TNT Cable Contractors v. Dir.1

2015 Ark. App. 79

• Court: Court of Appeals of Arkansas
• Decided: February 11, 2015
• Docket: E-14-224
• Status: Published

Opinion

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

2 2015 Ark. App. 79

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

3 2015 Ark. App. 79

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

4 2015 Ark. App. 79

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.

5 2015 Ark. App. 79

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:

1 2015 Ark. App. 79

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

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

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

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.