Sinclair Builders, Inc. v. Unemployment Insurance Commission

MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2013 ME 76
Docket: Han-13-10
Argued: June 11, 2013
Decided: August 20, 2013
Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and
JABAR, JJ.
SINCLAIR BUILDERS, INC.
v.
UNEMPLOYMENT INSURANCE COMMISSION
JABAR, J.
[¶1] Sinclair Builders, Inc., appeals from a judgment entered in the Superior
Court (Hancock County, Cuddy, J.) pursuant to 5 M.R.S. § 11007(4) (2012) and
M.R. Civ. P. 80C affirming the Unemployment Insurance Commission’s decision
that twenty-four individuals were employees of Sinclair as defined in 26 M.R.S.
§ 1043(11)(E) (2010).1 Sinclair argues that the Commission erred in determining
that pursuant to 26 M.R.S. § 1043(11)(E)(1) and (2), Sinclair failed to rebut the
presumption that the individuals at issue were employed with Sinclair. We affirm
the judgment in part, and vacate in part.
1
The Legislature substantially amended the definition of employment in 2011, see infra n.3, but
because the amended statute contains no language to indicate that the Legislature intended it to operate
retroactively, and this case was pending as of July 8, 2010, we apply the version of the statute that was in
force in 2010. See 1 M.R.S. § 302 (2012); cf. Bernier v. Data Gen. Corp., 2002 ME 2, ¶¶ 15-17,
787 A.2d 144.
2
I. BACKGROUND
[¶2] Sinclair Builders, Inc., is a general construction company located in
Ellsworth. In 2010, the Maine Department of Labor Bureau of Unemployment
Compensation conducted a random audit of Sinclair’s business to verify the
relationship between Sinclair and a list of twenty-four individuals that Sinclair had
claimed were independent contractors. See 26 M.R.S. § 1082(1) (2012) (providing
that the Commissioner of Labor, through the Bureau, “may . . . make investigations
and take other actions” necessary to administer the Employment Security Law).
On July 8, 2010, the Bureau determined that all twenty-four individuals were
employees of Sinclair as defined in 26 M.R.S. § 1043(11)(E). Thus, the Bureau
assessed Sinclair unpaid unemployment tax liability for each of those individuals,
from 2007 through the first quarter of 2010, at $16,630.55, with an additional
$6,053.17 in interest and penalties. Sinclair appealed the Bureau’s determination
to the Commission, see 26 M.R.S. § 1082(14)(D) (2012), which made the
following findings.
[¶3] Sinclair is in the business of residential construction and renovation,
and between 2007 and early 2010, the company employed some individuals who
3
were undisputedly employees and who were not listed in the Bureau’s decision.2
The Bureau’s list of workers whose status was disputed contained three categories
of individuals: two salesmen, a bookkeeper, and twenty-one skilled subcontractors
who performed various construction tasks.
[¶4] The two salesmen and Sinclair’s president would locate construction
and renovation projects in the greater Ellsworth area. When the salesmen found a
project, they would offer to sell the customer retail products including windows,
doors, fixtures, and other items related to Sinclair’s construction or renovation
business. Sinclair controlled the terms of the sales and paid the salesmen by fixed
commissions, and the salesmen could not negotiate the commission rate. The
salesmen occasionally worked from Sinclair’s office, but they typically worked
from various locations in a defined territory around Ellsworth.
[¶5] Sinclair also hired a part-time bookkeeper who worked from Sinclair’s
office three days per week. The bookkeeper provided general office support—
answering telephones, taking messages, and communicating with clients. The
bookkeeper billed Sinclair weekly for her work and was covered by Sinclair’s
liability insurance. Sinclair had the right to instruct or discharge the bookkeeper.
2
Sinclair’s president testified that he hired between six and eight ordinary employees during the
relevant time for whom he paid unemployment insurance taxes and whom he hired to perform the same
general construction tasks as some of the skilled subcontractors.
4
[¶6] Sinclair acted as the general contractor for customers and hired workers
to perform general carpentry services and specific services, such as plumbing,
heating, and electrical work, that Sinclair’s ordinary employees could not perform.
Sinclair paid these workers the standard market rate for their services.
[¶7] Sinclair did not provide training or equipment to the workers that it
hired, but it did instruct the individuals to follow the specifications on Sinclair’s
contract with the customer. The workers provided their own separate liability
insurance. Sinclair also required that all of the individuals who worked on its
projects follow safety protocols, regardless of whether it considered them
independent contractors or employees.
[¶8] The Commission held a hearing on December 15, 2010, and on
August 10, 2011, it affirmed the Bureau’s determination as to the bookkeeper, the
salesmen, and nineteen of the subcontractors. The Commission vacated the
Bureau’s decision as to two of the remaining subcontractors, for whom it found
there was no evidence in the record to support a finding of employment by
Sinclair. Sinclair sought review of the Commission’s determination in the
Superior Court, see 26 M.R.S. § 1082(14)(D); see also 5 M.R.S. § 11001(1)
(2012), which affirmed the Commission’s judgment in a memorandum of decision
on December 5, 2012. Sinclair filed this timely appeal. See 5 M.R.S. § 11008
(2012); M.R. App. P. 2(b)(3).
5
II. DISCUSSION
[¶9] “When, as in this case, the Superior Court sits as an intermediate
appellate court and reviews an agency decision, we review the administrative
tribunal’s decision directly.” Vector Mktg. Corp. v. Me. Unemployment Ins.
Comm’n, 610 A.2d 272, 274 (Me. 1992). We review the Commission’s judgment
“to determin[e] whether the Commission correctly applied the law and whether its
fact findings are supported by any competent evidence [in the record].”
McPherson Timberlands, Inc. v. Unemployment Ins. Comm’n, 1998 ME 177, ¶ 6,
714 A.2d 818. “We will not overrule findings of fact supported by substantial
evidence, defined as ‘such relevant evidence as a reasonable mind might accept as
adequate to support the resultant conclusion.’” Lewiston Daily Sun v.
Unemployment Ins. Comm’n, 1999 ME 90, ¶ 7, 733 A.2d 344 (quoting Crocker v.
Me. Emp’t Sec. Comm’n, 450 A.2d 469, 471 (Me. 1982)).
[¶10] With respect to the law, we review de novo issues of statutory
interpretation. Carrier v. Sec’y of State, 2012 ME 142, ¶ 12, 60 A.3d 1241.
However, “we defer to an agency in those areas within its expertise unless a statute
or regulation compels a contrary result.” Schwartz v. Unemployment Ins. Comm’n,
2006 ME 41, ¶ 9, 895 A.2d 965 (quotation marks omitted). “We first look to the
plain meaning of the statute, interpreting its language to avoid absurd, illogical or
inconsistent results.” Carrier, 2012 ME 142, ¶ 12, 60 A.3d 1241 (quotation marks
6
omitted). “[A] misapplication of the law to the facts will constitute reversible
error, and if an agency fails to make adequate findings of fact, the Court may
remand for findings that would permit meaningful judicial review.”
Nancy W. Bayley, Inc. v. Me. Emp’t Sec. Comm’n, 472 A.2d 1374, 1377
(Me. 1984) (citations omitted).
[¶11] At the relevant time, the Employment Security Law, which governs
unemployment compensation, defined “employment” as including “any . . . service
in interstate commerce, performed for wages.” 26 M.R.S. § 1043(11). The statute
defined “wages” broadly to include “all remuneration for personal services,
including commissions, bonuses[,] . . . and the cash value of all remuneration in
any medium other than cash.” 26 M.R.S. § 1043(19) (2010). It is undisputed that
Sinclair provided wages in exchange for personal services pursuant to section
1043.
[¶12] If the Bureau established that the employer paid wages in exchange
for an individual’s services, there was a presumption of an employment
relationship between that employer and the individual. See 26 M.R.S.
§ 1043(11)(E). The employing company could rebut the presumption, however, by
demonstrating that the employment relationship met three requirements listed in
7
26 M.R.S. § 1043(11)(E)(1) to (3), generally referred to as the ABC test.3 These
requirements were
([A]) Such individual has been and will continue to be free from
control or direction over the performance of such services, both under
his contract of service and in fact;
([B]) Such service is either outside the usual course of the business
for which such service is performed, or that such service is performed
outside of all the places of business of the enterprise for which such
service is performed; and
([C]) Such individual is customarily engaged in an independently
established trade, occupation, profession or business.
26 M.R.S. § 1043(11)(E)(1) to (3). The burden of proof is on the employer to
establish all three of these criteria; “[t]o satisfy one or two, and not all three, leaves
the relationship for purposes of the Act one of ‘employment.’” Hasco Mfg. Co. v.
Me. Emp’t Sec. Comm’n, 158 Me. 413, 415, 185 A.2d 442 (1962). The
Commission correctly determined that Sinclair met its burden of showing that all
of the individuals on the Bureau’s list met criterion C—having been customarily
3
In 2011, the Legislature amended 26 M.R.S. § 1043(11)(E) (2010) to completely redefine the test for
“employment.” See P.L. 2011, ch. 643, § 6 (effective Dec. 31, 2012) (codified at 26 M.R.S.
§ 1043(11)(E) (2012)). When the Legislature was considering amending the test, the Acting
Commissioner of the Department of Labor testified that the amended definition addressed complaints of
unfairness and frustration from the business community concerning the broad and uncertain nature of the
ABC test. Testimony of Laura L. Boyett, Acting Comm’r, Me. Dep’t of Labor on L.D. 1420 &
L.D. 1314 (125th Legis. 2011) before the Joint Standing Committee on Labor, Commerce, Research &
Econ. Dev. (May 4, 2011). Further, the Bureau, in its report to the joint legislative committee considering
the amended definition, stated that “[a]lthough containing only three elements, the ‘ABC’ test was
broadly written and difficult for employers and workers to use effectively as guidance without the
assistance of ‘experts’ in the application of the test.” The Dep’t of Labor, Bureau of Unemployment
Compensation, Report to the Joint Standing Comm. on Labor, Commerce, Research & Economic
Development of the 125th Legislature 2 (Feb. 2012).
8
engaged in an independently established trade. Thus, we address only parts A
and B.
[¶13] With respect to part A, which requires the employer to demonstrate
that an individual is free from the employer’s direction and control over the
performance of that individual’s services “both under his contract of service and in
fact,” see 26 M.R.S. § 1043(11)(E)(1), we have noted, “Control contemplated by
the statute is general control and the right to control may be sufficient even though
it is not exercised.” Me. Auto Test Equip. Co. v. Me. Unemployment Comp.
Comm’n, 679 A.2d 79, 81 (Me. 1996) (quotation marks omitted). One
commentator has observed that consideration of the “right to control” means that
“[t]he possibility of control in the future would thus seem to be as decisive as
present control.” Benjamin S. Asia, Employment Relation: Common-Law Concept
and Legislative Definition, 55 Yale L.J. 76, 87 (1945).
[¶14] With respect to part B of the ABC test, the employer must
demonstrate that the individual provides a service that is “outside the usual course
of the business” of the employer or “outside of all the places of business of the
enterprise for which such service is performed.” 26 M.R.S. § 1043(11)(E)(2).
This prong is disjunctive, meaning that the employer needs to show only one of the
two alternatives. See McPherson Timberlands, Inc., 1998 ME 177, ¶ 7,
714 A.2d 818.
9
[¶15] In order to demonstrate that an individual’s services are not within the
employer’s usual course of business, the employer must show that the service is
not an “integral part of” the employer’s business, but is rather “merely incidental
to” it. See id. ¶¶ 9-15 (quotation marks omitted). For example, we have held that
the repair and maintenance of real estate properties were incidental to the usual
course of business of a bank, see Me. Unemployment Ins. Comm’n v. Me. Sav.
Bank, 136 Me. 136, 140-41, 3 A.2d 897 (1939), but those same services were an
integral part of the business of a property owner and landlord, see
Me. Unemployment Comp. Comm’n v. Androscoggin Jr., Inc., 137 Me. 154, 164,
16 A.2d 252 (1940).
[¶16] Alternatively, the employer could demonstrate that the individual’s
“service is performed outside of all the places of business of the enterprise” in
order to satisfy part B. See 26 M.R.S. § 1043(11)(E)(2). An employer’s place of
business may include a place where the employer “has a significant and
business-related presence.” See McPherson Timberlands, Inc., 1998 ME 177, ¶ 17,
714 A.2d 818. In McPherson Timberlands, Inc., we upheld a finding by the
Commission that a timber harvesting company that employed a person to perform
tree removal had a significant, business-related presence in the woodlot where
those services were performed, and it was therefore a place of business of that
employer. Id. ¶¶ 17-18.
10
[¶17] Moreover, we are mindful that the rapid progress in technology and
the changing demands of the workplace may require a flexible interpretation of this
part of the test. As the Vermont Supreme Court recently observed in applying that
state’s identical statute, “The demands of parenthood, communications-technology
advances, issues of energy consumption, and other circumstances have created a
new type of employee—one who works from her home or car, enjoying flexibility
in the time and place of performance.” Fleece on Earth v. Dep’t of Emp’t &
Training, 923 A.2d 594, 600 (Vt. 2007). Defining an employment relationship
solely based on the individual’s presence in or absence from the employer’s place
of business may be more difficult given the nature of today’s workers.
A. Bookkeeper
[¶18] The Commission determined that Sinclair failed to satisfy both parts
A and B of the ABC test with respect to the bookkeeper. Sinclair does not dispute
that its office, where the bookkeeper performed her services, is the company’s
place of business. See 26 M.R.S. § 1043(11)(E)(2). Instead, Sinclair contends that
the bookkeeper was free from Sinclair’s direction and control over the performance
of her services, and that the bookkeeping services were outside Sinclair’s usual
course of business. See id. § 1043(11)(E)(1)-(2).
[¶19] With respect to its course of business, Sinclair argues that “[t]he fact
that balancing a company’s books and paying its bills is necessary to continue
11
operating does not transform a construction contracting business into a
bookkeeping or accounting firm.” However, the law does not require an
employee’s service to transform the company into a provider of that service.
Cf. McPherson Timberlands, Inc., 1998 ME 177, ¶¶ 9-15, 714 A.2d 818. Rather,
part B of the ABC test requires the employer to demonstrate that an individual
provides a service that is not an “integral part” of the company’s business, but is
“merely incidental” to it. Id. ¶¶ 9-10 (quotation marks omitted); Androscoggin Jr.,
Inc., 137 Me. at 164, 16 A.2d 252 (concluding that repair and maintenance of
buildings were within the usual course of a landlord’s business). There is
substantial evidence in the record supporting the Commission’s finding that the
bookkeeper’s services—answering phones, taking messages, and handling the
company’s billing and payments—were an integral part of Sinclair’s business. See
Gerber Dental Ctr. Corp. v. Me. Unemployment Ins. Comm’n, 531 A.2d 1262,
1264 (Me. 1987) (holding that dentists’ services were within the course of the
company’s business as a “full range” dental service provider). Therefore, we
conclude that the Commission did not err with respect to part B of the test, and we
affirm its decision as to the bookkeeper. Because we will affirm the Commission’s
decision regarding an employee if the employer failed to satisfy any one prong of
the ABC test, we do not need to reach the issue of whether the bookkeeper was
12
free from Sinclair’s direction or control. See Hasco Mfg. Co., 158 Me. at 415,
185 A.2d 442.
B. Salesmen
[¶20] The Commission similarly determined that Sinclair failed to meet its
burden for both prongs A and B with respect to its two salesmen. Sinclair argues
that the Commission’s finding that the salesmen were not free from the company’s
direction and control is not supported by the evidence in the record because
Sinclair provided only certain leads and did not instruct them on how to make
sales. Further, Sinclair argues that the salesmen were not located in Sinclair’s
place of business for the purpose of part B.
[¶21] In Hasco Manufacturing Company, we addressed whether salespeople
were free from the direction or control of a company that was in the business of
fabricating and selling aluminum products “in the form of windows, doors, storm
sash[es], combination windows and garages.” 158 Me. at 416, 185 A.2d 442.
Despite the absence of a written contract between Hasco and its salespeople, we
affirmed findings that the salespeople received a commission from the sales that
they made of Hasco products, and that Hasco set the terms of all sales and
ultimately accepted or rejected all transactions initiated by its salespeople. Id. at
416-17. We concluded that, based on these factual findings, the court was correct
13
in concluding that the salespeople were not free from Hasco’s direction or control
over the performance of their services. Id. at 418.
[¶22] Similarly, the evidence in the record supports the Commission’s
findings that Sinclair had the right to control the performance of the salesmen’s
services. Sinclair dictated the terms of their sales, provided a set commission,
without negotiation from either salesman, and gave the salesmen business cards
bearing Sinclair’s name and logo. See id. at 416-18. Additionally, Sinclair’s
president testified that he would ultimately choose which sales to make, taking the
most potentially lucrative clients. See id. Therefore, we conclude that the
Commission did not err in determining that Sinclair failed to meet its burden of
demonstrating that the salesmen were free from its direction and control. See
26 M.R.S. § 1043(11)(E)(1); Hasco Mfg. Co., 158 Me. at 416-18, 185 A.2d 442.
Having concluded that the Commission did not err with respect to part A of the
ABC test, we decline to address whether the salesmen acted within the usual
course or regular place of Sinclair’s business pursuant to part B. See Hasco Mfg.
Co., 158 Me. at 415, 185 A.2d 442.
C. Skilled Workers
[¶23] Finally, the Commission again found that Sinclair failed to meet its
burden of satisfying both parts A and B of the ABC test with respect to the skilled
workers that it employed as subcontractors. See 26 M.R.S. § 1043(11)(E)(1)-(2).
14
We note at the outset that the Commission vacated the Bureau’s determination
with respect to two workers for whom it found that there was no evidence to
support a finding of an employment relationship. Further, at oral argument,
Sinclair conceded an employment relationship with a groundskeeper who provided
services around Sinclair’s office. We affirm the Commission’s decision as to these
three individuals and go on to address the remaining eighteen workers.4
1. Part A: Control or Direction
[¶24] The Commission found that Sinclair failed to meet its burden of
showing that the workers were “free from control or direction over the
performance of such services, both under [their] contract[s] of service and in fact.”
See 26 M.R.S. § 1043(11)(E)(1). Although the Commission found that Sinclair
“controlled the price and form of [its] contract[s] with clients,” it did not make any
findings with respect to the workers’ contracts of service. The evidence in the
record compels us to conclude that the workers were free from Sinclair’s direction
and control with respect to their contractual relationship. Cf. Me. Auto Test Equip.
4
To clarify, we note that our opinion pertains to the following eighteen skilled workers listed in the
Bureau’s determination: Dennis Donnell, Eddie Ellis, Frank Zimmerman, Jeffrey Long, Joel Reisman,
Joseph Paganucci, Kevin Cobb, Les Mushero, Mark Rowly, Michael Becker Jr., Nathan B. Boyington,
Noah Jordan, Paul Bean Jr., Ricky N. Sinclair Sr., Robert Card, Robert Latchaw, Rusty Poors, and
Sonney (Bert) Sinclair.
Although the Commission’s decision listed all of the disputed workers by their initials, with the
exception of two—Joseph Paganucci and Frank Zimmerman—it stated that its decision applied to “all
other individuals not listed in this opinion.” Because the evidence in the record is similar for Joseph
Paganucci, Frank Zimmerman, and the other workers for which the Commission found an employment
relationship, we discuss them together.
15
Co., 679 A.2d at 80-81. In Maine Auto Test Equipment Company, we affirmed the
Commission’s finding that an employer exercised direction and control over the
performance of its salespeople’s services where it restricted its salespeople from
competing with the company after their employment, assigned them to specific
geographic regions, reserved the right to give final approval to all sales, and
provided sales leads to its employees. Id.
[¶25] In contrast, Sinclair’s president testified that none of the workers
worked exclusively for Sinclair during the years covered by the Bureau’s audit.
Sinclair hired them on a job-by-job basis and they often worked for competing
contractors in the area providing the same services. The workers would
occasionally turn down an offer to work with Sinclair if they were unavailable for
that job, and Sinclair’s president testified that the company would need to turn to
“[its] employee base or somebody else” to complete its projects. In addition,
Sinclair required the workers to provide their own insurance.
[¶26] For most of the skilled workers, Sinclair provided the Bureau with
copies of certifications that it had obtained from the Workers’ Compensation
Board stating that those individuals were predetermined and presumed to be
independent contractors for workers’ compensation purposes. See 39-A M.R.S.
§§ 105(1), 105-A(1)(B) (2010). Sinclair also filed an Internal Revenue Service
Form 1099 reporting nonemployee compensation for each worker to whom it made
16
payments in the years covered by the Bureau’s audit. See I.R.C. § 3121(d) (2006);
I.R.C. § 3402 (Supp. 2011); Treas Reg. § 31.3121, Q&A (d)-1 & (d)-2 (as
amended in 1980). Further, Sinclair’s president testified that the workers would
occasionally bring employees or assistants with them to a job, and Sinclair was not
involved in those arrangements. These facts demonstrate the lack of direction or
control that exists in a contractual relationship between a business and an
independent contractor. Cf. Contract Mgmt. Servs., Inc. v. La. Dep’t of Labor,
745 So. 2d 194, 199 (La. Ct. App. 1999) (applying part A of the ABC test and
vacating an agency determination that relied on facts that were “not indicia of
control or direction over the performance of the services that [the individual] was
providing under the contract” (emphasis omitted)).
[¶27] Despite the evidence outlined above, the Commission found that
Sinclair failed to demonstrate that the workers were free from Sinclair’s “control or
direction over the performance of [their] services . . . in fact.” See 26 M.R.S.
§ 1043(11)(E)(1) (emphasis added). We conclude that the Commission’s
determination is erroneous and not supported by the evidence in the record for
three reasons.
[¶28] First, the Commission’s conclusion was based, in part, on a finding
that Sinclair “mandated the safety measures required for all job sites and
communicated that if [its] safety guidelines or training was not adhered to,
17
termination was possible.” However, the Commission’s finding with regard to
safety measures is not relevant to the finding of an employment relationship.
Cf. Allied Res. for Corr. Health v. Me. Unemployment Ins. Comm’n, 680 A.2d 456,
458 (Me. 1996) (affirming the Commission’s determination that employees were
subject to the employer’s direction or control where they were required to follow
detailed policies of the employer and its clients). Sinclair’s president testified that
he holds safety meetings and enforces safety measures for every worker because he
believed that Sinclair was required to do so pursuant to the Occupational Safety
and Health Administration regulations. See 29 U.S.C.A. § 654(a) (West 2012);
29 C.F.R. § 1926.21(b)(2) (2012) (requiring the employer to provide “instruct[ion]
. . . in the recognition and avoidance of unsafe conditions” to every employee,
meaning “every laborer . . . regardless of the contractual relationship which may be
alleged to exist between the laborer . . . and the contractor . . . who engaged him,”
29 C.F.R. § 1926.32(j)-(k) (2012)).
[¶29] If a business is required by law to comply with state or federal
regulations, we do not require that business to face penalties for violating those
regulations or to endanger the health or safety of its workers in order to avoid
being characterized as an employer for unemployment insurance purposes. See
29 C.F.R. § 1903.15 (2012) (providing that penalties may be imposed for
violations of applicable safety standards). Sinclair’s control over the safety of its
18
workers is very different from the type of detailed oversight that we cited in
support of a finding of an employer’s direction or control in Allied Resources for
Correctional Health, where the employer required employees to “submit to all
rules, regulations and policies of [the employer] and its clients.” See 680 A.2d at
458 (emphasis added).
[¶30] Second, although the Commission found that Sinclair was responsible
for “fixing the problem” if the customer was not satisfied with the workers’
performance, the evidence in the record compels the opposite finding—that the
workers bore the burden of “fixing the problem” if the customer was not satisfied.
In the responses to the Bureau’s two-page questionnaires regarding the
employment relationship with the disputed workers, to the question “Who pays for
work the worker performs that must be done over?” the box next to “[t]he worker,”
was marked, rather than the boxes next to “[t]he company,” “[t]he customer,” or
“[o]ther.” Further, there is no evidence in the record that Sinclair bore the
financial burden of redoing the work. For many services, such as heating,
plumbing, electrical, or roofing, Sinclair did not have employees who could
perform the same tasks. Sinclair could not have been responsible for “fixing the
problem[s]” related to those services as the Commission found. Thus, the evidence
in the record does not support the Commission’s finding. See Lewiston Daily Sun,
1999 ME 90, ¶ 7, 733 A.2d 344; Hasco Mfg. Co., 158 Me. at 414, 185 A.2d 442.
19
[¶31] Third, with respect to Sinclair’s direction of the workers, the
Commission’s finding that Sinclair “controlled the nature and scope of the
workers’ work” is not supported by the evidence in the record. See 26 M.R.S.
§ 1043(11)(E)(1). Although a finding that the employer controlled the manner in
which services are performed weighs in favor of a determination that the individual
was not free from the employer’s direction and control, see Carpet Remnant
Warehouse, Inc. v. N.J. Dep’t of Labor, 593 A.2d 1177, 1185 (N.J. 1991), the
“control” exercised by Sinclair at these projects is not the type of control that
determines an employer-employee relationship.
[¶32] We agree with the reasoning of the First Division of the Indiana
Appellate Court in Alumiwall Corporation v. Indiana Employment Security Board,
explaining why roofers and siding installers were independent contractors:
the [workers] were free to perform the services when and in such
manner as they saw fit. They provided their own tools and equipment,
and could, if they so desired, hire helpers and determine the wage
scale of such helpers. The only restriction was that they perform such
services in a good and workmanlike manner. Such restriction is
inherent in all services performed by one for another. To hold that
such a restriction is the retention of direction and control over such
service so as to exclude it from [part] (A) is against good reasoning
and common sense.
167 N.E.2d 60, 62 (Ind. Ct. App. 1960); see also N. Am. Builders, Inc. v.
Unemployment Comp. Div., Dep’t of Emp. Sec., 453 P.2d 142, 145 (Utah 1969).
20
[¶33] Here, Sinclair’s president testified that he would visit the jobsites
“once or twice, depending on the length of it,” unless the project was the
construction of an entire home, in which case he would visit “once a week.”
Sinclair did not employ a foreman or on-site boss who supervised how services
were performed. Cf. Steel Pier Amusement Co. v. Unemployment Comp. Comm’n,
127 N.J.L. 154, 157 (N.J. 1941) (finding that an employer failed to establish that
the employees were free of its direction or control where it also employed someone
who “was for all practical purposes, a foreman”). Instead, Sinclair created a list of
the customer’s specifications and provided a copy to each of the workers.
Although the Commission based its determination that the workers were not free of
Sinclair’s control in part on its finding that Sinclair instructed the workers “to
follow specifications in the contract, which explained the project in detail,” the
contract to which the Commission refers was negotiated between Sinclair and the
customer, outlining the customer’s preferences. Insofar as Sinclair acted as an
intermediary, communicating the customer’s specifications to each of the workers,
it did not exert direction and control over the performance of the skilled workers’
services. Cf. Carpet Remnant Warehouse, Inc., 593 A.2d at 1189 (“Specific
factors indicative of control include whether the worker is required to work any set
hours or jobs, whether the enterprise has the right to control the details and means
by which the services are performed, and whether the services must be rendered
21
personally.”). The evidence in the record that is relevant to a finding of control or
direction over the “performance of such services . . . in fact” is the testimony of
Sinclair’s president that, after providing the worker with a copy of the customer’s
specifications, the company did not give the workers any further instruction.
[¶34] There is no competent evidence in the record to support the
Commission’s finding that Sinclair exercised control or direction over the disputed
workers. See Lewiston Daily Sun, 1999 ME 90, ¶ 7, 733 A.2d 344. Rather, all of
the evidence in the record demonstrates that Sinclair met its burden with regard to
part A of the ABC test. C.f. Me. Auto Test Equip. Co., 679 A.2d at 81.
2. Part B: Place of Employment
[¶35] Sinclair stipulates that the workers’ services were within Sinclair’s
usual course of business but disputes that they were performed within Sinclair’s
places of business. Sinclair argues that the construction jobsites were not “places
of business” pursuant to part B of the test.
[¶36] Although we have held that a woodlot constitutes a place of business
for a timber harvester, where the employer has a “significant and business-related
presence,” see McPherson Timberlands, Inc., 1998 ME 177, ¶¶ 17-18,
714 A.2d 818, we have declined to call customers’ homes a place of business for
salespeople, despite the fact that they made sales there, see Hasco Mfg. Co.,
158 Me. at 418, 185 A.2d 442.
22
[¶37] Several other states have declined to call a construction jobsite a
“place of business” within the meaning of part B of the ABC test because it
“precludes any construction company from ever meeting the requirements of [the
ABC test] with regard to tradespeople hired for construction work.” See Metro
Renovation, Inc. v. State Dep’t of Labor, 543 N.W.2d 715, 722 (Neb. 1996),
disapproved on other grounds by State v. Nelson, 739 N.W.2d 199, 204
(Neb. 2007). See also Matter of BKU Enters., Inc., 513 N.W.2d 382, 385
(N.D. 1994) (“The fact that the contract must be performed at a specific location,
such as a building site, does not, by itself, constitute furnishing a place to work if
the nature of the work to be done precludes a separate site or is the customary
practice in the industry.” (quotation marks omitted)); Barney v. Dep’t of Emp’t
Sec., 681 P.2d 1273, 1275 (Utah 1984).
[¶38] The Commission’s determination that a construction jobsite is a place
of business within the meaning of 26 M.R.S. § 1043(11)(E)(2) could require a
general contractor to be responsible for unemployment insurance taxes for a
delivery person who provides the materials from a lumber company, for example.
If this were the test, an employer’s “satisf[action of] the B standard’s second
alternative would be practically impossible.” See Carpet Remnant Warehouse,
Inc., 593 A.2d at 1190; see also Christopher J. Cotnoir, Comment, Employees or
Independent Contractors: A Call for Revision of Maine’s Unemployment
23
Compensation “ABC Test,” 46 Me. L. Rev. 325, 338-39 (1994) (discussing the
economic effects of the restrictive ABC test on the construction industry).
[¶39] Such an illogical reading of part B is not consistent with the intent of
the Legislature. See Carrier, 2012 ME 142, ¶ 12, 60 A.3d 1241 (stating that we
interpret statutes to avoid illogical results).
[W]e cannot permit the letter of the law to transcend the spirit of the
law. . . . [W]hether a person performing services is an employee or an
independent contractor is the question before us, and statutes
[applicable to] . . . such determinations must not be distorted to allow
persons who are truly independent in their operation to be held
employees merely for tax purposes and resulting benefits derived
from an employer-employee relationship.
Johnson v. Mont. Dep’t of Labor & Indus., 783 P.2d 1355, 1357-58 (Mont. 1989)
(quotation marks omitted). Thus, we do not defer to the Commission’s
determination with respect to part B and conclude that Sinclair has met its burden.
See 26 M.R.S. § 1043(11)(E)(2).
[¶40] Because the Commission erred in determining that Sinclair failed to
meet its burden with respect to parts A and B of the ABC test with respect to
eighteen of the disputed workers, we vacate the Commission’s judgment with
regard to those individuals. Having concluded that Sinclair met its burden of
demonstrating that those eighteen workers met all three criteria of the ABC test,
we remand the case for a redetermination of the appropriate taxes and penalties
consistent with this opinion.
24
The entry is:
Judgment vacated as to the eighteen individuals
identified in footnote 4 of this opinion, and
affirmed in all other respects. Remanded to the
Superior Court for remand to the Unemployment
Insurance Commission for further proceedings
consistent with this opinion.
On the briefs:
Frank T. McGuire, Esq., and John K. Hamer, Esq., Rudman
Winchell, Bangor, for appellant Sinclair Builders, Inc.
Janet T. Mills, Attorney General, and Elizabeth J. Wyman,
Assist. Atty. Gen., Office of Attorney General, Augusta, for
appellee Maine Unemployment Insurance Commission
At oral argument:
John K. Hamer, Esq., for appellant Sinclair Builders, Inc.
Elizabeth J. Wyman, Asst. Atty. Gen., for appellee Maine
Unemployment Insurance Commission
Hancock County Superior Court docket number AP-2011-10
FOR CLERK REFERENCE ONLY