Ky. Unemp. Ins. v. Landmark Comm. News.
| Decision Date | 19 December 2002 |
| Docket Number | No. 2000-SC-0884-DG.,2000-SC-0884-DG. |
| Citation | 91 S.W.3d 575 |
| Parties | KENTUCKY UNEMPLOYMENT INSURANCE COMMISSION and Division of Unemployment Insurance, Appellants, v. LANDMARK COMMUNITY NEWSPAPERS OF KENTUCKY, INC.; Ronald Warner and Leonard Faulkner, Appellees. |
| Court | United States State Supreme Court — District of Kentucky |
The Kentucky Unemployment Insurance Commission (Commission) and the Division of Unemployment Insurance (Division), the appellants herein, bring the following action before this Court on review seeking reversal of the Court of Appeals' judgment below. The Commission determined that the newspaper carriers of Landmark Community Newspapers of Kentucky (Landmark), the appellee herein, were employees performing services in covered employment for unemployment insurance purposes. The Franklin Circuit Court upheld that determination. The Court of Appeals reversed and held that the carriers were independent contractors. The primary issue that we must determine today is whether Landmark's newspaper carriers should be considered independent contractors or employees for purposes of unemployment insurance benefits.
Landmark owns and operates numerous Kentucky community newspapers, including the Kentucky Standard of Bardstown. Landmark hires individuals to work as carriers in order to deliver its newspapers to subscribers on various designated routes. If a person desires to be hired as a newspaper carrier, Landmark requires that person to sign a "Delivery Agent" agreement, which supposedly makes the newly-hired individual an independent contractor, instead of an employee. The boilerplate language of the agreement specifies that the carrier is to install hooks or tubes on designated routes for delivery of Landmark's newspapers. The newspapers are never to be placed in or around the mailbox. It is also the responsibility of the carrier to replace or repair the hooks or tubes. The agreement further specifies that the carrier must keep the newspaper dry, and if the weather report calls for showers, then each newspaper must be placed in a plastic bag. The carrier must also deliver copies of the weekly "Extra" section of the newspaper to non-subscribers on routes designated by Landmark. In addition, the carrier must have all of the newspapers delivered by no later than 7:00 a.m. on the day of publication. If subscribers are not pleased with the manner in which the newspaper is delivered by the carrier or if the newspaper is not timely delivered, then subscribers complain directly to Landmark. Landmark keeps records of complaints received and informs the carrier regarding any complaints. Landmark also has its carriers place newspapers in coin boxes in various locations for public sale.
The agreement further provides that either the carrier or Landmark can terminate the agreement for any reason upon thirty (30) days written notice. However, Landmark may terminate a carrier for any reason without notice if he or she fails to meet any condition of the agreement. The carriers are paid on a weekly basis at $.07 per newspaper and "Extra" section delivered. Landmark issues 1099 tax forms to the carriers it views as independent contractors. The carriers are paid no fringe benefits of any sort, and each carrier must furnish his or her own transportation in order to make deliveries along the routes designated by Landmark.
This matter began approximately six years ago when two former newspaper delivery persons, Leonard Faulkner and Ronald Warner, filed claims for unemployment insurance benefits. Landmark terminated the contracts of both Faulkner and Warner in 1996. Following these contract terminations, both men filed their respective claims for unemployment insurance benefits. In response to said claims, the Division assigned an auditor to conduct an appropriate investigation of those claims, and other delivery persons that Landmark claimed as contract labor. The Division found Faulkner, Warner, and twenty-one (21) other individuals were employees and not independent contractors for unemployment insurance purposes.
Following the Division's finding, Landmark brought an appeal before the Commission. The Commission conducted a full evidentiary hearing, upheld the Division's finding, and concluded that Landmark's newspaper delivery persons were employees that performed services in covered employment for unemployment insurance purposes. In reaching its final decision, the Commission considered factors set forth in Restatement (Second) of Agency § 220 (1958).
Next, Landmark appealed the Commission's order to the Franklin Circuit Court. The circuit court affirmed because it held that the Commission's decision was supported by substantial evidence from the record and was based on a correct interpretation of applicable law. Once again, Landmark appealed and sought review in the Court of Appeals. The Court of Appeals concluded that the Commission's decision, which held that the newspaper carriers were employees, was erroneous. The Court of Appeals held that the evidence showed the newspaper carriers were independent contractors, and not employees of Landmark. Accordingly, the Court of Appeals reversed and remanded the case to the circuit court.
The Commission then moved this Court to grant discretionary review. We granted said motion and this appeal followed. For the reasons set forth below, we now reverse the judgment of the Court of Appeals.
Our review of the matter herein is governed by the substantial evidence standard of review applicable to decisions of administrative agencies. "If the findings of fact are supported by substantial evidence of probative value, then they must be accepted as binding and it must then be determined whether or not the administrative agency has applied the correct rule of law to the facts so found." Southern Bell Tel. & Tel. Co. v. Kentucky Unemployment Ins. Comm'n, Ky., 437 S.W.2d 775, 778 (1969). The administrative agency's findings will be upheld even though there exists evidence to the contrary in the record. Kentucky Comm'n on Human Rights v. Fraser, Ky., 625 S.W.2d 852, 856 (1981). Substantial evidence is defined as "evidence of substance and relative consequence having the fitness to induce conviction in the minds of reasonable [persons]." Owens-Corning Fiberglas Corp. v. Golightly, Ky., 976 S.W.2d 409, 414 (1998). We must also determine whether the decision of the administrative agency was arbitrary or clearly erroneous, which is defined as "unsupported by substantial evidence." Danville-Boyle County Planning and Zoning Comm'n v. Prall, Ky., 840 S.W.2d 205, 208 (1992). "If there is any substantial evidence to support the action of the administrative agency, it cannot be found to be arbitrary and will be sustained." Taylor v. Coblin, Ky., 461 S.W.2d 78, 80 (1970).
In order for a worker to be eligible for unemployment insurance benefits, he or she must be engaged in "covered employment" as provided by Kentucky Revised Statutes (KRS) Chapter 341. KRS 341.050(1)(a) provides that lain individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee." We also note that KRS 341.055(11) provides that "[s]ervice performed by a worker under the age of eighteen (18) in the delivery or distribution of newspapers" is not covered employment under KRS Chapter 341, unless the employer has elected for those workers to be covered. Thus, this opinion does not address those newspaper carriers who have not reached the age of eighteen (18).
There is no solitary rule for a court to employ in ascertaining whether one should be characterized as being engaged in "covered employment" for unemployment insurance purposes. Rather, there are various factors that may be considered by a court when confronted with such an issue as we are today. In Sellards. v. B. & W. Coal Co., Ky., 358 S.W.2d 363 (1962), we acknowledged that the traditional common law factors employed in determining whether an individual is an employee or independent contractor are contained in Restatement (Second) of Agency § 220(2), which are virtually identical to the factors listed in the first Restatement of Agency. Id. at 364. Restatement (Second) of Agency § 220(2) provides:
In determining whether one acting for another is a servant or an independent contractor, the following matters of fact, among others, are considered:
(a) the extent of control which, by the agreement, the master may exercise over the details of the work;
(b) whether or not the one employed is engaged in a distinct occupation or business;
(c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
(d) the skill required in the particular occupation;
(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;
(f) the length of time for which the person is employed;
(g) the method of payment, whether by the time or by the job;
(h)...
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