Erspamer Advertising Co. v. Department of Labor, 82-421

• Decision Date: 15 April 1983
• Docket Number: No. 82-421,82-421
• Parties: ERSPAMER ADVERTISING COMPANY, a Nebraska corporation, Appellee, v. DEPARTMENT OF LABOR of the State of Nebraska et al., Appellants, and Richard G. Paulson, Appellee.
• Court: Nebraska Supreme Court

Page 646

333 N.W.2d 646

214 Neb. 68

ERSPAMER ADVERTISING COMPANY, a Nebraska corporation, Appellee, v. DEPARTMENT OF LABOR of the State of Nebraska et al., Appellants, and Richard G. Paulson, Appellee.

No. 82-421.

Supreme Court of Nebraska.

April 15, 1983.

Syllabus by the Court

1. Employment Security Law: Appeal and Error. An appeal to this court under the Employment Security Law is heard de novo.

2. Employment Security Law: Independent Contractors. The standards prescribed in Neb.Rev.Stat. § 48-604(5) (Reissue 1978) are not exclusive in determining whether an individual is an employee or an independent contractor.

3. Employment Security Law: Independent Contractors. Control or the right of control is the chief criterion in the determination of whether one acts as an independent contractor.

4. Statutes: Judicial Construction. Generally, where a statute has been judicially construed and that construction has not evoked an amendment, it will be presumed that the Legislature has acquiesced in the court's determination of its intent.

5. Statutes. An exemption becomes meaningless if it does not exempt anything from the statutory provisions.

Pamela A. Mattson, Lincoln, for appellants.

Joseph J. Skudlarek of Schumacher, Skudlarek, Raynor & Smith, Omaha, for appellee.

KRIVOSHA, C.J., BOSLAUGH, McCOWN, HASTINGS, and CAPORALE, JJ., and BRODKEY, J., Retired.

BOSLAUGH, Justice.

The Department of Labor has appealed from the judgment of the District Court reversing the determination by the Nebraska Appeal Tribunal that Richard G. Paulson, a salesman of advertising specialties for the appellee, Erspamer Advertising Company (Erspamer), was an employee.

In October 1980 Richard G. Paulson entered into a "salesman agreement" with Erspamer, a company which sells advertising specialties. The contract provided that (1) Erspamer could designate the salesman's territory; (2) compensation was to be on a commission basis only; (3) commissions were payable on a monthly basis and not due until the customer had paid; (4) bonuses would be paid under certain circumstances; (5) errors would be charged against the salesman's account; (6) all samples remained the property of Erspamer; (7) the salesman was deemed an independent contractor and no income would be withheld for tax purposes nor would social security or unemployment taxes be paid by Erspamer; (8) the salesman was to pay all traveling expenses and must carry automobile insurance; (9) no advance would be made; (10) Erspamer would not be liable for delay in filling orders; (11) the salesman agreed not to compete; and (12) the agreement could be terminated at the option of either party.

Paulson testified that he was paid on a straight commission basis and determined his own hours. He could set his own prices. No office or telephone was provided by Erspamer, and Paulson did not receive a car or expenses. Paulson could have sold outside the agreed upon territory and was free to work for another while he was under contract with Erspamer. Paulson did not have to report in to the office, but could mail his orders in.

On March 27, 1981, Paulson terminated his arrangement with Erspamer and decided to seek salaried employment because he was "financially unsuccessful as a commission salesman." Paulson then filed a claim for unemployment benefits.

On April 8, 1981, Paulson was notified of the claims deputy's determination that Paulson would not receive benefits on the basis of the wages earned at Erspamer, since his relationship had been on a straight commission basis. Benefits to Paulson were then charged against a prior employer, Blue Cross/Blue Shield, and were based on the amount of wages earned there. A reduction was assessed because he had voluntarily left his employment there.

On April 23, 1981, Erspamer was notified by the chief of contributions that the deputy's determination had been reversed. Paulson was now determined to be an employee, rather than an independent contractor, of Erspamer. Erspamer was assessed for a contribution, and benefits to Paulson were to be based on the amounts he earned at Erspamer. The benefits to Paulson were less than those which were based on his Blue Cross wages. Again, a reduction in benefits was assessed because he had voluntarily left Erspamer.

Erspamer appealed from the decision of the chief of contributions to the Nebraska Appeal Tribunal, which affirmed the determination that Paulson was an employee of Erspamer.

Erspamer then appealed to the District Court, which found that Paulson was an independent contractor. The Department of Labor appeals from that decision. The review here is de novo on the record. Neb.Rev.Stat. § 48-640 (Reissue 1978). Glionna v. Chizek, 204 Neb. 37, 281 N.W.2d 220 (1979); Heimsoth v. Kellwood Co., 211 Neb. 167, 318 N.W.2d 1 (1982). We are required to retry the issues of fact involved in the findings complained of and reach an independent conclusion.

The only issue on the appeal is whether Paulson was an employee or independent contractor. Neb.Rev.Stat. § 48-604(5) (Reissue 1978) provides: "Services performed by an individual for wages shall be deemed to be employment, unless it be shown to the satisfaction of the commissioner that (a) such individual has been and will continue to be free from control or direction over the performance of such services, both under his contract of service and in fact, (b) such service is either outside the usual course of the business for which such service is performed or such service is performed outside of all the places of business of the enterprise for which such service is performed, and (c) such individual is customarily engaged in an independently established trade, occupation, profession, or business."

The department reasons that the beneficent purpose of the unemployment compensation act requires that § 48-604(5) be construed such that a person will be deemed an employee (and thus entitled to benefits) more readily than if the common-law test is used. Erspamer contends that the ABC test is merely a codification of the common-law test of independent contractor.

The test for determining whether a person is an employee or an independent contractor as expressed in § 48-604(5) is known as the "ABC test." W. Malone, M. Plant & J. Little, Cases and Materials on Workers' Compensation and Employment Rights 505 (2d ed. 1980). The Department of Labor urges that the three conjunctive criteria of this test are the only ones which may be considered in determining status for purposes of unemployment compensation. Only if each factor is met can one be deemed an independent contractor. In contrast, the common-law test for independent contractor includes many factors which are to be considered and weighed in making the determination, no one of which may be conclusive.

Generally, control or the right of control is the chief criterion in the determination of whether one acts as an independent contractor. Maricle v. Spiegel, 213 Neb. 223, 329 N.W.2d 80 (1983). "However, even the employer of an independent contractor may, without changing the status, exercise such control as is necessary to assure performance of the contract in accordance with its terms." Stephens v. Celeryvale Transport, Inc., 205 Neb. 12, 20, 286 N.W.2d 420, 425 (1979).

The Restatement (Second) of Agency § 220 (1958) lists the following ten factors to be considered in determining whether a person is an employee or an independent contractor: "(2) In determining whether one acting for another is a servant or an independent contractor, the following matters of fact, among others, are considered:

"(a) the extent of control which, by the agreement, the master may exercise over the details of the work [A of the ABC test];

"(b) whether or not the one employed is engaged in a distinct occupation or business [C of the ABC test];

"(c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;

"(d) the skill required in the particular occupation;

"(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;

"(f) the length of time for which the person is employed "(g) the method of payment, whether by the time or by the job;

"(h) whether or not the work is a part of the regular business of the employer [B of the ABC test];

"(i) whether or not the parties believe they are creating the relation of master and servant; and

"(j) whether the principal is or is not in business."

This issue was addressed by this court in Hill Hotel Co. v. Kinney, 138 Neb. 760, 763, 295 N.W. 397, 398 (1940). In that case we said: "While there is a diversity of views among the courts on this subject and the opinions are not always unanimous, the weight of authority is that legislatures in enacting unemployment compensation statutes did not intend to depart from the common-law definition of 'independent contractor.' "

In Hill Hotel Co., supra, we quoted with approval from Washington Recorder Pub. Co. v. Ernst, 199 Wash. 176, 91 P.2d 718 (1939) (in effect overruled in Sound Cities Gas & Oil Co. v. Ryan, 13 Wash.2d 457, 125 P.2d 246 (1942)). We said at 762-63, 295 N.W. at 398: "The provisions quoted from the Nebraska statute are found in the unemployment compensation law of Washington and in construing them the supreme court of that state said:

" 'In the Restatement of the Law of Agency, nine different items are recited as the principal elements to be considered in determining which relationship exists. In the enactment of the unemployment compensation statute, the legislature selected or picked out three elements to be considered. The legislature did not say, nor is the language capable of that interpretation, that each of those elements must exist one hundred per cent in order to establish the relationship of independent contractor. * * *

" 'The cou...