Sinclair Builders, Inc. v. Unemployment Ins. Comm'n, Docket No. Han–13–10.

• Decision Date: 20 August 2013
• Docket Number: Docket No. Han–13–10.
• Citation: 73 A.3d 1061,2013 ME 76
• Parties: SINCLAIR BUILDERS, INC. v. UNEMPLOYMENT INSURANCE COMMISSION.
• Court: Maine Supreme Court

73 A.3d 1061

2013 ME 76

SINCLAIR BUILDERS, INC.

v.UNEMPLOYMENT INSURANCE COMMISSION.

Docket No. Han–13–10.

Supreme Judicial Court of Maine.

Argued: June 11, 2013.

Decided: Aug. 20, 2013.

Frank T. McGuire, Esq., and John K. Hamer (orally), Esq., Rudman Winchell, Bangor, for appellant Sinclair Builders, Inc.

Janet T. Mills, Attorney General, and Elizabeth J. Wyman, Assist. Atty. Gen. (orally), Office of Attorney General, Augusta, for appellee Maine Unemployment Insurance Commission.

Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and JABAR, JJ.

JABAR, J.

[¶ 1] Sinclair Builders, Inc., appeals from a judgment entered in the Superior Court (Hancock County, Cuddy, J.) pursuant to 5 M.R.S. § 11007(4) (2012) and M.R. Civ. P. 80C affirming the Unemployment Insurance Commission's decision that twenty-four individuals were employees of Sinclair as defined in 26 M.R.S. § 1043(11)(E) (2010).¹ Sinclair argues that the Commission erred in determining that pursuant to 26 M.R.S. § 1043(11)(E)(1) and (2), Sinclair failed to rebut the presumption that the individuals at issue were employed with Sinclair. We affirm the judgment in part, and vacate in part.

I. BACKGROUND

[¶ 2] Sinclair Builders, Inc., is a general construction company located in Ellsworth. In 2010, the Maine Department of Labor Bureau of Unemployment Compensation conducted a random audit of Sinclair's business to verify the relationship between Sinclair and a list of twenty-four individuals that Sinclair had claimed were independent contractors. See26 M.R.S. § 1082(1) (2012) (providing that the Commissioner of Labor, through the Bureau, “may ... make investigations and take other actions” necessary to administer the Employment Security Law). On July 8, 2010, the Bureau determined that all twenty-four individuals were employees of Sinclair as defined in 26 M.R.S. § 1043(11)(E). Thus, the Bureau assessed Sinclair unpaid unemployment tax liability for each of those individuals, from 2007 through the first quarter of 2010, at $16,630.55, with an additional $6,053.17 in interest and penalties. Sinclair appealed the Bureau's determination to the Commission, see26 M.R.S. § 1082(14)(D) (2012), which made the following findings.

[¶ 3] Sinclair is in the business of residential construction and renovation, and between 2007 and early 2010, the company employed some individuals who were undisputedly employees and who were not listed in the Bureau's decision. ² The Bureau's list of workers whose status was disputed contained three categories of individuals: two salesmen, a bookkeeper, and twenty-one skilled subcontractors who performed various construction tasks.

[¶ 4] The two salesmen and Sinclair's president would locate construction and renovation projects in the greater Ellsworth area. When the salesmen found a project, they would offer to sell the customer retail products including windows, doors, fixtures, and other items related to Sinclair's construction or renovation business. Sinclair controlled the terms of the sales and paid the salesmen by fixed commissions, and the salesmen could not negotiate the commission rate. The salesmen occasionally worked from Sinclair's office, but they typically worked from various locations in a defined territory around Ellsworth.

[¶ 5] Sinclair also hired a part-time bookkeeper who worked from Sinclair's office three days per week. The bookkeeper provided general office support—answering telephones, taking messages, and communicating with clients. The bookkeeper billed Sinclair weekly for her work and was covered by Sinclair's liability insurance. Sinclair had the right to instruct or discharge the bookkeeper.

[¶ 6] Sinclair acted as the general contractor for customers and hired workers to perform general carpentry services and specific services, such as plumbing, heating, and electrical work, that Sinclair's ordinary employees could not perform. Sinclair paid these workers the standard market rate for their services.

[¶ 7] Sinclair did not provide training or equipment to the workers that it hired, but it did instruct the individuals to follow the specifications on Sinclair's contract with the customer. The workers provided their own separate liability insurance. Sinclair also required that all of the individuals who worked on its projects follow safety protocols, regardless of whether it considered them independent contractors or employees.

[¶ 8] The Commission held a hearing on December 15, 2010, and on August 10, 2011, it affirmed the Bureau's determination as to the bookkeeper, the salesmen, and nineteen of the subcontractors. The Commission vacated the Bureau's decision as to two of the remaining subcontractors, for whom it found there was no evidence in the record to support a finding of employment by Sinclair. Sinclair sought review of the Commission's determination in the Superior Court, see26 M.R.S. § 1082(14)(D); see also5 M.R.S. § 11001(1) (2012), which affirmed the Commission's judgment in a memorandum of decision on December 5, 2012. Sinclair filed this timely appeal. See5 M.R.S. § 11008 (2012); M.R.App. P. 2(b)(3).

II. DISCUSSION

[¶ 9] “When, as in this case, the Superior Court sits as an intermediate appellate court and reviews an agency decision, we review the administrative tribunal's decision directly.” Vector Mktg. Corp. v. Me. Unemployment Ins. Comm'n, 610 A.2d 272, 274 (Me.1992). We review the Commission's judgment “to determin[e] whether the Commission correctly applied the law and whether its fact findings are supported by any competent evidence [in the record].” McPherson Timberlands, Inc. v. Unemployment Ins. Comm'n, 1998 ME 177, ¶ 6, 714 A.2d 818. “We will not overrule findings of fact supported by substantial evidence, defined as ‘such relevant evidence as a reasonable mind might accept as adequate to support the resultant conclusion.’ ” Lewiston Daily Sun v. Unemployment Ins. Comm'n, 1999 ME 90, ¶ 7, 733 A.2d 344 (quoting Crocker v. Me. Emp't Sec. Comm'n, 450 A.2d 469, 471 (Me.1982)).

[¶ 10] With respect to the law, we review de novo issues of statutory interpretation. Carrier v. Sec'y of State, 2012 ME 142, ¶ 12, 60 A.3d 1241. However, “we defer to an agency in those areas within its expertise unless a statute or regulation compels a contrary result.” Schwartz v. Unemployment Ins. Comm'n, 2006 ME 41, ¶ 9, 895 A.2d 965 (quotation marks omitted). “We first look to the plain meaning of the statute, interpreting its language to avoid absurd, illogical or inconsistent results.” Carrier, 2012 ME 142, ¶ 12, 60 A.3d 1241 (quotation marks omitted). “[A] misapplication of the law to the facts will constitute reversible error, and if an agency fails to make adequate findings of fact, the Court may remand for findings that would permit meaningful judicial review.” Nancy W. Bayley, Inc. v. Me. Emp't Sec. Comm'n, 472 A.2d 1374, 1377 (Me.1984) (citations omitted).

[¶ 11] At the relevant time, the Employment Security Law, which governs unemployment compensation, defined “employment” as including “any ... service in interstate commerce, performed for wages.” 26 M.R.S. § 1043(11). The statute defined “wages” broadly to include “all remuneration for personal services, including commissions, bonuses[,] ... and the cash value of all remuneration in any medium other than cash.” 26 M.R.S. § 1043(19) (2010). It is undisputed that Sinclair provided wages in exchange for personal services pursuant to section 1043.

[¶ 12] If the Bureau established that the employer paid wages in exchange for an individual's services, there was a presumption of an employment relationship between that employer and the individual. See26 M.R.S. § 1043(11)(E). The employing company could rebut the presumption, however, by demonstrating that the employment relationship met three requirements listed in 26 M.R.S. § 1043(11)(E)(1) to (3), generally referred to as the ABC test. ³ These requirements were

( [A] ) Such individual has been and will continue to be free from control or direction over the performance of such services, both under his contract of service and in fact;

( [B] ) 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 business of the enterprise for which such service is performed; and

( [C] ) Such individual is customarily engaged in an independently established trade, occupation, profession or business.

26 M.R.S. § 1043(11)(E)(1) to (3). The burden of proof is on the employer to establish all three of these criteria; “[t]o satisfy one or two, and not all three, leaves the relationship for purposes of the Act one of ‘employment.’ ” Hasco Mfg. Co. v. Me. Emp't Sec. Comm'n, 158 Me. 413, 415, 185 A.2d 442 (1962). The Commission correctly determined that Sinclair met its burden of showing that all of the individuals on the Bureau's list met criterion C—having been customarily engaged in an independently established trade. Thus, we address only parts A and B.

[¶ 13] With respect to part A, which requires the employer to demonstrate that an individual is free from the employer's direction and control over the performance of that individual's services “both under his contract of service and in fact,” see26 M.R.S. § 1043(11)(E)(1), we have noted, “Control contemplated by the statute is general control and the right to control may be sufficient even though it is not exercised.” Me. Auto Test Equip. Co. v. Me. Unemployment Insurance Comm'n, 679 A.2d 79, 81 (Me.1996) (quotation marks omitted). One commentator has observed that consideration of the “right to control” means that “[t]he possibility of control in the future would thus seem to be as decisive as present control.” Benjamin S. Asia, Employment Relation: Common–Law Concept and Legislative Definition, 55 Yale L.J. 76, 87 (1945).

[¶ 14] With respect to part B of the ABC test, the employer must demonstrate that the individual provides a service that is...