Unemployment Compensation Dept. v. Hunt

• Decision Date: 19 March 1943
• Docket Number: 28906.
• Citation: 135 P.2d 89,17 Wn.2d 228
• Court: Washington Supreme Court
• Parties: UNEMPLOYMENT COMPENSATION DEPARTMENT v. HUNT.

135 P.2d 89

17 Wn.2d 228

UNEMPLOYMENT COMPENSATION DEPARTMENT v. HUNT.

No. 28906.

Supreme Court of Washington

March 19, 1943

Department 1.

Proceeding in the matter of the Unemployment Compensation Department of the State of Washington against Paul John Hunt, employer, for the assessment of contributions to the Unemployment Compensation Fund from January 1, 1940, to and including June 30, 1941, in the sum of $337.93. From a judgment affirming the order of the commissioner, holding that the assessment levied against the employer in the sum of $337.93 was just and correct, the employer appeals.

Judgment affirmed.

Appeal from Superior Court, King County; J. T Ronald, Judge.

Lewie Williams and Frederick R. Burch, both of Seattle, for appellant.

Smith Troy, George W. Wilkins, John F. Lindberg, and Frank W Foley, all of Olympia, for respondent.

STEINERT Justice.

This is an appeal by an employer from a judgment of the superior court for King county which affirmed an order of the division of unemployment compensation and placement determining the amount of contribution due and owing from the employer to the unemployment compensation fund.

The original proceeding was initiated by the commissioner of unemployment compensation and placement, respondent herein, who, pursuant to the provisions of the unemployment compensation act (Chapter 162, Laws of 1937, as amended by chapter 214, Laws of 1939, and by chapter 253, Laws of 1941, Rem.Rev.Stat. § 9998-101 et seq., and Rem.Supp.1941, § 9998-103a et seq.) issued and caused to be served upon Paul John Hunt, hereinafter referred to as the employer or as appellant, an order and notice of assessment demanding payment of delinquent contributions due the unemployment compensation fund for the period from January 1, 1940, to and including June 30, 1941, in the sum of $337.93.

The employer duly filed a petition for a formal hearing of the matter Before the commissioner, alleging in his petition that the assessment is unjust and incorrect as to every part thereof, for the following reasons: (1) That under§ 19(f)(1) of the 1937 unemployment compensation act (which is still in effect and appears as Rem.Supp.1941, § 9998-119f(2)(a), he was not, at the time here involved, an employer, because never at any time had he employed eight or more individuals; (2) that he did not come within the provisions of § 19(g)(5) of the act (also still in effect and appearing as Rem.Rev.Stat. (Sup.) § 9998-119(g)(5), because the employees here concerned were not subject to his direction or control, but performed their services away from all of his places of business and, severally, had an established trade, occupation, profession, or business of the same nature as that covered by their respective agreements of service with him; (3) that he is exempt from contribution under the act because no profit inures to him or to anyone connected with his business; and (4) that he is exempt, under the provisions of § 19(g)(6) of the §937 act as amended by Laws of 1939, chapter 214, § 16, and now appearing as Rem.Supp.1941,§ 9998-119g(6)(ix), relating to services performed by solicitors whose compensation is on a commission basis.

Pursuant to the provisions of the unemployment compensation act, the commissioner assigned the matter to an appeal examiner, who, after a hearing, made findings of fact and rendered his decision. These findings are accepted by the appellant as being 'very fair and complete.' We state them at length, as follows:

Appellant, operating as an individual, is engaged in drilling test wells for gas and oil in the state of Washington. In connection therewith he is engaged in selling to residents within the state leasehold interests, under authority issued to him by the director of licenses, pursuant to chapter 110, Laws of 1939. He is required to use sixty-five per cent of the gross proceeds from such sales for the drilling of test wells, and the balance thereof is used for overhead expenses, such as commissions and office rent.

In order to distribute leases to the public, appellant engages the services of individuals under oral agreements to act as salesmen for him. These salesmen receive fifteen or twenty per cent commission on the gross amount of sales as remuneration for their services.

To engage in the selling of leases, it is necessary that the salesman obtain a license from the state director of licenses. Such license is issued to an otherwise qualified applicant upon a showing that he has been appointed as agent by the principal to represent and act for him in negotiating or soliciting for the sale of leases or in taking subscriptions therefor.

The activities of the Salesmen are restricted to the state of Washington. Each salesman is supplied with a prospectus describing the proposition and is instructed and required to follow the prospectus in his sales talks, especially with regard to the speculative nature of the enterprise.

The salesmen are not required to devote any specified amount of time to the business and may report to appellant's office regularly or not, as they wish. It is optional with them whether they shall attend the weekly lecture meetings held by the appellant. No part of their expenses is paid by the appellant and they may engage in other activities.

The salesmen are furnished with the names of prospects, on whom they may call if they so desire. If they make a call, they are required to note that fact on the prospect's card when it is returned to the office. No individual desk space is provided for the salesmen but they are allowed to use the office telephone. The appellant may discharge a salesman if at any time he is dissatisfied with his services, and the salesman likewise may quit whenever he wishes.

In some instances, the salesmen here involved had other interests. One of them sold real estate and insurance, and another one was a contractor. None of them, however, engaged in selling oil or gas leases for anyone other than the appellant.

On the basis of certain information presented in a questionnaire by one of appellant's salesmen, the collector of internal revenue at Tacoma ruled that there was not such a degree of direction and control by the appellant over the salesman's services as to establish the relationship of employer and employee, and that the commissions paid were therefore not subject to the taxes imposed under the provisions of the federal income contributions act or the federal unemployment tax act.

Upon request made by the appellant for a ruling by the state tax commission, appellant was held not to be engaged in a taxable activity under the revenue act of 1935, Laws 1935, c. 180, as amended by chapters 9 and 225, Laws of 1939. Exemption was accordingly granted by the tax commission upon a showing that no profit was involved in the sale of the leases and that there would be no profit unless and until gas or oil is found in commercial quantities.

From these findings, the appeal examiner concluded that appellant did not come within the exemptions prescribed by § 19(g)(6)(ix), excluding from the coverage of the act the services performed by solicitors compensated by commissions; that appellant was not exempt from contributions by virtue of § 19(g)(6)(v), now appearing as Rem.Supp.1941, § 9998-119g(6)(v), relating to charitable, scientific, literary, or educational organizations where no part of their earnings inures to the benefit of any private shareholder or individual; that the mere fact that profits were not immediate or certain was not sufficient to bring appellant within the exemption of the last mentioned section of the act; that appellant's salesmen performed services for him pursuant to their contracts and were compensated by commissions, constituting remuneration within the meaning of § 19(g)(5); that appellant had the right to control and direct the performance of the salesmen's services; that the services rendered by the salesmen were not outside the usual course of appellant's business, and were performed in part in appellant's office; that none of the salesmen was customarily engaged in an independently established business of the same nature as that involved in his contract of service with appellant; that the ruling of the internal revenue collector, referred to above, is not binding on the respondent; and that the services performed by appellant's salesmen constituted employment within the purview of § 19(f)(1).

It may be added that the parties stipulated at the hearing Before the appeal examiner that in the event the salesmen were held to be in 'employment,' appellant would be a liable employer under § 19(f)(1) for the years 1940 and 1941.

Upon these findings, stipulation, and conclusions, the appeal examiner rendered his decision holding that the assessment levied against appellant in the sum of $337.93 for the period stated is just and correct, and that the commissioner is entitled to recover that amount.

Upon receipt of notice of the decision made by the appeal examiner, appellant petitioned for a review by the commissioner. The petition was based upon the following grounds: (1) that, by the direction of the department of licenses, appellant is forbidden to make a profit; (2) that by the order of assessment, he is denied privileges accorded to insurance companies who employ solicitors on commission; (3) that the unemployment compensation act is discriminatory in that it accords privileges to insurance companies which are denied to him; (4) that appellant's business is not a private concern operated for profit, but is under strict supervision by the state, forbidding him to earn profits; (5) that his salesmen are not subject to his control, but conduct all their negotiations outside of his office,...