Schuffenhauer v. Department of Employment Sec.

• Decision Date: 11 December 1975
• Docket Number: No. 43809,43809
• Citation: 543 P.2d 343,86 Wn.2d 233
• Parties: Verne SCHUFFENHAUER, Appellant, v. The DEPARTMENT OF EMPLOYMENT SECURITY, Respondent.
• Court: Washington Supreme Court

Page 233

86 Wn.2d 233

543 P.2d 343

Verne SCHUFFENHAUER, Appellant, v. The DEPARTMENT OF EMPLOYMENT SECURITY, Respondent.

No. 43809.

Supreme Court of Washington, En Banc.

Dec. 11, 1975.

Oberquell & Ahlf, Argal D. Oberquell, Lacey, for appellant.

Slade Gorton, Atty. Gen., Thomas J. Wolfstone, Joseph M. Littlemore, Asst. Attys. Gen., Olympia, for respondent.

UTTER, Associate Justice.

Appellant, Verne Schuffenhauer, is a wholesaler of clams. The Washington Employment Security Department levied an assessment on him for unemployment compensation fund contributions. The department claimed individuals who dug clams for him on his leased tidelands were employed by him within the scope of RCW 50, Et seq., the Employment Security Act. This order of assessment was upheld by an appeal examiner at a departmental hearing, by the commissioner of the department and on appeal by the superior court.

The two issues before us are whether the services performed by clam diggers for Schuffenhauer constitute 'employment' as defined in RCW 50.04.100 and 50.04.140 and, alternatively, whether he is exempt from assessment because the services performed fall within the agricultural labor exemption of RCW 50.04.150. We uphold the commissioner's determinations that clam digging performed for appellant is employment by him within the terms of the act and does not constitute agricultural labor.

Appellant employs one salaried full-time employee for whom he contributes to the unemployment compensation fund. The other workers who dig clams for him control their own hours, subject to the tides, and no specified amount of claims are required to be harvested by them. These diggers are paid by the weight of clams delivered. Appellant's full-time employee is present at the leased tidelands during this digging, chooses the digging area and transports the necessary gear to it. Supervision is furnished by him over the digging to make sure the workers properly turn and loosen the tidelands while harvesting. In the past, appellant has refused to allow some diggers to dig on these tidelands when clams they recovered were substantially unmarketable. Most of the diggers have other jobs, some attend school, and there is no indication in the record of the extent to which appellant's diggers work for other clam wholesalers, if at all.

The gathering of appellant's clams on appellant's tidelands is accomplished by digging with a large fork. The ground is turned over and loosened to increase the productivity of the digging area. Clams grow from free-swimming larva which mature near the surface of the tidelands. By contrast, oysters are normally produced from seeds which adhere to rough shells or other surfaces prepared on the oyster lands. Appellant does not use artificial means to seed the clam tidelands.

Judicial review of administrative action is governed by RCW 34.04.130(6) which authorizes a court to reverse the decision of an administrative agency 'if the substantial rights of the petitioners may have been prejudiced because the administrative findings, inferences, conclusions, or decisions are: . . . (e) clearly erroneous in view of the entire record as submitted and the public policy contained in the act of the legislature authorizing the decision or order . . .' Appellant argues the findings of the commissioner are 'clearly erroneous' in that they are not supported by any evidence. As we decided in Ancheta v. Daly, 77 Wash.2d 255, 259, 461 P.2d 531 (1969), an administrative determination is clearly erroneous when, although there is evidence to support the finding, the reviewing court is left with the "definite and firm conviction that a mistake has been committed" (quoting from United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948). Under the Employment Security Act the decisions of the commissioner are 'prima facie correct' and the burden of proof is upon the party attacking the decision. RCW 50.32.150; In re All-State Construction Co., 70 Wash.2d 657, 659, 425 P.2d 16 (1967).

The public policy of the act, made a part of the standard of review by RCW 34.04.130(6)(e), is found in the preamble which states, 'the compulsory setting aside of unemployment reserves' is required to alleviate the many adverse effects of involuntary unemployment. RCW 50.01.010. The preamble further states, and we have held, that the act should be liberally construed in order to accomplish this objective. Cowiche Growers, Inc. v. Bates, 10 Wash.2d 585, 593, 117 P.2d 624 (1941); Amburn v. Daly, 81 Wash.2d 241, 248, 501 P.2d 178 (1972).

Appellant and respondent concede that the relationship between the clam diggers and appellant constitutes 'employment' within RCW 50.04.100. ¹ The parties dispute, however, whether the services of clam diggers satisfy RCW 50.04.140 ² excluding certain services from the definition of employment. Appellant must satisfy all three conditions set forth in that section in order to establish his exemption from the payment of contributions. Unemployment Compensation Dep't v. Hunt, 17 Wash.2d 228, 237, 135 P.2d 89 (1943). To succeed, appellant must show (1) clam diggers are in fact free from control or direction over the performance of their services, (2) the digging is either outside the usual course of the clam producing business or performed outside of all places of business of the clam wholesaler, and (3) the diggers are customarily engaged in an independently established occupation of the same nature as clam digging. With respect to these exemption tests, no distinction is drawn between part-time or temporary employment and full-time employment. Sound Cities Gas & Oil Co. v. Ryan, 13 Wash.2d 457, 467--68, 125 P.2d 246 (1942); See RCW 50.04.270. See Mulhausen v. Bates, 9 Wash.2d 264, 114 P.2d 995 (1941), and State ex rel. Mulhausen v. Superior Court, 22 Wash.2d 811, 157 P.2d 938 (1945). In these cases, an Oregon wholesale and retail dealer of margarine asserted that his representatives in Washington were not in his employment under the predecessor statute worded identically to RCW 50.04.140. Although these representatives handled other food products from other manufacturers, paid their own expenses, performed the services at their convenience, had their territory defined only in a general way, and were paid on a commission basis, the court held an employment relationship existed. Here there was some direction by appellant Schuffenhauer's full-time employee over the clam digging process. He selects the location of the digging and supervises the quality of the clams recovered and the quality of the digging itself. Also, the right of termination for substandard work, exercised by appellant in refusing to pay diggers who repeatedly recover unmarketable clams, is incompatible with freedom from control over the performance of services. Sound Cities Gas & Oil Co. v. Ryan, supra, 13 Wash.2d at 467, 125 P.2d 246. The commissioner's findings as to control and direction are supported by the record and not clearly erroneous.

Nor do the services performed by the clam diggers here satisfy subsection two of RCW 50.04.140. The digging takes place on land leased by appellant, and thus not outside all places of his business. In re Miller, 3 Wash App. 503, 476 P.2d 138 (1970). The services of the diggers do not satisfy the other portion of the subsection's disjunctive test inasmuch as their work is not outside the usual course of business of a clam producer and wholesaler. In interpreting subsection there, we have stated "the double requirement, that the worker's occupation be 'independently established' and that he be 'customarily' engaged in it, clearly calls for an enterprise created and existing separate and apart from the relationship with the particular employer, an enterprise that will survive the termination of that relationship." In re All-State Construction Co., supra, 70 Wash.2d at 666, 425 P.2d at 21. Appellant has made no showing that the diggers who perform services for him satisfy this requirement. His hiring of clam diggers is 'employment' which does not meet any of the three tests required to establish an exemption from unemployment compensation contributions.

Appellant's claim that clam diggers are not in his 'employment' since their services are agricultural labor within RCW 50.04.150 ³ and thus exempt from the coverage of the Employment Security Act must be closely scrutinized inasmuch as the act is a taxation statute. See RCW 50.04.072. In In re Fors Farms, Inc., 75 Wash.2d 383, 387, 450 P.2d 973 (1969), we recently reaffirmed that an exemption from a taxation statute must be strictly construed in favor of the application of the tax, and that the burden of proof is on the party claiming the exemption. Accord In re All-State Construction Co., 70 Wash.2d 657, 665, 425 P.2d 16 (1967). Closer scrutiny is required where the taxes to be saved by...