Schaefer v. Job Service North Dakota

• Decision Date: 29 November 1990
• Docket Number: No. 900210,900210
• Citation: 463 N.W.2d 665
• Parties: Ted SCHAEFER, d.b.a. Fresh Air Enterprises, Petitioner and Appellant, v. JOB SERVICE NORTH DAKOTA, Respondent and Appellee, and Kenneth Bedor, Respondent. Civ.
• Court: North Dakota Supreme Court

Page 665

463 N.W.2d 665

Ted SCHAEFER, d.b.a. Fresh Air Enterprises, Petitioner and Appellant, v. JOB SERVICE NORTH DAKOTA, Respondent and Appellee and Kenneth Bedor, Respondent.

Civ. No. 900210.

Supreme Court of North Dakota.

Nov. 29, 1990.

Sonna M. Anderson of Anderson & Anderson, Bismarck, for petitioner and appellant.

David E. Clinton, Asst. Atty. Gen., Bismarck, for respondent and appellee.

LEVINE, Justice.

Ted Schaefer, d.b.a. Fresh Air Enterprises, appeals from a district court judgment upholding the decision of Job Service of North Dakota requiring him to pay job insurance taxes on income received by Kenneth Bedor. We affirm.

Schaefer distributes the "Rainbow Household Cleaning System," a multiple-purpose machine that operates as a vacuum cleaner, air freshener and humidifier. Schaefer recruited, trained and supplied Bedor as a salesman of Schaefer's products in western North Dakota. After a brief period of training and monitored sales as an "Independent Trainee Dealer," Bedor became an " 'A' Dealer," compensated by the difference between a "wholesale" price set by Schaefer and the purchase price. Bedor worked under this arrangement from March 1988 until January 1989, when apparently, through mutual agreement, Bedor quit.

Job Service issued a determination requiring Schaefer to pay job insurance taxes on income received by Bedor. Schaefer appealed and, following a hearing, an appeals referee reversed the initial decision, concluding that Bedor was an independent contractor whose income was not subject to job insurance taxation. That decision was then reviewed by the Executive Director of Job Service who concurred with the initial determination requiring Schaefer to pay job insurance taxes. Schaefer appealed to the district court which upheld the decision of Job Service's Executive Director. Schaefer then appealed to this Court.

Schaefer asserts that he should not be required to pay job insurance taxes on Bedor's income because Bedor is an independent contractor whose services do not subject Schaefer to liability for job insurance taxes. We disagree.

It is the public policy of this State to soften the harsh impact of involuntary unemployment by providing unemployment insurance. Section 52-01-05, NDCC; see also Newland v. Job Service North Dakota, 460 N.W.2d 118 (N.D.1990). North Dakota unemployment compensation law is remedial legislation which should, therefore, be construed liberally in favor of the employee. Newland, 460 N.W.2d at 121. See also Princess House, Inc. v. Dept. of Industry, 111 Wis.2d 46, 330 N.W.2d 169, 177 (1983) (unemployment compensation statute is remedial and "should be liberally construed to effect unemployment compensation coverage for workers who are economically dependent upon others in respect to their wage-earning status").

Section 52-01-01(17)(e), NDCC, provides:

"Services performed by an individual for wages or under any contract of hire must be deemed to be employment subject to the North Dakota Unemployment Compensation Law unless and until it is shown that: (1) such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; (2) such service is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of the enterprise for which such service is performed; and (3) such individual is customarily engaged in an independently established trade, occupation, profession, or business ."

Under this provision, an individual who meets the criteria of subparts (1), (2) and (3) is deemed to have independent-contractor status which exempts his or her income from job insurance taxation. Speedway, Inc. v. Job Service North Dakota, 454 N.W.2d 526 (N.D.1990). This three-part test under section 52-01-01(17)(e), NDCC, is commonly referred to as the ABC test. Id. While Job Service has the burden of proving that the worker's services were done for wages or under a contract for hire, the employer has the burden of establishing an exemption from unemployment compensation liability. See Hasco Mfg. Co. v. Maine Employment Security Com'n, 158 Me. 413, 185 A.2d 442 (1962).

Schaefer argues that Bedor meets each of the criteria under the ABC test and is therefore an independent contractor whose income is exempt from unemployment insurance taxation. Job Service determined that Schaefer failed to establish that Bedor was an independent contractor under parts (1) and (3) of the ABC test. Each part of the ABC test must be fulfilled in order for a worker to qualify as an independent contractor. Because we uphold Job Service's findings and conclusion that Schaefer did not establish part (3) of the ABC test, namely that Bedor was "customarily engaged in an independently established trade, occupation, profession, or business," we need not review that part of the agency's decision that held that part (1) of the ABC test also was not fulfilled.

Part C, the third part of the ABC test, requires the worker to be "customarily engaged...