Department of Employment v. Bake Young Realty

• Decision Date: 22 February 1977
• Docket Number: No. 12159,12159
• Citation: 98 Idaho 182,560 P.2d 504
• Parties: DEPARTMENT OF EMPLOYMENT, Plaintiff-Respondent, v. BAKE YOUNG REALTY, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 504

560 P.2d 504

98 Idaho 182

DEPARTMENT OF EMPLOYMENT, Plaintiff-Respondent, v.BAKE YOUNG REALTY, Defendant-Appellant.

No. 12159.

Supreme Court of Idaho.

Feb. 22, 1977.

Randall C. Fredricks, Clemons, Cosho, Humphrey & Samuelsen, Boise, Roger L. Williams, Schiller, Williams & Trabert, Nampa, for defendant-appellant.

Wayne L. Kidwell, Atty. Gen., R. LaVar Marsh, Roger B. Madsen, Asst. Attys.Gen., Boise, for plaintiff-respondent.

BISTLINE, Justice.

In 1974, the Idaho legislature amended the state's Employment Security Law to provide a specific exemption from 'covered employment' for

'Service performed by an individual for a real estate broker as an associate real estate broker or as a real estate salesman, if all such service performed by such individual for such person is performed for remuneration solely by way of commission.'I.C. § 72-1316(a)(10)(B)

The result was to exempt real estate brokers from payment into the state's employment security fund for the services of their commissioned real estate salesmen.Assuming that this represented a change in a pre-existing policy, the Department of Employment notified Idaho's real estate brokers that they were in arrears for their payments from April 1, 1972, to July 1, 1974, the effective date of the new amendment exempting them from coverage.'Emergency'legislation was passed by the 1975legislature to prevent this assessment, but was vetoed by the Governor as interest group legislation.The veto was not overridden.

Bake Young Realty then brought the present challenge which, by agreement between the Idaho Association of Realtors and the Department of Employment, is to stand as a 'test case.'A hearing was held on May 29, 1975, before Appeals Examiner Subia of the Department of Employment.His decision, holding commissioned real estate salesmen to be 'covered' for purposes of the State Employment Security Law, was issued on July 9, 1975, and was affirmed by the Industrial Commission in an Order of January 8, 1976.We reverse.

I.

The sole question on appeal is whether services provided by commissioned real estate salesmen for real estate brokers were exempted from the definition of 'covered employment' prior to the effective date of the 1974 amendment. I.C. § 72-1316(d), the statute in effect at all times relevant for this case, provides:

'(d) Services performed by an individual for remuneration shall, for the purposes of the Employment Security Law, be covered employment:

(1) Unless it is shown:

(A) that the worker has been and will continue to be free from control or direction in the performance of his work, both under his contract of service and in fact, and

(B) That the worker is engaged in an independently established trade, occupation, profession, or business; . . .'

Condition (A) is not the source of the dispute.The typical broker/salesman contract which was put in evidence in this case recites that the two parties find it to their 'mutual advantage' to enter into the agreement.The broker, in exchange for 40% of the commissions earned on each sale, promises to provide a fully equipped office, to pay for all office expenses (such as post-age, telephones and advertising), and to assist the salesman in closings.The salesman, for his part, contracts to be diligent in his efforts to promote the broker's business and to abide by all Idaho laws relative to real estate brokers and salesmen.Either party can terminate the contract on ten days' written notice to the other, in which case all supplies and records become the property of the broker.All listings secured by the salesman remain his own personal property.Explicitly, the contract states:

'The salesman is to be deemed an independent contractor under the law and is to do nothing to change that status.The salesman is not to be deemed a servant, employee, joint adventurer or partner of the broker.'

Moreover, the testimony at the examiner's hearing was uncontradicted in affirming that Mr. Johnson, Bake Young Realty's salesman, functions quite independently.He makes his own hours, provides his own transportation, pays his own licensing fees and other work-related expenses, has his own separate listings and negotiates his own deals.

There would seem, then, to be little argument that 'both under his contract of service and in fact,' Mr. Johnson is and will continue to be free from the control or direction of Mr. Young.

But our inquiry cannot stop here.I.C. § 72-1316(d) is not phrased in the disjunctive.The worker must be free from direction and control in the performance of his work, and be engaged in an independently established trade, occupation, profession or business.The real issue in this case, then, is whether, under the laws governing the real estate business-I.C.§§ 54-2021 to 2051-real estate salesmen can be said to be engaged in an independent business.The Department of Employment insists that Idaho's real estate laws and regulations vest ultimate responsibility for the protection of the general public in the broker.That being the case, the Department argues, the broker has the right to control the activities of his salespeople, regardless of whether or not that right is exercised in fact.

By statute, it is clear that the broker does have the ultimate responsibility to the public.No salesman can operate apart from the place of business of a licensed broker, I.C. § 54-2038, and any salesman may be 'discharged by his employer for a violation of any of the provisions of section 54-2040'. I.C. § 54-2047.The Real Estate Commission's rules and regulations, passed pursuant to the enabling statute, I.C. § 54-2047, spell out the means whereby the broker must exercise his responsibility to the public.They require the salesman to turn over payments to the broker, who is alone to deposit and be responsible for such trust funds.The broker alone is permitted to perform the closing.The salesman is said to be licensed through the broker, the 'employer,' who has the right to terminate his 'employee,' the salesman.For similar reasons, the Department of Employement argues, this Court has held barbers 'covered' under the Employment Security Law.Byrd v. Employment Security Agency, 86 Idaho 469, 388 P.2d 100(1964).

We find Byrd to be distinguishable in critical particulars.In that case, a barber, who admittedly had been an employee of the master barber, entered into an agreement whereby he would become an independent lessee of part of the premises.Henceforth, he was to keep his own receipts and records, pay his own taxes and social security contributions, and maintain his own independent schedule and mode of operation.The Court ruled, nonetheless, that his services were 'covered' employment and the master barber must contribute into the state employment security fund.Crucial to that ruling was the Court's interpretation of the state's Barber Law.The Court held, first, that the 'legislature never anticipated that the principal-independent contractor relationship would exist in a barber shop'; second, that the enforcement mechanism placed the master barber in the position of being the one whose license would be revoked should the entire shop, or any part of it, fail to comply with the requirements of the Department of Public Health; and, finally, that the goals of the statute could not be met without the master barber exercising control over the details of the work performed by the other barbers.

The general test of whether the right to control is sufficient to give rise to the relationship of employer and employee is whether or not the control extends to

". . . the details of the work, the manner, method, or mode of doing it, the means by which it is to be accomplished, or, specifically, the details, manner, means or method of doing the work, as contrasted with the result thereof."Merrill v. Duffy Reed Construction Co., 82 Idaho 410, 415, 353 P.2d 657, 660(1960);Moore v. Idaho Employment Security Agency, 84 Idaho 1, 367 P.2d 291(1961);Beutler v. MacGregor Triangle Co., 85 Idaho 415, 380 P.2d 1(1963).

Applying this test, the Court found that a master barber, to meet the public health requirements, was responsible for supervising the cleanliness of each portion of his ship, seeing that all tools were kept in sanitary condition, and maintaining standards of personal hygiene among all the barbers in his shop.The Court concluded that this 'statutory obligation to supervise the work in so far as it in any manner affects the public health . . . (was) sufficient to create the employer-employee relationship.'Byrd v. Employment Security Agency, supra, 86 Idaho at 474, 388 P.2d at 102.

The Real Estate Law, by contrast, clearly envisions a relationship between broker and salesman other than that of employer-employee.The real estate salesman is defined as

'. . . any person employed, either directly or indirectly, by a real estate broker, or who represents a real estate borker in the performance of any of the acts above set forth.'(Emphasis added.)I.C. § 54-2022

The statute repeatedly refers to carrying on 'the business of real estate broker or real estate salesman' thus indicating a recognition that the two are separate professions.See, I.C. §§ 54-2021,2029(A)(2),2040.

The enforcement mechanism mirrors this recognition.The broker and salesman are separately licensed; their respective licenses are of a different quality.Each is given separate duties and responsibilities such as the keeping of adequate records on all property transactions, accounting for all moneys received, and abiding by all licensing regulations.The salesman is directly controlled by and responsible to the Real Estate Board, and must forfeit his license in the event of misconduct.

Finally, insofar as the broker himself is responsible for protecting the public from misconduct by the salesmen who represent him, we find that he exercises that responsibility by supervising the results, rather than the...