Midland Atlas Co. v. South Dakota Department of Labor, Unemployment Insurance Division

538 N.W.2d 232, 1995 S.D. LEXIS 119, 1995 WL 568729
CourtSouth Dakota Supreme Court
DecidedSeptember 27, 1995
Docket18999
StatusPublished
Cited by9 cases

This text of 538 N.W.2d 232 (Midland Atlas Co. v. South Dakota Department of Labor, Unemployment Insurance Division) is published on Counsel Stack Legal Research, covering South Dakota Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Midland Atlas Co. v. South Dakota Department of Labor, Unemployment Insurance Division, 538 N.W.2d 232, 1995 S.D. LEXIS 119, 1995 WL 568729 (S.D. 1995).

Opinions

MILLER, Chief Justice.

Midland Atlas Company, Inc. (Midland) appeals an order of the circuit court which affirmed the decision of the South Dakota Department of Labor that certain Midland sales representatives were employees rather than independent contractors for purposes of unemployment insurance tax liability. We reverse and remand.

FACTS

Midland publishes and sells county atlases. Homer G. Taggart, III, filed a claim for unemployment insurance benefits with the Unemployment Insurance Division (Division) of the South Dakota Department of Labor. Taggart claimed to have been a sales representative for Midland. The Division concluded that Taggart, and others similarly situated, were employees of Midland rather than independent contractors. Consequently, the Division held Midland liable for unemployment insurance taxes for Taggart and other sales employees.

Midland appealed and a hearing was held before an administrative law judge (ALJ). The ALJ concluded that Taggart had never performed services for Midland and proceeded to address the general question of the employment status of sales representatives for Midland. The ALJ found in pertinent part:

[Midland] enters into a written contract with individuals to sell atlases. The written contract provides the following:
-Representatives set their own hours and sales method of approaching customers
-Representatives are paid on a straight commission basis
-Representatives provide their own vehicles and pay all expenses — [Midland] does not reimburse any expenses
-[Midland] pays no fringe benefits including vacations, insurance premiums or a profit sharing plan
-Representatives have discretion on how to collect land information for [Midland]
-[Midland] retains the right to inspect the work and approve the final product of collecting land atlas information and sales methods
-Representatives can hire assistants
-[Midland] reserves the right to terminate the contract upon thirty days written notice or for good cause to terminate the contract immediately
-Representatives retain the right to carry other lines of work concurrent with [Midland’s] work
-Representatives agree not to compete against [Midland] in any competing atlas related business for a period of two years after termination of the contract
-Representatives must maintain sufficient auto insurance
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Before a person receives his commission, he must send [Midland] his production report. Production reports can be sent to [Midland] at anytime.
[Midland] furnishes representatives with a receipt book, information sheets, a blue print map and a sample atlas.

The ALJ turned to the statutory standard for exempting independent contractors from the unemployment insurance program. This statute provides:

Service performed by an individual for wages is employment subject to this title unless and until it is shown to the satisfaction of the department of labor that:
(1) The individual has been and will continue to be free from control or direction over the performance of the service, both under his contract of service and in fact; and
(2) The individual is customarily engaged in an independently established trade, occupation, profession or business.

SDCL 61-1-11. The ALJ concluded the first requirement was satisfied, ie., Midland does not control or direct the performance of sales representatives. As for the second element, the ALJ ruled that those individuals who had independently established businesses outside of their sales work for Midland were independent contractors, exempt from the unem[234]*234ployment insurance program. The ALJ identified three individuals who had separate, established businesses:

One of [Midland’s] former representatives, Steve Graves, does similar work for another business in Iowa. He performs this service as an independent contractor, has had his own business name since 1990 and also sells other products in addition to selling atlases.
One of [Midland’s] current sales representatives, Art Arndt, is a professional sales person. In addition to selling atlases on behalf of [Midland] he owns Sonny’s Lakeside Printing, and also performs services for Wilson Sign Company. He has a Minnesota sales tax license. He does not have a South Dakota sales tax license.
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Bob Brown sells atlases for [Midland] and usually decides what counties the sales representatives will work next. Ninety percent of Brown’s services are done outside of South Dakota. From 1977 to about 1979 Brown not only sold atlases, but he also sold real estate, grain bins and equipment. Sometime in 1991 or mid-1992 Brown let his sales tax license lapse. Currently, Brown farms on a part-time basis.

In contrast, the ALJ ruled that those individuals, namely Maynard Pearson and Bob Car-on, who had no other independently established business outside of their sales work for Midland, were employees within the meaning of the unemployment insurance program. As to these employees, the ALJ found:

Maynard Pearson currently sells atlases on behalf of [Midland]. When Pearson first worked for [Midland] in about 1983 he sold other companies’ products. [Midland] did not object to Pearson doing this. Pearson also worked as an independent contractor for another business that published and produced atlases. Presently, Pearson does not sell any other products. Pearson’s commission cheeks are made out to Buffalo Sales which is a corporation started by Pearson and his son. Bob Caron

Midland appealed the ALJ’s decision. The trial court ruled the ALJ was incorrect in holding that individuals who have no independently established business cannot be independent contractors. The trial court remanded the case to the ALJ for reconsideration in light of the South Dakota Supreme Court’s decision in South Dakota Dep’t of Labor, Unemployment Ins. Div. v. Tri State Insulation, 315 N.W.2d 315 (S.D.1982). In Tri State, this Court held that salespeople for an insulation company were independent contractors and therefore exempt from the unemployment insurance program. Id. at 317-18.

After considering the Tri State case, the ALJ noted that the alleged employer in Tri State did not assign salespeople to particular territories or restrict their ability to sell for competing companies. In contrast, Midland specifically prohibits salespeople from selling competitors’ atlases during their sales relationship with Midland and for two years following any termination.

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Cite This Page — Counsel Stack

Bluebook (online)
538 N.W.2d 232, 1995 S.D. LEXIS 119, 1995 WL 568729, Counsel Stack Legal Research, https://law.counselstack.com/opinion/midland-atlas-co-v-south-dakota-department-of-labor-unemployment-sd-1995.