S.E.A. Trucking v. Dept. of Labor , 51 State Rptr. 1479 ( 1994 )

No. 93-606
IN THE SUPREME COURT OF THE STATE OF MONTANA
1994
S.E.A. TRUCKING
Petitioner and Appellant,
-v-
THE STATE OF MONTANA, bv and throush
the Department of ~abor-and the ~o&d
of Labor Appeals, and THE MONTANa DK 22 1994
DEPARTMENT OF LABOR AND INDUSTRY 3 , r d d .I
Sunith
Respondents and Respondents CLERKOF SUPREME COURT
STATE OF MONTANA
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable John W. Larson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Patrick G. Frank and W. Carl Mendenhall, Worden,
Thane & Haines, Missoula, Montana
For Respondent:
Daniel B. McGregor, Montana Department of Labor &
Industry, Helena, Montana
For Amicus State Compensation Mutual Insurance Fund:
Stephen M. Frankino, Hughes, Kellner, Sullivan &
Alke, Helena, Montana
Submitted on Briefs: August 25, 1994
~ ~ ~ i d December 22, 1994
~ d :
Filed:
Justice James C. Nelson delivered the Opinion of the Court.
This is an appeal from a Fourth Judicial District Court,
Missoula County, order on a petition for judicial review, affirming
the Board of Labor Appeals' decision that SEA's base of operations
has been in Missoula, Montana, since June of 1988, and hence, SEA
should have been reporting its employees' wages to the State of
Montana for the purpose of unemployment insurance. We affirm.
The sole issue on appeal is whether the District Court
correctly affirmed the Board of Labor Appeals' decision that SEA's
base of operations was in Missoula, Montana, and therefore, the
corporation should have been reporting its employees' wages and
paying unemployment insurance to the State of Montana.
FACTUAL AND PROCEDURAL BACKGROUND
SEA, a motor carrier, was incorporated in July of 1988 in the
State of Wyoming. Robert Evers (Evers), of Casper, Wyoming, owned
51% of the corporation and Stan Spencer (Spencer), of Missoula,
Montana, owned 49% of the corporation. SEA, a =-licensed carrier
leased 20 over-the-road hauling trucks from Allstate, a Minnesota
company, and then re-leased the trucks to Bitterroot International
Systems, Inc. (Bitterroot), a motor carrier solely owned by
Spencer. Bitterroot is a federallv licensed motor carrier with its
headquarters in Missoula, Montana. SEA leased exclusively to
Bitterroot but Bitterroot had lease agreements with other
individual carriers in addition to SEA.
In July and August of 1990, because of a concern that proper
unemployment insurance coverage was not being provided to SEA
2
employees, SEA was audited by the Unemployment Insurance Division
of the Department of Labor and Industry (DO11 of the State of
Montana to determine whether drivers and their wages should be
reported to the state of Wyoming, as SEA claims, or the state of
Montana. On September 7, 1990, the Department determined that the
wages of SEA'S drivers should have been reported in Montana under
Bitterroot's account because the DOLI had determined that SEA
drivers were Montana workers employed by Bitterroot. SEA requested
a redetermination of the decision, and on December 10, 1990, the
initial determination was sustained.
SEA appealed this determination to the Department's Hearing
Examiner who heard the case on May 21, 1991, and on January 2 9 ,
1992, issued his decision reversing the initial determination that
SEA'S drivers should have been reported as Bitterroot employees,
but he sustained the determination that SEA should have been
reporting their driversf wages to Montana, rather than Wyoming.
This decision was appealed to the Department's Board of Labor
Appeals (Board), and on March 30, 1992, the Board adopted the
Hearing Examiner's Findings and Conclusions. SEA sought judicial
review in the Fourth Judicial District Court of the Board's
decision. The District Court affirmed the decision of the Board in
an Opinion and Order on the Petition for Judicial Review on October
22, 1993. In affirming the Board's affirmance of the Hearing
Examiner's Findings of Fact, the District Court particularly
addressed and subsequently modified certain findings which SEA
contended were either irrelevant or not supported by the evidence.
These findings, as amended by the District Court, state:
4. SEA rented a small administrative off ice/sbop facility
in Casper, Wyoming where Evers and his secretary worked.
The firm also rented space from the Bitterroot
International Systems Complex in Missoula . . . , All trucks
were dispatched . . . in Missoula. SEA assigned a manager to
the Missoula terminal to supervise . . . the drivers . . . . The
Missoula manager was able to conveniently confer with
Spencer since their offices were Located in the same
building.
5. The terminal manager advertised job openings,
interviewed and hired the drivers out of Missoula. Due
to the geographical location of the Missoula terminal,
nearly all of the drivers were Montana residents.
According to the 1989 W-2 forms issued by SEA, 146 out of
160 drivers on the payroll were Montana residents with
Montana drivers licenses.
6 . SEA processed its payroll records in its Montana
facility . . . . While business files were kept at the
Casper office, most, if not all, such data was a
duplication of records compiled and maintained in the
Missoula terminal.
SEA now requests that this Court review the decision of the Hearing
Examiner and the subsequent reviews of that decision, including
that of the District Court.
STANDARD OF REVIEW
The correct standard of review in the instant case is set out
in g 39-51-2410(5) and ( 6 ) , MCA, and provides:
( 5 ) In any judicial proceeding under 39-51-2406
through 39-51-2410, the findings of the board as to the
facts, if supported by evidence and in the absence of
fraud, shall be conclusive and the jurisdiction of said
court shall be confined to questions of law. . . .
( 6 ) An appeal may be taken from the decision of the
district court to the supreme court of Montana in the
same manner, but not inconsistent with the provisions of
this chapter, as is provided in civil cases....
We have stated that:
[slupported by the evidence means supported by
substantial evidence, which is 'something more than a
scintilla of evidence, but may be less than a
preponderance of the evidence.'
Potter v. Dept. of Labor and Industry (1993), 258 Mont. 476, 479,
853 P.2d 1207, 1209. (Citation omitted.) Moreover, in Potter, we
stated that "the District: Court must limit its review of the
Board's findings to a consideration of whether they are supported
by substantial evidence, and the same standard applies to this
Court. With regard to questions of law, however, our task is to
determine whether the agency's interpretation of the law is
correct." Potter, 853 P.2d at 1209. (Citations omitted.)
Further, we have stated that:
"The court is not permitted to balance conflicting
evidence in support of and in opposition to the [Board's]
findings of fact, nor to determine which is the more
substantial evidence, nor to consider where the
preponderance of evidence lies; for to do so would be to
substitute the Court's view of the evidence for that of
the [Board,] and effectively nullify the conclusive
character of the [Board's] findings of fact as provided
by statute. I'
Thus, the reviewing court must decide whether
substantial evidence supports the Board's decision and
not whether on the same evidence it would have arrived at
the same conclusion.
Ward v. Johnson (1990), 242 Mont. 225, 228, 790 P.2d 483, 485.
(Citations omitted.)
DISCUSSION
ISSUES OF FACT
SEA argues that substantial evidence does not exist to support
certain of the agency's findings which supported the conclusion
that SEA'S base of operations was in Montana. After a careful
review of the transcript, we conclude that substantial evidence
supports the Hearing Examiner's Findings of Fact as amended by the
5
District Court.
There was testimony presented to the effect that SEA had
office space in Missoula, trucks were dispatched out of Missoula,
and all drivers were supervised by the manager of SEA, Jhan
Sorensen, who worked out of the Missoula office. Moreover,
testimony was presented that it was the Missoula manager who
maintained day-to-day contact and communication with the drivers
from his Missoula office; he also prepared payroll in Missoula.
Further, the majority of the SEA workforce were Montana residents.
Testimony also demonstrated that the interview process for the
hiring of drivers was a job shared between Evers in Wyoming and
Sorensen in Montana although the positions were advertised out of
Missoula, and the final hiring of drivers was accomplished in
Montana. All testing of drivers occurred solely in Montana through
Bitterroot by virtue of its Interstate Commerce Commission license.
Finally, there was testimony that 40% of the maintenance on trucks
occurred in Montana, according to Allstate's instructions.
Although SEA argued that many activities were performed in Missoula
because the agencies with which SEA contracts, Bitterroot and
Allstate, required that these activities occur there, that does not
change the fact that these activities did occur in Montana and they
are activities basic to the operation of a trucking company.
Clearly, substantial evidence supports the findings of fact at
issue here. Furthermore, as stated above:
"The court is not permitted to balance conflicting
evidence in support of and in opposition to the [Board's]
findings of fact, nor to determine which is the more
substantial evidence, nor to consider where the
preponderance of evidence lies; for to do so would be to
substitute the Court's view of the evidence for that of
I
the [Board, and effectively nullify the conclusive
character of the [Board's] findings of fact as provided
by statute."
Thus, the reviewing court must decide whether
substantial evidence supports the Board's decision and
not whether on the same evidence it would have arrived at
the same conclusion.
Ward, 790 P.2d at 485. (Citations omitted.)
We conclude that substantial evidence supports the Findings of
Fact made by the Hearing Examiner and modified by the District
Court. We hold that the District Court did not err in affirming
the Hearing Examiner's Findings of Fact which were challenged by
the Appellant.
ISSUES OF LAW
The Findings of Fact also support the conclusion that SEA'S
base of operations was in Missoula, Montana, from the inception of
the corporation, and therefore, the employees' wages should have
been reported to the State of Montana's Unemployment Insurance
Division. Both parties agree that the statute to be applied in
determining whether SEA employees' wages should be reported to the
State of Montana is § 39-51-203, MCA, and particularly
subsection ( 2 ) (a)(ii)(A), which provides :
( 2 ) (a) The term l'employment" includes an
individual's entire service performed within or both
within and without this state if:
(ii) the service is not localized in any state but
some of the service is performed in this state and:
(A) the base of operations or, if there is no base
of operations, then the place from which such service is
directed or controlled, is in this state.. . .
The portion of the statute which is at issue in the instant
case is subsection (ii)(A), which premises the place of employment
in Montana on a company's "base of operations." If SEA'S "base of
operations1' is in Montana, then the place of employment is in
Montana, and the employees' wages should be reported to and
unemployment insurance premiums paid to the Unemployment Insurance
Division in the State of Montana. In order to determine whether
SEA employees' wages should have been reported to Montana and not
Wyoming, the company's base of operations would have to be in
Missoula, Montana.
The DOLI used the following definition of "base of operations"
in its determination. "Base of operations," which, as stated
above, is the essential element at issue in the case, was defined
as:
. . . the place of more or less permanent nature
from which the employee starts his work and to which he
customarily returns to perform the terms of his contract
with his employer, to seek other employment or to apply
for unemployment benefits.
The Department states that this definition was taken from a U.S.
Department of Labor Unemployment Insurance Program Letter # 291,
dated July 1, 1952, which purports to explain "employment for
employers employing in several states." The letter contains four
tests for determining whether an employee is covered by Montana
unemployment law, one of the tests being the "base of operations"
test which is at issue here. We note that the letter also states
that the tests apply to the emplovees, not the employer.
The District Court applied a definition for "base of
operations," from a Montana regulation, which is similar to the
DOLI1s definition and provides:
[tlhe term "base of operations" is the place of more
or less permanent nature from which the employee starts
his work and to which he customarily returns in order to
receive instructions from the taxpayer or communications
from his customers or other persons, to replenish stock
or other materials, repair equipment, or to perform any
other function necessary to exercise his trade or
profession at some other point or points. . . .
Rule 42.26.202( 7 ) , ARM. Rule 42.26.202( 7 ) , ARM, is a Montana
Department of Revenue regulation promulgated to implement the
Multistate Tax Compact. The District Court correctly pointed out
that s 15-1-601,Art, IV (l4), MCA, ( [part of] the ~ultistateTax
Compact) '!uses the exact same language as 39-51-203(2) (a) to
define when compensation is considered paid in Montana. The court
also stated, correctly, that " [tlhe Annotations to the Multistate
Tax Compact state that Article IV is based on the Model
Unemployment compensation Act, upon which the Montana Unemployment
Compensation Act is also based. [See Commission Notes for Section
15-1-601, Article IV (14), MCA, Annotations at 30-31.1 Thus the
language of the ~ultistate Tax Compact and of § 39-51-203(2)(a)
have the same source and the same meaning." We agree that these
sections of the Multistate Tax Compact and the pertinent section of
the Montana Unemployment Compensation Act are the same and provide
a sound justification for approving of the use of the particular
definition of "base of operations" used by the DOLI and cited
above. We therefore conclude that the definition of "base
operations" used by the DOLI is a proper and acceptable definition
of the term, and we approve of its use.
We also agree that the test to determine the place of
employment applies to the emplovee, not the employer. As stated
above, the letter from the U.S. Department of Labor states that the
"base of operations" test should be determined from the standpoint
of the employee. Moreover, the Montana regulation cited above
defines "base of operations" from the standpoint of the employee
and case law from other jurisdictions concerning the same issue
also focuses upon the employee in applying the base of operations
test. See Walco Leasing v. Bilich (Minn. App. 1986), 383 N.W.2d
374; Iverson Const. v. Dept. of Emp. Services (Iowa 1989), 449
N.W.2d 356. There is substantial support for the Hearing
Examiner's determination that the "base of operations" test should
focus on the employee, and we conclude that the Hearing Examiner
and the Board placed the proper focus of the test on the employee,
not the employer as suggested by SEA.
Walco, cited above, also provides guidance in determining the
meaning of the term "base of operations" because it enumerates
factors to be considered in determining whether a given location is
a company's base of operations. Walco states:
Factors such as the place of beginning the service
for which compensation is being paid, place of resupply
of materials needed in the service, if any, place of
repair of the machinery used in the service, the source
of orders or directions for the services rendered and the
permanency of any of these places if they exist should be
considered in determining if there is a base of
operations and where it is located.
Walco, 383 N.W.2d at 377, citing Heller v. International Transport,
Inc. (1971), 481 P .2d 602. In the instant case, drivers were
dispatched out of Missoula and if they needed instructions,
direction or information, they spoke to Sorensen, SEA'S manager.
10
Moreover, payroll was prepared in Missoula and many repairs were
made in Montana. Clearly, many a c t i v i t i e s basic to t h e operation
of a trucking company and listed in Walco as determinative factors
in determining the "base of operations" occurred in Montana.
Applying the >'baseof operationsn definition used by the DOLI,
and the Walco factors, we conclude that substantial evidence
existed to support the conclusion that SEA'S base of operations was
in Montana since 1988, and not in wyoming. We hold that the
District Court did not err in affirming the Board's affirmance of
the Hearing Examiner's conclusion that SEA1sbase of operations was
in Missoula, Montana, and therefore, its employees' wages should
have been reported to and unemployment insurance premiums paid to
Montana, not Wyoming.
AFFIRMED.
7 '
We Concur:
December 22, 1994
CERTIFICATE OF SERVICE
I hereby certify that the following certified order was sent by United States mail, prepaid, to the
following named:
Patrick G . Frank & W. Carl Mendenhall
WORDEN, THANE & HATNES, P. C.
Box
P. 0. 4747
Missoula, MT 59806
Daniel B. McGregor
DEPARTMENT OF LABOR & INDUSTRY
P. 0. Box 1728
Helena, MT 59624
Stephen M . Frankino, Esq.
Hughes, Kellner, Sullivan & Alke
P.O. Box 1166
Helena, MT 59624-1166
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA