Gordon v. District Unemployment Comp. Bd.

• Decision Date: 12 June 1979
• Docket Number: No. 13012.,13012.
• Parties: Melton M. GORDON, Petitioner, v. DISTRICT UNEMPLOYMENT COMPENSATION BOARD, Respondent.
• Court: D.C. Court of Appeals

402 A.2d 1251

Melton M. GORDON, Petitioner, v. DISTRICT UNEMPLOYMENT COMPENSATION BOARD, Respondent.

No. 13012.

District of Columbia Court of Appeals.

Argued June 8, 1978.

Decided June 12, 1979.

Burton Yavener, Silver Spring, Md., for petitioner.

Russell L. Carter, Bill L. Smith and Earl S. Vass, Jr., Washington, D. C., were on the brief for petitioner, which was submitted without oral argument. D. Kevin Dugan, Washington, D. C., also entered an appearance.

Before NEWMAN, Chief Judge, and KELLY and GALLAGHER, Associate Judges.

GALLAGHER, Associate Judge:

Petitioner appeals a decision by the District Unemployment Compensation Board (D.U.C.B.) denying unemployment benefits on the ground that he was not "paid wages for employment" within the meaning of the District of Columbia Unemployment Compensation Act, D.C.Code 1973, §§ 46-301 et seq.¹ The sole question on appeal is whether petitioner, a "debit agent" for Provident Indemnity Life Insurance Company (Provident), is covered by D.C.Code 1973, § 46-301(b)(5)(L), which provides:

(5) The term employment shall not include —

* * * * * *

(L) service performed by an individual for a person as an insurance agent or as an insurance solicitor, if all such service performed by such individual for such person is performed for remuneration solely by way of commission.

We remand to the Board for further proceedings.

After responding to a newspaper advertisement for "Insurance Debit Sales," in April 1974, petitioner was hired and assigned to the District of Columbia territory as an exclusive agent for Provident, a Pennsylvania corporation. His duties, as specified by contract, were collection of premiums² 2 and servicing insurance policies (e. g., following up on premium collections and lapsed policies, maintaining records, notifying insured of potential lapses), from a list of policies provided by the company. The contract also required that he "devote his entire time and efforts . . . to solicit applications for life and health insurance." Although he had no set hours of work, petitioner was expected to report to the office once a week to turn in collections and file reports. Agents also were required, by office rule, to phone in daily for telephone messages. Provident supplied petitioner with a desk, telephone and office supplies at the Maryland district office, but he furnished his own means of transportation.

Petitioner testified at the hearing before the Appeals Examiner that 90% of his earnings came from collection of premiums and servicing the policies. His weekly pay was based on a percentage formula, averaging the prior four-week total collections and sales. The record is unclear on the method of calculation, particularly because a new contract went into effect in June 1976, less than two months before petitioner terminated his employment. Apparently, the new contract established various commission pools (collections, sales, persistency bonus) to which the agent's total activity was credited. At the time of payment, the agent received amounts based on a percentage of the balance in each pool.

In addition, the company provided an expense allowance, 3% of collections under the old contract, and a flat $10.50 under the new contract. The weekly earnings (including expense allowance) were paid by company check or cash, after deductions for District of Columbia and federal taxes (income and social security).³ Fringe benefits included a two-week paid vacation (time off with pay), membership in the company group life, accident and hospitalization insurance plan, and an invitation to participate in the pension plan.

At the hearing, petitioner asserted that the employer's deposition in Pennsylvania denied him the opportunity to confront and cross-examine witnesses. As the Examiner stated, "serious consideration [was] given the request [to confront and cross-examine] and it would have been granted had the case turned on questions of fact. However, it does not turn on fact questions but rather, on an interpretation of the statute." Because of the objection, however, the Examiner disregarded the employer's evidence.

Based on petitioner's version of the facts, the Appeals Examiner concluded that "claimant's services as a debit agent were services excluded from covered employment by Section 1(b)(5)(L) of the Act." In the Examiner's view, debit agents fall within the scope of the insurance agent/solicitor exception as a matter of law, if remunerated solely by commission. The Examiner found the element of "remuneration solely by commission" present, defining a commission as "a percentage of the money received in a transaction paid to the agent responsible for the business." The decision of the Appeals Examiner was affirmed by the D.U.C.B. on December 21, 1977.

I.

The scope of our review here "is limited to questions of law and . . . to a determination of whether or not the findings of the compensation authorities are supported by competent evidence." Green v. District Unemployment Compensation Board, D.C.App., 346 A.2d 252, 255 (1975), quoting Coulter v. Commonwealth Unemployment Compensation Board of Review, 16 Pa.Cmwlth. 462, 332 A.2d 876 (1975); see D.C.Code 1973, § 1-1510.

Where "the [agency] action is based upon a determination of law as to which the reviewing authority of the courts does come into play, an order may not stand if the agency has misconceived the law." SEC v. Chenery Corporation, 318 U.S. 80, 94, 63 S.Ct. 454, 462, 87 L.Ed. 626 (1943). As a matter of statutory interpretation, therefore, we must determine (1) whether petitioner was an insurance agent or solicitor during the relevant quarters of 1976, within the meaning of the exemption, and (2) whether he was remunerated solely by commission.

Although a novel question in this jurisdiction, the insurance agent exemption has been discussed in federal and state judicial decisions.⁴ The District of Columbia, like several other jurisdictions, adopted the statutory exclusion for insurance agents from the Federal Unemployment Tax Act. See 26 U.S.C.A. § 3306(c)(14) (1979). The section, added by a 1939 amendment, to the Federal Unemployment Tax Act, Internal Revenue Code of 1939, 26 U.S.C.A. § 1607(c)(14), "was studiedly so written into the amended District Unemployment Compensation Act for purposes of conformity and coordination." Opinion of the Corporation Counsel, No. 166, Oct. 14, 1943.

The legislative history of the federal provision is sparse.⁵ The exemption was included by the Senate to insure uniform state and federal treatment of insurance agents. As explained on the Senate floor by the Finance Committee Chairman:

Several states have exempted insurance salesmen from coverage and your committee believes that it would be wise to exclude from the Federal Unemployment Compensation Tax Insurance salesmen whose sole pay is by way of commission. This would, of course, still leave the states free to cover this employment when they choose to do so, but it would eliminate the present situation, where the entire Federal tax, without any offset for State unemployment contributions comes to the Federal Government where the State exempts their employment. The principal class of insurance salesman which would be affected is that class engaged in what is generally called industrial insurance. [84 Cong.Rec. 8829 (1939).]

Petitioner contends on appeal that he is not an insurance agent or solicitor within the meaning of the statutory exemption. He argues that the section excludes from coverage those insurance agents representing several companies who are essentially independent contractors, not those, like himself, who are tied to one company.

Petitioner's contention finds support in an early case interpreting the federal exclusion, Capital Life & Health Insurance Co. v. Bowers, 186 F.2d 943 (4th Cir. 1951).⁶ In Capital, the Fourth Circuit held that agents hired primarily to collect weekly premiums on a commission basis were employees, and did not come within the Federal Unemployment Tax exemption for insurance agents and solicitors. The court stated:

The insurance agent or solicitor contemplated by this exception is one who is engaged primarily in the sale of insurance to new policy holders and does not collect insurance premiums which are paid by the policy holders directly to the company. Such an agent usually has a wide and unrestricted area of permissible activity, is possessed of knowledge of a considerable variety of insurance contracts and is qualified to advise prospective policy holders as to the kind of policies best suited to their needs. He is primarily a policy writing agent and not a collector of premiums. The contrast is marked between his work and that of the commission agent who, as in this case, is given a prepared debit to collect, is paid only by commissions on collections, and is limited to the sale of three kinds of policies . . . which must be issued in accordance with precise company instructions. [Capital Life & Health Insurance Co. v. Bowers, supra at 946.]

The Appeals Examiner, however, correctly rejected such a narrow interpretation of the section, concluding "The doctrine of the Capitol [sic] case is not the prevailing or controlling law on this subject." The Capital case does in fact appear to be a minority view. Other federal and state courts have specifically refused to construe the exemption so narrowly. See, e. g., Commonwealth Life & Accident Insurance Co. v. Board of Review, 414 Ill. 475, 111 N.E.2d 345, 348-49 (1953); Home Beneficial Life Insurance Co. v. Unemployment Compensation Commission, 181 Va. 811, 27 S.E.2d 159 (1943); see also Rev.Rul. 176, 1958-CB 1858. In Home Beneficial Life Insurance Co., supra, for example, the Supreme Court of Virginia concluded that the term "insurance agent" as used in the Virginia exclusion, identical to the District's, included both insurance solicitors and insurance collectors. Consequently, the court reversed as too narrow an...