Leach v. Board of Review of Industrial Commission, Department of Employment Security

• Decision Date: 03 September 1953
• Docket Number: No. 7751,7751
• Parties: LEACH et al. v. BOARD OF REVIEW OF INDUSTRIAL COMMISSION, DEPARTMENT OF EMPLOYMENT SECURITY.
• Court: Utah Supreme Court

Page 744

260 P.2d 744

123 Utah 423

LEACH et al. v. BOARD OF REVIEW OF INDUSTRIAL COMMISSION, DEPARTMENT OF EMPLOYMENT SECURITY.

No. 7751.

Supreme Court of Utah.

Sept. 3, 1953.

Herbert B. Maw, Salt Lake City, for appellants.

E. R. Callister, Atty. Gen., and Fred F. Dremann, Salt Lake City, for respondent.

WOLFE, Chief Justice.

Certiorari to review a decision of the Board of Review of the Industrial Commission affirming the decision of the Appeals Referee that the plaintiffs are liable for contributions to the Unemployment Compensation Fund on moneys paid by them to certain 'franchise dealers' who solicited orders for the sale of the plaintiffs' windows and other products; also to certain 'contract installers' who installed the plaintiffs' windows in buildings. The case presents for our determination whether the 'franchise dealers' and 'contract installers' were in the employment of the plaintiffs within the meaning of the Employment Security Act, Section 35-4-1 et seq., Utah Code Annotated, 1953.

The plaintiffs are partners engaged in the business of distributing Rusco Windows and other products manufactured by the F. C. Rusco Company of Cleveland, Ohio. Sales of the products are made by individuals and corporations denominated by the plaintiffs as 'franchise dealers,' hereinafter referred to simply as dealers, to whom the plaintiffs by agreements in writing give the exclusive right (subject to an exception not important here) to solicit orders for the sale and installation of Rusco Windows and products in a certain territory at prices fixed by the plaintiffs. The plaintiffs furnish all order forms and dealers are required to submit all orders solicited by them to the plaintiffs for acceptance within five days after procuring them. When the plaintiffs accept an order it becomes a contract between the customer and them. Dealers are precluded by their agreement with the plaintiffs from referring the orders which they solicit to any one but the plaintiffs. If a sale made by a dealer requires financing, the dealer must complete certain forms furnished by the plaintiffs giving necessary information. All credit investigations are made by the plaintiffs. Dealers receive a commission on the orders which the plaintiffs accept, the commission being usually paid after the products have been installed.

By their agreements with the plaintiffs, dealers may not handle, sell or distribute any other products, although there was testimony adduced that some dealers did, in fact, solicit sales of products not carried by the plaintiffs. The dealers work when and as they desire, pay their own expenses, hire help, if needed, at their own expense, and operate from their own homes or offices. They do, however, use the plaintiffs' office telephone as a reference in their selling activities and the plaintiffs provide a table at its office for the use of the dealers. While the dealers develop some of their own prospects, they are aided by leads furnished by the plaintiffs and placed by them in the dealers' individual mail boxes at the plaintiffs' office. Because the plaintiffs have sales and installation quotas to meet, the services of dealers who do not produce sufficiently are terminated by the plaintiffs. Only five days' notice of termination need be given to the dealers by the plaintiffs.

Before commencing work, dealers are given training by the plaintiffs or by factory representatives to acquaint them with the products which they will sell. During their training period, the length of which depends upon their previous sales experience prospective dealers are classed as employees by the plaintiffs and unemployment contributions are paid on their earnings.

Windows sold by the dealers are installed by persons who usually have full or part time employment elsewhere. Like the dealers, installers are given training by the plaintiffs to familiarize them with how the windows should be installed. After this training, the plaintiffs enter into a written agreement with each installer whereby the latter agrees to furnish all necessary tools and to perform the service necessary to install the products sold by the dealers in a workmanlike manner. The agreements between the plaintiffs and the installers provide that they may be cancelled on five days' notice by either party. When going on an installation job, the installer obtains at the plaintiffs' premises the windows or other products which have been fabricated by the plaintiffs or which have been received by the plaintiffs in a fabricated state. He also signs a receipt for them, and obtains a list of specifications for the installation which involves 20 points on standard jobs. After transporting the products in his own truck to the job and after installing the products pursuant to the specifications, the installer returns a completed form to the plaintiffs verifying that the materials have been installed, whereupon he is paid. The amount of payment received by the installers for the installation of windows is fixed by the plaintiffs, but on certain other jobs the installers often bid on the amount for which they will do the work. While the work of the installer is usually not inspected by the plaintiffs, they do occasionally inspect and sometimes the franchise dealer who obtained the job inspects the work to make certain that the customer is satisfied.

It is the contention of the plaintiffs that neither the dealers nor the installers were in their 'employment' but that the relationship of vendor-vendee existed between the dealers and them and that the installers were 'independent contractors' outside the scope of the Employment Security Act. In determining the merits of the plaintiffs' contention, the following definitions found in subsections of Section 35-4-22 of the Act should be borne in mind:

'(j)(1) 'Employment' means any service performed prior to January 1, 1941, which was employment as defined in the Utah Unemployment Compensation Law prior to the effective date of this act, and subject to the other provisions of this subsection, service performed after December 31, 1940, including service in interstate commerce, and service as an officer of a corporation performed for wages or under any contract of hire written or oral, express or implied.'

'(p) 'Wages' means all remuneration for personal services, including commissions and bonuses and the cash value of all remuneration in any medium other than cash. Gratuities customarily received by an individual in the course of his employment from persons other than his employing unit shall be treated as wages received from his employing unit. The reasonable cash value of remuneration in any medium other than cash and the reasonable amount of gratuities shall be estimated and determined in accordance with the rules prescribed by the Commission; * * *.'

If the dealers and the installers rendered services for the plaintiffs for wages or under a contract of hire, then the plaintiffs had persons in their employment and are liable for contributions on their wages unless those persons are excluded from the Act by the exclusion test contained in Section 35-4-22(j)(5)(A), (B) and (C), which test we will consider later in this opinion.

We find in the record competent evidence from which the Board of Review could have reasonably concluded that both the dealers and the installers were rendering services for the plaintiffs for 'wages' as that term is defined in the Act. This court held in Creameries of America, Inc., v. Industrial Comm., 98 Utah 571, 102 P.2d 300, 304, that the word 'services' while not defined in the Act, should be given a broad meaning. Said the court, speaking through Mr. Justice McDonough, 'In ordinary usage the term 'services' has a rather broad and general meaning. It includes generally any act performed for the benefit of another under some arrangement or agreement whereby such act was to have been performed.' We further stated that all remuneration payable for personal services is 'wages.'

The plaintiffs were in the business of fabricating, selling and installing Rusco products. To make their business successful, customers to purchase their products had to be obtained. In this endeavor, services were rendered to the plaintiffs by the dealers who solicited orders for the purchase of Rusco Windows and products. When the plaintiffs accepted an order obtained by a dealer, there arose a contract between the plaintiffs and the customer for the sale and installation of the plaintiffs' products. The plaintiffs are the sole distributors in this state of Rusco Windows and products and thus are the only persons who could accept the orders and supply the windows. The dealers by their agreement with the plaintiffs could not refer their orders to any one other than the plaintiffs. The orders were written up on forms supplied by the plaintiffs; prices for the windows were fixed by the plaintiffs, and dealers had to submit orders to them within five days after obtained. The dealers did not have legal title to the products for which they obtained orders. Title reposed in the plaintiffs. It was their products which the dealers sold, unlike the case of Fuller Brush Co. v. Industrial Comm., 99 Utah 97, 104 P.2d 201, 129 A.L.R. 511, where this court held that certain dealers selling brushes manufactured by the plaintiff owned the brushes, and thus in selling those brushes they were rendering service for themselves and not for the plaintiff company.

Under the definition of wages given in the Act, which definition is set out above, it is clear that the dealers' remuneration constituted wages. That the dealers' remuneration was a commission is manifest from paragraph 14 of the agreement between the plaintiffs and the dealers:

'This franchise dealer shall be entitled to a commission on any contract secured by him from customer after said contract has been approved by the distributor [plaintiffs] and after the products ordered by...