Carlos v. Dep't of Workforce Servs. & Stephen Thorsted

• Decision Date: 21 November 2013
• Docket Number: No. 20120948–CA.,20120948–CA.
• Parties: Wayne CARLOS, Petitioner, v. DEPARTMENT OF WORKFORCE SERVICES and Stephen Thorsted, Respondents.
• Court: Utah Court of Appeals

316 P.3d 957

748 Utah Adv. Rep. 11

Wayne CARLOS, Petitioner,

v.DEPARTMENT OF WORKFORCE SERVICES and Stephen Thorsted, Respondents.

No. 20120948–CA.

Court of Appeals of Utah.

Nov. 21, 2013.

Michael D. Zimmerman, Julie J. Nelson, and Randall T. Gaither, Salt Lake City, for Petitioner.

Amanda B. McPeck, for Respondent.

Department of Workforce Services Stephen Thorsted, Respondent Pro Se.

Judge JAMES Z. DAVIS authored this Opinion, in which Judges GREGORY K. ORME and CAROLYN B. McHUGH concurred.

DAVIS, Judge:

¶ 1 Wayne Carlos dba AAA Bail Bonds (AAA) seeks review of the Department of Workforce Services Appeals Board's (the Board) decision that Stephen Thorsted (Claimant) is eligible for unemployment benefits. AAA contends that the Board based its decision on an erroneous interpretation of provisions contained in the Federal Unemployment Tax Act (FUTA), see26 U.S.C. § 3306 (2006); the Utah Employment Security Act (the UESA), seeUtah Code Ann. §§ 35A–4–204 to –205 (LexisNexis 2011); and Title 31A of the Utah Code (the Utah Insurance Code). We agree and set aside the Board's decision.

BACKGROUND

¶ 2 Claimant began working with AAA as a bail bond producer in January 2010, in accordance with the requirement that a bail bond producer be associated with an authorized surety, seeUtah Code Ann. § 31A–35–402(2) (LexisNexis 2010). As a result, Claimant “began providing services to AAA” and obtained most of his clients from calls to AAA that were automatically rerouted to his cell phone. AAA's contact information was included on a list of bail bond companies made available to individuals in jail, and calls to AAA's telephone number were forwarded to its bail bond producers' personal telephones. Every time Claimant wrote a bond, he would charge the customer a premium. Forty percent of the premium was Claimant's compensation, and 60% went to AAA. When customers paid the premium in cash, which was most of the time, Claimant paid himself his 40% share and sent AAA its 60% share. AAA would process check and credit card payments made by customers and send Claimant 40%. If a customer failed to show up for court or if there was an error in the way the bond was filled out, AAA was liable for the entire amount of the bond. AAA could recover an agreed-upon percentage from Claimant as losses resulting from his having written an unreasonably risky bond or having incorrectly completed the bond.

¶ 3 By the end of 2011, AAA became concerned that Claimant was not completing necessary paperwork in a timely fashion and was taking too many risks in the bonds he was writing and, in turn, exposing AAA to too much liability. AAA terminated its relationship with Claimant in February 2012 after a brief period of probation-like supervision meant to remedy Claimant's excessive risk-taking. Claimant filed a claim for unemployment benefits that AAA contested. An Administrative Law Judge (ALJ) resolved the benefits request in Claimant's favor.

¶ 4 AAA appealed the ALJ's decision to the Board. AAA argued that Claimant's employment fell within one of the several exemptions in the UESA that limit the classes of individuals eligible to receive unemployment benefits, see id.§ 35A–4–205(1)(a)–(p) (2011); accord26 U.S.C. § 3306(c)(1)-(21) (2006). The UESA does this by limiting what types of employment, i.e., employers, are subject to the Act's provisions. In particular, AAA contended that Claimant was an insurance agent and fell within the UESA's exclusion that exempted “service performed by an individual for a person as an insurance agent or as an insurance solicitor, if all the service performed by the individual for that person is performed for remuneration solely by way of commission” and if the service is “also exempted under [FUTA],” seeUtah Code Ann. § 35A–4–205(1), (1)( l ); see also26 U.S.C. § 3306(c)(14) (exempting insurance agents that are paid by commission from the meaning of “employment” under FUTA); Utah Admin. Code R994–205–105 (implementing the Utah statute). The Board determined that Claimant was not an “insurance agent” and that he was not paid “solely by way of commission” under the UESA, thereby concluding that AAA is subject to the UESA's provisions.¹ AAA seeks review of the Board's decision.

ISSUES AND STANDARDS OF REVIEW

¶ 5 The Board's decision that bail bond agents are not insurance agents, and therefore not exempt under the UESA, is based on its interpretation of the applicable statutes, which presents a question of law that we review for correctness. See SF Phosphates LC v. Auditing Div., Utah State Tax Comm'n, 972 P.2d 384, 385 (Utah 1998). The Board's determination that Claimant was not paid solely by commission presents “a traditional mixed question of law and fact.” See Murray v. Labor Comm'n, 2013 UT 38, ¶ 24, 308 P.3d 461. Our review of “a mixed question can be either deferential or nondeferential.” Id. ¶ 36 (providing factors to consider when making this determination). Here, the Board's decision was “law-like” because it was based on “the legal effect of the facts,” see id. ¶ 40, and not “fact-like” because it did not depend on “the demeanor or credibility of witnesses,” see id. ¶ 39 (internal quotation marks omitted). Accordingly, we review the Board's decision that Claimant was not paid solely by way of commission without deference. See id. ¶ 40.

ANALYSIS

¶ 6 For the UESA's insurance agent exemption to apply, AAA needed to demonstrate that (1) Claimant “performed [services] ... for a person as an insurance agent or as an insurance solicitor,” (2) the services were “performed for remuneration solely by way of commission,” and (3) such “services are also exempted under [FUTA].” SeeUtah Code Ann. § 35A–4–205(1)( l ) (LexisNexis 2011). We address each element in turn.

I. Claimant Was an Insurance Agent.

¶ 7 The terms “insurance agent” and “bail bond producer” are not defined in the relevant statutory and administrative provisions. AAA contends that bail bond producers are insurance agents and, for support, cites the legislature's decision to include the Bail Bond Act within the framework of the Utah Insurance Code. See generally id. §§ 31A–35–101 to –704 (LexisNexis 2010 & Supp.2013). AAA also relies on other sections of the Insurance Code that directly address bail bonds within the same context as what the Board deemed “traditional insurance.” See, e.g., id.§ 31A–1–301(12) (Supp.2013) (defining the term “Bail bond insurance” under the general provisions of the Insurance Code); id. § 31A–4–102(2) (2010) (recognizing “bail bond surety compan[ies]” as insurers eligible to “conduct an insurance business in Utah”); Utah Admin. Code R590–186–1 to –14 (regulating the bail bonds business within the rules established by the Insurance Department in accordance with the Utah Insurance Code); Utah Admin. Code R590–196–1 to –9 (same).

¶ 8 The Board argues that because “[t]he Utah legislature ... has the authority to define employees for the purposes of the [UESA] without regard to the Utah Insurance Code,” the legislature's omission of a definition from the UESA amounts to a grant of discretion to the Board to provide its own definition. In its analysis, the Board appears to have relied on language in rule R994–205–105 of the Utah Administrative Code to differentiate a bail bond producer from an insurance agent. That rule states,

Employment does not include services performed as an insurance agent or solicitor if payment for such services is solely by way of commission.... An insurance solicitor is an employee of an insurance agent and is empowered to sell insurance on behalf of the agent. The solicitor usually does not have binding authority, and the business generated by the solicitor is usually owned by the agent, and not the solicitor.

Utah Admin. Code R994–205–105. The Board focuses on the language describing an insurance solicitor as “empowered to sell insurance,” see id. The Board reasoned that though a bail bond “could be considered a type of insurance taken out by the court system,” Claimant's role in issuing bail bonds does not amount to “ ‘sell[ing]’ insurance,” as required by the rule. Rather, Claimant “issued time-limited bonds on select individuals.” The Board further observed that Claimant “did not seek out new business in the manner of an insurance salesperson” but that individuals seeking bail bonds “sought out [AAA]'s service and in turn the Claimant assisted them.”

¶ 9 Bail bond producers, however, are not permitted to “solicit business in or about” the locations where they are most likely to find customers—“where persons in the custody of the state or any local law enforcement or correctional agency are confined” and in “any court.” Utah Code Ann. § 31A–35–701(1)(a) (LexisNexis 2010). The Board's consideration of Claimant's failure to “seek out new business in the manner of an insurance salesperson” as an important factor in determining whether the bail bond producer was “ ‘sell [ing]’ insurance” within the meaning of rule 994–205–105 is in direct conflict with the statutory provision restricting a bail bond producer's ability to do just that. Cf.Utah Admin. Code R994–204–303, –303(1)(b)(v) (listing advertising efforts as a factor to consider in the context of determining an individual's status as an independent contractor, and noting that “[t]he degree of importance of each factor varies” and that “some factors do not apply to certain services and, therefore, should not be considered”). Additionally, the Board's attempt to distinguish “ ‘sell[ing]’ an insurance policy” from “issu [ing] time-limited bonds” is, in this situation, an irrelevant distinction. As AAA points out, “the UESA uses neither ‘sell’ nor ‘issue,’ exempt[ing] all ‘ service.’ ” SeeUtah Code Ann. § 35A–4–205(1)( l ) (emphasis added). Because “an administrative grant to administer a statute is not to be confused with a grant of discretion to interpret the statute,” Murray, 2013 UT 38, ¶ 29, 308 P.3d 461 (citation and internal quotation...