BMS Ltd. v. Dep't of Workforce Servs. & James R. Capson, 20130499–CA.

• Decision Date: 22 May 2014
• Docket Number: No. 20130499–CA.,20130499–CA.
• Court: Utah Court of Appeals
• Parties: BMS LIMITED 1999, INC., Petitioner, v. DEPARTMENT OF WORKFORCE SERVICES and James R. Capson, Respondents.

327 P.3d 578

761 Utah Adv. Rep. 44

BMS LIMITED 1999, INC., Petitioner,

v.DEPARTMENT OF WORKFORCE SERVICES and James R. Capson, Respondents.

No. 20130499–CA.

Court of Appeals of Utah.

May 22, 2014.

Rick D. Roskelley and Dustin L. Clark, for Petitioner.

Kathleen Bounous, for Respondent Department of Workforce Services.

Judge JOHN A. PEARCE authored this Memorandum Decision, in which Judge STEPHEN L. ROTH and Senior Judge RUSSELL W. BENCH concurred.¹

Memorandum Decision

PEARCE, Judge:

¶ 1 BMS Limited 1999, Inc., doing business as RLS of Utah, challenges the Workforce Appeals Board's decision that James R. Capson had been an RLS employee rather than an independent contractor. This decision rendered Capson eligible for unemployment benefits under Utah's Employment Security Act. See generallyUtah Code Ann. §§ 35A–4–101 to –508 (LexisNexis 2011 & Supp.2013); Utah Admin. Code R994–102 to –508. We decline to disturb the Board's decision.

¶ 2 RLS operates a logistics business that delivers parts to automotive dealers on demand. In April 2010, RLS and Capson entered into an agreement titled “Independent Contractor Agreement (Co–Op),” under which Capson would deliver automotive parts to RLS's customers. The agreement specified that Capson would function as an independent contractor. This arrangement ended at some point before May 2012, when Capson filed for unemployment benefits and listed RLS as his former employer.

¶ 3 A Department of Workforce Services representative determined that RLS had employed Capson. An administrative law judge (the ALJ) reviewed that determination and ruled that RLS had not met its burden of demonstrating that Capson had in fact been an independent contractor. RLS appealed to the Board, which reviewed the ALJ's ruling and agreed that RLS had employed Capson. The Board reasoned that although RLS had not exercised direction and control over Capson, Capson was not independently established in a similar line of work.

¶ 4 The Board's written decision examined all of the factors listed in the relevant regulation, Utah Administrative Code R994–204–303(1)(b). The Board found that Capson had not owned a delivery business prior to his relationship with RLS, did not have a separate place of business or a business license, had not advertised his delivery services, and had not intended to establish an independent business. The decision also determined that some factors weighed in favor of independent contractor status. The Board recognized that Capson had provided his own delivery vehicle and trailer and that he could realize a profit or loss separately from RLS. The Board nonetheless concluded that the “totality of the circumstances” indicated that Capson was not independently established in his trade, occupation, profession, or business and had therefore been an RLS employee.

¶ 5 RLS petitions for review, asserting that the Board erred in determining that Capson was not independently established.²Specifically, RLS contends that the Board improperly considered whether Capson had established his parts delivery business before contracting with RLS. RLS also contends that the Board and the ALJ incorrectly weighted the factors identified in Utah Administrative Code R994–204–303(1)(b).

¶ 6 Utah's Employment Security Act is intended to “lighten the burdens of persons unemployed through no fault of their own” by “pay[ing such] workers for a limited time while they seek other employment.” Utah Admin. Code R994–102–101(1). Former employees are generally eligible for unemployment benefits while independent contractors are not. Id. R994–204–302. Utah law presumes that a paid or contracted worker is an employee unless the putative employer can demonstrate that the worker (1) is independently established in work of the same nature and (2) has been free from control or direction over the means of performing the work. Utah Code Ann. § 35A–4–204(3) (LexisNexis 2011); Utah Admin. Code R994–204–303.

¶ 7 When the Board decides whether a claimant was an employee or an independent contractor, the regulations implementing the Act demand “[s]pecial scrutiny of the facts” in order to ensure that “the form of a service relationship does not obscure its substance.” Utah Admin. Code R994–204–303. The regulations also list several factors “as aids in the analysis” but recognize that “[t]he degree of importance of each factor varies depending on” the nature of the work performed. Id. The administrative code further advises that “some factors do not apply to certain services and ... should not be considered.” Id. Finally, our supreme court has instructed that “the Employment Security Act should be liberally construed in favor of affording benefits.” Superior Cablevision Installers, Inc. v. Industrial Comm'n, 688 P.2d 444, 447 (Utah 1984).

¶ 8 RLS first contends that the Board erred by determining that Capson's delivery business was not established independently of his work for RLS. In support of this contention, RLS argues that “[t]he Board and ALJ erroneously read into the phrase ‘independently established trade or business' the requirement that Capson's business exist prior to, rather than contemporaneously with, providing delivery services” to RLS. We review the Board's interpretation of a regulation for correctness. See Carlos v. Department of Workforce Servs., 2013 UT App 279, ¶ 5, 316 P.3d 957 (explaining that the Board's interpretation of the applicable statute is reviewed for correctness); see also State v. Mooney, 2004 UT 49, ¶ 9 n. 1, 98 P.3d 420 (“Like issues of statutory interpretation, we review the trial court's interpretation of a regulation for correctness....”).

¶ 9 Here, the Board did not interpret the regulation in the manner RLS asserts. RLS does not point to any language in the Board's decision or the ALJ's ruling that suggests that either read the regulation as requiring prior establishment of an independent business. Moreover, we can discern nothing in the Board's decision indicating that the Board applied a requirement of prior existence. Indeed, the Board specifically stated that the ALJ “did not find [Capson] was required to have been a delivery driver prior to his relationship with RLS. Rather, the [ALJ] looked at all the factors surrounding [Capson's] business practices, one of which was that he had not created his profession as a delivery driver prior to his relationship with RLS.”

¶ 10 That finding leads RLS to also argue that “[t]he Board and ALJ erred because they based their decisions in part on Capson's business activities prior to contracting with RLS.” RLS appears to claim that because the regulations express the factors in the present tense, the Board was forbidden from even considering Capson's activities prior to his relationship with RLS. We review the Board's application of statutes and regulations for correctness. See Carlos, 2013 UT App 279, ¶ 5, 316 P.3d 957.

¶ 11 Nothing in the Act or its regulations limits the Board's ability to consider this type of probative information while carrying out its duty to scrupulously scrutinize the substance of the relationship. SeeUtah Admin. Code R994–204–303. Under RLS's reading, the Board would be hobbled in the performance of that duty because it could not consider, for example, whether a claimant had operated an independent and substantially similar business prior to engaging in the disputed work. Moreover, our supreme court has previously upheld an administrative board's determination that a claimant “was not independently established in similar work when that board relied in part on evidence that the claimant was not an independently established cable installer prior to his relationship” with a cable-installing entity. Superior Cablevision, 688 P.2d at 447.³ Accordingly, the Board did not err by considering evidence that Capson had not established his delivery services business prior to his relationship with RLS.

¶ 12 RLS next contends that “[t]he balance of factors establishes that Capson was customarily engaged in an independently-established trade.” This challenge may be read as either an assertion that the Board was required to give equal weight to all of the factors the Administrative Code outlines or a challenge to the weight actually assigned to each factor by the Board. To determine whether the Board erred by treating some factors as more relevant than others, we look...