidence, or a notice containing specific references to the discovery or specific references to other instruments, are filed and served on all parties together with a statement of intent to use the specified discovery as summary judgment proofs: (i) at least twenty-one days before the hearing if such proofs are to be used to support the summary judgment; or (ii) at least seven days before the hearing if such proofs are to be used to oppose the summary judgment. (e) Case not Fully Adjudicated on Motion. If summary judgment is not rendered upon the whole case or for all the relief asked and a trial is necessary, the judge may at the hearing examine the pleadings and the evidence on file, interrogate counsel, © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 Rule 166a. Summary Judgment, TX R RCP Rule 166a ascertain what material fact issues exist and make an order specifying the facts that are established as a matter of law, and directing such further proceedings in the action as are just. (f) Form of Affidavits; Further Testimony. Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith. The court may permit affidavits to be supplemented or opposed by depositions or by further affidavits. Defects in the form of affidavits or attachments will not be grounds for reversal unless specifically pointed out by objection by an opposing party with opportunity, but refusal, to amend. (g) When Affidavits Are Unavailable. Should it appear from the affidavits of a party opposing the motion that he cannot for reasons stated present by affidavit facts essential to justify his opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just. (h) Affidavits Made in Bad Faith. Should it appear to the satisfaction of the court at any time that any of the affidavits presented pursuant to this rule are presented in bad faith or solely for the purpose of delay, the court shall forthwith order the party employing them to pay to the other party the amount of the reasonable expenses which the filing of the affidavits caused him to incur, including reasonable attorney's fees, and any offending party or attorney may be adjudged guilty of contempt. (i) No-Evidence Motion. After adequate time for discovery, a party without presenting summary judgment evidence may move for summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial. The motion must state the elements as to which there is no evidence. The court must grant the motion unless the respondent produces summary judgment evidence raising a genuine issue of material fact. Credits Oct. 12, 1949, eff. March 1, 1950. Amended by orders of Oct. 1, 1951, eff. March 1, 1952; July 20, 1966, eff. Jan. 1, 1967; July 21, 1970, eff. Jan. 1, 1971; July 11, 1977, eff. Jan. 1, 1978; June 10, 1980, eff. Jan. 1, 1981; Dec. 5, 1983, eff. April 1, 1984; July 15, 1987, eff. Jan. 1, 1988; April 24, 1990, eff. Sept. 1, 1990; Aug. 15, 1997, eff. Sept. 1, 1997. Notes of Decisions (8188) Vernon's Ann. Texas Rules Civ. Proc., Rule 166a, TX R RCP Rule 166a Rules of Civil Procedure, Rules of Evidence, and Rules of Appellate Procedure are current with amendments received through September 1, 2015. Bar Rules, Rules of Disciplinary Procedure, Code of Judicial Conduct, and Rules of Judicial Administration are current with amendments received through September 1, 2015. Other state court rules and selected county rules are current with rules verified through June 1, 2015. End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works. © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2 Rule 1006. Summaries to Prove Content, TX R EVID Rule 1006 Vernon's Texas Rules Annotated Texas Rules of Evidence (Refs & Annos) Article X. Contents of Writings, Recordings, and Photographs (Refs & Annos) TX Rules of Evidence, Rule 1006 Rule 1006. Summaries to Prove Content Currentness The proponent may use a summary, chart, or calculation to prove the content of voluminous writings, recordings, or photographs that cannot be conveniently examined in court. The proponent must make the originals or duplicates available for examination or copying, or both, by other parties at a reasonable time and place. And the court may order the proponent to produce them in court. Credits Eff. March 1, 1998. Amended by orders of Supreme Court March 10, 2015 and Court of Criminal Appeals March 12, 2015, eff. April 1, 2015. Notes of Decisions (16) Rules of Evid., Rule 1006, TX R EVID Rule 1006 Rules of Civil Procedure, Rules of Evidence, and Rules of Appellate Procedure are current with amendments received through September 1, 2015. Bar Rules, Rules of Disciplinary Procedure, Code of Judicial Conduct, and Rules of Judicial Administration are current with amendments received through September 1, 2015. Other state court rules and selected county rules are current with rules verified through June 1, 2015. End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works. © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 § 639.3 Definitions., 20 C.F.R. § 639.3 Code of Federal Regulations Title 20. Employees' Benefits Chapter V. Employment and Training Administration, Department of Labor Part 639. Worker Adjustment and Retraining Notification (Refs & Annos) 20 C.F.R. § 639.3 § 639.3 Definitions. Currentness (a) Employer. (1) The term “employer” means any business enterprise that employs— (i) 100 or more employees, excluding part-time employees; or (ii) 100 or more employees, including part-time employees, who in the aggregate work at least 4,000 hours per week, exclusive of hours of overtime. Workers on temporary layoff or on leave who have a reasonable expectation of recall are counted as employees. An employee has a “reasonable expectation of recall” when he/she understands, through notification or through industry practice, that his/her employment with the employer has been temporarily interrupted and that he/she will be recalled to the same or to a similar job. The term “employer” includes non-profit organizations of the requisite size. Regular Federal, State, local and federally recognized Indian tribal governments are not covered. However, the term “employer” includes public and quasi-public entities which engage in business (i.e., take part in a commercial or industrial enterprise, supply a service or good on a mercantile basis, or provide independent management of public assets, raising revenue and making desired investments), and which are separately organized from the regular government, which have their own governing bodies and which have independent authority to manage their personnel and assets. (2) Under existing legal rules, independent contractors and subsidiaries which are wholly or partially owned by a parent company are treated as separate employers or as a part of the parent or contracting company depending upon the degree of their independence from the parent. Some of the factors to be considered in making this determination are (i) common ownership, (ii) common directors and/or officers, (iii) de facto exercise of control, (iv) unity of personnel policies emanating from a common source, and (v) the dependency of operations. (3) Workers, other than part-time workers, who are exempt from notice under section 4 of WARN are nonetheless counted as employees for purposes of determining coverage as an employer. (4) An employer may have one or more sites of employment under common ownership or control. An example would be a major auto maker which has dozens of automobile plants throughout the country. Each plant would be considered a site of employment, but there is only one “employer”, the auto maker. © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 § 639.3 Definitions., 20 C.F.R. § 639.3 (b) Plant closing. The term “plant closing” means the permanent or temporary shutdown of a “single site of employment”, or one or more “facilities or operating units” within a single site of employment, if the shutdown results in an “employment loss” during any 30–day period at the single site of employment for 50 or more employees, excluding any part-time employees. An employment action that results in the effective cessation of production or the work performed by a unit, even if a few employees remain, is a shutdown. A “temporary shutdown” triggers the notice requirement only if there are a sufficient number of terminations, layoffs exceeding 6 months, or reductions in hours of work as specified under the definition of “employment loss.” (c) Mass layoff. (1) The term “mass layoff” means a reduction in force which first, is not the result of a plant closing, and second, results in an employment loss at the single site of employment during any 30–day period for: (i) At least 33 percent of the active employees, excluding part-time employees, and (ii) At least 50 employees, excluding part-time employees. Where 500 or more employees (excluding part-time employees) are affected, the 33% requirement does not apply, and notice is required if the other criteria are met. Plant closings involve employment loss which results from the shutdown of one or more distinct units within a single site or the entire site. A mass layoff involves employment loss, regardless of whether one or more units are shut down at the site. (2) Workers, other than part-time workers, who are exempt from notice under section 4 of WARN are nonetheless counted as employees for purposes of determining coverage as a plant closing or mass layoff. For example, if an employer closes a temporary project on which 10 permanent and 40 temporary workers are employed, a covered plant closing has occurred although only 10 workers are entitled to notice. (d) Representative. The term “representative” means an exclusive representative of employees within the meaning of section 9(a) or 8(f) of the National Labor Relations Act or section 2 of the Railway Labor Act. (e) Affected employees. The term “affected employees” means employees who may reasonably be expected to experience an employment loss as a consequence of a proposed plant closing or mass layoff by their employer. This includes individually identifiable employees who will likely lose their jobs because of bumping rights or other factors, to the extent that such individual workers reasonably can be identified at the time notice is required to be given. The term “affected employees” includes managerial and supervisory employees, but does not include business partners. Consultant or contract employees who have a separate employment relationship with another employer and are paid by that other employer, or who are self-employed, are not “affected employees” of the business to which they are assigned. In addition, for purposes of determining whether coverage thresholds are met, either incumbent workers in jobs being eliminated or, if known 60 days in advance, the actual employees who suffer an employment loss may be counted. (f) Employment loss. © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2 § 639.3 Definitions., 20 C.F.R. § 639.3 (1) The term “employment loss” means (i) an employment termination, other than a discharge for cause, voluntary departure, or retirement, (ii) a layoff exceeding 6 months, or (iii) a reduction in hours of work of individual employees of more than 50% during each month of any 6–month period. (2) Where a termination or a layoff (see paragraphs (f)(1)(i) and (ii) of this section) is involved, an employment loss does not occur when an employee is reassigned or transferred to employer-sponsored programs, such as retraining or job search activities, as long as the reassignment does not constitute a constructive discharge or other involuntary termination. (3) An employee is not considered to have experienced an employment loss if the closing or layoff is the result of the relocation or consolidation of part or all of the employer's business and, prior to the closing or layoff— (i) The employer offers to transfer the employee to a different site of employment within a reasonable commuting distance with no more than a 6–month break in employment, or (ii) The employer offers to transfer the employee to any other site of employment regardless of distance with no more than a 6–month break in employment, and the employee accepts within 30 days of the offer or of the closing or layoff, whichever is later. (4) A “relocation or consolidation” of part or all of an employer's business, for purposes of paragraph § 639.3(h)(4), means that some definable business, whether customer orders, product lines, or operations, is transferred to a different site of employment and that transfer results in a plant closing or mass layoff. (g) Unit of local government. The term “unit of local government” means any general purpose political subdivision of a State, which has the power to levy taxes and spend funds and which also has general corporate and police powers. When a covered employment site is located in more than one unit of local government, the employer must give notice to the unit to which it determines it directly paid the highest taxes for the year preceding the year for which the determination is made. All local taxes directly paid to the local government should be aggregated for this purpose. (h) Part-time employee. The term “part-time” employee means an employee who is employed for an average of fewer than 20 hours per week or who has been employed for fewer than 6 of the 12 months preceding the date on which notice is required, including workers who work full-time. This term may include workers who would traditionally be understood as “seasonal” employees. The period to be used for calculating whether a worker has worked “an average of fewer than 20 hours per week” is the shorter of the actual time the worker has been employed or the most recent 90 days. (i) Single site of employment. (1) A single site of employment can refer to either a single location or a group of contiguous locations. Groups of structures which form a campus or industrial park, or separate facilities across the street from one another, may be considered a single site of employment. © 2015 Thomson Reuters. No claim to original U.S. Government Works. 3 § 639.3 Definitions., 20 C.F.R. § 639.3 (2) There may be several single sites of employment within a single building, such as an office building, if separate employers conduct activities within such a building. For example, an office building housing 50 different businesses will contain 50 single sites of employment. The offices of each employer will be its single site of employment. (3) Separate buildings or areas which are not directly connected or in immediate proximity may be considered a single site of employment if they are in reasonable geographic proximity, used for the same purpose, and share the same staff and equipment. An example is an employer who manages a number of warehouses in an area but who regularly shifts or rotates the same employees from one building to another. (4) Non-contiguous sites in the same geographic area which do not share the same staff or operational purpose should not be considered a single site. For example, assembly plants which are located on opposite sides of a town and which are managed by a single employer are separate sites if they employ different workers. (5) Contiguous buildings owned by the same employer which have separate management, produce different products, and have separate workforces are considered separate single sites of employment. (6) For workers whose primary duties require travel from point to point, who are outstationed, or whose primary duties involve work outside any of the employer's regular employment sites (e.g., railroad workers, bus drivers, salespersons), the single site of employment to which they are assigned as their home base, from which their work is assigned, or to which they report will be the single site in which they are covered for WARN purposes. (7) Foreign sites of employment are not covered under WARN. U.S. workers at such sites are counted to determine whether an employer is covered as an employer under § 639.3(a). (8) The term “single site of employment” may also apply to truly unusual organizational situations where the above criteria do not reasonably apply. The application of this definition with the intent to evade the purpose of the Act to provide notice is not acceptable. (j) Facility or operating unit. The term “facility” refers to a building or buildings. The term “operating unit” refers to an organizationally or operationally distinct product, operation, or specific work function within or across facilities at the single site. (k) State dislocated worker unit. The term “State dislocated worker unit” means a unit designated or created in each State by the Governor under title III of the Job Training Partnership Act, as amended by EDWAA. (l) State. For the purpose of WARN, the term “State” includes the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands. SOURCE: 54 FR 16064, April 20, 1989, unless otherwise noted. AUTHORITY: 29 U.S.C. 2107(a). © 2015 Thomson Reuters. No claim to original U.S. Government Works. 4 § 639.3 Definitions., 20 C.F.R. § 639.3 Notes of Decisions (226) Current through December 24, 2015; 80 FR 80290. End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works. © 2015 Thomson Reuters. No claim to original U.S. Government Works. 5 20 Common Law Factors Rev. Rul. 87-41, 1987-1 CB 296 ISSUE predecessor or affiliated corporation of the Client) at any time preceding the time at which In the situations described below, are the the Individual begins performing services for the individuals employees under the common law Client. Also, the Individual has not been an rules for purposes of the Federal Insurance employee of or performed services for or on Contributions Act (FICA), the Federal behalf of the Firm at any time preceding the time Unemployment Tax Act (FUTA), and the at which the Individual begins performing Collection of Income Tax at Source on Wages services for the Client. The Individual's contract (chapters 21, 23, and 24 respectively, subtitle C, with the Firm states that the Individual is an Internal Revenue Code)? These situations independent contractor with respect to services illustrate the application of section 530(d) of the performed on behalf of the Firm for the Client. Revenue Act of 1978, 1978-3 (Vol. 1) C.B. 119 (the 1978 Act), which was added by section The Individual and the other programmers 1706(a) of the Tax Reform Act of 1986, 1986- 3 perform the services under the Firm's contract (Vol. 1) C.B. 698 (the 1986 Act) (generally with the Client. During the time the Individual is effective for services performed and performing services for the Client, even though remuneration paid after December 31, 1986). the Individual retains the right to perform services for other persons, substantially all of the FACTS Individual's working time is devoted to In each factual situation, an individual worker performing services for the Client. A significant (Individual), pursuant to an arrangement portion of the services are performed on the between one person (Firm) and another person Client's premises. The Individual reports to the (Client), provides services for the Client as an Firm by accounting for time worked and engineer, designer, drafter, computer describing the progress of the work. The Firm programmer, systems analyst, or other similarly pays the Individual and regularly charges the skilled worker engaged in a similar line of work. Client for the services performed by the Situation 1 Individual. The Firm generally does not pay individuals who perform services for the Client The Firm is engaged in the business of providing unless the Firm provided such individuals to the temporary technical services to its clients. The Client. Firm maintains a roster of workers who are available to provide technical services to The work of the Individual and other prospective clients. The Firm does not train the programmers is regularly reviewed by the Firm. workers but determines the services that the The review is based primarily on reports by the workers are qualified to perform based on Client about the performance of these workers. information submitted by the workers. Under the contract between the Individual and the Firm, the Firm may terminate its relationship The Firm has entered into a contract with the with the Individual if the review shows that he Client. The contract states that the Firm is to or she is failing to perform the services provide the Client with workers to perform contracted for by the Client. Also, the Firm will computer programming services meeting replace the Individual with another worker if the specified qualifications for a particular project. Individual's services are unacceptable to the The Individual, a computer programmer, enters Client. In such a case, however, the Individual into a contract with the Firm to perform services will nevertheless receive his or her hourly pay as a computer programmer for the Client's for the work completed. project, which is expected to last less than one year. The Individual is one of several Finally, under the contract between the programmers provided by the Firm to the Client. Individual and the Firm, the Individual is The Individual has not been an employee of or prohibited from performing services directly for performed services for the Client (or any the Client and, under the contract between the Firm and the Client, the Client is prohibited payment made by the Client to the Individual from receiving services from the Individual for a reduces the amount of the fee that the Client is period of three months following the termination otherwise required to pay the Firm. The of services by the Individual for the Client on Individual is performing services that can be behalf of the Firm. accomplished without the Individual's receiving direction or control as to hours, place of work, Situation 2 sequence, or details of work. The Firm is a technical services firm that Situation 3 supplies clients with technical personnel. The Client requires the services of a systems analyst The Firm, a company engaged in furnishing to complete a project and contacts the Firm to client firms with technical personnel, is obtain such an analyst. The Firm maintains a contacted by the Client, who is in need of the roster of analysts and refers such an analyst, the services of a drafter for a particular project, Individual, to the Client. The Individual is not which is expected to last less than one year. The restricted by the Client or the Firm from Firm recruits the Individual to perform the providing services to the general public while drafting services for the Client. The Individual performing services for the Client and in fact performs substantially all of the services for the does perform substantial services for other Client at the office of the Client, using materials persons during the period the Individual is and equipment of the Client. The services are working for the Client. Neither the Firm nor the performed under the supervision of employees Client has priority on the services of the of the Client. The Individual reports to the Client Individual. The Individual does not report, on a regular basis. The Individual is paid by the directly or indirectly, to the Firm after the Firm based on the number of hours the beginning of the assignment to the Client Individual has worked for the Client, as reported concerning (1) hours worked by the Individual, to the Firm by the Client or as reported by the (2) progress on the job, or (3) expenses incurred Individual and confirmed by the Client. The by the Individual in performing services for the Firm has no obligation to pay the Individual if Client. No reports (including reports of time the Firm does not receive payment for the worked or progress on the job) made by the Individual's services from the Client. For Individual to the Client are provided by the recruiting the Individual for the Client, the Firm Client to the Firm. receives a flat fee that is fixed prior to the Individual's commencement of services for the If the Individual ceases providing services for Client and is unrelated to the number of hours the Client prior to completion of the project or if and quality of work performed by the Individual. the Individual's work product is otherwise However, the Firm does receive a reasonable fee unsatisfactory, the Client may seek damages for performing the payroll function. The Firm from the Individual. However, in such may not direct the work of the Individual and circumstances, the Client may not seek damages has no responsibility for the work performed by from the Firm, and the Firm is not required to the Individual. The Firm may not terminate the replace the Individual. The Firm may not services of the Individual. The Client may terminate the services of the Individual while he terminate the services of the Individual without or she is performing services for the Client and liability to either the Individual or the Firm. The may not otherwise affect the relationship Individual is permitted to work for another firm between the Client and the Individual. Neither while performing services for the Client, but the Individual nor the Client is prohibited for does in fact work for the Client on a any period after termination of the Individual's substantially full-time basis. services on this job from contracting directly with the other. For referring the Individual to the LAW AND ANALYSIS Client, the Firm receives a flat fee that is fixed This ruling provides guidance concerning the prior to the Individual's commencement of factors that are used to determine whether an services for the Client and is unrelated to the employment relationship exists between the number of hours and quality of work performed Individual and the Firm for federal employment by the Individual. The Individual is not paid by tax purposes and applies those factors to the the Firm either directly or indirectly. No given factual situations to determine whether the Individual is an employee of the Firm for such other than that of employer and employee is purposes. The ruling does not reach any immaterial. Thus, if such a relationship exists, it conclusions concerning whether an employment is of no consequence that the employee is relationship for federal employment tax designated as a partner, coadventurer, agent, purposes exists between the Individual and the independent contractor, or the like. Client in any of the factual situations. As an aid to determining whether an individual Analysis of the preceding three fact situations is an employee under the common law rules, requires an examination of the common law twenty factors or elements have been identified rules for determining whether the Individual is as indicating whether sufficient control is an employee with respect to either the Firm or present to establish an employer- employee the Client, a determination of whether the Firm relationship. The twenty factors have been or the Client qualifies for employment tax relief developed based on an examination of cases and under section 530(a) of the 1978 Act, and a rulings considering whether an individual is an determination of whether any such relief is employee. The degree of importance of each denied the Firm under section 530(d) of the factor varies depending on the occupation and 1978 Act (added by section 1706 of the 1986 the factual context in which the services are Act). performed. The twenty factors are designed only as guides for determining whether an individual An individual is an employee for federal is an employee; special scrutiny is required in employment tax purposes if the individual has applying the twenty factors to assure that the status of an employee under the usual formalistic aspects of an arrangement designed common law rules applicable in determining the to achieve a particular status do not obscure the employer-employee relationship. Guides for substance of the arrangement (that is, whether determining that status are found in the the person or persons for whom the services are following three substantially similar sections of performed exercise sufficient control over the the Employment Tax Regulations: sections individual for the individual to be classified as 31.3121(d)-1(c); 31.3306(i)- 1; and 31.3401(c)- an employee). The twenty factors are described 1. below: These sections provide that generally the 1. Instructions. A worker who is required to relationship of employer and employee exists comply with other persons' instructions about when the person or persons for whom the when, where, and how he or she is to work is services are performed have the right to control ordinarily an employee. This control factor is and direct the individual who performs the present if the person or persons for whom the services, not only as to the result to be services are performed have the right to require accomplished by the work but also as to the compliance with instructions. See, for example, details and means by which that result is Rev. Rul. 68-598, 1968-2 C.B. 464, and Rev. accomplished. That is, an employee is subject to Rul. 66- 381, 1966-2 C.B. 449. the will and control of the employer not only as to what shall be done but as to how it shall be 2. Training. Training a worker by requiring an done. In this connection, it is not necessary that experienced employee to work with the worker, the employer actually direct or control the by corresponding with the worker, by requiring manner in which the services are performed; it is the worker to attend meetings, or by using other sufficient if the employer has the right to do so. methods, indicates that the person or persons for whom the services are performed want the Conversely, these sections provide, in part, that services performed in a particular method or individuals (such as physicians, lawyers, manner. See Rev. Rul. 70-630, 1970-2 C.B. 229. dentists, contractors, and subcontractors) who follow an independent trade, business, or 3. Integration. Integration of the worker's profession, in which they offer their services to services into the business operations generally the public, generally are not employees. shows that the worker is subject to direction and control. When the success or continuation of a Finally, if the relationship of employer and business depends to an appreciable degree upon employee exists, the designation or description the performance of certain services, the workers of the relationship by the parties as anything who perform those services must necessarily be subject to a certain amount of control by the off the premises of the person or persons owner of the business. See United States v. Silk, receiving the services, such as at the office of 331 U.S. 704 (1947), 1947-2 C.B. 167. the worker, indicates some freedom from control. However, this fact by itself does not 4. Services Rendered Personally. If the services mean that the worker is not an employee. The must be rendered personally, presumably the importance of this factor depends on the nature person or persons for whom the services are of the service involved and the extent to which performed are interested in the methods used to an employer generally would require that accomplish the work as well as in the results. employees perform such services on the See Rev. Rul. 55-695, 1955-2 C.B. 410. employer's premises. Control over the place of 5. Hiring, Supervising, and Paying Assistants. If work is indicated when the person or persons for the person or persons for whom the services are whom the services are performed have the right performed hire, supervise, and pay assistants, to compel the worker to travel a designated that factor generally shows control over the route, to canvass a territory within a certain workers on the job. However, if one worker time, or to work at specific places as required. hires, supervises, and pays the other assistants See Rev. Rul. 56-694. pursuant to a contract under which the worker 10. Order or Sequence Set. If a worker must agrees to provide materials and labor and under perform services in the order or sequence set by which the worker is responsible only for the the person or persons for whom the services are attainment of a result, this factor indicates an performed, that factor shows that the worker is independent contractor status. Compare Rev. not free to follow the worker's own pattern of Rul. 63-115, 1963-1 C.B. 178, with Rev. Rul. work but must follow the established routines 55-593, 1955-2 C.B. 610. and schedules of the person or persons for whom 6. Continuing Relationship. A continuing the services are performed. Often, because of the relationship between the worker and the person nature of an occupation, the person or persons or persons for whom the services are performed for whom the services are performed do not set indicates that an employer-employee the order of the services or set the order relationship exists. A continuing relationship infrequently. It is sufficient to show control, may exist where work is performed at frequently however, if such person or persons retain the recurring although irregular intervals. See right to do so. See Rev. Rul. 56-694. United States v. Silk. 11. Oral or Written Reports. A requirement that 7. Set Hours of Work. The establishment of set the worker submit regular or written reports to hours of work by the person or persons for the person or persons for whom the services are whom the services are performed is a factor performed indicates a degree of control. See indicating control. See Rev. Rul. 73-591, 1973-2 Rev. Rul. 70-309, 1970-1 C.B. 199, and Rev. C.B. 337. Rul. 68- 248, 1968-1 C.B. 431. 8. Full Time Required. If the worker must 12. Payment by Hour, Week, Month. Payment by devote substantially full time to the business of the hour, week, or month generally points to an the person or persons for whom the services are employer-employee relationship, provided that performed, such person or persons have control this method of payment is not just a convenient over the amount of time the worker spends way of paying a lump sum agreed upon as the working and impliedly restrict the worker from cost of a job. Payment made by the job or on a doing other gainful work. An independent straight commission generally indicates that the contractor, on the other hand, is free to work worker is an independent contractor. See Rev. when and for whom he or she chooses. See Rev. Rul. 74-389, 1974-2 C.B. 330. Rul. 56- 694, 1956-2 C.B. 694. 13. Payment of Business and/or Traveling 9. Doing Work on Employer's Premises. If the Expenses. If the person or persons for whom the work is performed on the premises of the person services are performed ordinarily pay the or persons for whom the services are performed, worker's business and/or traveling expenses, the that factor suggests control over the worker, worker is ordinarily an employee. An employer, especially if the work could be done elsewhere. to be able to control expenses, generally retains Rev. Rul. 56-660, 1956-2 C.B. 693. Work done the right to regulate and direct the worker's business activities. See Rev. Rul. 55-144, 1955- 18. Making Service Available to General Public. 1 C.B. 483. The fact that a worker makes his or her services available to the general public on a regular and 14. Furnishing of Tools and Materials. The fact consistent basis indicates an independent that the person or persons for whom the services contractor relationship. See Rev. Rul. 56-660. are performed furnish significant tools, materials, and other equipment tends to show the 19. Right to Discharge. The right to discharge a existence of an employer- employee worker is a factor indicating that the worker is relationship. See Rev. Rul. 71-524, 1971-2 C.B. an employee and the person possessing the right 346. is an employer. An employer exercises control through the threat of dismissal, which causes the 15. Significant Investment. If the worker invests worker to obey the employer's instructions. An in facilities that are used by the worker in independent contractor, on the other hand, performing services and are not typically cannot be fired so long as the independent maintained by employees (such as the contractor produces a result that meets the maintenance of an office rented at fair value contract specifications. Rev. Rul. 75-41, 1975-1 from an unrelated party), that factor tends to C.B. 323. indicate that the worker is an independent contractor. On the other hand, lack of investment 20. Right to Terminate. If the worker has the in facilities indicates dependence on the person right to end his or her relationship with the or persons for whom the services are performed person for whom the services are performed at for such facilities and, accordingly, the existence any time he or she wishes without incurring of an employer-employee relationship. See Rev. liability, that factor indicates an employer- Rul. 71-524. Special scrutiny is required with employee relationship. See Rev. Rul. 70-309. respect to certain types of facilities, such as Rev. Rul. 75-41 considers the employment tax home offices. status of individuals performing services for a 16. Realization of Profit or Loss. A worker who physician's professional service corporation. The can realize a profit or suffer a loss as a result of corporation is in the business of providing a the worker's services (in addition to the profit or variety of services to professional people and loss ordinarily realized by employees) is firms (subscribers), including the services of generally an independent contractor, but the secretaries, nurses, dental hygienists, and other worker who cannot is an employee. See Rev. similarly trained personnel. The individuals who Rul. 70-309. For example, if the worker is are to perform the services are recruited by the subject to a real risk of economic loss due to corporation, paid by the corporation, assigned to significant investments or a bona fide liability jobs, and provided with employee benefits by for expenses, such as salary payments to the corporation. Individuals who enter into unrelated employees, that factor indicates that contracts with the corporation agree they will the worker is an independent contractor. The not contract directly with any subscriber to risk that a worker will not receive payment for which they are assigned for at least three months his or her services, however, is common to both after cessation of their contracts with the independent contractors and employees and thus corporation. The corporation assigns the does not constitute a sufficient economic risk to individual to the subscriber to work on the support treatment as an independent contractor. subscriber's premises with the subscriber's equipment. Subscribers have the right to require 17. Working for More Than One Firm at a Time. that an individual furnished by the corporation If a worker performs more than de minimis cease providing services to them, and they have services for a multiple of unrelated persons or the further right to have such individual replaced firms at the same time, that factor generally by the corporation within a reasonable period of indicates that the worker is an independent time, but the subscribers have no right to affect contractor. See Rev. Rul. 70-572, 1970-2 C.B. the contract between the individual and the 221. However, a worker who performs services corporation. The corporation retains the right to for more than one person may be an employee of discharge the individuals at any time. Rev. Rul. each of the persons, especially where such 75-41 concludes that the individuals are persons are part of the same service arrangement. employees of the corporation for federal The determination of whether any individual employment tax purposes. who is treated as an employee holds a position substantially similar to the position held by an Rev. Rul. 70-309 considers the employment tax individual whom the taxpayer would otherwise status of certain individuals who perform be permitted to treat as other than an employee services as oil well pumpers for a corporation for employment tax purposes under section under contracts that characterize such 530(a) of the 1978 Act requires an examination individuals as independent contractors. Even of all the facts and circumstances, including though the pumpers perform their services away particularly the activities and functions from the headquarters of the corporation and are performed by the individuals. Differences in the not given day-to-day directions and instructions, positions held by the respective individuals that the ruling concludes that the pumpers are result from the taxpayer's treatment of one employees of the corporation because the individual as an employee and the other pumpers perform their services pursuant to an individual as other than an employee (for arrangement that gives the corporation the right example, that the former individual is a to exercise whatever control is necessary to participant in the taxpayer's qualified pension assure proper performance of the services; the plan or health plan and the latter individual is pumpers' services are both necessary and not a participant in either) are to be disregarded incident to the business conducted by the in determining whether the individuals hold corporation; and the pumpers are not engaged in substantially similar positions. an independent enterprise in which they assume the usual business risks, but rather work in the Section 1706(a) of the 1986 Act added to section course of the corporation's trade or business. See 530 of the 1978 Act a new subsection (d), which also Rev. Rul. 70-630, 1970-2 C.B. 229, which provides an exception with respect to the considers the employment tax status of treatment of certain workers. Section 530(d) salesclerks furnished by an employee service provides that section 530 shall not apply in the company to a retail store to perform temporary case of an individual who, pursuant to an services for the store. arrangement between the taxpayer and another person, provides services for such other person Section 530(a) of the 1978 Act, as amended by as an engineer, designer, drafter, computer section 269(c) of the Tax Equity and Fiscal programmer, systems analyst, or other similarly Responsibility Act of 1982, 1982-2 C.B. 462, skilled worker engaged in a similar line of work. 536, provides, for purposes of the employment Section 530(d) of the 1978 Act does not affect taxes under subtitle C of the Code, that if a the determination of whether such workers are taxpayer did not treat an individual as an employees under the common law rules. Rather, employee for any period, then the individual it merely eliminates the employment tax relief shall be deemed not to be an employee, unless under section 530(a) of the 1978 Act that would the taxpayer had no reasonable basis for not otherwise be available to a taxpayer with respect treating the individual as an employee. For any to those workers who are determined to be period after December 31, 1978, this relief employees of the taxpayer under the usual applies only if both of the following consistency common law rules. Section 530(d) applies to rules are satisfied: (1) all federal tax returns remuneration paid and services rendered after (including information returns) required to be December 31, 1986. filed by the taxpayer with respect to the individual for the period are filed on a basis The Conference Report on the 1986 Act consistent with the taxpayer's treatment of the discusses the effect of section 530(d) as follows: individual as not being an employee (“reporting The Senate amendment applies whether the consistency rule”), and (2) the taxpayer (and any services of [technical service workers] are predecessor) has not treated any individual provided by the firm to only one client during holding a substantially similar position as an the year or to more than one client, and whether employee for purposes of the employment taxes or not such individuals have been designated or for periods beginning after December 31, 1977 treated by the technical services firm as (“substantive consistency rule”). independent contractors, sole proprietors, partners, or employees of a personal service corporation controlled by such individual. The The analysis would not differ if the facts of effect of the provision cannot be avoided by Situation 1 were changed to state that the claims that such technical service personnel are Individual provided the technical services employees of personal service corporations through a personal service corporation owned by controlled by such personnel. For example, an the Individual. engineer retained by a technical services firm to In Situation 2, the Firm does not retain any right provide services to a manufacturer cannot avoid to control the performance of the services by the the effect of this provision by organizing a Individual and, thus, no employment corporation that he or she controls and then relationship exists between the Individual and claiming to provide services as an employee of the Firm. that corporation. In Situation 3, the Firm does not control the . . . [T]he provision does not apply with respect performance of the services of the Individual, to individuals who are classified, under the and the Firm has no right to affect the generally applicable common law standards, as relationship between the Client and the employees of a business that is a client of the Individual. Consequently, no employment technical services firm. relationship exists between the Firm and the 2 H.R. Rep. No. 99-841 (Conf. Rep.), 99th Individual. Cong., 2d Sess. II-834 to 835 (1986). HOLDINGS Under the facts of Situation 1, the legal Situation 1. The Individual is an employee of the relationship is between the Firm and the Firm under the common law rules. Relief under Individual, and the Firm retains the right of section 530 of the 1978 Act is not available to control to insure that the services are performed the Firm because of the provisions of section in a satisfactory fashion. The fact that the Client 530(d). may also exercise some degree of control over the Individual does not indicate that the Situation 2. The Individual is not an employee of individual is not an employee. Therefore, in the Firm under the common law rules. Situation 1, the Individual is an employee of the Situation 3. The Individual is not an employee of Firm under the common law rules. The facts in the Firm under the common law rules. Situation 1 involve an arrangement among the Individual, Firm, and Client, and the services Because of the application of section 530(b) of provided by the Individual are technical the 1978 Act, no inference should be drawn with services. Accordingly, the Firm is denied section respect to whether the Individual in Situations 2 530 relief under section 530(d) of the 1978 Act and 3 is an employee of the Client for federal (as added by section 1706 of the 1986 Act), and employment tax purposes. no relief is available with respect to any employment tax liability incurred in Situation 1.