CHURCH AT 295 S. 18TH v. Employment Dept.

• Decision Date: 05 July 2001
• Citation: 28 P.3d 1185,175 Or. App. 114
• Parties: CHURCH AT 295 S. 18TH ST., ST. HELENS, Petitioner, v. EMPLOYMENT DEPARTMENT, Respondent.
• Court: Oregon Court of Appeals

28 P.3d 1185

175 Or. App. 114

CHURCH AT TH ST., ST. HELENS, Petitioner, v. EMPLOYMENT DEPARTMENT, Respondent.

00-TAX-00039; A109854

Court of Appeals of Oregon.

Argued and Submitted November 7, 2000.

Decided July 5, 2001.

Dean Lederer, Salem, argued the cause for petitioner. On the brief were Daniel A. Hill and Adams, Day & Hill.

Richard D. Wasserman, Assistant Attorney General, argued the cause for respondent. With him on the brief were Hardy Myers, Attorney General, and Michael D. Reynolds, Solicitor General.

Before LANDAU, Presiding Judge, and LINDER and BREWER, Judges.

LANDAU, P.J.

Petitioner, the Church at 295 S. 18th St., St. Helens (church), seeks judicial review of a final order of an Employment Department hearing officer holding that the church is an employer within the meaning of ORS 657.025 and is therefore liable for unemployment taxes. We affirm.

The hearing officer found the following facts. The church holds worship services on Sunday mornings and evenings and religious instruction classes on Wednesday evenings. Since 1996, Hubert Barton, who employs the title "evangelist," has led the Sunday worship services. That work includes teaching a class and delivering a sermon each Sunday morning and generally participating in the Sunday evening services. He also has provided teaching at the Wednesday meetings. Barton spends most of his time working at the church, but he does spend some time away. Occasionally, he has visited other churches in California and has spent time at a bible camp.

Barton does not maintain an office at the church. He operates from his home, using a table in his kitchen as an office. He uses a computer that he purchased with his own money. He has business cards that display his name and personal phone number.

The church collects from its members a tithe and then disburses the tithes—on average, approximately $1,000 per month—to Barton. It uses other collections for other church expenses. At least 80 percent of Barton's annual income comes from those tithes. He receives some additional income from his visits to other churches and from weddings and funerals.

The church considers Barton to be its evangelist, not its employee. It would end its association with Barton if he did not follow biblical doctrine or standards, however. The Employment Department (department) learned that Barton regularly received tithes in exchange for his services as evangelist for the church. It requested regular reports from the church as an employer. The church refused to provide any information to the department. Over the church's objections, the department prepared and submitted an employment tax registration for the church and estimated its tax responsibility. The church refused to pay and requested a hearing.

At the hearing, the church argued that: (1) it does not employ Barton; (2) if it does employ Barton, he is an independent contractor for whom no tax payments are required; and (3) requiring it to acknowledge that it is an "employer" violates its constitutional rights of free speech and free exercise of religion. The hearing officer concluded, on the foregoing findings of fact, that the church is Barton's employer, because it paid him for services that he provided. The hearing officer further concluded that Barton is not an independent contractor, because he failed to meet five of the eight requirements of the statutory exemption for independent contractors. Finally, the hearing officer held that requiring the church to acknowledge that it is an employer interferes with neither its right of free speech nor its right of free exercise.

On review, the church first argues that the hearing officer erred in concluding that it employs Barton. According to the church, the evidence shows that it has no governing body, exercised "very little control" over Barton's work, and paid him only tithes, not a wage or salary. The department argues that that evidence is beside the point, because the undisputed facts are that the church paid Barton to perform services for it. We agree with the department.

An "employer" must pay into the Unemployment Compensation Trust Fund. ORS 657.505. An "employer" is defined, if somewhat tautologically, as:

"[A]ny employing unit which employs one or more individuals in an employment subject to this chapter in each of 18 separate weeks during any calendar year, or in which its total payroll during any calendar quarter amounts to $225 or more."

ORS 657.025(1). An "employee" is defined as:

"[A]ny person * * * employed for remuneration or under any contract of hire, written or oral, express or implied, by an employer subject to this chapter * * *."

ORS 657.015. Finally, "employment" is "service for an employer * * * performed for remuneration or under any contract of hire, written or oral, express or implied." ORS 657.030(1).

The individual or entity challenging the applicability of the tax bears the burden of proving that it is not an employer within the meaning of ORS 657.025(1). Ponderosa Inn, Inc. v. Emp. Div., 63 Or.App. 183, 186, 663 P.2d 1291 (1983).

In light of the foregoing definitions, it is clear that the evidence on which the church relies simply is irrelevant. Whether the church has a governing body, pays out of the congregational tithes, or controls Barton's work is beside the point. All that matters for purposes of determining whether the church is an employer within the meaning of the statutes is whether it pays Barton for services that he renders under a contract of hire. The hearing officer concluded that it does, based on findings that it pays him approximately $1,000 per month for performing services as an evangelist. The church does not contest those findings. There is, therefore, no basis for concluding that the hearing officer erred.

The church next argues that, if the hearing officer did not err in concluding that it is an employer, he did err in concluding that it was not subject to the statutory exemption for employers of independent contractors. The church acknowledges that it did not meet each of the eight requirements for the statutory exemption. It argues that several of the factors simply do not apply to churches. In the alternative, it argues that the hearing officer's findings as to those factors are not supported by substantial evidence. The department argues that, as a matter of law, all eight requirements must be met and that, because the church could not satisfy all eight, the hearing officer did not err in concluding that the exemption did not apply. We agree with the department.

ORS 657.040(1)(a) provides, in part:

"(1) Services performed by an individual for remuneration are deemed to be employment subject to this chapter unless and until it is shown to the satisfaction of the Director of the Employment Department that:

"(a) Such individual is an independent contractor, as that term is defined in ORS 670.600 * * *."

ORS 670.600, in turn, provides that a person must satisfy the following conditions to be considered an independent contractor:

"As used in various provisions of ORS chapters 316, 448, 656, 657, 671 and 701, an individual or business entity that performs labor or services for remuneration shall be considered to perform the labor or services as an `independent contractor' if the standards of this section are met:

"(1) The individual or business entity providing the labor or services is free from direction and control over the means and manner of providing the labor or services, subject only to the right of the person for whom the labor or services are provided to specify the desired results;

"(2) The individual or business entity providing labor or services is responsible for obtaining all assumed business registrations or professional occupation licenses required by state law or local government ordinances for the individual or business entity to conduct the business;

"(3) The individual or business entity providing labor or services furnishes the tools or equipment necessary for performance of the contracted labor or services;

"(4) The individual or business entity providing labor or services has the authority to hire and fire employees to perform the labor or services;

"(5) Payment for the labor or services is made upon completion of the performance of specific portions of the project or is made on the basis of an annual or periodic retainer;

"(6) The individual or business entity providing labor or services is licensed under ORS chapter 701, if the individual or business entity provides labor or services for which licensure is required;

"(7) Federal and state income tax returns in the name of the business or a business Schedule C or farm Schedule F as part of the personal income tax return were filed for the previous year if the individual or business entity performed labor or services as an independent contractor in the previous year; and

"(8) The individual or business entity represents to the public that the labor or services are to be provided by an independently established business. Except when an individual or business entity files a Schedule F as part of the personal income tax returns and the individual or business entity performs farm labor or services that are reportable on Schedule C, an individual or business entity is considered to be engaged in an independently established business when four or more of the following circumstances exist:

"(a) The labor or services are primarily carried out at a location that is separate from the residence of an individual who performs the labor or services, or are primarily carried out in a specific portion of the residence, which portion is set aside as the location of the business;

"(b) Commercial advertising or business cards as is customary in operating similar businesses are purchased for the business, or the individual or business entity has a trade association membership;

"(c) Telephone listing and service are used for the business that is separate from

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