GP v. Administrator, Unemployment Compensation Act et al. (2015)

MEMORANDUM OF DECISION

These actions are appeals brought pursuant to General Statutes § 31–249b ¹ by the plaintiff, Kirby of Norwich,² from a grant of unemployment compensation benefits to Bryant Gardner and Rick Magee ³ (claimants) by the defendant, Administrator, Unemployment Compensation Act (Administrator).⁴  The present motions before the court are the Administrator's motions for judgment under each docket number.

The record reveals the following facts.  By decision issued on January 28, 2014, the Administrator ruled, pursuant to General Statutes § 31–241,⁵ that the plaintiff was engaged in an employer-employee relationship with the claimants and was liable to pay contributions under the Connecticut Unemployment Compensation Act. On February 7, 2014, the plaintiff appealed the Administrator's decision to the Office of Appeals Division.  By a decision issued on May 2, 2014, Associate Appeals Referee Elisabeth D. Lapidus (Referee), pursuant to General Statutes § 31–242,⁶ heard the claim de novo, made findings of fact, and affirmed the Administrator's ruling.  The plaintiff filed a timely appeal to the Board of Review (Board), and on July 9, 2014, pursuant to its authority under General Statutes § 31–249,⁷ the Board adopted the Referee's findings of fact, with some modification, affirmed her decision and dismissed the appeal.  The facts found in both of the present cases are nearly identical with regard to the actions of the plaintiff toward the employment of the claimants, and, because of this similarity, the claimants will be collectively referred to in this memorandum, while any individual differences will be highlighted where appropriate.  The findings of fact found by the Referee, and subsequently adopted and modified ⁸ by the Board, are as follows:

1. The claimant ․ worked for Kirby of Norwich from May 25, 2012, to September 2012, as an “independent dealer.”

2. The appellant is in the business of selling vacuum cleaners to consumer end users.

3. The claimant was a door to door sales person who made demonstrations at people's homes in an attempt to sell vacuum cleaners.

4. The appellant did not list the claimant as an employee.  The appellant treated the claimant as an independent contractor and provided the claimant with a Form 1099 reporting the payments made to the claimant for the services he provided.

5. The claimant sold Kirby vacuum cleaners to in home customers.  The appellant provided leads and appointments of customers for the claimant to contact.  The appellant utilized telemarketers to arrange these referrals.

6. The appellant provided training to the claimant at the beginning of his employment.  The appellant also provided ongoing training to the claimant each day.  All training was provided at the appellant's work place.  Attendance at the trainings was not mandatory.

7. The above trainings included operation of the equipment, explanation of features and benefits, providing documents for taking orders, and providing documents for financing orders with the appellant's finance company.

8. The trainings were educational and motivational.

9. The appellant limited the claimant to only selling products to consumers and users by in home demonstrations.

10. The appellant required the claimant to maintain and provide records by way of the warranty card.

11. The appellant supplied the demonstration equipment to the claimant without cost.

12. The appellant provided incentives and bonuses to the claimant.

13. The appellant paid the sales tax on the claimant's sales to customers.

14. The claimant billed the appellant to be paid for his services.  The claimant submitted an invoice by way of his contracts for sale.

15. While in the customer's home, the claimant was required to call the appellant's office as part of the negotiating of the price for the vacuum cleaners.

16. The claimant's only equipment was the vacuum cleaner supplied by the appellant.

17. The claimant relied upon a consigned vacuum cleaner of the appellant to generate substantially all of the revenue of this appellant.  The claimant's service was an integral part of the appellant's business.

18. The claimant utilized the appellant's credit supplier;  and the claimant's credit card company.  The appellant paid a [3 percent] fee to the credit card company for each such sale.  The point of sale by extension became the appellant's place of business.

19. The appellant set the profit margin for the sale of the vacuum cleaner.

20. The appellant had a seven day outside sales agreement with the claimant.  This agreement required the claimant [to] demonstrate a minimum of fifteen different individual qualified prospects during the seven day period;  and call the appellant from the customer's home to verify the demonstration in order to receive credit for the demonstration.

21. The whole sale price was set by the appellant.  The claimant had a retail price set by the appellant which was negotiable by calling the appellant to speak to a manager to get a better price.

22. The appellant delivered the vacuum cleaner to the customers.  The claimant was not involved in the delivery of the vacuum cleaner.

23. The claimant was not engaged in any other employment, trade, occupation or business other than selling vacuum cleaners for the appellant.  The claimant sold phones during his relationship with the appellant.  The claimant was never engaged in the sale of vacuum cleaners separate and apart from his relationship with the appellant.9

The plaintiff appealed the Board's decision to this court pursuant to § 31–249b.  The Administrator filed a motion for judgment which requested the dismissal of the plaintiff's appeal on the ground that the plaintiff failed to prove that the claimants were not employees for purposes of the Unemployment Compensation Act. The matter was heard on June 17, 2015.

Section 31–249b outlines the power of a reviewing court when deciding appeals of unemployment compensation decisions.  “To the extent that an administrative appeal, pursuant to General Statutes § 31–249b, concerns findings of fact, a court is limited to a review of the record certified and filed by the board of review.  The court must not retry the facts nor hear evidence.”  United Parcel Service, Inc. v. Administrator, 209 Conn. 381, 385 (1988).  “[The Superior Court] acts as an appellate court to review the record certified and filed by the board of review ․ The court is bound by the findings of subordinate facts and reasonable factual conclusions made by the appeals referee where ․ the board of review adopted the findings and affirmed the decision of the referee.”  (Citation omitted;  internal quotation marks omitted.)  Finkenstein v. Administrator, 192 Conn. 104, 112–13 (1984).

“If the appellant desires to have the finding of the board corrected, he or she must ․ file with the board a motion for the correction of the finding and with it such portions of the evidence as he or she deems relevant and material to the corrections asked for ․” Practice Book § 22–4.  A failure to file a timely motion for correction of a board's findings, in accordance with Practice Book § 22–4, prevents further review of those facts found by the board.  See JSF Promotions, Inc. v. Administrator, 265 Conn. 413, 422 (2003).  “If, however, the issue is one of law, the court has the broader responsibility of determining whether the administrative action resulted from an incorrect application of the law to the facts found or could not reasonably or logically have followed from such facts.  Although the court may not substitute its own conclusions for those of the administrative board, it retains the ultimate obligation to determine whether the administrative action was unreasonable, arbitrary, illegal, or an abuse of discretion.”  United Parcel Service, Inc. v. Administrator, supra, 209 Conn. 385–86.

The Unemployment Compensation Act (act) defines “employment” in General Statutes § 31–222(a)(1).¹⁰  “Besides codifying the common law rules used to determine the existence of an employer-employee relationship, the act was amended in 1971 to include the use of what is popularly known in Connecticut and throughout the country in similar legislation as the ABC test.  The ABC test is utilized to ascertain whether an employer-employee relationship exists under the act.  The ABC test is embodied in subdivisions (I), (II) and (III) of § 31–222(a)(1)(B)(ii) ․ In order to demonstrate that he is not an employer ․ a recipient of services must show that he has satisfied the criteria necessary to establish nonliability under all three prongs of the ABC test ․ The test is conjunctive;  all parts must be satisfied to exclude an employer from the Act.” (Citations omitted;  internal quotation marks omitted.)  Latimer v. Administrator, 216 Conn. 237, 245–47 (1990).

“Under the ABC test any service provided by an individual is considered employment, unless and until the recipient of the services provided has sustained the burden of showing to the satisfaction of the administrator that (I) such individual has been and will continue to be free from control and direction in connection with the performance of such service, both under his contract for the performance of service and in fact;  and (II) such service is performed either outside the usual course of the business for which the service is performed or is performed outside of all the places of business of the enterprise for which the service is performed;  and (III) such individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed ․” Id., 247.  “Whether one is an employee or an independent contractor is ․ a question of fact.”  F.A.S. International, Inc. v. Reilly, 179 Conn. 507, 513 (1980).  Further, “[t]he provisions of [§ 31–222 et seq.] shall be construed, interpreted and administered in such manner as to presume coverage, eligibility and nondisqualification in doubtful cases.”  General Statutes § 31–274(c).  The Board of Review in the present case held that the plaintiff did not satisfy Part C of the ABC Test, and therefore, the claimants' services constituted employment by the plaintiff.  For this reason, the court limits its review to whether the claimants' employment satisfied Part C of the ABC Test, codified at § 31–222(a)(1)(B)(ii)(III).

Part C of the ABC Test requires the plaintiff to prove that the claimants were “customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed ․” Section 31–222(a)(1)(B)(ii)(III).  “[T]he adverb ‘independently’ modifies the word ‘established’ and in that context, fairly construed, means that the trade, occupation, profession or business was established independently of the ‘employer’ ․ Moreover, such ‘independently established activity’ must be one in which the ‘employee’ is ‘customarily engaged.’  ‘Customarily’ has been said to mean ‘usually, habitually, regularly.’  ․ The use of ‘is,’ the present tense, shows that the ‘employee’ must be engaged in such independently established activity at the time of rendering the service which is the subject of inquiry.  An established business has been said to be one that is permanent, fixed, stable, or lasting.”  (Citations omitted.)  Daw's Critical Care Registry, Inc. v. Dept. of Labor, 42 Conn.Sup. 376, 407, 411 (1992), aff'd, 225 Conn. 99 (1993) (interpreting statutory language and ultimately concluding that nurses were not at risk of unemployment by plaintiff's conduct because they were customarily engaged in independently established professions which constituted a means of livelihood apart from their relationships with plaintiff).  “Such independent activity must exist separate and apart from the individual's relationship with the employer such that it will survive the termination of that relationship.”  (Internal quotation marks omitted.)  Labor & Logistics Management v. Administrator, Superior Court, judicial district of Hartford, Docket No. CV–09–4042142–S (October 3, 2012, Domnarski, J.) (54 Conn. L. Rptr. 822, 824) (citing F.A.S. International, Inc. v. Reilly, supra, 179 Conn. 515–16 (holding artists, writers, and photographers were not employees because they continued to work on free-lance basis in addition to teaching for plaintiff)).

Further, “[l]anguage in a contract that characterizes an individual as an independent contractor [rather than an employee] is not controlling.  The primary concern is what is done under the contract and not what it says ․ Such provisions in a contract are not effective to keep an employer outside the purview of the act when the established facts bring him within it.  [The court looks] beyond the plain language of the contract to the actual status in which the parties are placed.”  (Citations omitted;  internal quotation marks omitted.)  Latimer v. Administrator, supra, 216 Conn. 251–52.  “[A]n individual who is permitted under a contract for services to establish a business or perform additional services for third parties does not necessarily do so.”  (Emphasis omitted.)  JSF Promotions, Inc. v. Administrator, supra, 265 Conn. 420.  Therefore, “[t]he appropriate inquiry under Part C is whether the person engaged in covered employment actually has such an independent business, occupation, or profession, not whether he or she could have one.”  Labor & Logistics Management v. Administrator, supra, Superior Court, Docket No. CV–09–4042142–S (54 Conn. L. Rptr. 824).

On appeal, the plaintiff challenges the Board's conclusion of law that an employer-employee relationship existed between the claimants and the plaintiff, pursuant to General Statutes § 31–222(a)(1)(B)(ii)(III).  Specifically, the plaintiff challenges this conclusion on legal grounds, arguing that the Board's analysis of Part C was incorrect as a matter of law because the findings of fact and the applicable law establish that the claimants were customarily engaged in an independently established trade.  In its memorandum in support of its motion for judgment, the Administrator argues in response that the Board's conclusion that an employer-employee relationship existed between the plaintiff and the claimants was reasonable because the record contains evidence demonstrating that the claimants were not customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that of the service performed, and thus, the plaintiff did not satisfy Part C of § 31–222's ABC Test.

In its supplemental brief, the plaintiff argues that door-to-door vacuum sales is an independently established trade, based on the holding in Electrolux Corp. v. Danaher, 128 Conn. 342 (1941), and that the Administrator's interpretation of Part C of the ABC Test is too broad because sales people are skilled tradesmen, regardless of the product they are selling.  In response, the Administrator argues that the Electrolux Corp. case is inapplicable to the present case because it was decided based on what is now Part A of the ABC Test, rather than Part C, and because the record in the present case contains evidence that supports the conclusion that the claimants were not customarily engaged in an independently established trade, occupation, profession, or business of the same nature as selling vacuum cleaners.

The plaintiff cites Electrolux Corp. as support for its argument that vacuum cleaner sales people are considered to be independent contractors in Connecticut.  In Electrolux Corp., the Supreme Court held that the trial court did not err in finding that the plaintiff, a vacuum cleaner company, did not have general control over the means and methods of work of its vacuum cleaner sales representatives because the representatives could go where they wanted, they could spend as much or as little time using the plaintiff's suggested sales methods as they wished and they were not bound by any of the plaintiff's suggestions or directions beyond the terms of their contracts.  Electrolux Corp. v. Danaher, supra, 128 Conn. 349.  This case, while still good law, was decided in 1941 and under a different standard, before the General Assembly amended § 31–222 to include the ABC Test. Id., 342, 349.  That standard—whether the employer had the right of general control over the means and methods of work of the claimants—is currently covered under what is now known as Part A of the ABC Test:  “[the claimant] has been and will continue to be free from control and direction in connection with the performance of [the service in question], both under his contract for the performance of service and in fact ․” See § 31–222(a)(1)(B)(ii)(I).

In the present case, however, the Board decided that Part C of the ABC Test was not satisfied, and because all three prongs must be conjunctively satisfied in order to exclude the employer from the act, it did not analyze Parts A and B. While the court in Electrolux Corp. disposed of the defendant's argument that “the sales representatives were not engaged in an independent calling,” it did not analyze or apply Part C to the facts.  Electrolux Corp. v. Danaher, supra, 128 Conn. 349.  The court, therefore, cannot rely on the reasoning of Electrolux Corp. in deciding the present case because it does not address the part of the ABC Test at issue.

A more instructive case is Labor & Logistics Management v. Administrator, supra, Superior Court, Docket No. CV–09–4042142–S (54 Conn. L. Rptr. 822).  In Labor & Logistics Management, the court analyzed whether the Board erred as a matter of law in affirming the decision by the Administrator that fifty-three truck drivers were employees, and not independent contractors, of the plaintiff for purposes of the act.  Id. In reviewing the agency's decision, the court concluded that Part C “requires the subject [claimants] to be actively supplying the same kind of services to third persons in order to be considered independent contractors” because “[s]uch service to third persons ensures protection from unemployment” while “neither contractual freedom nor the possession of ordinary licenses ensures the same.”  Id. (54 Conn. L. Rptr. 825).  Further, the court reasoned that a key issue in the Part C inquiry is “whether [various] indicia or surrounding facts establish that the individual is customarily engaged in a category of service that is of the same nature as that involved in the services at issue.”  (Emphasis omitted.)  Id. Additionally, the court analyzed whether the claimants were using their driving skills to engage in an economic enterprise, such that they risked their own unemployment, rather than leaving their employment status in the control of their employer.  Id.

In the present case, the Board found no evidence that either claimant was engaged in the independent sale of vacuum cleaners before, during, or after his relationship with the plaintiff.  With regard to Gardener, the Board cited the plaintiff's owner and president, Vess Zaprianov's, testimony that “the claimant was employed in another field, selling phones.”  With regard to Magee, the Board cited Zaprianov's testimony that he was not aware of whether the claimant sold any products other than vacuum cleaners, that he did not know whether the claimant used a business card or otherwise advertised his services as a vacuum cleaner dealer, and, when asked whether the claimant worked for anyone else, said that the claimant worked for a church.  In both cases, the Board held that the mere fact that the claimants were otherwise employed—either selling phones or at a church—did not satisfy Part C because other employment does not demonstrate that the claimants were “customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed ․” § 31–222(a)(1)(B)(ii)(III).  Further, the Board held that the claimants' work, if any, selling phones or working at a church, did not constitute a business of the same nature as that of the service performed, which was selling vacuum cleaners.

The court notes at the outset that it is bound by the findings of fact adopted and modified by the Board because the plaintiff did not file a motion for the correction of the Board's findings.  Turning to the substance of the present case, the court affirms the Board's decision.  While the plaintiff argues that sales people are tradesmen and that the nature of the service performed is generally sales, not specifically the sale of vacuum cleaners, the record contains no facts demonstrating that either claimant was “customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.” § 31–222(a)(1)(B)(ii)(III).  Contrary to the plaintiff's arguments, Zaprianov's testimony seems to suggest that the claimants were employed elsewhere, not independent contractors risking their own unemployment by customarily engaged in the alleged independently established trade of sales that existed “separate and apart from the [claimants'] relationship[s] with the [plaintiff] such that it [would] survive the termination of [those] relationship[s].”  See Labor & Logistics Management v. Administrator, supra, Superior Court, Docket No. CV–09–4042142–S (54 Conn. L. Rptr. 824).  Furthermore, the record contains no facts that could allow the court to conclude that the sale of phones or working for a church constitutes business of the same nature as that of the sale of vacuum cleaners, especially in the absence of evidence that sales people are tradesmen.  Consequently, the court affirms the Board's decision that the plaintiff has not satisfied Part C of the ABC Test and that the claimants have an employer-employee relationship with the plaintiff.

The court concludes that the Board's decision was not unreasonable, arbitrary, illegal, or an abuse of discretion;  United Parcel Service, Inc. v. Administrator, supra, 209 Conn. 385–86.

CONCLUSION

Based on the foregoing, the Administrator's motions for judgment are granted and the plaintiff's appeals from the decisions of the Board are dismissed.

Seymour L. Hendel

Judge Trial Referee

FOOTNOTES

FN1. General Statutes § 31–249b states, in pertinent part, the following:  “At any time before the [Board of Review's] decision has become final, any party, including the administrator, may appeal such decision, including any claim that the decision violates statutory or constitutional provisions, to the superior court for the judicial district of Hartford or for the judicial district wherein the appellant resides.”.  FN1. General Statutes § 31–249b states, in pertinent part, the following:  “At any time before the [Board of Review's] decision has become final, any party, including the administrator, may appeal such decision, including any claim that the decision violates statutory or constitutional provisions, to the superior court for the judicial district of Hartford or for the judicial district wherein the appellant resides.”

FN2. Also known as GP Industries of Norwich, Inc..  FN2. Also known as GP Industries of Norwich, Inc.

FN3. Docket Numbers CV–14–5014761 and CV–14–5014762 are related cases involving the same parties, except that Gardner is the individual claimant involved in CV–14–5014761 and Magee is the individual claimant involved in CV–14–5014762.  The pleadings in both of these cases are nearly identical.  Because the cases are so related, the court will address both motions for judgment in this memorandum..  FN3. Docket Numbers CV–14–5014761 and CV–14–5014762 are related cases involving the same parties, except that Gardner is the individual claimant involved in CV–14–5014761 and Magee is the individual claimant involved in CV–14–5014762.  The pleadings in both of these cases are nearly identical.  Because the cases are so related, the court will address both motions for judgment in this memorandum.

FN4. There is a third defendant in both cases:  the Employment Security Appeals Division—Board of Review;  however, it is not a party to the present motions..  FN4. There is a third defendant in both cases:  the Employment Security Appeals Division—Board of Review;  however, it is not a party to the present motions.

FN5. General Statutes § 31–241 states, in pertinent part, the following:  “(a) The administrator ․ shall promptly examine the initiating claim and, on the basis of the facts found by him, shall determine whether or not such claim is valid and, if valid, the weekly amount of benefits payable and the maximum possible duration thereof.”.  FN5. General Statutes § 31–241 states, in pertinent part, the following:  “(a) The administrator ․ shall promptly examine the initiating claim and, on the basis of the facts found by him, shall determine whether or not such claim is valid and, if valid, the weekly amount of benefits payable and the maximum possible duration thereof.”

FN6. General Statutes § 31–242 states, in pertinent part, the following:  “Unless such appeal is withdrawn, a referee shall promptly hear the claim, de novo, and render a decision thereon.”.  FN6. General Statutes § 31–242 states, in pertinent part, the following:  “Unless such appeal is withdrawn, a referee shall promptly hear the claim, de novo, and render a decision thereon.”

FN7. General Statutes § 31–249 states, in pertinent part, the following:  “At any time before the referee's decision has become final ․ any party including the administrator, may appeal therefrom to the board.”.  FN7. General Statutes § 31–249 states, in pertinent part, the following:  “At any time before the referee's decision has become final ․ any party including the administrator, may appeal therefrom to the board.”

FN8. The Board's modifications are directly applied to the findings of fact cited in this memorandum..  FN8. The Board's modifications are directly applied to the findings of fact cited in this memorandum.

FN9. The court cited the Board's findings regarding Gardner above.  The Board's findings regarding Magee are essentially identical, except for number twenty-three, which states the following:  “The claimant was not engaged in any other employment, trade, occupation or business other than selling vacuum cleaners for the appellant.  The claimant did not sell any products other than vacuum cleaners.  The claimant did not use a business card or otherwise advertise services as a vacuum cleaner dealer.  The claimant was never engaged in the sale of vacuum cleaners separate and apart from his relationship with the appellant.”.  FN9. The court cited the Board's findings regarding Gardner above.  The Board's findings regarding Magee are essentially identical, except for number twenty-three, which states the following:  “The claimant was not engaged in any other employment, trade, occupation or business other than selling vacuum cleaners for the appellant.  The claimant did not sell any products other than vacuum cleaners.  The claimant did not use a business card or otherwise advertise services as a vacuum cleaner dealer.  The claimant was never engaged in the sale of vacuum cleaners separate and apart from his relationship with the appellant.”

FN10. General Statutes § 31–222(a)(1) states, in pertinent part, the following:“Employment,” subject to the other provisions of this subsection, means:(A) Any service, including service in interstate commerce, and service outside the United States, performed under any express or implied contract of hire creating the relationship of employer and employee;(B) Any service performed ․ by ․ (ii) any individual who, under either common law rules applicable in determining the employer-employee relationship or under the provisions of this subsection, has the status of an employee.  Service performed by an individual shall be deemed to be employment subject to this chapter irrespective of whether the common law relationship of master and servant exists, unless and until it is shown to the satisfaction of the administrator that (I) such individual has been and will continue to be free from control and direction in connection with the performance of such service, both under his contract for the performance of service and in fact;  and (II) such service is performed either outside the usual course of the business for which the service is performed or is performed outside of all the places of business of the enterprise for which the service is performed;  and (III) such individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed ․.  FN10. General Statutes § 31–222(a)(1) states, in pertinent part, the following:“Employment,” subject to the other provisions of this subsection, means:(A) Any service, including service in interstate commerce, and service outside the United States, performed under any express or implied contract of hire creating the relationship of employer and employee;(B) Any service performed ․ by ․ (ii) any individual who, under either common law rules applicable in determining the employer-employee relationship or under the provisions of this subsection, has the status of an employee.  Service performed by an individual shall be deemed to be employment subject to this chapter irrespective of whether the common law relationship of master and servant exists, unless and until it is shown to the satisfaction of the administrator that (I) such individual has been and will continue to be free from control and direction in connection with the performance of such service, both under his contract for the performance of service and in fact;  and (II) such service is performed either outside the usual course of the business for which the service is performed or is performed outside of all the places of business of the enterprise for which the service is performed;  and (III) such individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed ․

Hendel, Seymour L., J.T.R.