AMERICAN EMPLOYERS v. Department of Labor

Decision Date22 September 2000
Docket NumberNo. S-00-030.,S-00-030.
Citation617 N.W.2d 808,260 Neb. 405
CourtNebraska Supreme Court
PartiesAMERICAN EMPLOYERS GROUP, INC., appellee, v. DEPARTMENT OF LABOR of the State of Nebraska and Fernando Lecuona III, Commissioner of Labor of the State of Nebraska, appellants, and Gary James Tucker, appellee.

John F. Sheaff and John H. Albin, Lincoln, for appellant Fernando Lecuona III.

Jeffrey A. Silver, Omaha, for appellee American Employers Group, Inc.

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

MILLER-LERMAN, J.

I. NATURE OF CASE

The Department of Labor of the State of Nebraska and Fernando Lecuona III, Commissioner of Labor of the State of Nebraska (collectively referred to as "the Department"), appeal from the memorandum and order of the district court for Douglas County. The district court reversed the decision of the Nebraska Appeal Tribunal and concluded that American Employers Group, Inc. (AEG), was an "employee leasing company" within the meaning of Neb.Rev.Stat. § 48-602(11) (Reissue 1998) of the Nebraska unemployment compensation statutes and that AEG was, therefore, the former employer of Gary James Tucker for unemployment compensation purposes. The district court further determined that Tucker's employment with AEG was terminated as a result of misconduct in connection with his work and that pursuant to Neb.Rev.Stat. § 48-628(2) (Reissue 1998), Tucker was disqualified from receiving unemployment compensation benefits.

In this appeal, we are asked to construe the definition of "employee leasing company" under § 48-602(11) and apply such definition to the facts of this case. We conclude that the district court's decision that AEG was an employee leasing company, and therefore the employer of Tucker, does not conform to the law and is not supported by competent evidence. Further, because AEG was not Tucker's employer, there could be no termination for misconduct of Tucker's employment by AEG. We reverse the order of the district court and remand the cause with directions to the district court to determine if Tucker is entitled to unemployment compensation benefits with or without disqualification as to his employer, M & O Industries, Inc. (M & O).

II. STATEMENT OF FACTS

Tucker worked as a mechanic for M & O from approximately April 15 to June 16 or 17, 1999. M & O is in the business of golf cart sales and repair. Delbert Smock, the owner of M & O, interviewed and hired Tucker after advertising the position with the Nebraska Job Service. Smock supervised Tucker's daily work activities. Following an incident on June 15, Smock fired Tucker.

M & O paid AEG to perform payroll and recordkeeping services, including tax services for unemployment insurance taxes. AEG also provided personnel services, including making group health insurance available to employees of M & O. As discussed in greater detail below, AEG asserts that by virtue of these services, it is an "employee leasing company" as defined under § 48-602(11), and that consequently, it was Tucker's employer on June 15, 1999. The district court agreed with AEG and concluded that because "services such as those involved here" were provided by AEG to M & O, AEG was an "employee leasing company" and hence, Tucker's employer.

On June 15, 1999, Smock instructed Tucker to take M & O's truck and transport a golf cart to Glenwood, Iowa, 25 miles south of M & O's place of business. Tucker was to drop off the golf cart in Glenwood and pick up another golf cart in need of repair. However, instead of driving to Glenwood, Tucker drove 50 miles east to Griswold, Iowa, where he was involved in a traffic accident. As a result of the traffic accident, Tucker was injured and M & O's truck was destroyed. M & O was required to pay $1,000 for damage Tucker caused to a highway guardrail and $200 for the services of the rescue squad that took Tucker to the hospital. Following the accident, Smock talked to Tucker to determine why Tucker went to Griswold instead of Glenwood. When Tucker was unable to explain his actions, Smock terminated his employment.

Following Tucker's termination of employment, he filed for unemployment compensation benefits on or about June 20, 1999, with the Nebraska Department of Labor Unemployment Insurance Division (unemployment division). In Tucker's claim for benefits, he listed M & O as his employer. The record indicates that the unemployment division sent a "Request to Employer for Separation Information" form to M & O, which form M & O did not complete. The unemployment division sent the same form to AEG.

AEG completed the form and indicated that Tucker voluntarily quit his employment, with no reason given. On July 13, 1999, AEG amended its response to indicate that Tucker was discharged from employment for damaging the company vehicle and failing to follow orders. Later, AEG again amended its response by stating that Tucker was discharged for failing to follow instructions and by explaining that Tucker had been instructed to go to Glenwood and instead went to Griswold, where he was involved in a traffic accident. Certain notes of the unemployment division included in the record indicate that Tucker stated in a telephone conversation with the unemployment division investigator that the accident was the result of a diabetic seizure.

On July 23, 1999, the unemployment division notified Tucker of the claims deputy's determination that Tucker's discharge from employment had not been shown to be due to misconduct and that Tucker was allowed unemployment benefits with no disqualification. In its determination, the unemployment division listed AEG as the employer.

On July 30, 1999, AEG mailed a letter requesting an appeal of the deputy's determination to the Nebraska Appeal Tribunal. In its letter, AEG claimed that Tucker had been discharged for misconduct. The appeal tribunal heard the appeal telephonically on August 20. AEG appeared at the hearing. Smock testified as a witness on behalf of AEG, but M & O did not enter an appearance separate from AEG at the hearing. Although notified of the hearing, Tucker failed to be available at the telephone number he had provided for hearing purposes and, thus, did not appear.

During the telephonic hearing before the Nebraska Appeal Tribunal, Smock testified that Tucker had been an employee of M & O. Smock testified that he had hired, supervised, and fired Tucker and that AEG was not involved in the decisions either to hire or to fire Tucker. Smock testified, and the parties do not dispute, that Tucker's paychecks were issued by AEG and that AEG performed various personnel, payroll, and tax services. Smock testified that "Tucker was an employee of mine" and responded "yes" when asked if Tucker was employed by M & O. Smock further testified: "I own a company, and I lease my employees out to American Employer's [sic]." The only evidence tending to support AEG's position that AEG employed Tucker was a statement from Smock, who testified before the appeal tribunal that "[t]echnically," AEG was Tucker's employer. However, in response to a question as to what he meant by "technically," Smock clarified that AEG "provide[s] a payroll service, and the term that I use is like I [M & O] lease my employees to them [AEG]."

On August 25, 1999, the appeal tribunal issued its decision, in which it affirmed as modified the claims deputy's decision. The appeal tribunal determined that the employment relationship was between Tucker and M & O. The appeal tribunal further determined that there was no employment relationship between Tucker and AEG and that because AEG was not Tucker's employer, there could not be an adjudication of separation of employment between Tucker and AEG. To the extent that the claims deputy had determined that Tucker would be entitled to unemployment compensation benefits without disqualification, that determination was affirmed.

AEG filed its petition for review of the appeal tribunal's decision to the district Court for Douglas County, pursuant to Neb.Rev.Stat. § 84-917 (Reissue 1999), arguing that the appeal tribunal erred in its determination that AEG was not Tucker's employer and further erred in failing to determine that Tucker had been discharged for misconduct.

AEG's petition came on for hearing on December 1, 1999. The Department and AEG appeared at the hearing and submitted briefs. The district court received evidence consisting of a transcript of the proceedings before the unemployment division, the bill of exceptions before the appeal tribunal, and a summons addressed to Tucker sent by certified mail and returned as undeliverable. The district court took judicial notice of the district court's pleadings, as well as the legislative history of 1992 Neb. Laws, L.B. 879. L.B. 879 amended Nebraska's unemployment compensation statutes by adding, inter alia, a definition of an "employee leasing company" for purposes of the unemployment compensation statutes and by establishing certain requirements for the payment of unemployment compensation insurance by employee leasing companies. See § 48-602(11) and Neb. Rev.Stat. § 48-648(3) (Reissue 1998).

On December 9, 1999, the district court entered its memorandum and order, which reversed the decision of the Nebraska Appeal Tribunal. The district court concluded that AEG was an "employee leasing company" as defined under § 48-602(11) of the unemployment compensation statutes and, as such, was Tucker's employer at the time Tucker was discharged. The district court also determined that Tucker had been discharged from employment due to misconduct and should be disqualified from receiving unemployment benefits under § 48-628(2).

In its memorandum and order, the district court stated that the definition of "employee leasing company" in § 48-602(11) contained a self-contradictory term of leased employee. The district court stated: "[A] `leased employee', seems to be [a] self-contradictory term — someone over...

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