Needle Inc. v. Dep't of Workforce Servs., Workforce Appeals Bd., 20141157–CA.

• Decision Date: 28 April 2016
• Docket Number: No. 20141157–CA.,20141157–CA.
• Court: Utah Court of Appeals
• Parties: NEEDLE INC., Petitioner, v. DEPARTMENT OF WORKFORCE SERVICES, WORKFORCE APPEALS BOARD, Respondent.

372 P.3d 696

2016 UT App 85

NEEDLE INC., Petitioner

v.DEPARTMENT OF WORKFORCE SERVICES, WORKFORCE APPEALS BOARD, Respondent.

No. 20141157–CA.

Court of Appeals of Utah.

April 28, 2016.

Elizabeth T. Dunning and Steven M. Lau, Salt Lake City, for Petitioner.

Suzan Pixton, for Respondent.

Judge STEPHEN L. ROTH authored this Opinion, in which Judge GREGORY K. ORME and Senior Judge RUSSELL W. BENCH concurred.¹

Opinion

ROTH

, Judge:

¶ 1 Needle, Inc., seeks review of the Utah Workforce Appeals Board's (the Board) decision upholding an administrative law judge's (the ALJ) determination that individuals working as online product advocates for Needle's retail clients are employees, not independent contractors. We decline to disturb the Board's decision.

BACKGROUND

¶ 2 Needle is a software company that has developed a “customer engagement software” platform that it licenses to online retailers of products and services. This platform enables customers visiting a retailer's website to interact in real-time “chats”² with persons knowledgeable about the retailer's products and services. Needle assists the online retailers in advertising for, locating, and recruiting “advocates” to perform these interactive chats. These advocates are generally enthusiasts of the retailer's products who are often identified because they have established an online presence through such media as Facebook, blogs, and online products reviews, that demonstrated their familiarity and experience with particular products and services. Needle does not require that the advocates work in an industry related to the products; rather, it selects advocates primarily due to their product expertise, regardless of how that expertise may have been acquired. Needle also supervises the advocate application process, though the online retailer makes the final decision whether to hire any potential advocate.

¶ 3 Once the advocates complete Needle's application process and are approved by the online retailer, they are “signed up as contractors” to Needle itself. Needle owns and maintains the software through which the browser-based chat platform operates, and it licenses the software to each retailer for use. The advocates are expected to provide their own computers and internet access. Needle does not set working hours or quotas, nor does it provide office space. Instead, the advocates work at their own pace and during hours of their own choosing from wherever they find convenient. Most advocates work “very part-time” and are not expected to work exclusively for Needle or for Needle's online retailer clients. However, if an advocate has a period of inactivity longer than ninety days, he or she is required to re-certify with the particular online retailer in order to continue to work. The online retailers pay Needle for the advocates' work on a per-chat basis, and Needle in turn pays the advocates per chat. At the end of each year, Needle provides each advocate with a 1099 form.³ Advocates also earn points that can be redeemed for products or services directly from the online retailer.

¶ 4 In addition, Needle's platform monitors the advocates' performance according to criteria specified by the retailer. While neither the retailer nor Needle has “control over the content of the chats”—the chats are “unscripted” and “undirected”—the platform is programmed to preferentially route chats to advocates who are rated as having performed well according to the pre-selected metrics. Thus, the number of chats in which an advocate is able to participate depends both on the volume of customers requesting live chats at a particular time and the advocate's own performance rating.

¶ 5 Needle claimed that its advocates were independent contractors for purposes of the unemployment compensation regulatory scheme. The Department of Workforce Services field auditor determined, however, that Needle's advocates should instead be classified as employees and included in the audit the advocates' earnings as part of the total wages subject to unemployment compensation contributions. A hearing officer affirmed the auditor's decision, concluding that the advocates were not “independently established in a business activity that exist[s] separate and apart from Needle.” Needle appealed this decision, and after a hearing in March 2014, the ALJ affirmed the hearing officer's decision that the advocates were employees. Needle then appealed the ALJ's decision to the Board. The Board, with minor changes, adopted the ALJ's factual findings, reasoning, and conclusions and determined that the advocates were not established in an “independent business separate from Needle” and were therefore not independent contractors for unemployment compensation purposes. Needle seeks review of the Board's decision.

ISSUES AND STANDARDS OF REVIEW

¶ 6 Needle argues that the Board erred when it determined that the advocates were employees rather than independent contractors. In particular, Needle contends that the Board's decision is based on facts “not supported by substantial evidence when viewed in light of the whole record before the court.” See Utah Code Ann. § 63G–4–403(4)(g)

(LexisNexis 2014). It also argues that the Board's decision and its underlying determinations are “otherwise arbitrary or capricious.” See

id. § 63G–4–403(4)(h)(iv). We will uphold the Board's decision if its factual findings and determinations are supported by “substantial evidence when viewed in light of the whole record.” Id. § 63G–4–403(4)(g). “Substantial evidence is that quantum and quality of relevant evidence that is adequate to convince a reasonable mind to support a conclusion” and “is more than a mere scintilla” but “something less than the weight of the evidence.” Rosen v. Saratoga Springs City, 2012 UT App 291, ¶ 9, 288 P.3d 606 (citation and internal quotation marks omitted). We also defer to the Board's credibility determinations and its resolution of conflicts in the evidence, see

Allen v. Department of Workforce Servs., 2005 UT App 186, ¶ 20, 112 P.3d 1238, and we will not overturn the Board's determinations simply because we think “another conclusion from the evidence is permissible,” Allied Constr. & Dev., Inc. v. Labor Comm'n Appeals Bd., 2013 UT App 224, ¶ 2, 310 P.3d 1230 (citation and internal quotation marks omitted).

¶ 7 Needle also argues that the Board “erroneously interpreted or applied the law” pertaining to the determination of independent contractor status under Utah Code section 35A–4–204

and rule R994–204–303 of the Utah Administrative Code. See Utah Code Ann. § 63G–4–403(4)(d). We generally review the Board's interpretation and application of statutes and regulations for correctness. BMS Ltd. 1999 Inc. v. Department of Workforce Servs., 2014 UT App 111, ¶¶ 8, 10, 327 P.3d 578. However, due to the “fact-intensive inquiry” involved in applying the law to the facts in cases where an employment relationship is at issue, see Carbon County v. Workforce Appeals Bd., 2013 UT 41, ¶ 7, 308 P.3d 477

(citation and internal quotation marks omitted), we afford the Board deference in its intermediate determinations and will affirm its ultimate decision “so long as it is within the bounds of reasonableness and rationality,” Prosper Team, Inc. v. Department of Workforce Servs., 2011 UT App 142, ¶ 6, 256 P.3d 246 (citation and internal quotation marks omitted); Tasters Ltd. v. Department of Emp't Sec., 863 P.2d 12, 19 (Utah Ct.App.1993) (“[T]his court will reverse the Board's ultimate determination, and upset its intermediate conclusions, only if we conclude they are irrational or unreasonable.”). And “[w]e do not reweigh the evidence or substitute our decision for that of [the Board] but instead will uphold its determinations if they are supported by the record evidence.” Evolocity Inc. v. Department of Workforce Servs., 2015 UT App 61, ¶ 6, 347 P.3d 406.

ANALYSIS

I. Applicable Rules and Law

¶ 8 In Utah, there is a presumption that persons who perform “[s]ervices ... for wages or under any contract of hire” are employees. Utah Code Ann. § 35A–4–204(3)

(LexisNexis 2011); see also

BMS Ltd. 1999, 2014 UT App 111, ¶ 6, 327 P.3d 578. Needle's advocates perform services under contract and are therefore presumed to be employees for purposes of unemployment compensation. In order to overcome that presumption, Needle must demonstrate that the individuals performing services are, instead, independent contractors. See

BMS Ltd. 1999, 2014 UT App 111, ¶ 6, 327 P.3d 578. An independent contractor is one who is “regularly” and “customarily engaged in an independently established trade,” and an independently established trade is one that is “created and exists apart from a relationship with a particular employer and does not depend on a relationship with any one employer for its continued existence.” Utah Admin. Code R994–204–303(1)(a).

¶ 9 To establish that an individual is an independent contractor, Needle bears the burden to show both of the following:

(a) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the contract of hire for services; and

(b) the individual has been and will continue to be free from control or direction over the means of performance of those services, both under the individual's contract of hire and in fact.

Utah Code Ann. § 35A–4–204(3)(a), (b)

(emphasis added). Because the factors are conjunctive, both parts of the test—the independently established trade prong and the control or direction prong—must be met for an individual to qualify as an independent contractor. See

Petro–Hunt LLC v. Department of Workforce Servs., 2008 UT App 391, ¶¶ 22, 31, 197 P.3d 107. As a result, if the employer does not “prove[ ] to the satisfaction of the Department that the worker is customarily engaged in an independently established trade ... of the same nature as the service in question,” Utah Admin. Code R994–204–303(1)(c), then the court need not...