Boston Bicycle Couriers v. Director of Det

• Decision Date: 18 November 2002
• Docket Number: No. 99-P-1433.,99-P-1433.
• Citation: 56 Mass. App. Ct. 473,778 N.E.2d 964
• Parties: BOSTON BICYCLE COURIERS, INC. v. DEPUTY DIRECTOR OF THE DIVISION OF EMPLOYMENT AND TRAINING & another.<SMALL><SUP>1</SUP></SMALL>
• Court: Appeals Court of Massachusetts

Page 964

778 N.E.2d 964

56 Mass. App. Ct. 473

BOSTON BICYCLE COURIERS, INC. v. DEPUTY DIRECTOR OF THE DIVISION OF EMPLOYMENT AND TRAINING & another.¹

No. 99-P-1433.

Appeals Court of Massachusetts, Suffolk.

Argued August 29, 2001.

Decided November 18, 2002.

Susan Paulson, Assistant Attorney General, for Deputy Director of the Division of Employment and Training.

Michael B. Cosentino, Wellesley, for the plaintiff.

Present: LAURENCE, MASON, & BERRY, JJ.

BERRY, J.

This case concerns the liability of Boston Bicycle Couriers, Inc. (BBC), for contributions to the State unemployment compensation fund under G.L. c. 151A, the Massachusetts Employment and Training Law (Act). See G.L. c. 151A, §§ 13-14. BBC contends that it was exempt from contributions to the fund because delivery couriers working for BBC, such as Anthony DiMare (the claimant for unemployment benefits in this case), were independent contractors. Therefore, BBC asserts the company fell within the independent contractor exemption set forth in G.L. c. 151A, § 2.², ³ 1. Procedural and factual background. The case began when DiMare, a courier, left his position at BBC and applied to the Division of Employment and Training (DET) for unemployment benefits. While this unemployment application was pending, the DET status department, acting on its own motion, commenced an investigation of BBC. See G.L. c. 151A, § 12. The purpose of the DET investigation was to reach a status determination concerning whether BBC was subject to the Act's provisions for mandatory contributions to the unemployment compensation fund in connection with wages paid to employees.

Following proceedings at several levels of administrative review, a board of review (board) of the DET determined that BBC had not met its burden of proof on the tripartite elements of the independent contractor exception in § 2.⁴ The board, accordingly, held that "the services performed by the claimant [DiMare], as well as others performing services in similar circumstances, are deemed to be in employment," and subject to the Act. By this status determination, BBC, among other requirements, would be responsible for contributions to the unemployment compensation fund based on the wages BBC paid to the couriers.⁵ BBC filed an appeal with the Boston Municipal Court.⁶ See G.L. c. 151A, § 42. A judge of that court reversed the determination of the board that BBC was subject to the Act. The board then filed this appeal. We reverse.

A detailed description of the facts in the administrative record concerning the nature of DiMare's activities in working for BBC and the terms and conditions of a contract that BBC had drafted and provided for execution by drivers, such as DiMare, is reserved for that part of the analysis addressed to BBC's contention that DiMare's activities were such as to render him an independent contractor. At this point, it will suffice to note that BBC is in the business of providing same-day pick-up and delivery services on an on-call basis. The pick-up items are generally letters and packages to be delivered between offices. BBC engages approximately twelve drivers for these courier services, of which DiMare was one.

2. The legal framework for the § 2 independent contractor exemption. The trigger for an employer's contribution liability to the unemployment compensation fund under the Act is whether there exists an employment relationship between the employing unit and an individual performing services. The term "employment" under the Act is inclusive,⁷ and the Act is of broad reach.⁸ To that end, the Act carves out exceptions, limited in number and scope.

The provision for an independent contractor exemption from the Act is set forth in G.L. c. 151A, § 2. See note 2 for the pertinent text of § 2. In 1971, the Legislature dramatically altered the configuration of the § 2 exemption in two important respects. See St.1971, c. 940, § 2. First, the amendment expressly rejected the previously applied—and potentially more open ended—standard of employment that rested on common-law analysis. The effect of this first part of the amendment to § 2 was that an employer would be subject to the Act "irrespective of whether the common-law relationship of master and servant exists." Ibid. Thus, notwithstanding that the working relationship could be considered to be one of independent contract under common law, by the § 2 statutory standard, the worker may still be deemed in employment for purposes of the Act.⁹ Second, the 1971 amendment added two new elements in § 2(b) and (c), which increased an employer's burden of proof and more narrowly circumscribed the kind of activities deemed to satisfy the independent contractor exemption. The three elements of proof, as amended and now set forth in § 2(a), (b), and (c), require that, in order to qualify for the independent contractor exemption, the employer must prove that the worker (a) is free from direction and control by the employing unit; (b) performs services outside the usual course of, or places of business of, the employing unit; and (c) the worker — albeit performing services of the same nature as the employing unit — is engaged in an independently established trade, occupation, profession or business wholly apart from the employing unit. See Silva v. Director of the Div. of Employment Security, 398 Mass. 609, 613-614, 499 N.E.2d 1205 (1986). The elements are conjunctive. Ibid. This three-part test for the independent contractor exemption is commonly known as the "ABC" test.¹⁰, ¹¹

The board concluded that BBC had failed to meet its burden with respect to all three statutory requirements in § 2(a)(c), that is, all three segments of the ABC test. However, given the conjunctive burden under § 2, failure of proof on any one of subsections (a), (b), or (c) disqualifies an employer from the § 2 exemption. In this case, because the weight of evidence in the case record implicated the § 2(c) element, we will focus upon that exemption to determine whether the board decision that BBC failed to satisfy the § 2(c) requirements meets the applicable legal and evidentiary criteria for G.L. c. 30A appellate review. If the § 2(c) aspect of the board decision stands, we need not address the other conjunctive requirements in § 2 (a) and (b).

In review of the board's determination concerning § 2(c), we apply the overarching principle of administrative law, that "[i]f the findings of the board are supported by substantial evidence, and if there is no error of law, the court must affirm the board." See Silva, 398 Mass. at 611, 499 N.E.2d 1205. See also Tri-County Youth Programs, Inc. v. Acting Deputy Director of the Div. of Employment & Training, 54 Mass.App.Ct. 405, 407-408, 765 N.E.2d 810 (2002). Moreover, a court will afford deference to the function of the board in employment security cases. A reviewing court will accord "due weight to the experience, technical competence, and specialized knowledge of the agency, as well as to the discretionary authority conferred upon it." G.L. c. 30A, § 14(7). With respect to such deference, to be noted is the provision in § 2 that workers shall be deemed employees "unless and until it is shown to the satisfaction of the commissioner" that the exemption applies. G.L. c. 151A, § 2.

To meet its burden of proof under § 2(c) that DiMare, as one of its drivers, was "customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed," BBC was required to adduce evidence to establish that (1) DiMare customarily engaged in an independent courier delivery service on his own; (2) DiMare's courier delivery service operated wholly independently of his work for BBC; and (3) DiMare's business was established and running. This requirement is most commonly referred to as the "independent trade or business requirement."

A significant amount of case law construing identical or similarly worded provisions to § 2(c) has been developed in other jurisdictions.¹² A common methodology for review of this independent trade or business requirement is the so-called "proprietary interest test."¹³ As developed in the case law, the formulations for the proprietary interest test provide a flexible standard that allows for comprehensive review of the working relationship based on the totality of relevant facts and circumstances adjusted to the particularities of the performance of service associated with various industries. No individual factor is a prerequisite to a finding of an independently established business. See Vendx Mktg. Co., Inc. v. Department of Employment, 122 Idaho 890, 896, 841 P.2d 420 (1992). Rather, the relevancy and importance of specific indicia of proprietary interest will vary by the nature of the services provided in the working relationship and the industry in which the services are provided. See Larsen v. State Dept. of Employment, 106 Idaho 382, 383-384, 679 P.2d 659 (1984). The essential determination is whether "the worker is an entrepreneur and service is performed by him or her in that capacity." Hardman, Unemployment Compensation and Independent Contractors: The Motor Carrier Industry as a Case Study, 22 Transp. L.J. 15, 29 (1994).

More imagistically described, the proprietary interest test seeks to discern whether the worker is wearing the hat of an employee of the employing company, or is wearing the hat of his own independent enterprise. To establish the latter and qualify under the § 2(c) independent contractor standard, the insignia must be that of a freestanding, independent entrepreneurial business in which the worker has a proprietary interest. Recurring factors in the analyses in other jurisdictions tending to show a proprietary interest in an independently established trade or business include, but are not limited to that: (1) the individual worker is free both to operate an independent enterprise and to perform services...