JSF Promotions, Inc. v. Administrator, Unemployment Compensation Act

• Decision Date: 12 August 2003
• Docket Number: (SC 16804).
• Court: Connecticut Supreme Court
• Parties: JSF PROMOTIONS, INC. v. ADMINISTRATOR, UNEMPLOYMENT COMPENSATION ACT.

265 Conn. 413

828 A.2d 609

JSF PROMOTIONS, INC. v. ADMINISTRATOR, UNEMPLOYMENT COMPENSATION ACT.

(SC 16804).

Supreme Court of Connecticut.

Argued April 15, 2003.

Officially released August 12, 2003.

Sullivan, C. J., and Borden, Norcott, Katz and Vertefeuille, Js.

Richard T. Sponzo, assistant attorney general, with whom, on the brief, were Richard Blumenthal, attorney general, and Thomas P. Clifford III, assistant attorney general, for the appellant (defendant).

George J. Kelly, Jr., with whom was Glenn A. Duhl, for the appellee (plaintiff).

Bennett Pudlin filed a brief for the intervening appellant (employment security board of review).

Opinion

SULLIVAN, C. J.

The defendant, the administrator of the Unemployment Compensation Act, appeals¹ from the judgment of the trial court reversing the decision of the employment security board of review (board),² which had found the plaintiff, JSF Promotions, Inc. (JSF), liable for unemployment compensation contributions with regard to individuals recruited and assigned by JSF to work as product demonstrators in supermarkets. We reverse the judgment of the trial court.

The opinion of the trial court sets out the following relevant facts and procedural history. "[JSF] operates a business providing individuals to demonstrate products of various manufacturers to consumers, primarily in supermarkets. [JSF] engages the services of these individuals, who will be referred to as `demonstrators,' pursuant to contracts [JSF] has with the supermarkets and the demonstrators.

"Following an audit by the defendant ... for the period January 1, 1993 to December 31, 1995, the auditor determined that the services performed by the demonstrators constituted employment within the meaning of General Statutes § 31-222 (a) (1) (B) (ii) and that [JSF] as the employer was, therefore, liable for contributions pursuant to the state Unemployment Compensation Act [(act), General Statutes § 31-222 et seq.]. The auditor's decision was dated July 9, 1996.

"[JSF] appealed from the auditor's decision. The appeal was heard by an appeals referee as a de novo proceeding. At the hearing, [JSF] appeared, represented by counsel, and presented testimony and other evidence through its president. The defendant administrator appeared and presented testimony of the auditor. Evidence presented by the parties included copies of the contracts [JSF] had with the demonstrators and with the supermarkets ... as well as other evidence. Following the hearing, the referee determined that the services performed by [JSF's] demonstrators constituted employment for purposes of the act, essentially agreeing with the auditor's analysis. The referee's decision was dated July 30, 1997.

"[JSF] thereupon appealed from the referee's decision to the [board]. In its letter to the board requesting review of the referee's decision, dated August 20, 1997, [JSF] set forth in detail why it disputed twenty-eight of the referee's findings of fact. The board reviewed the record, including the tape recording of the hearing before the referee and the referee's decision. The board adopted the referee's findings of fact, subject to four modifications ...."

Among the referee's findings, as modified upon their adoption by the board, were that "[JSF] engaged the services of individuals called demonstrators to hand out samples. The [d]emonstrators hand out food samples and coupons to store customers.... JSF has an arrangement with supermarkets ... as to when and where the demonstrators' work needs to be performed.... JSF required the demonstrators to sign an [i]ndependent [c]ontractor [a]greement. The contract states that the demonstrators are not employees of [the supermarket] or JSF.... JSF would contact the demonstrators and advise the demonstrators of the time and place of the demonstrations. ... JSF provides compensation to the demonstrators. ... [The supermarket] does not set the pay rate for the demonstrators. JSF determines the rate of pay.... JSF did not provide any documentation that the demonstrators were in business for themselves. ... The demonstrators do not have business card[s]. ... In July, 1995, the [defendant] conducted a random audit on JSF.... [Field auditor] Lisa L. Chassee called nine demonstrators [and] she was able to talk to three of the demonstrators on June 10, 1996.... The three demonstrators did not contract with other entities to perform demonstrations but had signed a contract with JSF which stated that they were independent contractors." On the basis of these findings, the board determined that "[JSF] has failed to demonstrate that any of the individuals it engaged as demonstrators are customarily engaged in an independently established trade, occupation or business as demonstrators which exists separate and apart from the relationship with [JSF], and which would survive the termination of that relationship ...." Accordingly, the board affirmed the decision of the referee.

JSF appealed from the decision of the board to the trial court, and that court reversed the decision of the board and rendered judgment sustaining JSF's appeal. In its appeal from the judgment of the trial court, the defendant claims that the trial court's conclusion that the services performed by the demonstrators were not "employment" within the meaning of § 31-222 (a) (1) (B) (ii) was based on an incorrect interpretation of that section.³ We agree.

"[R]eview of an administrative agency decision requires a court to determine whether there is substantial evidence in the administrative record to support the agency's findings of basic fact and whether the conclusions drawn from those facts are reasonable.... Neither this court nor the trial court may retry the case or substitute its own judgment for that of the administrative agency on the weight of the evidence or questions of fact.... Our ultimate duty is to determine, in view of all of the evidence, whether the agency, in issuing its order, acted unreasonably, arbitrarily, illegally or in abuse of its discretion." (Internal quotation marks omitted.) Murphy v. Commissioner of Motor Vehicles, 254 Conn. 333, 343, 757 A.2d 561 (2000). "[A]n agency's factual and discretionary determinations are to be accorded considerable weight by the courts." Skindzier v. Commissioner of Social Services, 258 Conn. 642, 647, 784 A.2d 323 (2001). "It is well settled [however] that we do not defer to the board's construction of a statute — a question of law — when, as in the present case, the [provision] at issue previously ha[s] not been subjected to judicial scrutiny or when the board's interpretation has not been time tested." Rayhall v. Akim Co., 263 Conn. 328, 354, 819 A.2d 803 (2003). Whether the relationship between JSF and the demonstrators constituted "employment" within the meaning of § 31-222 (a) (1) (B) presents a question of statutory interpretation. Accordingly, our review is plenary. Id.

For purposes of the act, "employment" is defined in part by General Statutes § 31-222 (a) (1) (B) (ii), which provides in relevant part that "[s]ervice performed by an individual shall be deemed to be employment subject to this chapter irrespective of whether the common law relationship of master and servant exists, unless and until it is shown to the satisfaction of the administrator that (I) such individual has been and will continue to be free from control and direction in connection with the performance of such service, both under his contract for the performance of service and in fact; and (II) such service is performed either outside the usual course of the business for which the service is performed or is performed outside of all the places of business of the enterprise for which the service is performed; and (III) such individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed ...." This statutory provision is commonly referred to as the "ABC test," with parts A, B and C corresponding to clauses I, II and III, respectively. Mattatuck Museum-Mattatuck Historical Society v. Administrator, Unemployment Compensation Act, 238 Conn. 273, 277-78, 679 A.2d 347 (1996).

This statutory provision is in the conjunctive. Accordingly, unless the party claiming the exception to the rule that service is employment shows that all three prongs of the test have been met, an employment relationship will be found. Latimer v. Administrator, Unemployment Compensation Act, 216 Conn. 237, 246-47, 579 A.2d 497 (1990). The trial court concluded that JSF had satisfied all three prongs of this test. The defendant on appeal challenges the trial court's conclusion only with regard to the third prong, part C of the test. We limit our review accordingly.

In reversing the decision of the board, the trial court did not disturb the board's findings of fact. The trial court instead concluded, as a matter of law, that the board had misinterpreted § 31-222 (a) (1) (B) (ii). The court reasoned that "the test is not what kind of work is involved or whether the demonstrator is simultaneously engaged in performing the same service for others. The essence of the part C test is whether the business is established independent of the relationship with [JSF] and would survive the termination of that relationship. In this regard, the contract between the demonstrators and [JSF] is highly significant. It provides that the demonstrator `is NOT the exclusive agent of [JSF], and [the demonstrator] is free to contract for similar services to be performed for others.' ... Plainly, an individual under this contract with [JSF] has established a business that is independent of his or her relationship with [JSF]. The demonstrator is free to work for a competitor of [JSF], or even compete directly, during the same period he or she is doing similar work under the contract with [JSF]. Just as obviously, that business would survive the cancellation...