Circle Health Partners, Inc. v. Unemployment Insurance Appeals of the Indiana Department of Workforce Development

Dec 16 2015, 8:43 am
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
Andrew M. McNeil Gregory F. Zoeller
Philip R. Zimmerly Attorney General of Indiana
Bose McKinney & Evans LLP
Indianapolis, Indiana Frances Barrow
Deputy Attorney General
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Circle Health Partners, Inc., December 16, 2015
Appellant-Employer, Court of Appeals Case No.
93A02-1503-EX-183
v. Appeal from the Final Judgment of
the Indiana Department of
Unemployment Insurance Workforce Development
Appeals of the Indiana The Honorable Aija Funderburk,
Department of Workforce Liability Administrative Law
Development, Judge
Appellee-Claimant. Case No.
67702
May, Judge.
[1] Circle Health Partners, Inc., (“CHP”) appeals the decision of the Liability
Administrative Law Judge (“LALJ”) that certain workers were employees of
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CHP, rather than independent contractors, such that CHP’s payments to those
workers were “wages” as defined in Ind. Code § 22-4-4-2 for which CHP was
liable to the State of Indiana for additional unemployment taxes.
[2] We affirm.
Facts and Procedural History
[3] In 2013, the Department of Workforce Development (the Department)
undertook an audit of CHP’s business and tax records. It determined CHP
“had additional taxable wages in 2009, 2010, and 2011 based on payments
made to individuals for services that constituted employment.” (App. at 3.)
CHP filed a timely protest of those Findings.
[4] An LALJ conducted a hearing in January 2015 and, thereafter, entered an
order that affirmed the Department’s decision. That order included the
following findings of fact:
[CHP] is a pre-claim cost control consulting business located in
Indianapolis, Indiana and serves clients in various states.
[CHP]’s typical clients are employers that provide health
insurance benefits to their employees. [CHP] creates strategies
for its clients to reduce healthcare costs and save lives. [CHP]’s
mission is to “lead our country in pre-claim cost control
strategies[;] [d]eliver truly integrated health and wellness
strategies that save lives and impacts [sic] the bottom line for our
clients[; and] [c]hange the corporate health delivery model so
that employers and members can focus on their core business and
success.” See Department’s Ex. 4.
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[CHP] generally offers its clients wellness programs,
pharmaceutical benefit management, administration, reporting,
and a web portal to achieve its mission goals. [CHP]’s
pharmaceutical benefit management includes identifying
medications that the employer makes available to its employees
and finding lower cost alternatives or substitutions for those
medications. [CHP] uses a web portal to obtain confidential
information and data to develop and implement its cost control
strategies. [CHP] also offers the web portal to its clients to
communicate with their employees. [CHP] reports data and
information to its clients and provides administrative services.
[CHP] designs wellness programs for its clients after a
consultation with top executives to determine the work
environment and culture and the goals for the program.
Typically, [CHP] offers three strategies as part of its wellness
programs: awareness, education and motivation. With respect
to awareness, [CHP] uses data from a questionnaire and health
screenings to help an individual understand where they [sic] are
on the health spectrum and to analyze its clients’ employees’
highest risk areas. Through the education component of the
wellness programs, [CHP] offers seminars, e-learning, lifestyle
management programs, and a web portal health encyclopedia to
its clients and their employees. [CHP] uses a motivation strategy
in its wellness programs to encourage health and cost control by
providing incentives, rewards and coaching to its clients’
employees.
As stated, [CHP] uses data from health screenings to implement
the awareness strategy of its wellness programs. As part of its
wellness services, [CHP] regularly offers health screenings to its
clients. See Department’s Ex. 4. Depending on a client’s needs
and/or budget, [CHP] conducts health screenings at the client’s
facility for an additional cost. In some cases, clients choose not
to use the health screenings at all. In other cases, clients may
choose to have another entity perform a health screening or
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perform their own health screenings. For example, in 2010,
approximately 7,000 of [CHP]’s 49,000 covered individuals had a
health screening completed by [CHP].
When [CHP] performs the health screenings, [CHP] hires
licensed registered nurses and certified phlebotomists to do so.
[CHP] also hires licensed nurses to conduct personal
consultations to discuss the results of a questionnaire and
biometric screening with its clients’ employees, when that service
is selected by the client. [CHP] generally hires nurses that are
employed by other entities, such as hospitals and, typically, finds
them by word of mouth. See Department’s Ex. 3. [CHP] is
unaware as to whether the nurses and phlebotomists offer
services to other entities as independent contractors.
*****
The Department conducted an audit of [CHP]’s business for
years 2009, 2010 and 2011. As part of the audit process, Steve
Husk, President/Principal, completed a Compliance Audit
Questionnaire. See Department’s Ex. 2. On the questionnaire,
Mr. Husk described [CHP]’s business activity as “WELLNESS
CONSULTING, PROGRAM SCREENING &
CONSULTATION[,] WEB TOOL SUPPORT SERVICES[.]”
Department’s Ex. 2. In addition, Mr. Husk communicated with
the auditor, Tracy Robbins, via email to explain [CHP]’s
business and the services that individuals that received 1099 tax
forms provided. See Department’s Ex. 3.
In the email, Mr. Husk explained that [CHP] uses the services of
registered nurses, certified phlebotomists, and wellness
professionals in the delivery of its on-site wellness service to its
clients. Mr. Husk also stated that “if [CHP] could not rely on
[registered nurses, certified phlebotomists, and wellness
professionals] to execute the on-site wellness program, [CHP]
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would not offer that service and instead would limit its business
to expert wellness consulting and web-based programs.”
Department’s Ex. 3 at p3.
(Id. at 3-5.) The LALJ concluded:
1. The [LALJ] has jurisdiction over this matter pursuant to
Indiana Code §22-4-32-1. et. seq.
2. The [LALJ] concludes that the nurses and phlebotomists
at issue were not free from direction and control in
contract and in fact.
3. The [LALJ] concludes that the services that the nurses and
phlebotomists performed were not outside the usual course
of [CHP]’s business.
4. The [LALJ] concludes that the nurses and phlebotomists
were customarily engaged in an independently established
trade, occupation, profession, or business of the same
nature as that involved in the service performed.
5. Accordingly, the [LALJ] concludes the services provided
by the nurses and phlebotomists at issue constitute
employment and that payments made to those individuals
as remuneration for those services constitute wages.
(Id. at 5-6.)
Discussion and Decision
[5] “Any decision of the liability administrative law judge shall be conclusive and
binding as to all questions of fact.” Ind. Code § 22-4-32-9(a) (1995). However
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we “are not bound by an agency’s interpretation of the law.” Jug’s Catering, Inc.
v. Indiana Dep’t. of Workforce Dev., Unemployment Ins. Bd., 714 N.E.2d 207, 210
(Ind. 1999), trans. denied. When a party challenges an administrative law
judge’s decision as contrary to law, we may consider “both the sufficiency of
the facts found to sustain the decision, and the sufficiency of the evidence to
sustain the finding of facts.” Ind. Code § 2-4-32-12 (1990). When undertaking
our review, we must look at the record in the light most favorable to the
administrative decision, and we may neither reweigh the evidence nor assess
the credibility of the witnesses. Jug’s Catering, 714 N.E.2d at 209. “Under this
standard, basic facts are reviewed for substantial evidence, conclusions of law
are reviewed for their correctness, and ultimate facts 1 are reviewed to determine
whether the ALJ’s finding is a reasonable one.” Bloomington Area Arts Council v.
Dep’t of Workforce Dev., Unemployment Ins. Appeals, 821 N.E.2d 843, 849 (Ind. Ct.
App. 2005) (footnote added).
[6] Circle Health argues the LALJ erred by determining the nurses and
phlebotomists are employees of CHP within the meaning of Ind. Code § 22-4-8-
1. For purposes of determining when an employer is liable for unemployment
taxes, employment means “service . . . performed for remuneration or under
any contract of hire, written or oral, expressed or implied.” Ind. Code § 22-4-8-
1(a). Any service
1
“Ultimate facts are conclusions or inferences from the basic facts.” Bloomington Area Arts Council v.
Department of Workforce Dev., Unemployment Ins. Appeals, 821 N.E.2d 843, 849 (Ind. Ct. App. 2005).
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performed by an individual for remuneration shall be deemed to
be employment subject to this article irrespective of whether the
common-law relationship of master and servant exists, unless
and until all the following are shown to the satisfaction of the
department:
(1) The individual has been and will continue to be free from
control and direction in connection with the performance of such
service, both under the individual’s contract of service and in
fact.
(2) The service is performed outside the usual course of the
business for which the service is performed.
(3) The individual:
(A) is customarily engaged in an independently established
trade, occupation, profession, or business of the same
nature as that involved in the service performed; or
(B) is a sales agent who receives remuneration solely upon
a commission basis and who is the master of the
individual’s own time and effort.
Ind. Code § 22-4-8-1(b) (2006). Pursuant to that definition, all workers are
presumed to be employees until an employer demonstrates all three factors. See
Bloomington Area Arts Council, 821 N.E.2d at 849 (noting employing unit had
burden of proof as to three elements). When we review a decision, we must
consider those three statutory provisions “conjunctively.” Id. Furthermore,
because assessments made by the commission against “employing units [are]
prima facie correct,” Ind. Code § 22-4-29-2 (2009), CHP has the burden of
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demonstrating it proved the nurses and phlebotomists at issue met all three
factors in that test.
[7] The first factor that an employing unit must demonstrate to prove a worker is
not an employee is that the worker is “free from control and direction in
connection with the performance of such service, both under the individual’s
contract of service and in fact.” Ind. Code § 22-4-8-1(b)(1). To meet this
requirement “requires more than the mere power to have the [workers] cease
their performance of the service upon a showing that such service was not being
performed in the manner in which it should be performed.” Alumiwall Corp. v.
Indiana Emp’t Sec. Bd., 130 Ind. App. 535, 541, 167 N.E.2d 60, 62 (1960).
Instead, the employer must exert “some control and direction over the manner,
method and means in which the services are performed.” Id. “What
constitutes control and direction under the statute is a factual question. Each
case must be decided upon its own particular facts.” Norman A. Boerger Ins., Inc
v. Indiana Emp’t Sec. Bd., 158 Ind. App. 154, 158, 301 N.E.2d 797, 800 (1973).
[8] The LALJ concluded “the nurses and phlebotomists at issue were not free from
direction and control in contract and in fact.” (App. at 5.) She explained:
The [LALJ] notes that the reason for the service is to gather
health information and to inform individuals receiving health
screenings. The employer’s contract, however, directs the
manner and/or method by which the individuals perform the
health screenings and consultations. Indeed, the Description of
Services document for health screenings instructs the nurses and
phlebotomists to set up the screening in an efficient manner,
collect money, start discussions with client employees, show the
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employees how to complete the employer’s computer
questionnaire, tear down and clean up the screening room, and
provide customer service. See Department’s Ex. 6.
Likewise, the Description of Services document for personal
consultations requires nurses to discuss preventative tests, discuss
the participant’s health record and applicable company benefits,
and set goals for healthier living, etc. See Department’s Ex. 5.
Per the Description of Services document, the nurse consultant is
also responsible for giving out pamphlets, filling out a no
show/show list, gathering contact info and goals for at risk
clients and recording. The Description of Services documents do
more than list information that the individuals must gather or list
services; it directs the individuals on how to conduct the
screenings and consultations. Therefore, the [ALJ] concludes
that individuals at issue were not free from the employer’s
direction and control in contract.
(Id. at 7.) Her order also included the following pertinent findings of fact:
When the employer performs the health screenings, the employer
hires licensed registered nurses and certified phlebotomists to do
so. The employer also hires licensed nurses to conduct personal
consultations to discuss the results of a questionnaire and
biometric screening with its clients’ employees, when that service
is selected by the client. The employer generally hires nurses that
are employed by other entities, such as hospitals and, typically,
finds them by word of mouth. See Department’s Ex. 3. The
employer is unaware as to whether the nurses and phlebotomists
offer services to other entities as independent contractors.
Each nurse and phlebotomist is required to sign an Independent
Contractor Agreement (agreement) with the employer. Per the
agreement, the nurses and phlebotomists agree to provide
services listed in a Description of Services document and are paid
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an hourly rate for hours worked that are billable to the employer
or its clients. See Department’s Ex. 6. The agreement also states
that the nurses and phlebotomists are entitled to reimbursement
for travel and other expenses incurred in providing services.
The Description of Services document for either the health
screening or the personal consultation is attached to the
agreement, as Exhibit A. See Department’s Ex. 5, 6. For a
health screening, nurses are to perform eighteen (18) different
steps, including “Setup screening in an efficient manner[;] …
Facilitate discussion of recommended tests if applicable[;]
…Collect money for additional tests if applicable[;] … Measure
the participant’s height and weight[;] … Measure the
participant’s blood pressure and heart rate[;] … Direct individual
as needed on how to complete the computer questionnaire[;] …
Properly tear down and restore the room to before screening
state; … Provide quality customer service throughout the
contracted time[.]” See Department’s Ex. 6.
For a personal consultation, nurses should review health
screening results, discuss preventative tests, discuss the
participant’s health record and applicable company benefits, and
set goals for healthier living, etc. See Department’s Ex. 5. The
consultation is also supposed to include a discussion of exercise,
weight, stress, and family preventative health. The consultant is
responsible for giving out pamphlets, filling out a no show/show
list, gathering contact info and goals for at risk clients and
recording, etc. See Department’s Ex. 5.
(Id. at 4) (italics in original).
[9] CHP argues “the undisputed evidence reveals” the workers at issue were like
the workers in Alumiwall, 130 Ind. App. 535, 167 N.E.2d 60, and Twin States
Publ’g Co., Inc. v. Indiana Unemployment Ins. Bd., 678 N.E.2d 110 (Ind. Ct. App.
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1997), trans. denied, two cases in which we held LALJs incorrectly determined
workers were employees. (Br. of Appellant at 10.) We disagree.
[10] Alumiwall was a siding and roofing business that sold and supplied the
materials to be attached to the exterior of buildings. After selling materials to a
customer, Alumiwall contracted with an “applicator” to attach the materials to
the building. 130 Ind. App. at 537, 167 N.E.2d at 60. The contracted
applicator could hire as many workers as desired at whatever pay rate the
applicator chose, and the applicator had complete discretion as to when and
how the application was performed. Id. In addition, the applicator provided
the tools and equipment necessary to perform the work. Id. at 540, 167 N.E.2d
at 62. “The only restriction was that they perform such services in a good and
workmanlike manner.” Id. at 540-41, 167 N.E.2d at 62. We held the right to
have the applicators cease work if the service was not being done in a
workmanlike manner was not the statutory “direction and control” over
workers that made them employees because an expectation of workmanlike
performance “is inherent in all services performed by one for another.” Id. at
541, 167 N.E.2d at 62.
[11] Twin States Publishing Company printed newspapers and shopping guides that
it then hired individuals to deliver. Twin States, 678 N.E.2d at 111. Those
individuals had approximately twenty-four hours to deliver the publications
using any method or means, and they could hire others to help complete
deliveries. On appeal, we reversed the LALJ’s determination that those
delivery people were employees for purposes of Ind. Code § 22-4-8-1 because:
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They have complete discretion over the manner, method and
means of performing their work. The only restrictions are that
the carriers deliver the guides by 5:00 p.m. on Tuesdays, place
the guides in a dry place, and perform their services in a
workmanlike manner.
678 N.E.2d at 114.
[12] The nurses and phlebotomists who contracted to work for CHP had more
restrictions on them than just performing in a workmanlike manner, although
they were required to so perform. (See, e.g., Ex. 6 at 5) (“Provide quality
customer service throughout contracted time”). They were not simply told to
conduct a health screening or “collect biometric information,” (id.), and then
left to their own devices. Rather, they were given eighteen specific steps to
complete. (Id.) Furthermore, as the first step is to “1. Setup screening in an
efficient manner,” (id.), and one of the last is to “16. Properly tear down and
restore room to before screening state,” (id.), one could reasonably infer the
eighteen steps are listed in the order they are to be completed during the health
screening. The workers in Alumiwall and Twin States could hire others to
complete the contracted work for them, but there is no indication those
contracted to work for CHP could send others to complete the work. Nor could
those nurses and phlebotomists conduct the screenings at times other than the
hours scheduled for the screenings. The facts in this case are not like those in
Alumiwall and Twin States, and we see no error in the LALJ’s conclusion the
phlebotomists and nurses were not free of CHP’s direction and control.
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[13] As a business must meet all three of the factors in Ind. Code § 22-4-8-1 in order
to prove a worker is not an employee, CHP’s inability to prove the LALJ erred
as to the first factor is sufficient to require us to affirm the LALJ’s decision.
See Bloomington Area Arts Council, 821 N.E.2d at 849 (all workers presumed to be
employees until employer demonstrates all three statutory factors).
Conclusion
[14] The evidence supports the LALJ’s findings, and those findings support the
LALJ’s conclusion “the nurses and phlebotomists at issue were not free from
direction and control in contract and in fact.” (App. at 20.) Accordingly, we
affirm.
[15] Affirmed.
Crone, J., and Bradford, J., concur.
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