Warburton v. Warkentin

Decision Date07 November 1959
Docket NumberNo. 41443,41443
Citation345 P.2d 992,185 Kan. 468
Parties, 79 A.L.R.2d 1114 D. L. WARBURTON, d/b/a Deluxe Cab Company, Appellee, v. R. L. WARKENTIN, State Labor Commissioner, Appellant.
CourtKansas Supreme Court

Syllabus by the Court

1. In an appeal from a judgment of the district court, reversing and setting aside a decision of the State Labor Commissioner holding the owner and operator of a taxicab company to be a liable employer under the Kansas Employment Security Law, the record is examined and under the facts, conditions and circumstances set forth in the opinion, it is held: (a) The relationship of employer and employee exists between the owner of the taxicab company and the drivers of his taxicabs within the meaning of the provisions of G.S.1957 Supp., 44-703(i) and (o), of the Kansas Employment Security Law (Following Read v. Warkentin, 185 Kan. 286, 341 P.2d 980); and (b) the order of the Labor Commissioner establishing the employer's liability for contributions as a contributing employer under the Kansas Employment Security Law, insofar as it applies retroactively, is invalid.

2. The Kansas Employment Security Law (G.S.1949, 44-701 et seq., as amended) is construed and held to reflect a legislative intention that the powers and jurisdiction of the State Labor Commissioner be continuing in nature.

3. The doctrine of res judicata does not ordinarily apply to decisions of administrative tribunals.

4. The doctrine of stare decisis is not generally applicable to decisions of administrative tribunals. An administrative agency may refuse to follow its prior ruling when its action is not oppressive or it does not act arbitrarily, unreasonably or capriciously.

5. An administrative determination in which is embedded a legal question open to judicial review does not impliedly foreclose the administrative agency, after its error has been corrected, from enforcing the legislative policy committed to its charge.

6. An administrative agency, charged with the protection of the public interest, is not precluded from taking appropriate action to that end because of mistaken action on its part in the past.

7. Where an employer operates pursuant to an order of the Labor Commissioner terminating his liability for contributions under the Kansas Employment Security Law, such Labor Commissioner having full knowledge of all the facts upon which the order was based, although erroneously concluding that the relationship of the employer to his taxicab drivers was one of independent contract, and a sucessor labor commissioner almost three years later changes the order with respect to such erroneous conclusion of law, giving it effect retroactively to include the years in which the employer was operating under the previous order, thereby assessing several thousand dollars in delinquent contributions with interest against the employer which could have the effect of wiping out his small business, such action on the part of the successor commissioner, insofar as the order is made retroactive, is oppressive. It is arbitrary, unreasonable and capricious.

Chas. H. Cory, Topeka, argued the cause and was on the brief, for appellant.

Clement H. Hall, Coffeyville, argued the cause and was on the brief, for appellee.

SCHROEDER, Justice.

This appeal, authorized by G.S.1949, 44-710b(c), is by the Labor Commissioner of the State of Kansas from a judgment of the district court of Montgomery County, Kansas, which reversed a decision of the State Labor Commissioner holding D. L. Warburton, d/b/a Deluxe Cab Company, to be a liable employer under the Kansas Employment Security Law. G.S.1949, 44-701 et seq., as amended.

Basically two questions are presented: (1) Whether the relationship of employer and employee exists between the appellee, D. L. Warburton, and the drivers of his taxicabs within the meaning of the provisions of G.S.1957 Supp., 44-703(i) and (o) of the Employment Security Law, and (2) whether the Labor Commissioner may issue an order establishing the appellee's liability for contributions as a contributing employer under the Kansas Employment Security Law retroactively.

The facts disclosed by the record, except for minor factual differences, are the same as those which confronted the court in Read v. Warkentin, 185 Kan. 286, 341 P.2d 980. In fact, counsel for the respective parties in the Read case (No. 41,438) and in the instant case (No. 41,443) joined in a motion to consolidate the two cases in this court. The motion to consolidate was denied on May 1, 1959. In such motion counsel for the respective parties disclosed 'that all except one of the major issues involved in each of said cases are the same.' Question No. 1 above was presented in the Read case but not question No. 2.

It is therefore unnecessary in the instant case to present the facts or review the law regarding question No. 1. The answer to this question is controlled by Read v. Warkentin, supra. Concerning this question we hold on the basis of the factual situation presented by the record herein, which is identical in all material respects to those presented in the Read case, that an employer-employee relationship existed between Warburton and the drivers of his taxicabs, and as a result Warburton is a liable employer under the Kansas Employment Security Law. Therefore, the conclusion of the trial court that the involved taxicab drivers were independent contractors is erroneous.

Only the facts necessary to dispose of the second question will be realted.

D. L. Warburton lived in Coffeyville, Kansas, and owned six automobiles which were driven as taxicabs in the city of Coffeyville. When Warburton started his operation in 1952, he made contributions under the Employment Security Law of the State of Kansas as a liable employer through voluntary election. He thus automatically became a liable employer for a minimum of two calendar years. G.S.1957 Supp., 44-711(a) and (c)(1).

In the process of administering the Employment Security Law contributing employers are called upon periodically by field representatives of the Employment Security Division. These field representatives make reports to the Topeka office. On June 22, 1953, A. L. Douglas, a field representative of the Employment Security Division, made a field visit to Mr. Warburton's place of business in Coffeyville. In his report to the Security Division he said in his comments and summary: 'Warburton has cut his regular employment to 3 with an occasional extra helper.'

Almost a year later, after another visit with Warburton, another field representative in his written report to the Employment Security Division stated: 'Mr. Warburton desires to terminate his liability effective Dec. 31, 1953. I furnished him with KUC 136. He promised to have KUC 136 in our office by June 1.'

The application (on form KUC 136 provided by the Employment Security Division) for termination of coverage was completed and subscribed and sworn to by Warburton on May 26, 1954, and filed with the then Labor Commissioner, P. G. Baird. In this application Warburton stated that during each calendar week during the calendar year 1953 the greatest number of employees he had in any single day in each of said weeks was three. The instructions on the reverse side of the application form supplied to Warburton by the Labor Commissioner include the following statement: 'After the application has been considered by this agency and the employment verified, one copy showing the Labor Commissioner's decision will be returned to you.' (Emphasis added.)

On June 8, 1954, Commissioner Baird passed on the application and issued his order terminating the liability of Warburton as a contributing employer. The notice of termination stated, among other things: 'This action terminates your legal liability for contributions on all wages paid in Kansas.' The order stated that the application had been 'Approved in accordance with Section 44-711(b) of the Kansas Employment Security Law.' Thus, as of December 31, 1953, the effective termination date, Warburton ceased to make contributions as a liable employer under the Kansas Employment Security Law. He continued his operations in the same location in Coffeyville, under the same name and in exactly the same manner, for the years 1954, 1955 and 1956. After Commissioner Baird had terminated Warburton's liability as a contributing employee, Warburton then communicated with the Internal Revenue Service in Wichita, Kansas, to determine whether he was required to withhold and remit federal income tax on the taxicab drivers, and whether he was required to pay federal unemployment tax on the cab drivers. On November 22, 1955, Lynn R. Brodrick, District Director, advised Warburton in writing that the Internal Revenue Service did not consider him a common law employer of taxicab drivers, and advised Warburton he had no liability to withhold income taxes or pay federal unemployment tax on the taxicab drivers.

By act of the 1955 session of the legislature (Laws of 1955, Ch. 251, § 1, now appearing as G.S.1957 Supp. 44-703[h]) coverage on employers of eight or more individuals was expanded to coverage on employers of four or more. As a result of this amendment the Kansas Employment Security Division made a routine check of employers who might be liable under the act as amended. Thus, on or about December 19, 1956, a routine inspection at Warburton's place of business was made for the year 1956 by Duane C. Koll, a field representative of the Kansas Employment Security Division to whom Warburton's file had been assigned. As a result of this inspection Warburton and his attorney were contacted by Mr. Koll about December 19, 1956, who contended that Warburton's taxicab drivers were his employees, thus making him liable as a contributing employer under the Kansas Employment Security Law. Warburton's records were complete and well kept. Mr. Koll admitted no one made any effort...

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