TNT Cable Contractors v. Dir.1

2015 Ark. App. 79
ARKANSAS COURT OF APPEALS
DIVISION I
No. E-14-224
TNT CABLE CONTRACTORS, INC. Opinion Delivered FEBRUARY 11, 2015
APPELLANT APPEAL FROM THE ARKANSAS
BOARD OF REVIEW
V. [NO. 2013-BR-04-EC]
DIRECTOR, DEPARTMENT OF
WORKFORCE SERVICES, AND AFFIRMED
CHRIS SINGLETON
APPELLEES
DAVID M. GLOVER, Judge
TNT Cable Contractors, Inc., appeals from the Board of Review’s decision that the
services performed by Chris Singleton (see companion case of this date) and other similarly
situated TNT workers are subject to the payment of unemployment-insurance taxes. TNT
challenges the Board’s decision, contending that Singleton and all other similarly situated
workers perform services for TNT as independent contractors, not as employees. We affirm.
Background
Chris Singleton performed cable-installation and other services for TNT. When his
work relationship with the company ended, he applied for unemployment benefits, which
prompted an investigation by the Arkansas Department of Workforce Services (ADWS)
concerning TNT’s classification of cable installers as independent contractors, rather than as
employees. Following its investigation, the ADWS issued its unemployment tax
2015 Ark. App. 79
determination letter of liability on January 9, 2013, concluding that TNT had misclassified
Singleton and all other similarly situated workers as independent contractors when they
should have been classified as employees. ADWS ordered TNT to report these workers’
wages to ADWS and tax them appropriately.
TNT then timely requested an administrative determination of coverage pursuant to
Arkansas Code Annotated section 11-10-308 (Repl. 2012). Following a July 25, 2013
hearing, the decision of ADWS Director Artee Williams agreed with the initial agency
determination that TNT’s relationship with Singleton and all other similarly situated workers
constituted covered employment, resulting in wages subject to the payment of
unemployment-insurance taxes. TNT then appealed the Director’s decision to the Board
of Review. It, too, affirmed the employee classification, and this appeal followed. TNT
challenges the Board’s decision, contending that the services performed by Singleton and
other similarly situated workers were those of independent contractors, not employees, and
therefore not subject to unemployment taxes. We do not agree.
Standard of Review
Appellate courts will affirm a Board of Review decision if it is supported by substantial
evidence. Clifton Servs., Inc. v. Dep’t of Workforce Servs., 2014 Ark. App. 562, 445 S.W.3d
538. Substantial evidence is such relevant evidence as reasonable minds might accept as
adequate to support a conclusion. Id. We view the evidence and all reasonable inferences
deducible therefrom in the light most favorable to the Board’s findings. Id. Even if the
evidence could support a different decision, our review is limited to whether the Board could
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have reasonably reached its decision based on the evidence presented. Id.
Arkansas Code Annotated section 11-10-210(e)
Under our statutes, the Board of Review begins with a presumption of coverage for
unemployment-insurance purposes. Arkansas Code Annotated section 11-10-210(e) (Supp.
2013) sets forth the factors that must be proved by an employer in order to overcome the
presumption that services performed by an individual for wages are deemed to be
employment:
(e) Service performed by an individual for wages shall be deemed to be
employment subject to this chapter irrespective of whether the common law
relationship of master and servant exists, unless and until it is shown to the satisfaction
of the director that:
(1) Such individual has been and will continue to be free from control and
direction in connection with the performance of the service, both under his or her
contract for the performance of service and in fact;
(2) The service is performed either outside the usual course of the business for
which the service is performed or is performed outside all the places of business of the
enterprise for which the service is performed; and
(3) The individual is customarily engaged in an independently established trade,
occupation, profession, or business of the same nature as that involved in the service
performed.
(Emphasis added.) According to the statute, an employment relationship exists unless all
three of the above elements are met. Mamo Transp., Inc. v. Williams, 375 Ark. 97, 289
S.W.3d 79 (2008).
In the instant case, the Board concluded that TNT failed to establish the second prong
of the three-part statutory test; i.e., that the “service is performed either outside the usual
course of the business for which the service is performed or is performed outside all the
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places of business of the enterprise for which the service is performed.” The Board explained
in its decision:
Singleton’s services and those of similarly situated individuals, as installers[,] fail to
meet the second prong of the three part test. TNT is not simply a referral service.
It appears that it is being paid by Cox for installation jobs. TNT is paid for the
installation and TNT pays the installers a lower rate than what Cox pays TNT. TNT
is not paid until the installation is complete. The installers are an integral part of
completing those installations. Thus, the services are not “outside the usual course
of the business for which the service is performed.” Moreover, they are not outside
all the places of business of the enterprise for which the service is performed as the
places of business would encompass the locations of the installation and the roadways
between them. Mamo Transp., Inc. v. Williams, 375 Ark. 97, 289 S.W.3d 79 (2008).
....
The claimant was paid by TNT for his personal services to TNT for his installation
work. The pay was based on a rate set by Cox, apparently based on the time
estimated to complete a particular task. The Board finds that the remuneration paid
by TNT to Singleton and similarly situated individuals constitutes “wages” for
unemployment insurance purposes. TNT has not shown that the workers met the
second prong of the test for independent contractors. Since the second prong of the
test has not been satisfied, it is not necessary to address whether the other two prongs
might be satisfied. The wording of the law requires that all three prongs be met in
order to exempt the workers from covered employment.
TNT contends that it is neither a cable installer nor a cable provider; that it merely
locates skilled cable installers on behalf of cable installers; that its business is sourcing labor,
not installing cable; and that it is simply a referral service. As set forth above, the Board’s
decision specifically rejected this limited characterization, concluding that TNT was not
simply a referral service.
The only evidence that is really pertinent in this appeal is evidence that supports the
Board’s decision that the second prong was not satisfied. If reasonable minds can accept the
evidence as adequate to support the conclusion that the service performed by the installers
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was either outside the usual course of the business for which the service was performed or
it was performed outside of all the places of business of the enterprise for which the service
is performed, then this court must affirm the Board—even if the evidence could also support
a different decision.
The evidence that was clearly important to the Board in reaching its decision was
undisputed. TNT was not paid until the cable installation was complete. The Board,
therefore, reasoned that Cox was paying TNT for installation jobs, not simply for referrals,
making the installers an integral part of completing those installations and part of the ususal
course of the business for which the service was performed—not outside that course of
business. Based upon the evidence before the Board, and viewing that evidence and all
reasonable inferences deducible therefrom in the light most favorable to the Board’s findings,
we are not able to say that reasonable minds could not reach the same conclusion the Board
did; i.e., that TNT did not overcome the presumption that the services performed by
Singleton and other similarly situated workers was that of employees rather than independent
contractors because TNT did not establish the second prong of the three-part test. We
therefore affirm.
Affirmed.
ABRAMSON, J., agrees.
HARRISON, J., concurs.
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BRANDON J. HARRISON, Judge, concurring. I agree with my colleagues’
decision to affirm this case. I write separately to express some concern about the hazy
statute on which the Board of Review decided the issue this appeal presents and to explain
why I join to affirm.
As my colleagues have stated, TNT styles itself as a “broker” that locates cable
installers for corporate clients, like Cox Communication. The installers—which TNT
firmly argues are independent contractors—install cable and other technical services, like
telephones and internet connections. According to TNT, once it hires an installer to
perform a particular job, the installer may in turn hire additional help, even swap jobs with
other installers, without TNT’s permission or knowledge. TNT also provided testimony
and evidence that the installers with whom it associates must provide and pay for their
trucks, tools, fuel, and other business-related expenses. According to Chris Brown, a cable
installer who has worked with TNT and testified before the hearing officer, he spends up
to $20,000–$25,000 on business expenses each year. The installers may also, at their sole
discretion, accept or reject any job that TNT posts without adverse consequences from
TNT; and they may even work for TNT’s competitors. Or so TNT contends, and there
really was no material, countervailing proof in the record.
This case hinges on the Board’s decision that TNT failed to rebut a statutory
presumption that the laborers TNT characterizes as independent contractors are
employees for Department of Workforce Service purposes. In particular, the Board found
that TNT failed to rebut Ark. Code Ann. § 11-10-210(e)(2) (Supp. 2013). Subsection
(e)(2) states:
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The service is performed either outside the usual course of the business for
which the service is performed or is performed outside of all the places of
business of the enterprise for which the service is performed[.]
TNT argues, among other things, that the Department erred because it did not use a
“comparative approach” to determine whether TNT satisfied subsection (e)(2). The
argument is that the Department’s website lists a number of factors that it purportedly
considers when deciding whether a person is an employee, and the Department in this
case admittedly did not apply the factors to TNT. Our supreme court, however, has not
required the Department to do what TNT in part contends that it should have done; the
focus has been, for better or worse, on section 11-10-210’s elements. See Mamo Transp.,
Inc. v. Williams, 375 Ark. 97, 101, 289 S.W.3d 79, 83 (2008) (“employment relationship
exists unless all three of the [statutory] elements are met”). So TNT had to persuade the
Department that it was exempt because the installers at issue in this case either performed
services “outside the usual course of the business” or “outside all the places of business.”
Ark. Code Ann. § 11-10-210(e)(2) (emphasis added).
In Mamo Transportation, Inc. v. Williams, the Department and a transportation
company tussled over whether drivers the transport company used to move vehicles across
the country were employees or independent contractors. Our supreme court interpreted
the “places of business” phrase to mean “all the places of business of the enterprise for
which the service is performed.” 375 Ark. at 101, 289 S.W.3d at 84. The court also
stated that “[a]n enterprise’s place of business must be decided on a case-by-case basis.” Id.
at 103, 289 S.W.3d at 85. The supreme court interpreted Mamo’s place of business to
include all the roadways upon which its drivers travelled and the vehicles in which the
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drivers travelled. In Home Care Professionals of Arkansas, Inc. v. Williams, this court held
that a business providing home care for the elderly had its place of business in the
customers’ homes. 95 Ark. App. 194, 199, 235 S.W.3d 536, 541 (2006). In O’Dell v.
Director, Department of Workforce Services, we reversed the Board of Review’s decision, in
part, because it misapplied Mamo and the evidence showed that a medical transcriptionist
who contracted out extra work she had to additional typists did not dictate where the
work must be done and that no alternative places of business were necessary to fulfill the
enterprise’s purpose. 2014 Ark. App. 504, 442 S.W.3d 897.
So the caselaw has seemingly given subsection (e)(2) a reach that Plastic Man would
envy. The long reach, as a practical matter, makes it difficult for a business entity to
successfully claim that it associates independent contractors, not hires employees, for
Department of Workforce Services purposes. Perhaps that is precisely what the General
Assembly intended. Whether the subsection’s reach has extended beyond a prudent
boundary is a question that our supreme court or legislature may be asked to decide in due
course. Today, however, I cannot say that the Board erred in finding that TNT failed to
prove that the places where the installers it schedules perform their services are “outside all
the places of business,” given how the courts have applied subsection (e)(2).
Whether TNT-affiliated installers provide services “outside the usual course of the
business” is a closer call. In Mamo, the supreme court did not address the “course of
business” phrase; it addressed the “place of business” phrase. 375 Ark. at 101, 289 S.W.3d
at 84. TNT argues that it satisfied subsection (e)(2) because its contractors’ course of
business is different that TNT’s. As has been said, according to TNT, its client (primarily
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Cox) is in the business of providing cable services, and it (TNT) is a “broker” of services
that allows independent contractors to install Cox’s cable service. In this vein, TNT
insists that it does not install cable, it just sources labor.
The Board rejected TNT’s distinction because it found that cable installation was a
key part of how TNT operated and made money. “TNT is paid for the installation [by
Cox] and TNT pays the installers a lower rate than what Cox pays TNT . . . . The
installers are an integral part of completing those installations,” the Board concluded. This
statement is the reason the Board provided on why it rejected TNT’s argument regarding
subsection (e)(2).
I agree that we may affirm because the Board’s conclusion that TNT is not a mere
broker, but a cable-installation business, is supportable under our standard of review. But
the decision for me is a close one. To the extent TNT argues that the Board considered
an irrelevant factor—the irrelevancy being who sets the rate of pay—I tend to agree with
TNT that the rate of pay and the timing of when installers get paid should not primarily
fuel the subsection (e)(2) analysis. Who gets paid what, when, and by whom, clearly
matters when asking whether “wages” were paid; and the topic of wages is important
because a finding that wages are paid is a condition precedent to applying section 11-10-
210(e)(1)–(3). It’s not clear to me why the Board’s point here means that TNT failed to
rebut subsection (e)(2).
I opened, and now close, with the notion that subsection (e)(2) not only lacks
clarity of expression, though it does in a material way, but also that it is not obvious what
real-world business enterprise could escape subsection (e)(2)’s reach. Despite Justice
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Brown’s dissent in Mamo and (now) Justice Baker’s dissent in Home Care Professionals—
both of which can be read as signaling an alarm that the Department is too strenuously
applying subsection (e)(2)—the law as it stands today seems to impel that we affirm the
Board’s decision.
I therefore agree to affirm the Board of Review’s decision.
K & L Gates LLP, by: John M. Farrell; and
Kutak Rock LLP, by: James M. Gary, for appellant.
Phyllis A. Edwards, for appellee.
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