Tak v. Sd Unemployment Ins. Div., 24343.
| Decision Date | 11 July 2007 |
| Docket Number | No. 24343.,24343. |
| Citation | 736 N.W.2d 840,2007 SD 68 |
| Parties | TAK COMMUNICATIONS, Appellant, v. SOUTH DAKOTA UNEMPLOYMENT INSURANCE DIVISION, Appellee. |
| Court | South Dakota Supreme Court |
Craig A. Pfeifle of Lynn, Jackson, Shultz & Lebrun, Rapid City, South Dakota, A. Stevenson Bogue of McGrath, North, Mullin & Kratz, Omaha, Nebraska, Attorneys for appellant.
Shannon George-Larson, South Dakota Department of Labor Pierre, South Dakota, Robert B. Anderson of May, Adam, Gerdes & Thompson, Pierre, South Dakota, Attorneys for appellee.
[¶ 1.] TAK Communications (TAK) appeals from the circuit court's judgment affirming the Administrative Law Judge's (ALJ) decision that Diana Dillman (Dillman) and others similarly situated were employees of TAK, rendering TAK liable for contributions to the unemployment compensation fund based on their wages. We affirm.
[¶ 2.] TAK is a South Dakota corporation which contracts with cable companies across the United States to perform their sales campaigns. In South Dakota TAK's only client is Midcontinent Communications (Midco). Dillman began working for TAK in June 2004 after signing an Independent Contractor Agreement (Agreement) which TAK drafted. Prior to her work with TAK, Dillman, educated through the tenth grade, had always acted as an employee of others, never having owned or operated her own business. She came to TAK with no prior sales experience.
[¶ 3.] The Agreement, which Dillman contended she did not fully comprehend, provided that Dillman "is not and will not be considered an employee of TAK Communications, Inc. and that the relationship between [sic] and [Dillman] is on [sic] of principal-independent contractor rater [sic] than employer-employee." In the Agreement, Dillman represented that as contractor she was Despite this language, no Exhibit A was attached to the Agreement, Dillman established no such organization, and she executed the Agreement solely in her own name.
[¶ 4.] According to the Agreement, Dillman was to supply her own materials, provide her own insurance, set her own hours, and bear the risk of not earning any commission due to lack of sales. TAK provided Dillman with forms and sales materials to allow her to sell Midco products. It also provided her with a shirt and identification tag with Midco's name on them, although Dillman was not required to wear either item. Dillman's training consisted of accompanying other sales personnel to learn how to sell the product and she was provided guidance from a TAK representative on sales techniques. She was responsible for her own transportation, was to purchase her own peddler's license for each municipality in which she sold, and was provided with "turf sheets" indicating areas in which to market the products.
[¶ 5.] While TAK allows its sales associates to operate other businesses independent of their relationship with TAK, and some of its sales associates did so, Dillman was not among them. Dillman had never obtained a sales tax license, either before, during, or after the time she sold for TAK. Apart from her relationship with TAK, Dillman had no sales experience prior to, during, or after the conclusion of her relationship with TAK. During the time Dillman sold for TAK she never used a business name, did not advertise the sale of other products, and had no separate business premises. Dillman had no peddler's license before TAK's representative, Pam Boyden, ordered her to stop selling until she obtained one. When Dillman paid the fee and obtained the required license, it listed TAK Communications above Dillman's name and contained TAK's address rather than Dillman's.
[¶ 6.] In 2005 Dillman ceased selling for TAK. After her relationship with TAK ended, she eventually returned to work full time as an employee for another business. Following an investigation, the South Dakota Unemployment Insurance Division (Division) issued a determination notice concluding that Dillman was TAK's employee, and that services she and others similarly situated provided to TAK were subject to the unemployment insurance laws. TAK appealed Division's determination. The ALJ concluded that Dillman was free from TAK's control in the performance of her service, however, she was not customarily engaged in an independently established trade, occupation, profession, or business, thus rendering her, and others similarly situated, TAK employees under SDCL 61-1-11. TAK appealed the ALJ's decision to the circuit court.
[¶ 7.] The circuit court affirmed both of the ALJ's determinations. TAK then appealed to this Court. Division did not file a notice of review as to the ALJ's conclusion that Dillman was free from TAK's control, leaving us with the sole issue of whether the circuit court erred in affirming the ALJ's decision that Dillman was not customarily engaged in an independently established trade, occupation, profession, or business as provided in SDCL 61-1-11(2).
[¶ 8.] Agency findings are subject to the same standard of review as circuit court findings. This Court must decide, in light of all the evidence, whether the findings are clearly erroneous. "If after careful review of the entire record we are definitely and firmly convinced a mistake has been committed, only then will we reverse." Streeter v. Canton School Dist., 2004 SD 30, ¶ 14, 677 N.W.2d 221, 225. Whether an individual is an employee or an independent contractor raises a mixed question of law and fact; as such, it is "fully reviewable by this Court." Egemo v. Flores, 470 N.W.2d 817, 820 (S.D.1991) (citing Appeal of Hendrickson's Health Care Service, 462 N.W.2d 655, 658 (S.D. 1990)). We give no deference to the decision of either the ALJ or the circuit court. Midland Atlas Co., Inc. v. South Dakota Dep't of Labor, 538 N.W.2d 232, 235 (S.D. 1995).
[¶ 9.] Resolution of this appeal is controlled by SDCL 61-1-11. That statute provides:
Service performed by an individual for wages is employment subject to this title unless and until it is shown to the satisfaction of the Department of Labor that:
(1) The individual has been and will continue to be free from control or direction over the performance of the service, both under his contract of service and in fact; and
(2) The individual is customarily engaged in an independently established trade, occupation, profession, or business.
SDCL 61-1-11. The burden initially lies with Division to prove that Dillman provided services to TAK for wages. Midland Atlas Co. Inc., 538 N.W.2d at 235. Wages are defined by SDCL 61-1-1(17) as: "all remuneration paid for services, including commissions and bonuses."
[¶ 10.] TAK acknowledges that it paid Dillman wages in the form of commissions. Thus, the burden shifts to TAK to prove that Dillman met both elements of SDCL 61-1-11. Midland Atlas Co. Inc., 538 N.W.2d at 235. Because Division does not seek review of the determination that Dillman was free from TAK's control over the performance of her work, the question of Dillman's status turns on whether at the time in question she was "customarily engaged in an independently established trade, occupation, profession, or business" pursuant to SDCL 61-1-11(2).
[¶ 11.] We have previously defined the terms employed in this provision:
The adverb `independently' clearly modifies the word `established', and must carry the meaning that the trade, occupation, profession or business was established, independently of the employer or the rendering of the personal service forming the basis of the claim. The present tense `is' indicates the individual must be engaged in such independent activity at the time of rendering the service involved. `Customarily' means usually, habitually, regularly. The language used contemplates that one engaged in an independently established trade, occupation, profession or business has a proprietary interest therein to the extent that he can operate it without hindrance from any individual whatsoever. An established business is one that is permanent, fixed, stable and lasting.
South Dakota Dep't of Labor v. Tri State Insulation Co., 315 N.W.2d 315, 316 (S.D.1982) (citing Vermont Securities v. Vermont Unemployment Comp. Comm'n, 118 Vt. 196, 104 A.2d 915, 917 (1954) (internal citations omitted)).
[¶ 12.] We have addressed this issue in a variety of contexts, including several actions involving salespersons. See, e.g., Moonlight Rose Co. v. South Dakota Unemployment Ins. Div., 2003 SD 96, 668 N.W.2d 304 (); Lake Preston Housing Corp. v. South Dakota Dep't of Labor, 1999 SD 5, 587 N.W.2d 736 (); Unemployment Liability of Shoppers Guide v. South Dakota Dep't of Labor, Unemployment Ins. Div., 1996 SD 92, 551 N.W.2d 584 (); Midland Atlas Co., Inc. 538 N.W.2d at 236 (); Appeal of Hendrickson's Health Care Serv., 462 N.W.2d at 655 (); Miller Liquid Feeds v. South Dakota Dep't of Labor, Unemployment Ins. Div., 340 N.W.2d 185 (S.D.1983)(affirming circuit court's determination that a corporation's salesmen were employees rather than independent contractors); Tri State Insulation Co., 315 N.W.2d at 319 (...
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...as the circuit court, to decide whether, in light of all the evidence, the findings are clearly erroneous. TAK Communications v. South Dakota Unemployment Ins. Div., 2007 SD 68, ¶ 8, 736 N.W.2d 840, 842. "`If after careful review of the entire record we are definitely and firmly convinced a......