MNH Truck Leasing Co., L.L.C. v. Dir., Ohio Dept. of Job & Family Servs. , 2017 Ohio 442 ( 2017 )

[Cite as MNH Truck Leasing Co., L.L.C. v. Dir., Ohio Dept. of Job & Family Servs., 2017-Ohio-442.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
MNH Truck Leasing Company, LLC, :
Appellant-Appellant, : No. 16AP-301
(C.P.C. No. 14CV-10701)
v. : No. 16AP-302
(C.P.C. No. 14CV-10698)
Director, Ohio Department of : No. 16AP-303
Job & Family Services, (C.P.C. No. 14CV-10699)
:
Appellee-Appellee. (REGULAR CALENDAR)
:
D E C I S I O N
Rendered on February 7, 2017
On brief: Mark R. McBride, for appellant. Argued: Mark
R. McBride.
On brief: Michael DeWine, Attorney General, and Patria V.
Hoskins, for appellee. Argued: Patria V. Hoskins.
APPEALS from the Franklin County Court of Common Pleas
SADLER, J.
{¶ 1} In this consolidated appeal, appellant, MNH Truck Leasing Company, LLC,
appeals from the judgment entry of the Franklin County Court of Common Pleas
upholding three administrative decisions of the Unemployment Compensation Review
Commission ("UCRC") regarding appellant's liability and contribution rate determination
under Ohio unemployment compensation laws. For the following reasons, we affirm.
I. FACTS AND PROCEDURAL HISTORY
{¶ 2} Appellant is a limited liability company primarily in the business of freight
brokerage and trucking services. A claim for unemployment benefits filed by one of
appellant's former workers prompted the Ohio Department of Job and Family Services
Nos. 16AP-301, 16AP-302, and 16AP-303 2
("ODJFS") to audit appellant's status under Ohio unemployment compensation law and
classification of its workers. ODJFS notified appellant that it met the definition of an
employer for purposes of Ohio unemployment compensation law, and in August 2013,
issued two employer's liability and contribution rate determinations assessing appellant
maximum penalty tax rates for 2012 and 2013 as a result of appellant's failure to timely
submit required quarterly wage information. In September 2013, the director of ODJFS
issued reconsidered decisions affirming the determination that appellant was a liable
employer and affirming both the 2012 and 2013 liability and contribution determinations.
In October 2013, ODJFS released the final audit report reviewing the period of 2009
through 2011. According to the audit, appellant became a liable employer as of January 1,
2009, misclassified 41 workers as independent consultants, and underreported wages by
nearly $2.5 million. The audit report notes that appellant "had no comment concerning
people being considered employees or wages paid by the employer." (Oct. 1, 2013 Audit
Report at 9.)
{¶ 3} On October 23, 2013, appellant appealed the director's reconsidered
decisions to the UCRC, and a telephone hearing on the matter was held on September 9,
2014. During the hearing, the attorney representing ODJFS was sworn in to testify.
ODJFS' attorney identified exhibits submitted for admission on behalf of ODJFS "with the
support of * * * affidavit[s]." (Sept. 9, 2014 Hearing Tr. at 7.) The exhibits identified
included the unemployment tax notification contribution rate determinations, the
application for reconsideration, the director's reconsidered decisions, quarterly report
histories, the audit report, notes prepared by the auditor, business documents prepared
by appellant used in support of the auditor's report, an ODJFS compliance examiner
questionnaire interviewing appellant, and an ODJFS compliance examiner questionnaire
with appellant's former worker. The two affidavits submitted by ODJFS, one from the
chief of the contributions section and one from the assistant chief of the compliance
section of ODJFS' Office of Unemployment Compensation, averred that the exhibits
submitted at the hearing were true and accurate copies of the originals produced or
obtained in connection with appellant's investigation, audit, and appeals.
{¶ 4} When asked whether she would offer additional testimony based on her
conversations with the auditor and the compliance examiner, ODJFS' attorney replied:
Nos. 16AP-301, 16AP-302, and 16AP-303 3
Yes although not necessarily in regards to the information
they provided me at least up until now I think that
everything's been covered fairly well in the documents. I did
want to give some additional information on those three
[redeterminations by ODJFS].
(Sept. 9, 2014 Hearing Tr. at 16.) After describing the basis for ODJFS' reconsiderations,
ODJFS' attorney declined to offer additional testimony. Appellant lodged a general
objection to the attorney for ODJFS offering testimony and characterized such testimony
as inappropriate, hearsay, and not the best evidence. ODJFS' attorney responded that
hearsay is admissible in administrative proceedings, that ODJFS' staffers were
unavailable due to retirement and maternity leave, that the affidavits supported the
testimony, and that appellant could have subpoenaed either one. The hearing officer
overruled the objection, noting that he would determine the weight to give the evidence
submitted.
{¶ 5} Thereafter, the single member of appellant, John Petrlich, testified. Petrlich
agreed that some of the workers at issue were employees. However, Petrlich generally
argued that the audit was inaccurate and that some of the workers were actually
independent contractors who were not obligated to drive for appellant, had their own
federal ID number, and drove trucks owned by other people. Appellant did not provide
documentation or other evidence supporting these contentions.
{¶ 6} The UCRC affirmed the director's reconsidered decisions in three separate
decisions mailed September 17, 2014. Regarding the two director's reconsidered
decisions addressing the penalty rates imposed for 2012 and 2013, the UCRC found that
because appellant "did not provide the wage information in the specified timeframes to
receive a calculated rate, even despite the fact that the employer now acknowledges that at
least some individuals performed services for the employer in covered employment from
2011 to the present," appellant was correctly assigned the penalty rate pursuant to R.C.
4141.25 and 4141.26. (UCRC Decision on 2012 Rate at 5; UCRC Decision on 2013 Rate at
5.)
{¶ 7} Regarding the director's reconsidered decision addressing individuals who
provided services to appellant covered in employment, UCRC concluded that, pursuant to
R.C. 4141.01(B)(1) and Ohio Adm.Code 4141-3-05 and viewing the totality of the
Nos. 16AP-301, 16AP-302, and 16AP-303 4
circumstances, appellant exercised direction and control over the truck drivers, office
workers, sales staff, and an individual who provided financial services. The UCRC notes
that Petrlich acknowledged that the office workers should have been classified as
employees. As to the truck drivers, the UCRC cited a variety of factors showing discretion
and control by appellant, including that none of the individuals owned the trucks that
they operated, appellant paid for liability insurance for all drivers, appellant reimbursed
expenses of the drivers, and appellant took disciplinary actions against a driver. The
UCRC further notes:
[Appellant's] primary concern in this case seems to be that the
auditor, Ms. Earl, did not perform her job in an appropriate
manner. In other words, [appellant's] concerns seem to be
more procedural in nature. [Appellant] has produced very
little evidence regarding the substantive nature of Ms. Earl's
findings, and [appellant] has not produced evidence to
establish that Ms. Earl's primary findings regarding the
covered employment issues in this case were incorrect.
(UCRC Decision on Covered Employees at 7.)
{¶ 8} Appellant appealed the decisions of the UCRC to the Franklin County Court
of Common Pleas, and on appellee's motion, the cases were consolidated. Appellant
based its appeal of the UCRC's decision on three grounds: the decisions were not
supported by reliable, probative, or substantive evidence; the evidence proffered during
the hearing should not have been admitted in the form in which it was presented; and the
decisions were not in accordance with due process. The trial court upheld the decisions of
the UCRC. In doing so, the trial court states that "[a]ppellant's brief in this matter * * *
does not argue that the ODJFS or [UCRC's] findings of fact are actually wrong. Instead,
[a]ppellant attacks the [UCRC] decisions on essentially procedural and due process
grounds." (Mar. 22, 2016 Trial Court Decision to Affirm and Final Judgment at 3-4.) In
resolving the appeal, the trial court found that appellant presented nothing to dispute the
factual findings made by the ODJFS or the UCRC, that appellant's due process rights were
not violated by the admission of hearsay evidence or by the contacting of appellant
directly during the audit, and that after an independent review of the record, the UCRC's
decisions are in fact supported by reliable, probative, and substantial evidence. Appellant
filed a timely appeal to this court.
Nos. 16AP-301, 16AP-302, and 16AP-303 5
II. ASSIGNMENTS OF ERROR
{¶ 9} Appellant presents two assignments of error for our review:
[1.] The trial court committed reversible error by permitting
testimony from an advocate representing the Ohio
Department of Job and Family Services to be used as
evidence, which formed the basis for the Department's
adverse determination against Appellant.
[2.] The trial court committed reversible error by erroneously
indicating that MNH failed to dispute the Director's factual
findings.
III. STANDARD OF REVIEW
{¶ 10} This court recently set forth the applicable standard of review as follows:
The standard of review for appeals from decisions of the
UCRC is found in R.C. 4141.26(D)(2), which states that a
common pleas court may affirm UCRC's decision where it is
"supported by reliable, probative, and substantial evidence
and is in accordance with law." A court of appeals' review of
an administrative agency's ruling "is more limited than that of
a common pleas court. This court does not weigh the
evidence." Kate Corp. v. Ohio State Unemp. Comp. Rev.
Comm., 10th Dist. No. 03AP-315, 2003-Ohio-5668, ¶ 7, citing
Childs v. Oil & Gas Comm., 10th Dist. No. 99AP-626, 2000
Ohio App. LEXIS 1242 (Mar. 28, 2000), citing Lorain City
Bd. of Edn. v. State Emp. Relations Bd., 40 Ohio St.3d 257,
533 N.E.2d 264 (1988). "Although appellate courts are not
permitted to make factual findings or weigh the credibility of
the witnesses, the court does have a duty to determine
whether the board's decision is supported by the evidence in
the record." Pennex Aluminum Co., LLC v. Ohio Dept. of Job
& Family Servs., 10th Dist. No. 14AP-446, 2014-Ohio-5308,
¶ 10, citing Tzangas, Plakas & Mannos v. Ohio Bur. of Emp.
Servs., 73 Ohio St.3d 694, 696, 1995 Ohio 206, 653 N.E.2d
1207 (1995).
Thus, a court of appeals determines only if the common pleas
court abused its discretion. Tzangas at 696-97. * * *
However, where a R.C. 4141.26(D)(2) appeal raises legal
issues, our review is de novo. Slats & Nails Pallets, Inc. v.
Ohio Dept. of Job & Family Servs., 10th Dist. No. 14AP-690,
2015-Ohio-1238, ¶ 8, citing Hayward v. Summa Health
Nos. 16AP-301, 16AP-302, and 16AP-303 6
Sys./Akron City Hosp., 139 Ohio St.3d 238, 2014-Ohio-1913,
¶ 23, 11 N.E.3d 243.
Senco Brands, Inc. v. Ohio Dept. of Job & Family Servs., 10th Dist. No. 15AP-796, 2016-
Ohio-4769, ¶ 11-13.
IV. DISCUSSION
A. First Assignment of Error
{¶ 11} Under the first assignment of error, appellant contends that the trial court
abused its discretion by permitting an attorney for ODJFS to testify at the administrative
hearing regarding the attorney's conversation with the person who conducted appellant's
audit in this matter and by basing its decision on such testimony. Although it is not
entirely clear, appellant's argument seems to incorporate both rules of evidence and due
process protections as a means to eliminate evidence relied on by the UCRC to support its
decision. For the following reasons, we disagree with appellant.
{¶ 12} "Although administrative appeals to government agencies are required to
comport with fundamental aspects of due process, they are not judicial proceedings."
Rudd v. Ohio Dept. of Job & Family Servs., 2d Dist. No. 2015-CA-9, 2015-Ohio-3796,
¶ 13. As a general rule, administrative agencies are not bound by the strict rules of
evidence applied in court. H.K. Trading Ctr., Inc. v. Liquor Control Comm., 10th Dist.
No. 09AP-293, 2010-Ohio-913, ¶ 41. For example, "[s]tatements or evidence that would
be excluded as hearsay elsewhere are admissible in an administrative proceeding where
they are not inherently unreliable and are sufficient to constitute substantial, reliable, and
probative evidence." Harr v. Jackson Twp., 10th Dist. No. 10AP-1060, 2012-Ohio-2030,
¶ 24, fn. 1, discretionary appeal not allowed, 132 Ohio St.3d 1533, 2012-Ohio-4381. See
also Rudd at ¶ 14. Furthermore, to comport with due process in an administrative
hearing, the state agency must afford "notice and hearing, that is, an opportunity to be
heard." Korn v. State Medical Bd., 61 Ohio App.3d 677, 684 (10th Dist.1988), citing Luff
v. State, 117 Ohio St. 102 (1927).
{¶ 13} Here, the testimony offered by the attorney for ODJFS is essentially a
description of the exhibits offered for submission and an explanation of the director's
reconsidered decisions. Such testimony was supported by affidavits establishing the
Nos. 16AP-301, 16AP-302, and 16AP-303 7
accuracy of the exhibits, and the attorney declined to testify further based on her
conversations with the auditor and compliance examiner.
{¶ 14} Considering the limited scope of this testimony and its reliability based on
the affidavits, the trial court did not err by finding that UCRC properly admitted what
appellant characterizes as hearsay evidence. Furthermore, on an independent review of
appellant's related due process concerns, we do not find that the UCRC's decision to allow
the specific testimony in this case deprived appellant of an opportunity to be heard such
that his due process rights were violated. Considering all the above, we find that on the
facts of this case, the trial court did not abuse its discretion in permitting the issue here as
evidence.
{¶ 15} Moreover, contrary to appellant's assignment of error, we find no indication
that the testimony of ODJFS' attorney was dispositive to the UCRC decision. As described
above, the testimony of ODJFS' attorney is essentially a duplication of the exhibits and
affidavits. Even if the testimony of the attorney is removed from consideration here, the
exhibits, affidavits, and Petrlich's own testimony support the decision of the UCRC. As
such, appellant's argument does not constitute reversible error in this case.
{¶ 16} Accordingly, for all the above reasons, appellant's first assignment of error
is overruled.
B. Second Assignment of Error
{¶ 17} Under the second assignment of error, appellant contends that the trial
court committed reversible error by indicating that appellant failed to dispute the
director's findings.
{¶ 18} Appellant takes issue with the trial court's assertions that "[a]ppellant's brief
in this matter * * * does not argue that the ODJFS or [UCRC's] findings of fact are actually
wrong" and "[appellant] has presented nothing that disputes the factual finding made by
the ODJFS or the [UCRC]." (Trial Court Decision to Affirm and Final Judgment at 3, 6.)
Appellant argues in its memorandum in support of its appeal that it did make two
objections to the findings of fact, including the auditor's "characterization of [appellant's]
misclassifying its workers," and "[appellant's] appeals, which challenged both the issue of
worker classification and its subsequent penalty rates." (Brief of Appellant at 9.)
Nos. 16AP-301, 16AP-302, and 16AP-303 8
{¶ 19} However, even if appellant's assertion is true that the trial court erroneously
indicated that appellant failed to dispute the director's findings, the trial court ultimately
did review this issue. The trial court states: "Furthermore, the Court has done an
independent review of the record in this matter and finds that the [UCRC's] three
decisions are in fact supported by reliable, probative, and substantial evidence." (Trial
Court Decision to Affirm and Final Judgment at 6.) Therefore, appellant's argument,
even if correct, does not constitute reversible error here, and, as a result, the assignment
of error lacks merit.
{¶ 20} Accordingly, appellant's second assignment of error is overruled.
V. CONCLUSION
{¶ 21} Having overruled appellant's two assignments of error, we affirm the
judgment of the Franklin County Court of Common Pleas.
Judgment affirmed.
BROWN and BRUNNER, JJ., concur.
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