Northwest Advancement, Inc. v. State, Bureau of Labor, Wage and Hour Div.

• Decision Date: 14 July 1989
• Citation: 772 P.2d 934,96 Or.App. 133
• Court: Oregon Court of Appeals
• Parties: , 29 Wage & Hour Cas. (BNA) 433, 122 Lab.Cas. P 56,915 NORTHWEST ADVANCEMENT, INC. and Nancy Louise Mark, Guardian ad litem for Tanya Sue Dow, Appellants, v. STATE of Oregon, BUREAU OF LABOR, WAGE AND HOUR DIVISION, Respondent. STATE of Oregon, ex rel. Mary Wendy ROBERTS, Commissioner of the Oregon Bureau of Labor and Industries, and the Wage and Hour Commission of the State of Oregon, Respondents, v. NORTHWEST ADVANCEMENT, INC., Jeff Henke, Joe Geer and Tim Cox, Appellants. Marion County 85-1052, Multnomah County 8601-00401; CA A41042 , CA A41109.

Page 934

772 P.2d 934

96 Or.App. 133, 29 Wage & Hour Cas. (BNA) 433,

122 Lab.Cas. P 56,915

NORTHWEST ADVANCEMENT, INC. and Nancy Louise Mark, Guardian ad litem for Tanya Sue Dow, Appellants, v. STATE of Oregon, BUREAU OF LABOR, WAGE AND HOUR DIVISION,

Respondent.

STATE of Oregon, ex rel. Mary Wendy ROBERTS, Commissioner of

the Oregon Bureau of Labor and Industries, and the

Wage and Hour Commission of the State of

Oregon, Respondents, v. NORTHWEST ADVANCEMENT, INC., Jeff Henke, Joe Geer and Tim

Cox, Appellants.

Marion County 85-1052, Multnomah County 8601-00401; CA

A41042 , CA A41109.

Court of Appeals of Oregon.

Argued and Submitted May 23, 1988.

Decided April 12, 1989.

Reconsideration Denied July 14, 1989.

Gordon T. Carey, Jr., Portland, argued the cause and filed the briefs, for appellants.

Douglas F. Zier, Asst. Atty. Gen., Salem, argued the cause for respondents. With him on the brief were Dave Frohnmayer, Atty. Gen., and Virginia L. Linder, Sol. Gen., Salem.

Before RICHARDSON, P.J., and NEWMAN and DEITS, JJ.

DEITS, Judge.

Appellants in these consolidated appeals seek review of two judgments entered in separate counties. In Northwest Advancement v. Bureau of Labor, the Marion County Circuit Court entered a summary judgment for the state in appellants' declaratory judgment action challenging the validity of regulations promulgated by the Oregon Wage and Hour Commission (WHC). In State ex rel Roberts v. Northwest Advancement, the Multnomah County Circuit Court granted the state's request for a permanent mandatory injunction requiring appellants to comply with the challenged regulations. We affirm both judgments. ¹

Appellant Northwest Advancement Inc. (NWA) is an Oregon corporation engaged in the wholesale distribution of candy and various household products. Appellant Henke is NWA's president and sole shareholder. NWA distributes its products primarily through door-to-door sales by minors. The minors are recruited by Henke and his "crew chiefs," whom Henke himself recruits. Appellants Geer and Cox were both NWA crew chiefs and were responsible for transporting minors to and from neighborhoods where they sold NWA's products.

In 1985, WHC promulgated administrative rules regulating the employment of minors as canvassers, peddlers or outside house-to-house salesmen. Appellants NWA and Nancy Louise Mark, guardian ad litem for one of the minors working for NWA, filed an action in Marion County seeking a declaratory judgment that the regulations were invalid. ² While that action was pending, the Bureau of Labor and Industries (Bureau) filed a separate action in Multnomah County seeking preliminary and mandatory injunctions requiring NWA and its crew chiefs to comply with the regulations. The Marion County Circuit Court entered a summary judgment for the state, and the Multnomah County Circuit Court granted the state's request for an injunction. Appellants challenged both judgments.

Appellants first argue that the Multnomah court erred in concluding that the NWA sales operation was governed by the statutes and administrative rules relating to the employment of minors, because NWA does not "employ" minors as that term is used in ORS 653.305, ³ the enabling statute for the challenged regulations. They assert that the minors and crew chiefs are independent contractors and are, therefore, exempt from the regulations. We disagree. Although appellants and the state differ over the meaning of "employ" and "employer" as used in ORS 653.305, ⁴ under either party's definitions of those terms the minors in this case were employes.

ORS 653.010, which the state argues applies to ORS 653.305, defines "employ" as "suffer or permit to work," and "employer" as "any person who employs another person." Although no Oregon cases have further refined those terms, federal regulations and case law interpreting the same terms under the Fair Labor Standards Act, after which most of ORS chapter 653 is patterned, are instructive. For example 29 CFR § 570.113, relating to the definitions of "employ" and "employer" for purposes of child labor law under FLSA, states:

"The nature of an employer-employee relationship is ordinarily to be determined not solely on the basis of the contractual relationship between the parties but also in the light of all the facts and circumstances. Moreover, the terms "employer" and "employ" as used in the Act are broader than the common-law concept of employment and must be interpreted broadly in the light of the mischief to be corrected. Thus, neither the technical relationship between the parties nor the fact that the minor is unsupervised or receives no compensation is controlling in determining whether an employer-employee relationship exists * * *."

In Wirtz v. Keystone Readers Service, Inc., 282 F.Supp. 871 (S.D.Fla.1968), aff'd 418 F.2d 249 (5th Cir.1969), the court addressed an employment scheme nearly identical to the one in this case. In Wirtz, a magazine distributor hired "student salesmen" to work after school and on weekends soliciting magazine subscriptions door-to-door. The principal officer and shareholder of the defendant corporation either interviewed and trained the minors himself or supervised a "student manager" who did. During the training process, the minors had to memorize a sales speech that he provided. After reporting to the defendant's office each day, the minors were transported in cars driven by "student managers" to designated neighborhoods, where they would "fan out" and solicit subscriptions. At the end of the day, the minors met the "student managers" at a designated place and then were transported back to the defendant's office. There, the minors would turn in their subscriptions and receive a commission based on the volume of sales. On those facts, the court concluded that the minors were employes for the purposes of FLSA. The court observed that "[w]hen work done, in its essence, follows the usual path of an employee, putting on an 'independent contractor' label does not take the worker from the protection of the Act." 282 F.Supp. at 874. We conclude that, if the FLSA definitions of employ and employer contained in ORS 653.010 apply in this case, the minors and crew chiefs are employes.

However, even assuming that appellants are correct in their assertion that the FLSA definitions incorporated in ORS 653.010 do not apply to ORS 653.305, and that we therefore must turn to the common law distinction between employes and independent contractors, we conclude that the minors and crew chiefs in this case were still employes. At common law, the question of whether an independent contractor relationship exists focuses primarily on whether the worker is subject to the principal's direction and control. See, e.g., Restatement (Second) Agency, § 2(3) (1958); Nordling v. Johnston, 205 Or. 315, 332, 283 P.2d 994 (1955). In this case, both the crew chiefs and the minors were subject to the direction and control of Henke and, therefore, of NWA. Henke interviewed and trained the minors in their sales techniques, giving them standardized sales speeches to memorize. He assigned the crew chiefs specific territories in which to operate. The minors did not choose the neighborhoods in which they sold NWA products, but rather were driven to and from areas selected by Henke and the crew chiefs. Although the crew chiefs and the minors were paid on commission and not on an hourly basis, neither was at financial risk, because they did not purchase the product in advance and were allowed to return all unsold inventory. Finally, the NWA logo was printed on all advertising materials used by the minors to promote sales. We conclude that both the minors and the crew chiefs are employes for purpose of ORS 653.305.

Appellants next argue that both courts erred in concluding that the Bureau did not exceed its authority under ORS 653.305(1) when it promulgated OAR 839-21-097(1)(c), which prohibits the employment of minors under 16 years of age as door-to-door salespersons. ⁵ ORS 653.305(1) provides that WHC may at any time "inquire into wages or hours or conditions of labor of minors employed in any occupation in this state and determine suitable hours and conditions of labor for such minors." Appellants argue that the statute only authorizes WHC to establish suitable hours of employment, not to prohibit employment altogether. Again, we disagree.

Appellants rely on Ore. Newspaper Pub. v. Peterson, 244 Or. 116, 415 P.2d 21 (1966), for the proposition that a grant of power to "regulate" does not include the power to "prohibit." The holding in Peterson, however, is not that broad. In Peterson, the legislature had authorized the Board of Pharmacy to "make regulations, necessary for the protection of the public, pertaining to the practice of pharmacy" and to "[r]egulate the practice of pharmacy." Former ORS 689.620. Pursuant to that statute, the Board promulgated a regulation prohibiting the public advertisement of prescription drugs. The Supreme Court held that the regulation exceeded the scope of the enabling statute, because "[n]othing in ORS 689.620 or elsewhere in the same chapter suggests that advertising was contemplated as a proper subject of regulation." 244 Or. at 124, 415 P.2d 21. The court did not, as appellants argue here, hold that the legislature's use of the term "regulate" prevents an agency from "prohibiting." Rather, the court held that the power to regulate one area, pharmacy, does not by implication include the power to regulate another area, advertising. In this case, the legislature authorized WHC to determine suitable hours of employment for minors and to promulgate rules regulating those hours. Under that delegation of authority, WHC had the ability to determine that no suitable hours of employment exist for certain minors in certain occupations, and to promulgate rules to that effect. ⁶

Appellants next argue that both courts erred in rejecting their argument that...