Evolocity, Inc. v. Dep't of Workforce Servs., 20130587–CA.

Decision Date19 March 2015
Docket NumberNo. 20130587–CA.,20130587–CA.
Citation2015 UT App 61,347 P.3d 406
PartiesEVOLOCITY, INC., Petitioner, v. DEPARTMENT OF WORKFORCE SERVICES and Deabra C. Colbert, Respondents.
CourtUtah Court of Appeals

347 P.3d 406
2015 UT App 61

EVOLOCITY, INC., Petitioner
v.
DEPARTMENT OF WORKFORCE SERVICES and Deabra C. Colbert, Respondents.

No. 20130587–CA.

Court of Appeals of Utah.

March 19, 2015.


347 P.3d 408

Vincent C. Rampton, Salt Lake City, Attorney for Petitioner.

Kathleen Bounous, Attorney for Respondent Department of Workforce Services.

David J. Holdsworth, Sandy, Attorney for Respondent Deabra C. Colbert.

Judge MICHELE M. CHRISTIANSEN authored this Opinion, in which Senior Judges RUSSELL W. BENCH and JUDITH M. BILLINGS concurred.1

Opinion

CHRISTIANSEN, Judge:

¶ 1 Evolocity, Inc. challenges the Department of Workforce Services' determination that Deabra C. Colbert was an employee of Evolocity rather than an independent contractor. We decline to disturb the Department's decision.

BACKGROUND

¶ 2 Evolocity provides website design and marketing services for healthcare providers.2 Evolocity operates largely through a system of what it terms independent contractors, who perform the company's programming and website-marketing work. Colbert was approached by her neighbor—Evolocity's owner—who offered her a position as a “go between” or intermediary between Evolocity's clients and its website designers and website-marketing workers. Colbert was a teacher at the time and had no previous experience working with website services.

¶ 3 When Colbert began working for Evolocity, she signed a contract indicating that she was an independent contractor. She received training from Evolocity on the operation of its “Steel Jaws” software, which Evolocity's workers were required to use to communicate with and track the work performed for Evolocity's clients. After her training, Colbert worked from her own home office. Colbert used her own computer, but Evolocity provided access to the Steel Jaws software and other software Colbert needed. Colbert received payment from Evolocity in the form of a biweekly retainer, which was akin to a set salary. Colbert's payments from Evolocity did not vary based on the quantity or quality of work she performed unless she was penalized by Evolocity for poor work performance.

¶ 4 During the time she worked for Evolocity, Colbert never formed a business, though she did keep records of her business expenses for tax purposes. Colbert worked full-time for Evolocity and did not perform website marketing or other similar services for other clients during this time.

¶ 5 After a number of years, Colbert's working relationship with Evolocity came to an end. Colbert filed for unemployment benefits with the Department. Evolocity challenged Colbert's entitlement to unemployment benefits, arguing that Colbert was an independent contractor, not an employee. An administrative law judge determined that, notwithstanding the form of Colbert's employment contract, she was Evolocity's employee. Evolocity appealed that decision to the Department's appeals board, which affirmed the administrative law judge's decision. Evolocity now seeks judicial review of the Department's final decision.

ISSUES AND STANDARDS OF REVIEW

¶ 6 Evolocity first argues that the Department's determination that Colbert was not an independent contractor is unsupported by the evidence in the record. The determination whether a claimant is an independent contractor involves a fact-sensitive inquiry into the unique facts of a particular employment relationship. See BMS Ltd. 1999, Inc. v. Department of Workforce Servs., 2014 UT App 111, ¶ 13, 327 P.3d 578. Because

347 P.3d 409

this inquiry “will differ in every case due to the individuality of fact patterns and the vagaries of various vocations,” we grant deference to the Department in its weighing of the relevant factors to arrive at its ultimate decision. Id. And we will disturb that decision only if it is clearly erroneous or falls outside the scope of the afforded deference. See Carbon County v. Workforce Appeals Bd., 2013 UT 41, ¶¶ 22–23, 308 P.3d 477 ; see also In re Adoption of Baby B., 2012 UT 35, ¶ 46, 308 P.3d 382 (explaining that a “fact-like” mixed finding is “entitled to deference and would be properly affirmed on appeal if not clearly erroneous”). “To establish clear error, the challenging party must show that a finding is not supported by legally sufficient evidence even when the evidence is viewed in a light most favorable to the finding.” State v. Cater, 2014 UT App 207, ¶ 10, 336 P.3d 32. We do not reweigh the evidence or substitute our decision for that of the Department but instead will uphold its determinations if they are supported by the record evidence. Cf. Migliaccio v. Labor Comm'n, 2013 UT App 51, ¶ 7, 298 P.3d 676.

¶ 7 In addressing this issue, we review the Department's subsidiary legal conclusions for correctness and its underlying factual findings for the support of substantial evidence. Drake v. Industrial Comm'n, 939 P.2d 177, 181 (Utah 1997) ; see Murray v. Labor Comm'n, 2013 UT 38, ¶¶ 19, 21, 308 P.3d 461.

¶ 8 Evolocity also argues that the Department's interpretation of the regulations governing an independent-contractor determination rendered those regulations unconstitutionally vague and thereby violated Evolocity's right to due process. “Constitutional issues, including questions regarding due process, are questions of law....” Summerhaze Co. v. Federal Deposit Ins. Corp., 2014 UT 28, ¶ 8, 332 P.3d 908 (citation and internal quotation marks omitted). We therefore decide Evolocity's constitutional challenge as a matter of law. Id.3

ANALYSIS

I. The Department's Determination Is Supported by the Evidence and Entitled to Deference.

¶ 9 Evolocity first argues that the Department's determination that Colbert was an employee, rather than an independent contractor, is not supported by the record evidence. Under Utah's Employment Security Act, “[f]ormer employees are generally eligible for unemployment benefits while independent contractors are not.” BMS Ltd. 1999, Inc. v. Department of Workforce Servs., 2014 UT App 111, ¶ 6, 327 P.3d 578. For purposes of establishing entitlement to unemployment benefits, “Utah law presumes that a paid or contracted worker is an employee unless the putative employer can demonstrate that the worker (1) is independently established in work of the same nature and (2) has been free from control or direction over the means of performing the work.” Id. (citing Utah Code Ann. § 35A–4–204(3) (LexisNexis 2011) and Utah Admin. Code R994–204–303 ). “Special scrutiny of the facts is required to assure that the form of a service relationship does not obscure its substance....” Utah Admin. Code R994–204–303. If an employer fails to demonstrate either independent establishment or freedom from control, the worker is considered an employee and may be entitled to unemployment benefits. Utah Code Ann. § 35A–4–204(3). We first address the Department's determination that Colbert was not independently established in work of the same nature as she performed for Evolocity.

¶ 10 “An independent contractor is a worker who is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as the services performed.”Utah Admin. Code R994–204–301(1). “[A]n independently established trade, occupation, profession, or business is created and exists apart from a relationship with a particular employer and does not depend on a relationship with any one employer for its continued existence.” Id. R994–204–303(1)(a). In evaluating whether a claimant is independently established,

347 P.3d 410

the Utah Administrative Code sets forth seven factors to be used by the Department as “aids in the analysis of the facts of each case.” Id. R994–204–303.4 However, the regulations also recognize that “[t]he degree of importance of each factor varies depending on” the nature of the work performed and that “some factors do not apply to certain services and ... should not be considered.” Id.

¶ 11 Here, the Department determined that two of the factors—whether the claimant had a separate place of business and maintained records for business-tax purposes—were established by the evidence. And the Department determined that a third factor—whether the claimant had obtained required or customary business licenses—was not applicable under these circumstances. Evolocity has not challenged these determinations, and we therefore consider Evolocity's challenges to the remaining four factors.5

A. Tools and Equipment

¶ 12 Evolocity first argues that the Department erroneously determined that Colbert did not provide her own tools and equipment.6 This factor asks whether the claimant “has a substantial investment in the tools, equipment, or facilities customarily required to perform the services.” Utah Admin. Code R994–204–303(1)(b)(ii). Evolocity notes that “for the most part, Ms. Colbert used her own computer, used her own telephone service, used her own internet service, and used her own other related equipment.” Evolocity concedes, however, that it had furnished some equipment and software to Colbert, most notably access to the company's Steel Jaws software, which Colbert was required to use to communicate with Evolocity's clients and track the work she had performed each day. The Department determined that...

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