National Heritage v. Division of Emp. Sec.
| Decision Date | 07 June 2005 |
| Docket Number | No. WD 64201.,WD 64201. |
| Citation | 164 S.W.3d 160 |
| Parties | NATIONAL HERITAGE ENTERPRISES, INC., Appellant, v. DIVISION OF EMPLOYMENT SECURITY, Respondent. |
| Court | Missouri Supreme Court |
Jean H. Maylack and Richard G. Hauser, St. Louis, MO, for appellant.
Marilyn Green and Cynthia A. Quetsch, Jefferson City, MO, for respondent.
Before EDWIN H. SMITH, C.J., and HOWARD and HOLLIGER, JJ.
National Heritage Enterprises, Inc., appeals from the decision of the Labor and Industrial Relations Commission (Commission) that the payments made to its employee, Lynda Ridley, for performing certain after-hours services for the appellant were considered wages subject to state unemployment taxes, pursuant to the Missouri Employment Security Law, §§ 288.010-.390.1
The appellant raises two points on appeal. In both points, it claims that the Commission erred in concluding that the payments made to Ridley for performing the after-hour services were wages subject to state unemployment taxes. It claims in both points that the Commission erred in so concluding because its supporting finding, that the after-hours services performed by Ridley constituted employment, as defined in § 288.034, rather than services performed by an independent contractor, was not supported by competent and substantial evidence.
We reverse.
In May of 1996, Ridley became a full-time employee of the appellant, a holding company with corporate offices in St. Louis, Missouri. The appellant controls a number of subsidiaries, including Memorial Services Life Insurance Company (Memorial), which also has corporate offices in St. Louis. Specifically, Ridley worked full time for Memorial as a paralegal from May of 1996 until July of 2001. At some point in 1999, Ridley and the appellant agreed that, in addition to working a 40-hour week at Memorial's corporate offices as a paralegal, she would do additional work for the appellant during the evenings and on weekends.
The appellant's arrangement with Ridley came to the attention of the Division when it performed a random audit of the appellant's payroll records. On June 1, 2001, Robin Cleveland, the Division auditor, reported her findings, in which she described Ridley's duties as a paralegal, and the additional work Ridley performed on evenings and weekends:
Lynda stated that her normal job duties for [Memorial] was [sic] essentially legal research and maintaining (insurance) agent licensing and funeral director licensing research. At the conclusion of her day, one of the vice-presidents, Nicki Provence, would have a stack of work available for her to take home. This work was varied in nature and included notations about what was to be done to it, including completion dates or special needs. Lynda described it generally as being anything you could do on her computer at home. This included producing a manager's manual, designing flyers and inserts, document preparation and the reconciling of changing rate structures on insurance policies. She mentioned that she even helped in the acquisition of a New York condo for one of the owners. She stated that folder was 1 1/2" thick and required her to prepare financial statements and tax returns and document asset agreements.
Lynda stated they had agreed upon a flat rate of $525/week (for most of 2000) regardless of the number of hours worked. There was no report on hours worked/week or project. They just always made sure there was enough work there for her to take home. Lynda stated that if the workload became overwhelming she would only take what she could. She had Nicki Provence's home number if she had any problems or required clarification on a job. She worked evenings and weekends as her workload demanded and her husband had minimal involvement.
Cleveland concluded that, in performing the after-hours services for the appellant, Ridley On June 25, 2001, the Division mailed the appellant its determination that the payments which Ridley received for the additional services which she performed on evenings and weekends were wages for the purpose of the Missouri Employment Security Law and were subject to unemployment insurance taxes.
The appellant filed an administrative appeal, pursuant to § 288.130. On February 17, 2004, the Appeals Tribunal heard the appeal by telephone conference. During the telephone conference, Ridley testified that, in 1995, she had started a sole proprietorship, R & L Enterprises, doing office work and document preparation at home. According to Ridley, sometime in 1999, she told Provence about R & L Enterprises and offered its services to make some needed revisions in the appellant's corporate manuals and procedure books after hours. Ridley testified that Provence agreed to the arrangement, and the work assignments were "put into a central location [in the corporate office] because there were other independent contractors but the work was put into a central location and you were free to take what you wanted to do."
Ridley testified that, in addition to document preparation, the after-hours work which Ridley performed for the appellant included picking up clients at the airport and cleaning the corporate suite and apartment. She also testified that, other than when her husband or son would do the driving to and from the airport, she performed all of the services offered by R & L Enterprises herself. R & L Enterprises had five clients in addition to the appellant. Ridley testified that she spent, on the average, fifteen hours a week performing services for the appellant in her capacity as R & L Enterprises and twelve hours a week performing services for other clients. Ridley testified that she used her own computer and office supplies for the work that she performed at home, and she purchased the supplies which she used in cleaning the corporate suites and apartment. In 1999, she purchased a limousine which she used to pick up corporate clients at the airport. Ridley's document preparation and cleaning services were not advertised. However, her limousine services were advertised in the telephone directory, local publications, and on business cards.
Ridley received two weekly checks from the appellant: one of which was made out to her and represented her salary for her full-time position at Memorial, the other of which was made out to "Linda Ridley d/b/a R & L Enterprises." State and federal taxes were not withheld from the latter check. Initially, the check made out to "Linda Ridley d/b/a R & L Enterprises" was between $380 and $400 a week. Then, in 2000, the amount increased to $525 per week.
On February 24, 2004, the Appeals Tribunal issued its decision affirming the June 25, 2001, determination of the Division that, in working for the appellant in her capacity as R & L Enterprises, Ridley was functioning as an employee rather than an independent contractor. The Appeals Tribunal's decision included the following findings and conclusions:
The appellant has the burden of proving that the additional work performed during the evenings and weekends by Linda Ridley was as an independent contractor.
The appellant cannot change an employee into an independent contractor just by a name change or a label. The Tribunal is not convinced that the office work Ms. Ridley took to complete on her home computer was any different in nature than the work she was assigned by her supervisors in her full time salaried administrative paralegal position. The same supervisors left notes and directions for the completion of the work she took home. She called them at home and asked for assistance in order to complete the work. The only difference was that she was not assigned a specific project; she was allowed to choose from the stack which task she cared to work on at home.
The services she performed under the business name R & L Enterprises were highly integrated to the appellant's businesses. She performed the services herself and there was no evidence that she hired assistants. The relationship between the appellant and Ms. Ridley was ongoing and continuing.
Some of the factors suggest an independent contractor relationship. The appellant did not withhold taxes from the weekly checks issued to R & L Enterprises. The appellant did not require time sheets or invoices for payment. Ms. Ridley used her own computer and office supplies for the work she performed at home. She could work whatever evening or weekend hours she desired. R & L Enterprises was listed in the phone book. But these factors are outweighed by the factors mentioned before which support an employer-employee relationship. A paralegal that performs legal research and document preparation is required to be supervised by an attorney. The supervision is required whether the work is performed at home or at the office. The Tribunal is not persuaded that Ms. Ridley made policy and handbook revisions without the appellant's management retaining the right to control her work.
In the judgment of the Tribunal the relationship of the appellant and Linda Ridley dba R & L Enterprises was that of an employer and employee. Therefore beginning January 1, 1999 ... the remuneration paid to Linda Ridley dba R & L Enterprises for specialized office support constituted "wages" in "employment" within the meaning of those terms as defined in Sections 288.034 and 288.036 of the RSMo.
On April 30, 2004, the Commission adopted the decision of the Appeals Tribunal. The appellant then appealed the Commission's decision to this court, pursuant to § 288.210.
This appeal followed.
Our review of the Commission's decision is governed by § 288.210, which provides, in pertinent part:
The findings of the commission as to the facts, if supported by competent and substantial...
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