Deseret Book v. Department of Workforce Services ( 2018 )

2018 UT App 50THE UTAH COURT OF APPEALS
DESERET BOOK COMPANY,
Petitioner,
v.
DEPARTMENT OF WORKFORCE SERVICES, WORKFORCE
APPEALS BOARD; AND KATHERINE THOMPSON,
Respondents.
Opinion
No. 20170269-CA
Filed March 29, 2018
Original Proceeding in this Court
Mary Anne Q. Wood and Jared M. Asbury,
Attorneys for Petitioner
Nathan R. White, Attorney for Respondent
Department of Workforce Services,
Workforce Appeals Board
JUDGE RYAN M. HARRIS authored this Opinion, in which JUDGES
MICHELE M. CHRISTIANSEN and DAVID N. MORTENSEN concurred.
HARRIS, Judge:
¶1 Deseret Book Company (Deseret Book) hired an actress to
perform in a holiday-themed theatrical production. The question
presented in this case is whether that actress was Deseret Book’s
employee, or was instead an independent contractor. A hearing
officer from the Utah Department of Workforce Services (DWS),
an administrative law judge (ALJ), and the DWS Board of
Appeals (the Board) all determined that the actress was Deseret
Book’s employee, and that Deseret Book was therefore
responsible for making unemployment insurance contributions
related to its payment of the actress. Deseret Book seeks judicial
review of the Board’s determination. We decline to disturb the
Board’s determination.
Deseret Book Company v. Department of Workforce Services
BACKGROUND
¶2 For the past couple of decades, Deseret Book has been
involved in the production of an annual Christmas program
called “The Forgotten Carols.” The production involves live
performances by actors and singers, and tours for several weeks
during the holiday season. For the 2014 version of the program,
Deseret Book hired Katherine Thompson (Thompson) to play
“Connie Lou,” one of the production’s two main characters.
Thompson is an experienced stage actress, singer, and
songwriter who has appeared in many different theatrical
productions. She advertises through her own website, uses social
media to keep others apprised of her performances, and has an
agent to represent her in contract negotiations. Thompson had
been a cast member in The Forgotten Carols on at least one other
occasion.
¶3 Prior to hiring Thompson, Deseret Book and Thompson’s
agent negotiated a written “Work for Hire Agreement” that was
eventually executed by both Deseret Book and Thompson.
Under the terms of this contract, it was agreed that Thompson
“is an independent contractor with respect to” Deseret Book.
However, the contract also stipulated that Thompson “agrees to
the role of [Connie Lou] under the direction of [Deseret Book’s]
authorized representative.” (Emphasis added.) Specifically,
Thompson “agree[d] to participate in and be on time for call
times, performances, rehearsals, signings (pending artist’s
availability), media appearances, and sound checks according to
[the] tour itinerary,” and “agree[d] to abide by the schedule” set
by Deseret Book. Thompson reserved the right to approve her
costume. Deseret Book “reserve[d] the right to postpone,
reschedule, or cancel any planned show for any reason in its sole
discretion.”
¶4 During the 2014 holiday season, Thompson played the
role of Connie Lou, as scheduled, during The Forgotten Carols’
20170269-CA 2 2018 UT App 50Deseret Book Company v. Department of Workforce Services
seasonal tour. The performances did not take place on Deseret
Book’s property but, rather, in public theaters and auditoriums.
Deseret Book provided a script—containing both music and the
spoken word—that Thompson was expected to follow, and
Deseret Book’s representative scheduled rehearsals and oversaw
the performances. While Deseret Book did not formally pay a
director, one of the actors helped set “staging positions” and
determine “who should come in when” during performances.
Deseret Book’s “tour producer” had the right to have “the final
say” should a dispute ever come up regarding the details of the
performance. After the conclusion of the 2014 holiday tour,
Thompson’s work for Deseret Book ended.
¶5 In October 2015, a DWS hearing officer determined that
Thompson was an “employee” of Deseret Book, and that
payments made by Deseret Book to Thompson were subject to
unemployment insurance contributions. Deseret Book appealed
the hearing officer’s decision to an ALJ, who agreed with the
hearing officer’s conclusion. The ALJ determined that, although
Thompson was independently established in the entertainment
industry, Thompson was nevertheless under Deseret Book’s
control and direction during the Forgotten Carols tour, and
therefore was an employee of Deseret Book.
¶6 Deseret Book appealed the ALJ’s determination to the
Board. The Board agreed with the ALJ that Thompson had been
under Deseret Book’s control and direction during the tour. The
Board also concluded, however, that Thompson was not
independently established in her own business. Accordingly, the
Board determined that Thompson had been an employee of
Deseret Book during her work on the Forgotten Carols tour.
¶7 Deseret Book now seeks review in this court.
20170269-CA 3 2018 UT App 50Deseret Book Company v. Department of Workforce Services
ISSUE AND STANDARD OF REVIEW
¶8 The main issue 1 presented for our review is whether the
Board erred when it determined that Thompson was an
employee of Deseret Book. “The determination whether a
claimant is an independent contractor involves a fact-sensitive
inquiry into the unique facts of a particular employment
relationship.” Evolocity, Inc. v. Department of Workforce Services,
2015 UT App 61, ¶ 6, 347 P.3d 406. Accordingly, “we grant
deference to the [Board] in its weighing of the relevant factors to
arrive at its ultimate decision . . . [a]nd we will disturb that
1. In addition to the main issue, Deseret Book also contends that
certain testimony presented during the ALJ’s hearings (and
arguably considered by the Board) constituted inadmissible
hearsay, and that the Board improperly relied on that evidence
in reaching its conclusions. The legal principles Deseret Book
relies upon in making this argument are sound. While hearsay
evidence is “clearly admissible in administrative hearings,” all
factual findings made in such hearings “must be supported by a
residuum of legal evidence competent in a court of law.” Prosper,
Inc. v. Department of Workforce Services, 2007 UT App 281, ¶ 10,
168 P.3d 344 (citations and internal quotation marks omitted).
Thus, a finding of fact may not be based entirely on inadmissible
hearsay evidence. Id. ¶ 11. Despite the soundness of Deseret
Book’s legal argument, however, its position fails on factual
grounds. Even if we exclude the evidence that Deseret Book
identifies as hearsay, substantial non-hearsay evidence remains
to support all of the facts necessary to resolve this appeal.
Indeed, in reviewing the Board’s conclusions, we have simply
excluded from our consideration all evidence that Deseret Book
contends was inadmissible hearsay, including Thompson’s
written questionnaire and the DWS investigator’s statements. All
of the facts described in this opinion and relied upon to reach
our conclusions come from other (admissible) sources.
20170269-CA 4 2018 UT App 50Deseret Book Company v. Department of Workforce Services
decision only if it is clearly erroneous or falls outside [of] the
scope of the afforded deference.” Id. To establish clear error, the
challenging party must demonstrate that the Board’s decision is
not “supported by ‘substantial evidence when viewed in light of
the whole record.’” Needle, Inc. v. Department of Workforce
Services, 2016 UT App 85, ¶ 6, 372 P.3d 696 (citing Utah Code
Ann. § 63G-4-403(4)(g) (LexisNexis 2014)). “Substantial evidence
is that quantum and quality of relevant evidence that is adequate
to convince a reasonable mind to support a conclusion and is
more than a mere scintilla but [is] something less than the
weight of the evidence.” Id. (citation and internal quotation
marks omitted). Further, we defer to the “intermediate
conclusions” and “ultimate determination” of the Board if they
are not “irrational” or “unreasonable.” Tasters Ltd. v. Department
of Emp’t Sec., 863 P.2d 12, 19 (Utah Ct. App. 1993). 2
2. Deseret Book attempts to escape this deferential standard of
review by arguing that the Board misinterpreted the law by not
sufficiently taking into account the unique characteristics of the
entertainment industry. Accordingly, Deseret Book maintains
that we should review for correctness the Board’s asserted
failure to take into account the specifics of the industry. See
Petersen v. Utah Labor Comm’n, 2017 UT 87, ¶ 8 (noting that we
review whether an agency properly interpreted or applied the
law for correctness). We certainly do not hesitate to correct the
Board when we believe its interpretation of governing law is
incorrect. See, e.g., Fur Breeders Agric. Coop. v. Department of
Workforce Services, 2018 UT App 49, ¶¶ 13–19. But the Board did
not erroneously interpret the law in this case. First of all,
whether and to what extent the Board takes into account the
particular industry in question is not necessarily a question of
legal interpretation. Moreover, as discussed below, in reaching
its conclusions in this case, the Board actually referenced the
specifics of the entertainment industry several times and at
(continued…)
20170269-CA 5 2018 UT App 50Deseret Book Company v. Department of Workforce Services
ANALYSIS
¶9 Under Utah law, individuals performing services for
wages “under any contract of hire” are considered to be
employees unless they meet both parts of a two-part test: they
must be both (1) “customarily engaged in an independently
established trade, occupation, profession, or business of the same
nature as that involved in the contract of hire for services”; and
(2) “free from control or direction over the means of performance
of those services, both under the individual’s contract of hire and
in fact.” Utah Code Ann. § 35A-4-204(3)(a)–(b) (LexisNexis 2015).
If the first element of the test is resolved in favor of
independence, “there will be a rebuttable presumption that the
employer did not have the right of or exercise direction or
control over the service.” Utah Admin. Code R994-204-303(1)(c).
As noted above, the ALJ determined that Deseret Book met the
first element of this test, but concluded that Thompson was an
employee because Deseret Book could not meet the second
element. The Board, however, determined that Deseret Book met
neither of the two elements and that Thompson was therefore an
employee under either part of the test.
¶10 In order to prevail in this case, Deseret Book must
persuade us that the Board’s analysis of the various factors was
erroneous under both elements of the two-part test. We assume,
for the purposes of our analysis, that Deseret Book’s arguments
are sufficient on the first element, and that Thompson is (as the
ALJ concluded) “customarily engaged in an independently
established trade, occupation, profession, or business of the same
nature as that involved in the contract of hire for services.” See
(…continued)
length. Under these circumstances, we are not persuaded that
the Board misinterpreted the law, and we will therefore apply
our customary standard of review to the Board’s conclusions.
20170269-CA 6 2018 UT App 50Deseret Book Company v. Department of Workforce Services
Utah Code Ann. § 35A-4-204(3)(a). 3 We need not directly
confront the first element of the test in this case, because Deseret
Book has not persuaded us that the Board erred in its evaluation
of the second part of the test.
¶11 In interpreting the governing statute, the Board properly
looked to regulatory guidance in the Utah Administrative Code.
See Utah Admin. Code R994-204-303 (laying out “Factors for
Determining Independent Contractor Status”). There, several
factors have been developed to aid in the determination of
whether a worker meets the second part of the statutory test. Id.
R994-204-303(2)(b); see Utah Code Ann. § 35A-4-204(3)(b).
Specifically, the regulation lists eight factors that may, “if
applicable,” aid in determination of whether an employer “has
the right of or exercises control and direction over the service of
a worker”: (1) whether the employer has the right to require a
worker’s compliance with instructions; (2) whether the employer
provides training to the worker; (3) whether the worker’s work
is required to be conducted at a specific “pace or ordered
sequence of duties”; (4) whether the work must be performed on
the employer’s premises; (5) whether the worker must provide
personal service (i.e., whether the work is assignable); (6)
whether the worker has a continuous relationship with the
employer; (7) whether the employer sets work hours for the
worker; and (8) how the worker is paid. Id. R994-204-
3. While we do not directly reach the issue of whether or not
Thompson was independently established, we note that Deseret
Book’s arguments on this issue have significant force in this case,
and we also reference our opinion, also issued today, in Fur
Breeders, 2018 UT App 49, ¶¶ 13–19, in which we determined
that the Board embraced too stringent a conception of
“independently established.” While two cases do not necessarily
a trend make, we would caution the Board not to espouse too
narrow a view of the first element of the statutory test.
20170269-CA 7 2018 UT App 50Deseret Book Company v. Department of Workforce Services
303(2)(b)(i)–(viii). In arriving at its conclusions, the Board
appropriately engaged in an evaluation of these factors, and
determined that four of those factors weighed in favor of
classifying Thompson as an employee, and that four of those
factors weighed in favor of classifying Thompson as an
independent contractor. The Board then considered all of the
factors together and weighed them, and concluded that the most
critical factors were the ones weighing in favor of classifying
Thompson as an employee, including “the contractual right to
control” Thompson’s performance. Based on this case-specific
weighing, the Board concluded that Thompson was under the
control and direction of Deseret Book, and was therefore Deseret
Book’s employee.
¶12 Deseret Book contends that the Board erred in reaching
this conclusion. Deseret Book first makes a general argument
that the Board “failed to properly consider the unique nature of
both the entertainment industry and [Thompson’s] relationship
with Deseret Book.” Deseret Book then specifically takes issue
with the Board’s intermediate conclusions that four of the factors
weighed in favor of “employee” status. Finally, Deseret Book
complains about the Board’s ultimate weighing of the various
factors, culminating in its final determination that Thompson
was under its control and direction and therefore its employee.
We do not find Deseret Book’s arguments persuasive.
A
¶13 First, the Board appropriately took into account the
unique features and characteristics of the entertainment
industry, as well as Thompson’s relationship with Deseret Book.
The Board’s analysis with regard to each of the factors included
at least some examination of the features of the entertainment
industry and/or the features of the specific relationship between
Thompson and Deseret Book. Indeed, on three occasions, the
Board explicitly found that, due to the “nature of [Thompson’s]
20170269-CA 8 2018 UT App 50Deseret Book Company v. Department of Workforce Services
industry,” certain factors weighed only “weakly” one way or the
other. In this way, the Board took into account such things as the
fact that many entertainers must perform according to a strict
show schedule, and that most work in the entertainment
industry is “not typically performed at a regular place of
business such as an office or storefront.” The Board likewise
examined the specific features of Thompson’s relationship with
Deseret Book, including the terms of the written contract at issue
as well as specific characteristics of the seasonal holiday
theatrical production in which Thompson was involved. In the
end, we find no fault with the manner and extent to which the
Board considered the unique features of the industry in
question, and the specific nature of the relationship between
Deseret Book and Thompson.
B
¶14 We likewise find no fault with the Board’s intermediate
conclusions that four of the factors weighed in favor of
classifying Thompson as an employee. The Board’s analysis of
the first factor—whether Deseret Book had the right to require
compliance with instructions—was particularly appropriate. In
reaching its conclusion, the Board relied heavily on the plain
terms of the written contract, which provided that Thompson
would be “under the direction of” Deseret Book. The Board also
noted that Thompson was required to work from a script, and
had no “right to change the script or otherwise control the
production other [than] to give approval of the costume.”
¶15 Deseret Book argues that the terms of the contract are
ambiguous, and construes the contractual “control” provision to
mean only that “Thompson [would] perform under the general
direction of [Deseret Book’s representative], whose position gave
[the representative] only logistical responsibilities and no artistic
control over the [p]roduction.” In our view, however, the
contractual provision is not ambiguous—it clearly indicates that
20170269-CA 9 2018 UT App 50Deseret Book Company v. Department of Workforce Services
Deseret Book would retain the right of “direction” over
Thompson’s performance—and therefore consideration of parol
evidence would be inappropriate. See Flores v. Earnshaw, 2009 UT
App 90, ¶ 13, 209 P.3d 428 (stating that “admission of parol
evidence to determine intent is allowed only if there is a finding
of facial ambiguity” (citation and internal quotation marks
omitted)). Even if we were to consider parol evidence as to that
term’s meaning, that evidence is one-sided in favor of the
Board’s view. As the Board noted, Deseret Book gave Thompson
a script from which she was required to work, and the script told
her exactly which words to say (or sing) and in exactly which
order to say (or sing) them. It is no doubt the case that
Thompson retained some measure of artistic license to perform
the script with various states of emotion or levels of vigor, but
there is no evidence that Thompson had the right to make
material changes to the dialogue or the musical numbers.
Moreover, Deseret Book’s own representative testified that
Deseret Book’s “tour producer” had the right to have “the final
say” should a dispute ever come up regarding the details of the
performance. These are clear indications that Deseret Book
retained the right to control more than just “logistical
responsibilities.” It is irrelevant whether Deseret Book’s
representative actually exercised that control on a nightly basis.
Indeed, as the Board correctly noted, “‘it is the right of control’”
and “not the actual exercise of control,” that is “‘the critical
element’” underlying whether an employment relationship
exists. (Quoting Mitchell v. Rice, 885 P.2d 820, 822 (Utah Ct. App.
1994)). The Board’s intermediate conclusion that the first factor
weighs in favor of classifying Thompson as an employee was
sound, and we have no basis to disturb it.
¶16 The third factor asks whether the worker was required to
perform her duties at a particular pace or in a particular
sequence. The Board concluded that this factor weighed in favor
of employee status, but the Board conceded that this factor
weighed only weakly in that direction given the unique nature
20170269-CA 10 2018 UT App 50Deseret Book Company v. Department of Workforce Services
of the entertainment industry. The Board noted that Deseret
Book gave Thompson a script that required her to perform her
duties at a particular pace and in a particular sequence. The
Board also noted that Deseret Book also set the schedule for
rehearsals and performances, which Thompson was
contractually required to attend. Deseret Book resists the Board’s
conclusion, arguing that the Board erred because “the script was
never even presented into evidence” and because Deseret Book’s
right to schedule rehearsals and productions “was nothing more
than the sort of coordination required for multiple actors to
come together to perform in any joint undertaking.” However,
whether the script was entered into evidence is irrelevant,
because Deseret Book’s representative conceded the existence of
a script in her testimony. Further, Deseret Book’s representative
testified that part of the rehearsal process involved instruction
on “who should come in when” during performances, and that
Thompson did not have “the final say” as to her performance.
We therefore find Deseret Book’s arguments unpersuasive, and
see no cause to disturb the Board’s conclusion regarding
applicability of this third factor.
¶17 The fifth factor asks whether the worker was providing a
personal service. The Board concluded that this factor weighed
in favor of employment, because the role of “Connie Lou” was
one of the two major roles in the production, and Deseret Book
specifically hired Thompson to play that particular role. Deseret
Book implicitly concedes that Thompson was hired to perform a
personal service, but nevertheless takes issue with the Board’s
conclusion, arguing that “any contract for the services of actors
depends on the personal attributes of the actors,” and that
therefore this factor should not usually apply in the
entertainment context. However, Deseret Book cites to no
authority indicating that this factor should be considered
inapplicable with respect to the entertainment industry, and we
are aware of none. In this case, Thompson was hired to perform a
personal service, and the Board properly so concluded, and
20170269-CA 11 2018 UT App 50Deseret Book Company v. Department of Workforce Services
appropriately determined that this factor weighs in favor of
employment.
¶18 Finally, the seventh factor asks whether the worker is
required to utilize set work hours. The Board noted that
Thompson, like all of the participants in the production, had set
hours for rehearsals and performances, and concluded therefore
that this factor weighed in favor of employment, albeit weakly in
light of the fact that, in the entertainment industry, such set
hours were often unavoidable. Deseret Book argues that this
factor cannot weigh in favor of employment here, because Utah
regulatory law proclaims that “[t]he coordinating and
scheduling of the services of more than one worker does not
indicate control or direction.” (Quoting Utah Admin. Code R994-
204-303(2)(b)(iii).) We are unpersuaded. Producing a stage play
involves a higher level of control than simply coordinating the
scheduling of multiple workers. Thompson was required to
perform her work during set hours not just for Deseret Book’s
convenience in coordinating the work schedules of its various
employees, but because stage plays, for a host of reasons (e.g.,
patrons need to know when showtime is), must be performed at
a set time. The Board gave a nod toward the issues Deseret Book
raises when it concluded that this factor weighs only “weakly”
in favor of employment, and we find no reason to take issue
with this conclusion.
¶19 Thus, the Board’s intermediate conclusions—that four of
the eight factors weighed in favor of classifying Thompson as
Deseret Book’s employee—were all supported by substantial
evidence, and we therefore decline to disturb those conclusions.
C
¶20 After reaching its intermediate conclusions regarding
applicability of the various factors, the Board then weighed all of
the factors, and concluded that, on balance, Thompson was
Deseret Book’s employee. On this part of the analysis, we afford
20170269-CA 12 2018 UT App 50Deseret Book Company v. Department of Workforce Services
the Board considerable deference. See Evolocity, 2015 UT App 61,
¶ 6 (stating that “we grant deference to the [Board] in its
weighing of the relevant factors to arrive at its ultimate decision”
and “disturb that decision only if it is clearly erroneous or falls
outside the scope of afforded deference”). In support of its
conclusion, the Board specifically noted that Deseret Book “had
the contractual right to control [Thompson’s] performance,” and
in addition that Deseret Book “set the rehearsal and tour
schedule” and required Thompson to attend. The Board also
specifically noted that Thompson had been hired to perform a
“personal service.” In light of these circumstances, the Board
concluded that “those factors outweigh the factors indicating
independent contractor status,” and that Thompson was
therefore Deseret Book’s employee. Viewed on its own merits,
this sort of multi-factor weighing is precisely the sort of analysis
to which we typically defer, and we see no infirmities in this case
in the manner in which the Board weighed these factors against
the considerations that weighed in the other direction.
¶21 The complicating factor here is that the Board—because it
concluded that Thompson was “independently established”—
specifically did not take into account the rebuttable presumption
that arises in favor of absence of control or direction in cases
where the worker is independently established. See Utah Admin.
Code R994-204-303(1)(c). We conclude, however, that application
of this presumption would not have carried the day for Deseret
Book, even if the Board had specifically discussed it. We agree
with the analysis of the ALJ, 4 who (after concluding that
4. We are, of course, aware that we are here reviewing the
analysis of the Board, and not (at least not directly) the analysis
of the ALJ. See Utah Code Ann. § 78A-4-103(2)(a)(i)(A)
(LexisNexis Supp. 2017) (describing our jurisdiction as a review
of “a final order or decree resulting from . . . a formal
adjudicative proceeding”); Utah Admin. Code R994-508-122
(continued…)
20170269-CA 13 2018 UT App 50Deseret Book Company v. Department of Workforce Services
Thompson was in fact independently established) determined
that the evidence in this case was sufficient to overcome the
presumption against control and direction. Like the ALJ, we are
persuaded that the existence of the written contract, which
specifically provides that Thompson will be “under the direction
of” Deseret Book, is sufficient to rebut the presumption. In the
application of multi-factor tests, the existence of any one factor is
not necessarily determinative, but in our view (as well as in the
view of the ALJ and the Board) the contractual language in this
case is key. It is difficult for an employer to argue that it does not
have the right to provide control and direction to a worker when
it negotiated a contract that specifically reserves that right.
¶22 Before concluding our opinion, we find it necessary to
briefly address some of the concerns raised by the parties about
the potential scope of our decision. Deseret Book warns us that a
decision allowing the Board’s determination to stand will mean
that all actors and entertainers will necessarily be considered
“employees.” Deseret Book further opines that such a decision
might even be construed to apply to subcontractors in the
construction context. We consider Deseret Book’s concerns to be
overstated. Not all entertainers are burdened by a contract that
gives an employer the right to control their performance. And
not all entertainers are required to follow a script provided to
them by their employer. Moreover, we consider at least most
construction subcontractors to be in a different situation
(…continued)
(stating that an ALJ’s decision is only “final” if it is not appealed
to the Board); see also Schaeffer Indus., Inc. v. Utah Dep’t of
Workforce Services, 1999 UT App 148U, para. 5 & n.1 (stating that
“it is this court’s proper procedural role to review the
determination of the Board, not that of the ALJ”). We mention
the ALJ’s conclusions here simply because we find the ALJ’s
analysis persuasive.
20170269-CA 14 2018 UT App 50Deseret Book Company v. Department of Workforce Services
altogether—while they are often given very specific instructions
on how and where to build something, they are usually free to
do their work with their own tools, in their own way, and on
their own (reasonable) schedule. We do not think that most
subcontractors, or even all entertainers, will be swept up into the
net of this opinion. And in any event, we consider the Board’s
analysis regarding direction and control to have been entirely in
keeping with statutory and regulatory guidance, and to the
extent Deseret Book believes that our opinion will lead to
improvident results for stage actors, it is free to seek amendment
to the governing statutes or regulations through the legislative
or administrative processes.
CONCLUSION
¶23 We conclude that the Board’s intermediate conclusions
regarding each of the four challenged factors of the “control and
direction” element of the employment test were supported by
substantial evidence in the record. We also conclude that the
Board’s ultimate conclusion, reached after weighing all the
factors, that Thompson was under Deseret Book’s control and
direction was likewise reasonable and grounded in evidentiary
support. Accordingly, we decline to disturb the Board’s
determination that Thompson was an employee of Deseret Book.
20170269-CA 15 2018 UT App 50