Daw's Critical Care Registry, Inc. v. Department of Labor, Employment Sec. Div., s. CV-88-029573

Decision Date29 April 1992
Docket NumberNos. CV-88-029573,CV-88-02957,s. CV-88-029573
Citation42 Conn.Supp. 376,622 A.2d 622
CourtConnecticut Superior Court

Garrison & Arterton, New Haven, for plaintiff.

Richard T. Sponzo, Asst. Atty. Gen., with whom was Richard Blumenthal, Atty. Gen., for defendant.

ARTHUR H. HEALEY, State Trial Referee.

These two cases 1 are appeals 2 from assessments by the defendant administrator of the Connecticut Unemployment Compensation Act (administrator) pursuant to General Statutes § 31-270 3 for unemployment taxes based on the administrator's determination that nurses furnished by the plaintiff, Daw's Critical Care Registry Inc. 4 (Daws), to medical facilities 5 are employees of Daws under the Connecticut Unemployment Compensation Act (act) and not independent contractors as Daws contends.

Daws took appeals to the Superior Court maintaining that Daws' nurses, whom Daws treated as independent contractors, were not, as the administrator determined, employees under the act. Daws alleges that this determination of the administrator is incorrect as a matter of both fact and law because the status of the nurses in dispute is that of independent contractors. Daws also alleges that the administrator's assessments under the act are illegal and improper. In the event, however, that the assessments by the administrator are legal and found to be owing by Daws under the act, Daws asserts that they should be due only prospectively and not retroactively.

In its appeals, Daws seeks a hearing and review of the determinations and assessments made by the administrator, and an order correcting and vacating the assessments and determinations, or for such other proper order as the court deems just. The administrator admits that he made the determination that these nurses are employees of Daws under the act and that assessments of amounts due under the act have been forwarded to Daws. He, however, denies that this determination is incorrect, either factually or legally, as well as denying that the assessments may not be made due retroactively.

The procedural history of these cases deserves some comment. In that regard, the record of the proceedings prior to the actual appeals is illuminating. Pursuant to the request of G. Joseph George (George), a field auditor of the employment security division of the defendant administrator, Daws made available its books and records in response to George's letter asking for an examination of them as they related to the provisions of the act. Daws cooperated and George conducted his audit. A postaudit "discussion" was held on March 16, 1988, at which George, David Delaney (Waterbury area field service representative), Joseph Whyko (president of Daws) and his attorney, Joseph Garrison, were present. Thereafter, in April, 1988, George issued his written report in which he concluded that all the Daws nurses involved were, under the ABC test, 6 employees and not independent contractors and that remunerations paid to such nurses were to be treated "as liable wages subject to the U.C. [unemployment compensation] law...." According to the record, upon the presentation of the original assessment, George's written report was discussed at the March 16, 1988 meeting. According to the administrator, Daws was given the opportunity at the March 16, 1988 meeting for another conference "at which point ... he might wish to pay the amount due, or ... provide any material or further argument to dispute the finding of [the] audit. The employer declined and was advised that a formal assessment would be sent and that it could be appealed to the Superior Court." Thereafter, a formal assessment of moneys claimed to be due under the act was made. These two appeals followed.

These appeals come before this court in a somewhat unusual posture. The record of the proceedings before the employment security division of the defendant, as certified, contains, inter alia, George's field audit report, which makes certain factual findings and concludes that the remuneration paid to Daws' nurses should be treated as "wages" under the act, specifically General Statutes § 31-222, under which it was determined that they were "employees" and not independent contractors as Daws claimed. It also includes an assessment of the taxes (with interest) the defendant found owing from Daws for the tax years involved. The record further states, as noted above, that Daws was given the opportunity for another conference. Thereafter, a formal assessment was sent to Daws, and it was formally advised in writing that any appeal from the defendant's determination that the nurses were "employees" and not "independent contractors" was to be taken to the Superior Court under § 31-270. There is no transcript of any sort in the record.

After the appeals had been returned to court, the parties then filed a long "Stipulation of Facts," containing eighty-two separate facts, which had appended to it a number of exhibits. In addition, they also filed a "Stipulation of Joint Exhibits" as well as a "Stipulation of Operative Pleadings." In addition, at the trial, both parties adduced evidence through a number of witnesses and introduced additional exhibits. This entire procedure was agreed upon between the parties.

The manner in which these appeals come to this court, it is thus fair to say, resulted from the conduct of the parties concerning what occurred from the outset of their interaction since the audit proceedings were instituted against Daws by the administrator. The court notes, as does Daws, that our Supreme Court has recently said that "[t]he scope of review in an appeal from an assessment of unemployment tax contributions under General Statutes § 31-270 is less than clear. See Beaverdale Memorial Park Inc. v. Danaher, 127 Conn. 175, 181-83, 15 A.2d 17 (1940)...." Latimer v. Administrator, 216 Conn. 237, 245 n. 9, 579 A.2d 497 (1990). Daws points here to Latimer's citation of Beaverdale and claims that where the original assessment was made ex parte and without notice that the appellant is then entitled, under the constitution, to a full hearing after notice and, that "upon such hearing the court shall correct the assessment." Continuing its reference to Latimer, Daws says that in that case "the trial court was permitted to restrict its review to the record developed at the administrative level" because, as the Latimer court said: "Although not provided by statute, the parties agreed to an elaborate procedural arrangement that contemplated and resulted in a full scale hearing before a hearing officer with a resultant finding of facts and a decision." Id. It is noted that Latimer then said: "To ignore the finding of facts and the conclusion of the hearing officer and to treat this appeal [Latimer ] as a de novo proceeding would defy common sense and go against the grain of what the parties obviously intended," and the Latimer courtconcluded that "[t]he trial court did not err by restricting its review to the record developed at the administrative hearing." Id. In contrast to Latimer, 7 Daws argues, no such hearing has been held in these cases but rather, the defendant's decision was the product of a simple audit at the end of which Daws was presented with a fait accompli. Parenthetically, "[a] 'hearing' is generally defined as a '[p]roceeding of relative formality ... generally public, with definite issues of fact and of law to be tried, in which ... parties proceeded against have [a] right to be heard....' (Emphasis in original.) Black's Law Dictionary (5th Ed.)." Herman v. Division of Special Revenue, 193 Conn. 379, 382-83, 477 A.2d 119 (1984). Daws then contends that, in "keeping" with Beaverdale and the "strong suggestion" of Latimer, it is now entitled to a "full and fair hearing" before this court in which all the relevant evidence can be presented and considered. Daws asserts that its claim here is strengthened by the conduct of the attorney general's office, which, through extensive discovery by deposition, interrogatories and multiple sets of requests for admissions has come quite close, to use Daws' language, to treating these appeals as ones "in which the 'administrative record,' such as it is, is a sidelight and [so] a de novo hearing is required."

On the other hand, the defendant, referring to his pretrial brief while conceding that the administrator did not hold a formal hearing as in Latimer, argues that he did "[make] findings of fact and conclusions of law underlying his assessment." He claims that those are contained in the April 4, 1988 report that resulted in the assessment. He goes on to contend that "to the extent that the factual basis for the assessment coincides with the facts found on appeal, the court is similarly limited in determining whether the agency's conclusions in the assessment are unreasonable, arbitrary or illegal, and the court should accordingly give considerable deference to those conclusions." In addition, he says that "while the court may consider further evidence [on these appeals], it should defer to the agency's conclusions if based on the same facts ultimately found by the court." Finally, in that earlier brief he maintains that "the proper standard of judicial review is whether the Administrator could reasonably have concluded in his assessment, on a factual basis 'followed by the court,' that plaintiff [Daws] failed to sustain its burden of showing that it satisfied part of the ABC test."

In his posttrial brief the defendant says that: "Regardless of the status of this proceeding as a trial de novo on factual issues, the principle of deference to the agency's legal conclusions cited in Latimer and other cases is based on the agency's expertise in the law and in drawing legal conclusions from facts, regardless of the party or the manner of finding the facts and the actual...

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