CALIFORNIA EMPLOYMENT STABILIZATION COMMISSION v. NORINS REALTY CO (1946)

Plaintiff instituted this action for the collection of unemployment contributions and interest alleged to be due from defendant for the period commencing January 1, 1936, to and including December 31, 1937. By its answer defendant corporation denied that it was an employer with respect to certain of the individuals in connection with whom contributions were sought to be collected. Following trial of the action, judgment was rendered in favor of the defendant. From such judgment plaintiff prosecutes this appeal.

By its findings of fact the trial court determined that the individuals whose services to defendant are involved in this appeal ‘were not employees of said defendant, but * * * were in truth and in fact independent contractors.’

The facts are not in dispute, and may be summarized as follows: Defendant was a corporation engaged mainly in the sale of real estate owned by it. In order to carry on this business defendant engaged the services of certain individuals whom it admitted to be its employees. In addition to these, defendant engaged the services of about sixty-nine real estate salesmen and brokers, who sold the property of the corporation. It is with this group alone we are here concerned. The method of operation by both the real estate salesmen and the brokers performing services for the defendant was identical. With but few exceptions, defendant sold its own property, and for a time also sold insurance. Defendant's holdings consisted principally of subdivision property, and the salesmen and brokers selling it were licensed by the California Real Estate Commission to defendant corporation. Asked regarding the conversation had with salesmen and brokers who were employed, John W. Dewey, secretary-treasurer of defendant corporation, testified that such conversation was substantially as follows: ‘Well, that he would be paid commissions the same as the other agents on the same basis for the sale of the property we were selling at that time, which we own near Lake Arrowhead, and the price we asked for the property.’ Each salesman and broker signed a contract with reference to his services. With reference to their operations, the record discloses that the salesman or broker would take his prospects to respondent's office, display pictures of the property to them, and would receive 25% of the sales price as his commission. Defendant furnished the salesmen with pictures of the property and business cards showing defendant's name. Some of the salesmen and brokers used the defendant's telephone service, usually without charge, and with reference to one of the salesmen defendant's sales manager urged her to ‘hustle up on her sales a little bit’; salesmen were asked to attend sales meetings, and were given a price list of the properties by defendant. In some cases the salesmen did not close the sale, but other persons in defendant's office would take the clients to view the property. The salesmen were furnished with price lists of the property to be sold, and in each case there was an agreement with regard to the amount of commission. At times advances were given to the salesmen from the defendant's funds and bookkeeping entries thereof made on defendant's records. The contract blanks to be used by salesmen were furnished them by the defendant. Salesmen were instructed not to make any misrepresentations.

There was introduced in evidence an ‘employment card,’ in which the salesman agreed to abide by certain regulations appearing thereon when he accepted employment with the defendant. The salesmen were not furnished with office space, desk space, or transportation. They were not given report forms which they were required to fill out. The salesmen were not restricted to any particular territory and were not required to devote any particular time to the business or produce a minimum volume of business, nor were they confined to fixed hours of employment. No surety bonds were furnished by the salesmen, nor were the names of prospective customers furnished to them. In the event inquiry was made at the office of the corporation concerning property, this information would be given to the salesman who might be around at the time. Defendant did not bear any part of the expense incurred by the salesmen in their selling activities, nor were any instructions given to them as to the manner in which the sales were to be made. The defendant did not carry workmen's compensation insurance on the salesmen and had never done so.

The question in the case is whether or not the real estate salesmen and brokers performing the aforesaid services were ‘in employment’ of defendant as that term is defined in the California Unemployment Insurance Act, Stats.1935, ch. 352, p. 1226, the pertinent and applicable provisions of which read as follows: ‘Sec. 7. ‘An employment,’ means any employment by an employer * * *.'

In 1937 the definition of the term ‘employment’ was changed by section 6.5 of the act to read in part as follows: “Employment,' subject to the other provisions of this act, means service, including service in interstate commerce, performed for wages or under any contract of hire, wirtten or oral, express or implied.' St.1937, p. 2052.

In the case at bar we are dealing with an express statute declaratory of the social policy of the state and designed to implement such social or economic policy to the end that the evil social effects of unemloyment may be avoided. B. P. Schulberg Productions, Ltd., v. California Employment Commission, 66 Cal.App.2d 831, 153 P.2d 404. It therefore becomes the duty of the courts to so construe it as to accomplish its objects and overcome the evil results of excessive unemployment. Respondent's reliance upon cases decided under workmen's compensation and bankruptcy statutes is unavailing, because, as said by this court in B. P. Schulberg Productions v. California Employment Commission, supra, 66 Cal.App.2d at page 834, 153 P.2d at page 406, ‘That the legislature did not intend to incorporate in this measure the common law concept of master and servant or the definitions of ‘employment’, ‘service’, ‘employee’ and ‘wages' as contained the Labor Code * * * and the Workmen's Compensation Act * * * is evidenced by the fact that the statute itself contains definitions of the words ‘emloyment’ and ‘employer’, both of which definitions are hereinbefore set forth. When the meaning to be given to particular terms is prescribed by the legislature in enacting a statute, that meaning is binding upon the courts. In re Monrovia Evening Post, 199 Cal. 263, 270, 248 P. 1017; Rideaux v. Turgrimson, 12 Cal.2d 633, 637, 86 P.2d 826. We must not, therefore, use the words defined in the statute according to their rigid, precise or dictionary meanings, but rather as defined by the act itself, which evidences a legislative intent to give the words a broad and liberal description to the end that the far-reaching and evil effects of excessive unemployment may be eradicated. The broad language of the definitions contained in the statute leaves no doubt that the application of the act is to be broadly determined rather than by any narrow, technical, or even previously established legal definitions or descriptions.'

While the occupation of real estate salesman is one that might come under the classification of either employee or independent contractor, the determination of which category it falls within depends upon the facts of the particular case. In the recent case of Empire Star Mines Co. v. California Employment Commission, 168 P.2d 686, 692, the Supreme Court said: ‘The relationship contemplated by the legislation as the basis of the requirement for contributions is that of employer and employee; a principal for whom services are rendered by an independent contractor does not come within the scope of its provisions. Garrison v. State of California, 64 Cal.App.2d 820, 824, 149 P.2d 711; see California Emp. Comm. v. Bates, 24 Cal.2d 432, 150 P.2d 192; California Emp. Comm. v. Los Angeles, etc., News Corp., supra [24 Cal.2d 421, 150 P.2d 186]. * * * Other factors to be taken into consideration are (a) whether or not the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee. Rest., Angency, § 220; Cal.Ann. § 220.’

Bearing in mind the foregoing rules enunciated by the Supreme Court for determining the distinction between the status of independent contractor and that of employee, we find in the record before us conclusive evidence of the right of the employer to exercise complete and authoritative control over the manner in which the work of the employee was to be done. It is the existence of such control and not the extent of its exercise that is controlling. Plaintiff's Exhibit 1, introduced at the trial, was a form of ‘employment card,’ issued to the salesman, reading as follows:

‘I, the undersigned, hereby accept employment, as salesman, with the Norins Realty Co., Inc., Realtors.

‘I agree to abide by all the rules and regulations as set forth by the officers of the company.

‘Any dispute that may arise as to commissions, whether as to amount, or as to a division with another salesman, or as to how said commission shall be paid, I agree to let the judgment of the company decide.

‘In the event that it is necessary to make a refund to a customer, I agree that the amount of the refund may be deducted from my contingent commissions, if any, or to reimburse the company amount of said refund. The company is to be the judge as to whether or not refund is made.

‘I agree to turn over all checks and money received in payment on sales to the company. Commissions on sales shall be the basis of compensation, payable on Saturday of each week.

‘In consideration therefore I agree to devote my whole time and energies to further and effect sales of North Albuquerque Acres and other properties of Norins Realty Co., Inc., and I agree to make no statement or representation not contained in the literature published by the company.

‘The kit, maps, etc., supplied me by the company is loaned and remains the property of the Norins Realty Co., Inc., and I agree to return it on demand or reimburse the company therefor.’

It would be difficult to conceive of an agreement reflecting more complete or authoritative control of the employer over the employee than is contained in the foregoing document.

The employer was also clothed with the right to discharge the employee and terminate his services at will and without cause, which is strong evidence in support of an employer-employee relationship. The employee possessed the right to end his services whenever he desired to do so. It is axiomatic that while an employee may quit, an independent contractor is legally obliged to complete his contract. That the salesmen had no freedom of action as to the means and methods for accomplishing the result of their services is at once apparent from the conditions of their employment wherein they agreed to ‘abide by all the rules and regulations as set forth by the officers of the company.’ Each salesman also agreed ‘to devote my whole time and energies to further and effect sales of * * * properties of Norins Realty Co., Inc.’ Can there be any question as to what would have happened should a salesman ignore or refuse to obey the ‘rules and regulations as set forth by the officers of the company’? In addition, the contract authorizes the defendant to enforce its ‘rules and regulations' by the ever-present right to discharge the salesman. Could there be any doubt as to what would have happened if in the judgment of its officers the salesman refused a request, for instance, to attend a sales meeting or do as he agreed and devote his ‘whole time and energies to further and effect sales'?

While the respondent company did not concern itself with how the salesman conducted his business so long as the results were satisfactory, nevertheless, whether or not the respondent company exercised its authority with respect to all duties of the salesmen, it was possessed of the right to exercise complete control.

The instrumentalities and the place of work were supplied for the persons doing the work, viz., contract blanks, kits, maps, pictures, etc., and use of the company's office. The services were performed in furtherance of the business the company was engaged in. Its present function was the selling of real estate. While respondent company did not control at all times the place where the original solicitation occurred, it did control the place to which the salesmen brought their prospects and from which they were taken by other persons in respondent company's office to view the property in which the salesmen had interested them.

In the instant case appellant urges that the salesmen here in question were all licensed as real estate salesmen at the request of and under the employment of respondent. The California Real Estate Act, Deering's Gen.Laws, Act 112, Stats.1919, p. 1252, now sec. 10000 et seq., Business & Professions Code, made it unlawful to engage in the business of real estate broker or real estate salesman without first obtaining a license and fulfilling certain other requirements. Section 2 of the act defined a real estate broker as one ‘who, for a compensation, sells or offers for sale, * * * lists, or solicits for prospective purchaser, or negotiates the purchase or sale or exchange of real estate * * * for another or others.’ (Emphasis added.) A real estate salesman was defined in part as one ‘who for a compensation is employed by a licensed broker to sell, or offer for sale * * * real estate.’ (Emphasis added.) Section 9 provided that an application for a license as real estate salesman ‘shall be accompanied by the recommendation of his employer, if employed, certifying that the applicant is honest, truthful and of good reputation, and recommending that the license be granted to the applicant.’ Section 18 of the act made it unlawful for any real estate salesman to ‘be employed by or accept compensation from any person other than the broker under whom he is at the time licensed.’

Pursuant to the provisions of the act, respondent company, in signing its salesmen's applications for a license, executed the following certificate to the State Real Estate Division:

‘Certificate of Employer Recommending Salesman

‘I Hereby Certify, that I am a licensed Real Estate Broker; that upon investigation I have ascertained that the person named in this application for a Real Estate Salesman License is honest, truthful and of good reputation. I request the Division of Real Estate to issue to said applicant a license as Real Estate Salesman in my employ, and if a license is issued I will exercise a careful supervision over his real estate activities while so employed.’

While it is true that respondent when selling its own property could not strictly be classified as a broker because section 2 of the act makes one a broker only when performing the enumerated services ‘for another or others', nevertheless it was conceded that respondent was a licensed broker, had made sales of property other than its own, and procured real estate salesman's licenses for the salesmen with whom we are here concerned, certifying to the state Division of Real Estate that as the employer of each of such salesmen respondent would ‘exercise a careful supervision over his real estate activities while so employed.’ Furthermore, by the provisions of the act the salesmen were prohibited from being employed by or accepting compensation from any person other than the respondent company under whom such salesmen were licensed. In other words, these salesmen under the law could work only for respondent under a license procured by it for them. Possessed as respondent was of the right to discharge a salesman at will, without cause, and burdened with the duty to ‘exercise a careful supervision over his activities while so employed,’ the only reasonable inference that can be deduced is that the salesmen were subject to the control of responent company.

In the case of Lowmiller v. Monroe, Lyon & Miller, Inc., 101 Cal.App. 147, 151, 281 P. 433, 282 P. 537, a situation somewhat similar in its factual background to that confronting us in the instant case concerning the status of real estate salesmen was presented. In the cited case the court said: ‘In the case at hand Clark, Black and Friedman were all licensed as real estate salesmen at the request of and under the employment of the appellant herein. Their licenses were issued by the state real estate commissioner under the provisions of the act of 1919 (St.1919, p. 1252), and any attempt to create for them the status of independent contractor or broker would have been in violation of the penal provisions of that act.’

In Empire Star Mines Co., Ltd., v. California Employment Commission, supra, the factors to be taken into consideration in determining whether one who performed services for another is an employee or an independent contractor are set forth as hereinbefore narrated. Those principles, as well as those contained in Twentieth Century Lites, Inc., v. California Dept. of Employment, Cal., 68 P.2d 699, and Briggs v. California Employment Commission, Cal., 168 P.2d 696 are determinative of the present controversy. Upon the authority of and for the reasons stated in the three cases just cited, it must be held as a matter of law under the uncontradicted evidence herein that as between respondent and the salesmen with whose status we are here concerned there existed an employer-employee relationship within the meaning of the California Unemployment Insurance Act.

For the foregoing reasons, the judgment is reversed.

I dissent.

It is my opinion that the California Real Estate Act can not be considered for the purpose of determining who are employees under the California Unemployment Insurance Act. Neither by such test, nor by any test, am I satisfied that these real estate agents were employees in any sense, and in particular, employees for ‘wages' within the meaning of the latter act.

WHITE, Justice.

YORK, P. J., concurs.