C.L.E.A.N., LLC. v. Div. of Emp't Sec.

• Decision Date: 13 August 2013
• Docket Number: No. WD 75561.,WD 75561.
• Citation: 405 S.W.3d 613
• Parties: C.L.E.A.N., LLC., Appellant, v. DIVISION OF EMPLOYMENT SECURITY, Respondent.
• Court: Missouri Court of Appeals

405 S.W.3d 613

C.L.E.A.N., LLC., Appellant,
v.
DIVISION OF EMPLOYMENT SECURITY, Respondent.

No. WD 75561.

Missouri Court of Appeals,
Western District.

Aug. 13, 2013.

[405 S.W.3d 614]

Gretchen E. Gaynor, for Appellant.

[405 S.W.3d 615]

Bart A. Matanic, for Respondent.

Before Special Division: JOSEPH M. ELLIS, Presiding Judge, GARY D. WITT, Judge and ROBERT M. CLAYTON, III, Special Judge.

JOSEPH M. ELLIS, Judge.

Appellant C.L.E.A.N., LLC, appeals from a decision entered by the Labor and Industrial Relations Commission (“the Commission”) in which the Commission found that since January 1, 2008, twenty-six of C.L.E.A.N.'s workers performed services for wages in employment. C.L.E.A.N. avers that the Commission's decision is erroneous because its workers are independent contractors, not employees, and because it was denied fair proceedings in front of the Appeals Tribunal. For the following reasons, the judgment is affirmed.

Organized in 2004, C.L.E.A.N. is a limited liability company that specializes in residential cleaning. C.L.E.A.N.'s sole member, Robin Wittenborn, owns and operates the business out of her home in Ballwin, Missouri.

Since its inception, C.L.E.A.N. has engaged workers to provide cleaning services in its clients' homes. C.L.E.A.N. finds workers by advertising in newspapers, local journals, and the Internet. C.L.E.A.N. has each worker sign an “independent contractor agreement” in which the worker agrees to provide “detailed and conscientious cleaning” services at the homes to which he or she is assigned. The agreement further provides that the worker “will be responsible for successfully completing the [cleaning assignment] according to [the] specifications and expectations of the cleaning checklist, in a timely and professional manner.”

C.L.E.A.N. also requires its workers to sign an agreement entitled “Performance Bonus: 10% of Gross.” The agreement sets forth the responsibilities and duties C.L.E.A.N. expects from its workers as “partners” in “the growth of a residential cleaning service.” The Performance Bonus agreement further contains a section entitled “Rules,” which outlines a progressive penalty system for workers that fail “to maintain the high standards [C.L.E.A.N.] uphold[s].” The penalties range from loss of the 10% Performance Bonus to termination.¹ The agreement also gives C.L.E.A.N. the right to immediately terminate its “business partnership” with a worker as a result of any misconduct, such as lying, cheating, or stealing.

Additionally, workers have to sign an “Independent Contractor Non–Compete Agreement.” The non-compete agreement provides: “The Independent Contractor agrees that during the time of her service with the contractor, she will not accept nor will she engage in employment, consulting

[405 S.W.3d 616]

or any other business activity, directly related to the business of the Contractor.” The non-compete goes on to state that upon termination, “the independent contractor agrees not to engage directly or indirectly in any business substantially similar to or in competition with the business of the Contractor ... for a period of 1 years [sic] ... within a radius of 20 Miles from” C.L.E.A.N.'s office in Ballwin, Missouri. For purposes of the non-compete agreement, engaging in any business substantially similar to or in competition with the business of the contractor means “(i) engaging in a business as an owner, partner, or agent; (ii) taking employment with a third party engaged in such business either as an employee, contractor, or consultant; [or] (iii) soliciting customers for the benefit of a third party engaged in such business.”

Before officially performing services for C.L.E.A.N., workers must accompany either Wittenborn or other experienced C.L.E.A.N. workers and assist them in cleaning anywhere between five to eight homes belonging to C.L.E.A.N. clients. Workers are not compensated for these initial cleanings, which Wittenborn deems “situational interviews.” During these cleanings, Wittenborn or other C.L.E.A.N. workers demonstrate how to clean the homes of C.L.E.A.N. clients. C.L.E.A.N. further requires its workers to organize limited liability companies after the worker earns over $600.00 working for the company. On at least one occasion, C.L.E.A.N. threatened to withhold a worker's pay if she did not form an LLC.

When a potential customer contacts C.L.E.A.N., Wittenborn goes to the potential customer's home to perform an initial cleaning and give the client an estimate. Once the customer agrees to be C.L.E.A.N.'s client, Wittenborn calls a worker and offers him or her the assignment of cleaning the new client's home. Workers are free to accept or decline the assignment. If the worker accepts the assignment, Wittenborn provides the worker with a customer data sheet, or cleaning checklist, which lists the client's preferences and gives a detailed cleaning list for that particular customer. Wittenborn also informs the assigned worker of the client's preferred cleaning day and time. Workers are responsible for scheduling and rescheduling of cleanings with the customers. Nevertheless, workers must inform Wittenborn of all scheduled and rescheduled cleanings. Workers are required to provide cleaning services to the satisfaction of the customer within twenty-four hours of the scheduled cleaning.

To ensure its workers have the proper cleaning equipment and supplies, C.L.E.A.N. offers to lease its workers the necessary equipment, materials, and supplies. Workers renting C.L.E.A.N.'s equipment are required to sign an “Independent Contractor Equipment Lease Agreement,” which provides that Wittenborn, as the owner and operator of C.L.E.A.N., agrees to lease all equipment, supplies, products, and materials necessary to clean a customer's home for a fee of $10.00 a week (Monday through Friday). The agreement further states that the workers are liable for any lost or damaged equipment and that Wittenborn can withhold a worker's pay until the equipment is returned. The $10.00 rental fee, which is non-negotiable, is deducted from the worker's weekly pay.

Ninety percent of C.L.E.A.N. workers rent their cleaning equipment and supplies from C.L.E.A.N. C.L.E.A.N. stores the equipment and supplies, including the cleaning solutions that Wittenborn mixes herself, at its office in Wittenborn's home. Workers take the supplies and equipment

[405 S.W.3d 617]

they deem necessary to clean their assigned homes for the week. No inventory is kept of the amount of supplies and materials used by the C.L.E.A.N. workers each week.

While in a client's home, the workers hold themselves out to be representatives of C.L.E.A.N. Once finished cleaning the client's home, the worker leaves a C.L.E.A.N. business card that contains C.L.E.A.N.'s contact information. Workers can write their name on the business card as well as their voicemail message box number if the worker has one set up with C.L.E.A.N. Any payment a worker receives from a C.L.E.A.N. client is to be handed over to Wittenborn. C.L.E.A.N.'s clients always make their checks payable to C.L.E.A.N.

On Friday of each week, C.L.E.A.N. workers are required to submit a statement to C.L.E.A.N. listing the homes they cleaned that week. Wittenborn requires the statements to be made on a particular form and instructs the workers how to fill out and calculate the form. Workers are paid 40% commission for each home they clean and a 10% performance bonus based upon the totals reflected on their weekly statements.²

The workers can terminate their relationship with C.L.E.A.N. at any time by providing written or oral notice to the company. All agreements between C.L.E.A.N. and the worker become null and void after twenty-four hours of notification being given.

In 2005, the Division of Employment Security (“the Division”) investigated C.L.E.A.N. for failing to pay unemployment security taxes. The Division determined that C.L.E.A.N.'s workers performed services for wages in employment, and, thus, C.L.E.A.N. was an employer subject to the Missouri Employment Security Law. The Commission affirmed the Division's decision. Since then, C.L.E.A.N. has failed to comply with the Division's requests that it file quarterly contribution and wage reports and continues to maintain that its workers are independent contractors, not employees.

In 2011, the Division conducted another investigation into the working relationship between C.L.E.A.N. and its workers. Auditor Robin Cleveland (“the Auditor”) determined that 27 of C.L.E.A.N.'s workers performed services in employment as defined in § 288.034 and, therefore, were not independent contractors. C.L.E.A.N. appealed the Division's determination to the Appeals Tribunal.

On November 8, 2011, an Appeals Tribunal referee (“the Referee”) conducted a hearing on whether the Division correctly determined that C.L.E.A.N. workers performed services in employment for wages. At the hearing, the Auditor and two former C.L.E.A.N. employees, Kimberly Steger and Crystal Roark, testified as witnesses for the Division. Wittenborn, acting pro se, represented and testified on behalf of C.L.E.A.N. The specifics of the witnesses' testimony at the hearing will be discussed infra as necessary.

On December 20, 2011, the Referee entered the Decision of the Appeals Tribunal, in which she affirmed the Division's determination that C.L.E.A.N.'s 27 workers performed services for wages in employment. In reaching that decision, the Referee analyzed C.L.E.A.N.'s relationship with its workers by applying the

[405 S.W.3d 618]

twenty factors identified by the Internal Revenue Service (“IRS”) that are used as guides in determining whether sufficient control is present to establish an employer-employee relationship. SeeRev. Rul. 87–41, 1987–1 C.B. 296. Of the twenty factors, the Referee determined that four favored independent contractor status: (1) Workers were free to establish the order or sequence in which the work was accomplished; (2) the workers were...