Travelers Equities Sales, Inc. v. Division of Employment Sec.

• Decision Date: 06 August 1996
• Docket Number: No. WD,WD
• Citation: 927 S.W.2d 912
• Parties: TRAVELERS EQUITIES SALES, INC., Appellant, v. DIVISION OF EMPLOYMENT SECURITY, Respondent. 51774.
• Court: Missouri Court of Appeals

Page 912

927 S.W.2d 912

TRAVELERS EQUITIES SALES, INC., Appellant, v. DIVISION OF EMPLOYMENT SECURITY, Respondent.

No. WD 51774.

Missouri Court of Appeals Western District.

Aug. 6, 1996.

Richard J. Zalasky, St. Louis, for appellant.

Alan J. Downs, Mo. Div. of Employment Security, St. Louis, for respondent.

Before LAURA DENVIR STITH, P.J., and ULRICH and SMART, JJ.

SMART, Judge.

This is an appeal from the Labor and Industrial Relations Commission affirming a ruling of an appeals tribunal holding that registered sales representatives of Travelers Equities Sales, Inc. are employees and not independent contractors under the Missouri Employment Security Law. Travelers Equities Sales, Inc. appeals, contending that the registered representatives are independent contractors under the Employment Security Law. The decision of the Labor and Industrial Relations Commission is reversed.

The Division of Employment Security ("the Division") determined that as of January 1, 1986, David K. Duren, Ronald G. Hebbeln, Raymond D. Santie, W.H. Snead, A.R. Tynon, G.C. Davis and all others similarly engaged as registered representatives performed services for "wages" in "employment" by Travelers Equities Sales, Inc. ("TESI") within the meaning of those terms as defined in §§ 288.034 and 288.036, RSMo 1986 and 1994. TESI appealed this determination to the appeals tribunal. The appeals tribunal issued a decision that the registered representatives are employees pursuant to § 288.034.5, RSMo 1986 and 1994. The referee succinctly set forth most of the key facts along with its findings:

The appellant is, and at all times pertinent to this decision has been, a registered broker/dealer regulated by the National Association of Securities Dealers (NASD) and the United States Securities Exchange Commission (SEC). It offers a variety of products such as mutual funds, limited partnerships, variable life annuities and managed accounts, through a network of registered representatives. It is the relationship between the registered representatives and the appellant that is at issue.

The registered representatives are insurance agents for Travelers Insurance Company who have taken the necessary steps to become licensed to sell the kinds of products offered by the appellant, and who have entered into an agreement with the appellant to do so. This agreement authorizes registered representatives to solicit customer applications and purchase orders for the appellant's products. The appellant remunerates the registered representatives for these services by way of commission.

The agreement requires the registered representative to remit immediately to the appellant all executed account documents, applications and orders along with the customer's check, which must be made out to the appellant or as directed by the appellant. The agreement prohibits the registered representative from soliciting any conditional orders for securities transactions without prior written approval of the appellant, and requires the applications or orders which may be set by the appellant. The agreement requires registered representatives to comply with rules and procedures set out in the appellant's financial services/securities handbook, with NASD rules, and with the acts and regulations administered by the SEC.

The agreement requires registered representatives to observe high standards of commercial honor and just and equitable principles of trade, to immediately report in writing to the appellant any complaint about the registered representative, to notify the appellant of any change in the registered representative's business and personal activity, to deliver to a customer at the time of a sales presentation any required then-effective prospectus, to successfully complete all appropriate examinations, and to solicit transactions only in jurisdictions where the registered representative is registered and licensed and where the appellant's products are approved for sale or use.

The agreement prohibits a registered representative from making representations directly or indirectly in solicitation of securities transactions except as are contained in a current prospectus or other authorized supplementary sales literature made available by the appellant, and prohibits a registered representative from soliciting business through mailings, advertisement or other media unless the content of any sales material used has been previously examined and approved by the appellant. The agreement requires the registered representative to maintain a separate file to keep and preserve copies of all correspondence concerning accounts and securities transactions solicited for the appellant, and requires the registered representative to make this file available for review at any time by the appellant or by authorities having jurisdiction. The agreement permits the registered representative to continue other employment with the appellant's prior knowledge except that no dual registration as a registered representative with another broker/dealer is permitted unless authorized by the appellant in writing and registered with NASD. In the event of termination of the agreement, which may be done unilaterally by either party at any time, the registered representative must surrender to the appellant any prospectuses, applications, forms, books, records, customer lists, or other materials or supplies furnished to the registered representative or created for the proper continuing maintenance and service of customer accounts.

Registered representatives typically perform their solicitation services at their insurance agency premises. They never perform such services at any of the appellant's premises. The appellant does not dictate the hours during which registered representatives are to perform solicitation services for the appellant's products. Registered representatives are required by the appellant to maintain a sufficient level of sales to justify the risk of violation of securities laws and regulations. The appellant supplies the registered representatives with certain business forms designed by the appellant to comply with the requirements of regulatory authorities, and registered representatives are required to use those forms. The appellant pays postage for transmittal of the required forms to the appellant. Solicitation materials and business cards used by the registered representatives are required to have the appellant's name on them. Until 1993, the appellant paid the licensure examination fee for registered representatives. The appellant pays license renewal fees for registered representatives, then bills the registered representatives for reimbursement unless certain product levels have been achieved, in which case such reimbursement is waived by the appellant. In accordance with NASD requirements, the appellant conducts annual face-to-face interviews with its registered representatives. The appellant also has its registered representatives complete a multi-page questionnaire addressing issues of compliance with regulatory authorities. The appellant might terminate the relationship with a registered representative for violations of securities laws and regulations or for failure to disclose customer complaints. The appellant bonds each registered representative, as required by NASD.

The appeals tribunal found that the sales representatives of TESI are employees for purposes of the employment security laws. Neither party challenges the factual recitation set out above. The Division, however, suggests there are other pertinent facts, which we discuss below. TESI filed an application for review with the Labor and Industrial Relations Commission ("the Commission") contending the appeals tribunal had erred in applying the law. The Commission affirmed the decision of the appeals tribunal, adopting the opinion. This appeal followed.

Standard of Review

This case is governed by Chapter 288, the Missouri Employment Security Law. In reviewing a decision of the Commission an appellate court may not substitute its judgment on factual matters for that of the commission. Section 288.210 provides that the Commission's findings of fact, if supported by competent and substantial evidence and absent fraud, shall be conclusive. Substantial evidence is evidence which has probative force on the issues, and from which the trier of facts can reasonably decide the case. Nettie's Flower Garden, Inc. v. S.I.S., Inc., 869 S.W.2d 226, 231 (Mo.App.1993). This court is not bound by the Commission's conclusions of law, including statutory interpretation. Division of Employment Sec. v. Hatfield, 831 S.W.2d 216, 218 (Mo.App.1992). It is the court's duty to interpret and determine the legislative intent of the Missouri Employment Security law. Division of Employment Sec. v. Labor & Indus. Relations Comm'n, 617 S.W.2d 620, 622 (Mo.App.1981). In this case, the facts are not disputed. Section 288.210, RSMo, Supp.1996, like § 287.495, RSMo 1994, provides that the reviewing court may grant relief only when 1) the commission acted without or in excess of its powers, 2) the decision was procured by fraud, 3) the facts found by the commission do not support the award, or 4) there was no sufficient competent evidence in the record to warrant the making of the award. In view of the fact that § 288.210, Supp.1996, and § 287.495, RSMo 1994, prescribe exactly the same grounds for the granting of relief on appellate review, we regard Davis v. Research Medical Center, 903 S.W.2d 557 (Mo.App.1995) as applicable to employment security decisions as well as worker's compensation decisions. In Davis, which dealt with review of worker's compensation decisions, we said:

Findings and awards of the Commission which are clearly the interpretation or application of the law, as distinguished from a determination of facts, are not binding on the court and fall within the court's province of independent review and correction where erroneous....