K & D Auto Body v. Division of Employ. Sec.

• Decision Date: 16 August 2005
• Docket Number: No. WD 64400.,WD 64400.
• Parties: K & D AUTO BODY, INC., Appellant, v. DIVISION OF EMPLOYMENT SECURITY, Respondent.
• Court: Missouri Supreme Court

171 S.W.3d 100

K & D AUTO BODY, INC., Appellant, v. DIVISION OF EMPLOYMENT SECURITY, Respondent.

No. WD 64400.

Missouri Court of Appeals, Western District.

August 16, 2005.

COPYRIGHT MATERIAL OMITTED

Mathew E. Hoffman, St. Louis, MO, for appellant.

Larry R. Ruhmann, St. Louis, MO, for respondent.

Before ROBERT G. ULRICH, P.J., JAMES M. SMART, JR., Judge and JOSEPH M. ELLIS, Judge.

JOSEPH M. ELLIS, Judge.

K & D Auto Body, Inc. ("K & D") appeals a June 16, 2004 Order of the Labor and Industrial Relations Commission of Missouri ("Commission") affirming the Division of Employment Security's ("Division's") determination that, pursuant to the applicable provisions of Chapter 288 (the Missouri Employment Security Law),¹ several dozen tow truck drivers engaged by K & D were employees of K & D, not independent contractors, since they performed services for "wages" in "employment" by K & D within the meaning of those terms as defined in sections 288.034.1 and 288.036.1.

Our review of the Commission's decision is governed by section 288.210, which provides, in relevant part:

The findings of the commission as to the facts, if supported by competent and substantial evidence and in the absence of fraud, shall be conclusive, and the jurisdiction of the appellate court shall be confined to questions of law. The court, on appeal, may modify, reverse, remand for rehearing, or set aside the decision of the commission on the following grounds and no other:

(1) That the commission acted without or in excess of its powers;

(2) That the decision was procured by fraud;

(3) That the facts found by the commission do not support the award; or

(4) That there was no sufficient competent evidence in the record to warrant the making of the award.

Decisions of the Commission "which are clearly the interpretation or application of the law, as distinguished from a determination of facts, are not binding upon us and fall within our province of review and correction." Merriman v. Ben Gutman Truck Serv., Inc., 392 S.W.2d 292, 297 (Mo.1965) (internal quotation marks omitted)." "We independently review such questions without giving any deference to the Commission's conclusions." CNW Foods, Inc. v. Davidson, 141 S.W.3d 100, 102 (Mo.App. S.D.2004). Moreover, where the Commission's "finding of ultimate fact is reached by the application of rules of law instead of by a process of natural reasoning from the facts alone, it is a conclusion of law and subject to our reversal." Merriman, 392 S.W.2d at 297; see also Baxi v. United Techs. Auto., 956 S.W.2d 340, 343 (Mo.App. E.D.1997). Accordingly, in reviewing the correctness of the Commission's legal conclusion that, based on the facts found by the Commission, the drivers in question were employees of K & D rather than independent contractors, we exercise our own independent judgment and do not defer to the Commission's conclusion, including the way in which it arrived at that conclusion by balancing, weighing, and applying the various facts it found.

"The Commission's factual findings, on the other hand, are treated deferentially." CNW Foods, 141 S.W.3d at 102; § 288.210. As to such findings, "the reviewing court does not substitute its judgment for that of the [C]ommission[.]" Merriman, 392 S.W.2d at 296. Rather, "[a]bsent fraud, the Commission's factual findings are conclusive on appeal if they are supported by competent and substantial evidence upon the whole record and are not clearly against the overwhelming weight of the evidence." CNW Foods, 141 S.W.3d at 102.

The facts of this case as found by the Commission are largely undisputed. K & D, which also does business as M & M Towing, is an employer subject to the Missouri Employment Security Law. It runs a towing service and owns several tow trucks for that purpose. K & D engages various individuals to drive the trucks. These individuals are asked to sign an agreement, which states that the driver is an independent contractor for K & D and that K & D will pay the driver one-third of the total fee or charge for each tow job. The agreement was amended in 2001 to reflect that drivers are responsible for paying up to $1,000 in damages "acquired in [an] accident or wreck be it to [the] truck or other vehicles," although there was no evidence that any of the drivers had been involved in such an accident since then and actually had to pay those damages. All of the workers involved in this case performed services for K & D as tow truck drivers, and their services were an integral part of K & D's business.

K & D finds drivers by word of mouth and by newspaper advertisements seeking "commission drivers." While K & D is licensed to operate throughout the United States and the drivers sometimes work out-of-state, most of the work is performed in Missouri. K & D engages only experienced drivers. If a driver is nevertheless unfamiliar with how to attach certain types of vehicles to the tow truck he or she is driving, K & D provides simple instructions, as it also does regarding safety issues. However, the training and instruction provided by K & D is not significant. Drivers are required to perform their services personally and do not have helpers. K & D provides uniforms, but does not require the drivers to wear them.

K & D provides the chains and the tow trucks themselves, which range in value from $60,000 to $120,000. The drivers are required to provide their own hand tools, such as wrenches and sockets, the value of which ranges from $200 to $400. While K & D provides workers' compensation coverage to those drivers who do not already have it, the cost of the coverage is recovered from them by reducing their remuneration on a dollar-for-dollar basis.

The drivers perform their services under K & D's business name, and the tow trucks they drive are marked with K & D's business name as well. They do not advertise as providing towing services in their own names and do not represent themselves to the public as independent tow truck drivers. Because he regards it as a conflict of interest, K & D's president, Ron Kuhn, testified that K & D does not engage drivers who are performing towing services for themselves or for other towing companies. However, drivers occasionally repair vehicles apart from providing services to K & D, and when they do so, K & D does not provide them with any additional workers' compensation coverage.

Under federal Department of Transportation rules, the drivers are required to have commercial drivers' licenses. The drivers themselves, not K & D, pay the costs for these licenses. Federal Department of Transportation regulations also require K & D to perform random drug tests on the drivers, and the costs of such tests are borne by K & D. Under these regulations, K & D may also require individual drivers to submit to a drug test upon reasonable suspicion, and K & D's president occasionally requests such drug tests. Usually, the driver in question simply quits rather than submit to the drug test.

In an attempt to match incoming tow requests with a particular driver's availability, drivers provide K & D's dispatcher with a list of times they are available, and K & D issues pagers to the drivers. Each driver has the right to refuse any tow job. If a driver refuses a number of such jobs, the dispatcher is less likely to contact that driver when a tow request comes in.

Although federal law provides that Class A tow truck drivers are permitted to work a maximum of ten hours per day and the drivers keep time logs to prove they are in compliance with the law, K & D does not require any of its drivers to work full-time. K & D does not guarantee continued work or a minimum amount of pay to the drivers, who are paid by the job and can suffer a financial loss on a particular job if the tow results in damage.

K & D pays the drivers by check. There is no withholding for Social Security or Medicare taxes or federal or state income taxes, and K & D provides the drivers with a Form 1099-MISC to report their earnings to the Internal Revenue Service ("IRS"). K & D can discharge a driver at any time without incurring liability and a driver can also quit at any time without incurring liability.

K & D also submitted into evidence a July 3, 1996 document indicating that the IRS had performed an investigation of the work relationship between K & D and its drivers for the purpose of determining K & D's federal employment tax liability. According to this document, the IRS determined that K & D's drivers are properly classified as independent contractors rather than employees of K & D.

On the facts set forth supra, the Commission concluded that K & D's drivers were employees of K & D rather than independent contractors. This is the subject of K & D's sole point on appeal, in which it argues that this conclusion was erroneous as a matter of law.

Section 288.034.5 provides the following "right to control" test for determining whether, under the Missouri Employment Security Law, an individual is an employee or an independent contractor:

Service performed by an individual for remuneration shall be deemed to be employment subject to this law unless it is shown to the satisfaction of the division that such services were performed by an independent contractor. In determining the existence of the independent contractor relationship, the common law of agency right to control shall be applied. The common law of agency right to control test shall include but not be limited to: if the alleged employer retains the right to control the manner and means by which the results are to be accomplished, the individual who performs the service is an employee. If only the results are controlled, the individual performing the service is an independent contractor.

The term "independent contractor" is not defined in the Employment Security Law. However, our Supreme Court has provided the following judicial definition, which is entirely consonant with section...