Wallis v. Secretary of Kansas Dept. of Human Resources, 55788

• Decision Date: 26 October 1984
• Docket Number: No. 55788,55788
• Citation: 689 P.2d 787,236 Kan. 97
• Parties: Vernon O. WALLIS, Kirby Vacuum Cleaner Co., Dodge City, Kansas, Appellee, v. SECRETARY OF KANSAS DEPARTMENT OF HUMAN RESOURCES, State of Kansas, Appellant.
• Court: Kansas Supreme Court

Page 787

689 P.2d 787

236 Kan. 97

Vernon O. WALLIS, Kirby Vacuum Cleaner Co., Dodge City Kansas, Appellee, v. SECRETARY OF KANSAS DEPARTMENT OF HUMAN RESOURCES, State of Kansas, Appellant.

No. 55788.

Supreme Court of Kansas.

Oct. 26, 1984.

Syllabus by the Court

1. Where the district court adopts the hearing officer's findings of fact in total, it is then limited by K.S.A. 44-710b(b) to considering questions of law.

2. Where the findings of the hearing officer and the Secretary of Human Resources are contrary to the evidence, it presents a question of law which is always open to review by the courts. In reviewing questions of law, the trial court may substitute its judgment for that of the agency, although ordinarily the court will give great deference to the agency's interpretation of the law.

3. An independent contractor is generally described as one who, in exercising an independent employment, contracts to do certain work according to his own methods, without being subject to the control of his employer, except as to the results or product of his work.

4. There can be no absolute rule for determining whether an individual is an independent contractor or an employee. It is the facts and circumstances in each case that determine whether one is an employee or an independent contractor.

5. The primary test used by the courts in determining whether the employer-employee relationship exists is whether the employer has the right of control and supervision over the work of the alleged employee, and the right to direct the manner in which the work is to be performed, as well as the result which is to be accomplished. It is not the actual interference or exercise of the control by the employer, but the existence of the right or authority to interfere or control, which renders one a servant rather than an independent contractor. Jones v. City of Dodge City, 194 Kan. 777, 402 P.2d 108 (1965).

H. Dean Cotton, Topeka, argued the cause and was on brief for appellant.

Eldon L. Ford, of Cosgrove, Webb & Oman, Topeka, argued the cause and was on brief for appellee.

LOCKETT, Justice:

This is an appeal from the District Court of Ford County. The trial judge reversed the findings and rulings of the Secretary of Human Resources and found certain persons selling vacuum cleaners were independent contractors rather than employees.

The plaintiff, Vernon O. Wallis (Wallis), is the proprietor of Kirby Vacuum Cleaner Co. (Kirby), Dodge City, Kansas. The Kansas Department of Human Resources (KDHR) conducted a hearing on December 21, 1981, to determine whether individuals who are dealers of Kirby Vacuum Cleaners were employees of Wallis or were independent contractors under K.S.A. 44-703(i)(1)(B) and K.S.A. 44-703(i)(3)(D). The hearing officer made findings of fact and determined that the dealers were employees and not independent contractors and that assessments of unemployment taxes made by the KDHR against plaintiff for such individuals were owed. Wallis requested a review by the Secretary of Human Resources (Secretary). The Secretary adopted the hearing officer's findings of fact and determined the individuals were employees of Wallis, not independent contractors.

Wallis petitioned for judicial review pursuant to K.S.A. 44-710b(b). The district court heard the matter on January 14, 1983, and issued a decision containing findings of fact and conclusions of law. The district court adopted the findings of fact of the hearing officer, and found the jurisdiction of the district court was confined to questions of law. The district court determined that the dealers were independent contractors, not employees under common law rules and statutory definitions, and accordingly abated the taxes collected.

The findings of fact adopted by the district court are:

"(1) Vernon O. Wallis hereinafter referred to as the appellant, is the proprietor of Kirby Vacuum Cleaner Company of Dodge City, Kansas performing services at 306 West Highway 56, Dodge City, Kansas. Mr. Wallis is a direct factory distributor of the Kirby Company including all accessories to the sweeper, customarily produced by such company. Mr. Wallis is the distributor for the western section of the State of Kansas.

"(2) Within the premises found at 306 West Highway 56, Dodge City, Kansas, are housed a service technician, an office for Mr. Wallis, and a display area wherein two secretaries perform the clerical function of the business. Incorporated within the duties of the secretaries is the sale of the product to those who might enter the premises to purchase the cleaner or accessories thereto on a retail basis.

"(3) Mr. Wallis is in the business of selling vacuum sweepers generally on a door-to-door basis within area of the distributorship. To accomplish the aforegoing, Mr. Wallis recruits through advertisements and by word of mouth potential 'dealers' to carry out the sale of vacuum sweepers within his distributorship. Prior to beginning the process of selling, dealers sign what is designated as an independent dealer agreement as set forth in Exhibit # 1 during the course of the hearing.

"(4) The newly associated dealers began a training course carried out by key personnel including Mr. Wallis, his son, Mr. Cole, and other experienced and qualified sales personnel. New dealers are oriented with the product and counselled with regard to beneficial sales techniques with reference to such product. New dealers are accompanied by more experienced dealers during the early course of their sales experience on a door to door basis. Each dealer receives 'a sales kit' from Mr. Wallis.

"(5) A 'sales receipt' is effectuated between the dealer and the distributor to provide the dealer with a vacuum sweeper to sell. The receipt requires the dealer to be responsible to the distributor for the machine and its value irrespective of damage or loss to the machine while in the keeping of the dealer. The dealers are expected to compensate Mr. Wallis for the machine within a 30 day period from the date the receipt is effectuated. The machine dispersed by Mr. Wallis may be returned if unsold.

"(6) Dealers in an effort to sell Kirby vacuum sweepers, are not compensated or reimbursed for expenses incurred nor do they receive a minimum salary or other fringe benefits save only what has been eluded to on page 69 and 70 of the transcript as a profit sharing plan provided by Mr. Wallis to his dealers. The profit sharing plan is to help compensate those who train other dealers as such new dealers will sell the product therein creating more revenue for dispersal among those who share within the plan. Dealers generally are free to establish their own hours of service and the territories they shall serve.

"(7) Dealers who are distributed to by Mr. Wallis are not responsible for the repossession of sweepers previously sold. Dealers are provided no office space to perform services within, and do not sell competing products. Dealers may negotiate the price of the product to the customer with the proceeds and the contract of sale to be reviewed for acceptance by the distributor, in this instance, Mr. Wallis, as set forth on page 19, line 6. Dealers do not service the equipment sold and must complete and process warranty cards prior to their receipt of the proceeds from the sale. All monies as herebefore set out are deposited with Mr. Wallis then dispensed back to the dealer subsequent to the three day waiting period required under Kansas Statutory Law for sales of this nature.

"(8) In Section 8 of the Independent Dealer Agreement as herebefore set out, are set forth the provisions of the time for which this agreement is entered into and the right of either party to cancel such agreement. Mr. Wallis, as a distributor, provides that within 30 days written notice the agreement may be terminated with a dealer and vice versa. The distributor may withhold the product to be sold by dealers as another avenue to terminate the agreement as herebefore set out. Mr. Wallis as set forth in line 23 of the transcript on page 28, further terminates the agreement in those instances wherein he finds the dealer to be not representative of the product or the product line as he shall 'let him go' with reference to a dealer who does not conform with the expectations of the distributor.

"(9) The dealer who sells Kirby vacuum sweepers on a door-to-door basis has not a business to offer for sale within the market place. The dealer must work through the distributor or other dispersing agents of the Kirby Company to obtain the product he or she sells to the customer."

After receiving the decision of the court dated January 27, 1983, but prior to the filing of the Journal Entry, KDHR filed a first Notice of Appeal on February 28, 1983. The Journal Entry was filed on May 9, 1983. On May 31, 1983, KDHR filed a second Notice of Appeal.

KDHR raises two issues:

1. Whether the district court applied the proper standard for a review of an administrative officer's findings of fact under K.S.A. 44-710b(b).

2. Whether the district court correctly determined the question of law based on the findings of fact.

The statutory provision granting judicial review of decisions rendered by the Secretary concerning tax assessments is K.S.A. 44-710b(b). The relevant part of the statute states that "In any proceeding under this subsection the findings of the secretary of human resources as to the facts, if supported by evidence and in the absence of fraud, shall be conclusive and the jurisdiction of said court shall be confined to questions of law."

The only case in which this section of the statute has been mentioned is Wesley Medical Center v. McCain, 226 Kan. 263, 597 P.2d 1088 (1979). The case actually dealt with the constitutionality of the Kansas Employment Security Act. The court held the Act did not violate either the due process or equal protection clauses of the 14th Amendment to the Constitution of the United States or ...