Kaus v. Unemployment Compensation Commission
| Decision Date | 04 August 1941 |
| Docket Number | 45533. |
| Citation | 299 N.W. 415,230 Iowa 860 |
| Parties | KAUS v. UNEMPLOYMENT COMPENSATION COMMISSION et al. |
| Court | Iowa Supreme Court |
Appeal from District Court, Pottawattamie County; Chas. Roe, Judge.
Suit in equity to restrain defendant commission from collecting contributions from plaintiff who claims he is not an employer under the terms of the Iowa Unemployment Compensation law. From a decree for plaintiff, the commission appeals.
Reversed.
J Charles Crawley and Homer M. Lyon, both of Des Moines, and George Finch, of Sioux City, for appellants.
Capel & Jackson and Tinley, Mitchell, Ross, Everest & Geiser, all of Council Bluffs, for appellee.
The principal question involved is whether the relation of employer-employee exists between plaintiff and drivers of his taxicabs. Defendant-appellant commission contends that it does. Plaintiff-appellee claims the relation between him and the drivers is that of bailor and bailee.
Plaintiff-appellee Peter J. Kaus, operates a taxi business in Council Bluffs under the trade-name, United Cab Co. He owns ten taxicabs with the name and insignia of the United Cab Co. painted on each cab. He has a central downtown office and garage together with eleven taxicab stands or stations at convenient places in the city. In the central office he maintains a telephone switchboard connected with the various stations. He employs telephone operators at the switchboard; also a mechanic to keep the taxis in running order. The cabs are operated on two twelve hour shifts between the hours of six and six. There are twenty drivers during each twenty-four hour period.
The arrangement between appellee and the drivers is oral. Appellee furnishes the cab, the oil, the switchboard service the city license to operate as a taxicab and the insurance on the drivers protecting the public. The driver furnishes the gasoline and repairs to the tires. The driver pays appellee $3 for each twelve hour period and retains as his compensation all sums collected by him from passengers in excess of the $3 and the cost of the gasoline. The drivers are not required to account to appellee for the amounts taken in by them.
Appellee advertises in the telephone directory and newspapers, holding out such inducements to the public as: Those desiring taxi service ordinarily call the downtown office. From the office switchboard calls are relayed to the stand best located to answer the call. If the driver at that station is on a trip, another station is called. When a driver leaves a station to make a trip he usually notifies the central office that his stand is vacant and another driver then has the privilege of going to that station.
Appellee requires the drivers to refrain from the use of intoxicating liquor, to drive carefully and observe traffic laws, to keep the cabs clean, to be courteous, and to abide by the established schedule of fares. The schedule of fares was agreed upon by the drivers and appellee and is the same schedule used by competitors. Complaints from the police and from customers regarding the drivers are received at the central office. Appellee then " would post something on the bulletin board saying something about being more cautious and keeping within the law." Appellee has " terminated his relationship" with drivers concerning whom there were many complaints. He has terminated the relationship because of reckless or fast driving. Appellee does not permit his drivers to drive for a competing firm. If a driver wants to take time off he notifies appellee, who tries to engage a substitute driver approved by appellee. If no satisfactory substitute is obtainable the driver is expected to operate the cab, or in any event to pay the $3. The arrangement between appellee and any driver may be terminated at any time by either party.
Appellee makes much of the fact that the drivers are given permission to refuse a call if they do not care to make it, and also that they are permitted to use the cars for personal use so long as the $3 is paid. There is evidence that a driver occasionally rejects a call where the trip is too far away " to make any money on it." The principal personal use made by a driver is an occasional trip with his family.
The city ordinances require a license for anyone engaging in the taxi business and the procurement of insurance or a bond for the benefit of those injured or damaged through the negligence or misconduct of any driver. A violation of the ordinances constitutes a misdemeanor. Appellee procured such a license and took out the required insurance covering himself and his employees while operating the cabs. No such license was ever issued to any driver.
From the evidence above summarized the trial court found that appellee was not the employer of the drivers and restrained the commission from requiring appellee to contribute to the unemployment compensation fund.
In this state equity will restrain the collection of an illegal or void tax. Hubbard v. Board, 23 Iowa 130, 131; Montis v. McQuiston, 107 Iowa 651, 78 N.W. 704; Woodbine Savings Bank v. Tyler, 181 Iowa 1389, 162 N.W. 590. And this rule prevails in Iowa even though there may be an adequate remedy at law. Smith v. Peterson, 123 Iowa 672, 99 N.W. 552; Fort Dodge E. L. & P. Co. v. Fort Dodge, 115 Iowa 568, 89 N.W. 7. Appellant commission (for the sake of brevity we disregard the fact that the commissioners are also appellants) concedes as much. If appellee is not the employer of the cab drivers, he could not be required to contribute for their benefit to the unemployment compensation fund.
The Unemployment Compensation Law provides:
Section 1551.13, A. 1, Code 1939, " * * contributions shall accrue and become payable by each employer with respect to wages payable for employment as defined in section 1551.25 subsection ‘ G." ’ .
means service * * * performed for wages or under any contract of hire, written or oral, express or implied.
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G. 6. Services performed by an individual for wages shall be deemed to be employment subject to this chapter unless and until it is shown to the satisfaction of the commission 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.
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M. ‘ Wages' means all remuneration payable for personal services, including commissions and bonuses and the cash value of all remuneration payable in any medium other than cash. * * *" Both sides in effect apply the common-law tests of employer-employee to determine the relationship between appellee and his drivers. The courts of some other states have applied such tests in cases arising under similar statutes. Wisconsin Bridge & Iron Co. v. Ramsey, 233 Wis. 467, 290 N.W. 199,Washington Recorder Pub. Co. v. Ernst, 199 Wash. 176, 91 P.2d 718, 124 A.L.R. 667. In view of the attitude of both parties, we are justified in this case in applying these common-law tests. It is not to be understood from this, however, that we do not abide by the definitions of terms found in the Unemployment Compensation Act itself.
We will not go into an extended discussion of the familiar rules for determining the existence of the employer-employee relationship. These rules are discussed somewhat at length in the recent case of Moorman Mfg. Co. v. Iowa Unemployment Compensation Comm., 230 Iowa 123, 296 N.W. 791, where we held the relation was that of independent contractor. See, too, Mallinger v. Webster City Oil Co., 211 Iowa 847, 234 N.W. 254; Lembke v. Fritz, 223 Iowa 261, 272 N.W. 300; Restatement of Agency, sec. 220, p. 483. The authorities agree that the right of control is the principal test.
It is well settled that a failure to exercise control does not mean that the right of control does not exist. Also, that a servant may be given by his master much freedom in the methods and means whereby he does his work. Lembke v. Fritz, supra; Mallinger v. Webster City Oil Co., supra; Smith v. Marshall Ice Co., 204 Iowa 1348, 1351, 217 N.W. 264. It should be remembered also that absence from the agreement of a provision recognizing the right of control does not mean that no such right exists. The reservation of the right of control is presumed unless the contrary appears. Mallinger v. Webster City Oil Co. (see pp. 857 and 858 of 211 Iowa 234 N.W. 254); Franks v. Carpenter, 192 Iowa 1398, 1401, 186 N.W. 647. The statute (sec. 1551.25-G6) requires an affirmative showing of freedom from control both under the contract and in fact.
The distinction between the relations of employer-employee and bailor-bailee is sometimes difficult to draw. Ordinarily where there is a bailment, the employer relation does not exist because the bailor has no control over the bailee and is not responsible to others for his acts. 2 C.J. S., Agency, p. 1027, § 2b; 18 R.C.L. p. 492, sec. 2.
In a suit brought by appellee in the United States District Court seeking to enjoin the enforcement of federal social security taxes, the court held, upon what is apparently almost an identical record, that appellee had failed to prove that the drivers were not his employees. Kaus v. Huston, D.C., 35 F.Supp. 327, where the court says at page 331: ...
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