TO BE PUBLISHED
KENTUCKY UNEMPLOYMENT
INSURANCE COMMISSION
AND
DIVISION OF UNEMPLOYMENT INSURANCE APPELLANTS
APPEAL FROM COURT OF APPEALS
1999-CA-2265
FRANKLIN CIRCUIT COURT NO. 1997-CI-0521
LANDMARK COMMUNITY NEWSPAPERS
OF KENTUCKY,INC. ;RONALD WARNER
AND LEONARD FAULKNER APPELLEES
OPINION OFTHE COURT BY JUSTICE STUMBO
REVERSING
The Kentucky Unemployment Insurance Commission (Commission) and the
Division of Unemployment Insurance (Division), the appellants herein, bring the
following action before this Court on review seeking reversal of the Court of Appeals'
judgment below. The Commission determined that the newspaper carriers of
Landmark Community Newspapers of Kentucky (Landmark), the appellee herein, were
employees performing services in covered employment for unemployment insurance
purposes. The Franklin Circuit Court upheld that determination . The Court of Appeals
reversed and held that the carriers were independent contractors. The primary issue
that we must determine today is whether Landmark's newspaper carriers should be
considered independent contractors or employees for purposes of unemployment
insurance benefits.
I . Factual Background
Landmark owns and operates numerous Kentucky community newspapers,
including the Kentucky Standard of Bardstown. Landmark hires individuals to work as
carriers in order to deliver its newspapers to subscribers on various designated routes .
If a person desires to be hired as a newspaper carrier, Landmark requires that person
to sign a "Delivery Agent" agreement, which supposedly makes the newly-hired
individual an independent contractor, instead of an employee. The boilerplate language
of the agreement specifies that the carrier is to install hooks or tubes on designated
routes for delivery of Landmark's newspapers. The newspapers are never to be placed
in or around the mailbox. It is also the responsibility of the carrier to replace or repair
the hooks or tubes. The agreement further specifies that the carrier must keep the
newspaper dry, and if the weather report calls for showers, then each newspaper must
be placed in a plastic bag. The carrier must also deliver copies of the weekly "Extra"
section of the newspaper to non-subscribers on routes designated by Landmark. In
addition,thecarriermusthave all ofthenewspapersdeliveredbyno laterthan 7 :00
a.m . on the day of publication. If subscribers are not pleased with the manner in which
the newspaper is delivered by the carrier or if the newspaper is not timely delivered,
then subscribers complain directly to Landmark. Landmark keeps records of
complaints received and informs the carrier regarding any complaints . Landmark also
has its carriers place newspapers in coin boxes in various locations for public sale.
The agreement further provides that either the carrier or Landmark can terminate
the agreement for any reason upon thirty (30) days written notice. However, Landmark
mayterminateacarrierforanyreasonwithoutnotice ifheorshefailstomeetany
conditionoftheagreement.Thecarriersarepaidonaweeklybasisat$.07per
newspaper and "Extra" section delivered . Landmark issues 1099 tax forms to the
carriers it views as independent contractors. The carriers are paid no fringe benefits of
any sort, and each carrier must furnish his or her own transportation in order to make
deliveries along the routes designated by Landmark.
This matter began approximately six years ago when two former newspaper
delivery persons, Leonard Faulkner and Ronald Warner, filed claims for unemployment
insurance benefits . Landmark terminated the contracts of both Faulkner and Warner in
1996. Following these contract terminations, both men filed their respective claims for
unemployment insurance benefits. In response to said claims, the Division assigned an
auditor to conduct an appropriate investigation of those claims, and other delivery
persons that Landmark claimed as contract labor. The Division found Faulkner,
Warner, and twenty-one (21) other individuals were employees and not independent
contractors forunemployment insurancepurposes.
Following the Division's finding, Landmark brought an appeal before the
Commission . The Commission conducted a full evidentiary hearing, upheld the
Division's finding, and concluded that Landmark's newspaper delivery persons were
employees that performed services in covered employment for unemployment
insurancepurposes. Inreaching itsfinaldecision,theCommissionconsideredfactors
setforth inRestatement(Second)ofAgency§220(1958).
Next, Landmark appealed the Commission's order to the Franklin Circuit Court.
The circuit court affirmed because it held that the Commission's decision was
supported by substantial evidence from the record and was based on a correct
interpretation of applicable law. Once again, Landmark appealed and sought review in
theCourtofAppeals.TheCourtofAppealsconcludedthattheCommission'sdecision,
which held that the newspaper carriers were employees, was erroneous. The Court of
Appeals held that the evidence showed the newspaper carriers were independent
contractors,andnotemployeesofLandmark. Accordingly,theCourtofAppeals
reversed and remanded the case to the circuit court.
The Commission then moved this Court to grant discretionary review. We
granted said motion and this appeal followed . For the reasons set forth below, we now
reversethejudgmentoftheCourtofAppeals.
II . StandardofReview andControllingLaw
Our review of the matter herein is governed by the substantial evidence standard
of review applicable to decisions of administrative agencies. "If the findings of fact are
supported by substantial evidence of probative value, then they must be accepted as
binding and it must then be determined whether or not the administrative agency has
applied the correct rule of law to the facts so found ." Southern Bell Tel . & Tel . Co. v.
KentuckyUnemploymentIns .Comm'n,Ky.,437S.W.2d775,778(1969).The
administrative agency's findings will be upheld even though there exists evidence to the
contraryintherecord .KentuckyComm'nonHumanRightsv.Fraser,Ky.,625S.W.2d
852, 856 (1981) . Substantial evidence is defined as "evidence of substance and
relative consequence having the fitness to induce conviction in the minds of reasonable
[persons]." Owens-Corning FiberglasCorp.v.Golightly,Ky.,976S.W.2d409,414
(1998) . We must also determine whether the decision of the administrative agency was
arbitrary or clearly erroneous, which is defined as "unsupported by substantial
evidence."Danville-BoyleCountyPlanningandZoningComm'nv.Prall ,Ky.,840
S.W.2d 205, 208 (1992) . "If there is any substantial evidence to support the action of
the administrative agency, it cannot be found to be arbitrary and will be sustained ."
Taylorv .Coblin,Ky.,461S.W.2d 78,80(1970) .
In order for a worker to be eligible for unemployment insurance benefits, he or
she must be engaged in "covered employment" as provided by Kentucky Revised
Statutes (KRS) Chapter 341 . KRS 341 .050(1)(a) provides that "[a]n individual who,
under the usual common law rules applicable in determining the employer-employee
relationship, has the status of an employee." We also,note thatKRS 341.055(11)
provides that "[s]ervice performed by a worker under the age of eighteen(18) in the
delivery or distribution of newspapers" is not covered employment under KRS Chapter
341, unless the employer has elected for those workers to be covered . Thus, this
opinion does not address those newspaper carriers who have not reached the age of
eighteen (18).
There is no solitary rule for a court to employ in ascertaining whether one should
be characterized as being engaged in "covered employment" for unemployment
insurance purposes. Rather, there are various factors that may be considered by a
courtwhenconfrontedwithsuchanissueaswearetoday. InSellardsv .B.&W.Coal
Co. ,Ky.,358S.W.2d363(1962),weacknowledgedthatthetraditionalcommonlaw
factors employed in determining whether an individual is an employee or independent
contractor are contained in Restatement (Second) of Agency §220(2), which are
virtually identical to the factors listed in the first Restatement of Agency. Id .at364 .
Restatement (Second) of Agency §220(2) provides:
In determining whether one acting for another is a servant or an
independent contractor, the following matters of fact, among others, are
considered :
(a) the extent of control which, by the agreement, the master may
exercise over the details of the work;
(b)whether or not the one employed is engaged in a distinct
occupation or business;
(c) the kind of occupation, with reference to whether, in the locality,
the work is usually done under the direction of the employer or by a
specialist without supervision;
(d) the skill required in the particular occupation ;
(e)whether the employer or the workman supplies the
instrumentalities, tools, and the place of work for the person doing
the work;
(f) the length of time for which the person is employed;
(g) the method of payment, whether by the time or by the job;
(h)whether or not the work is a part of the regular business of the
employer;
(i)whether or not the parties believe they are creating the relation
of master and servant; and
U)whether the principal is or is not in business .
While any or all of these factors may be helpful in determining whether or not an
individual is an employee or independent contractor, we have held that "the chief
criterion is the right to control the details of the work." Sturgill v. Barnes, Ky.,300
S.W.2d 574, 577 (1957). On the other hand, we have also held that "[no] one of [the
above-mentioned] factors is determinative, and each case must be decided on its own
particular facts." Locust Coal Co. v. Bennett, Ky., 325S.W.2d322,324(1959) . It is
evident that the case law is not in total harmony. We now correct this inconsistency
and recognize the latter as written in Locust Coal Co. ,supra. The ability to control the
specific details of the work is an important factor for a court or administrative agency to
consider. However, we do not believe this factor is of greater importance than the
others. Accordingly, we hold that not one of the aforementioned factors is
determinative,andeverycase,where itmustbedeterminedwhetheranindividual isan
employee or an independent contractor for unemployment insurance purposes, needs
to be resolved on its own facts.
III. Discussion
The Court of Appeals determined that the facts were undisputed . Consequently,
it determined that the question for its review was a question of law, which the court
phrased as follows: "[W]hether the Commission correctly applied the law to those facts
in concluding that the newspaper carriers were employees ."
After applying the aforementioned Restatement factors to this case, the three judge
panel of the Court of Appealsd etermined that two of the factors unquestionably
supported an employer-employee relationship. The court stated that Landmark was in
business as a newspaper publisher and that the job of delivering newspapers requires
minimal skill . The court further found that factors (b), (f), and (h) could equally favor a
finding that the newspaper carriers are either employees or independent contractors.
However, the court determined that in its view the remaining factors clearly evidenced
an independent contractor relationship between Landmark and the carriers . The Court
of Appeals held that the newspaper carriers were not employees, but instead were
independent contractors, and reversed the judgment of the circuit court affirming the
Commission's order.
We must disagree with the Court of Appeals. In our view the Commission's
findings of fact are supported by substantial evidence of probative value. The
Commission also applied the correct rule of law by employing the previously mentioned
factors from Restatement (Second) of Agency. Landmark, however, asserts that the
Commission incorrectly applied the above Restatement factors to the facts when the
Commission determined the newspaper carriers to be employees. Landmark further
contends that the Commission's decision was a mere "legal conclusion" that was
corrected on appeal by the Court of Appeals, which Landmark claims correctly applied
the law to determine that the carriers were actually independent contractors . We
cannot agree.
We fail to see how the Commission misapplied the law to the findings of fact. As
we stated beforehand, the Commission correctly identified the factors from
Restatement (Second) of Agency §220(2), which are used in determining whether one
is an employee or an independent contractor. The Commission also referenced case
law that concerned whether workers should be viewed as employees or independent
contractors for purposes of unemployment compensation . See Litteral v.
Commonwealth ,312Ky.505,228S.W.2d37(1950) ;Commonwealthv .Potts ,295Ky.
724, 175 S.W.2d 515 (1943) . The Commission conceded that some factors evidenced
that the newspaper carriers could be viewed as either employees or independent
contractors. However, after reviewing the evidence, the Commission was convinced
than an employer-employee relationship existed between Landmark and its carriers . In
its order affirming the Division, the Commission provided sufficient reasons to support
its decision that the newspaper carriers were in fact employees and not independent
contractors . We now quote directly from the pertinent section of the Commission's
order with appropriate corrections and modifications as needed:
REASONS
. . . The evidence clearly shows that the workers were controlled by
[Landmark] relative to where the newspapers were to be placed, when
they were to be delivered, and in what condition . [Landmark] not only
retained the right to control, but exercised that control, up to and including
termination .
The agreement/contract between [Landmark] and the workers was
[Landmark's] requirement. If a worker did not sign the
agreement/contract,heorshecouldnotworkfor[Landmark]. Inaddition
to [Landmark] requiring workers to sign the agreement/contract, it clearly
set about to make sure that the suggestions from the Newspaper
Association of America's book, "Newspaper Manual on Utilizing
Independent Contractors," was followed . The agreement/contract is
nothing short of an adroit scheme to create something other than an
employer-employee relationship between itself and its delivery/carriers .
The statement that an individual worker is independent and understands
that is not dispositive in a case such as this . We find the
agreement/contract between [Landmark] and the delivery/carriers to be
nothing short of legal fiction in so far as it attempts to create independent
contractorsoutofworkerswhoclearlyare notengaged inindependent
businesses .
The relationship between [Landmark and the carriers] was ongoing . . . .
The work was a regular part of the business of [Landmark] . [Landmark]
chose to use delivery/carriers to deliver its newspapers. [Landmark]
advertised for delivery/carriers and told [the carriers] they would be
independent . In addition, it was [Landmark] who set the rate
delivery/carriers would be paid for their services.
It is clearly [Landmark] who is in business, not the workers who perform
services for it. It is [Landmark] who controls the work and how it is
performed .
The belief of the parties in this case is clear relative to [Landmark].
[Landmark] tried valiantly to create something other than an employeremployee
relationship between itself and the delivery/carriers. This
attempt does not make it reality. The delivery/carriers who testified were
told they were independent. They accepted this characterization as they
hadnochoice, iftheywantedtowork. . . .
Substantial evidence existed to support the conclusion reached by the
Commission, and we find no error in that decision. We agree and adopt the
Commission's reasons as set forth above.
Since we have found sufficient evidence is present to support the Commission's
decision that the newspaper carriers at issue were employees for unemployment
insurance purposes, we cannot say that the Commission's findings were clearly
erroneous . Thus, the judgment entered by the Commission cannot be found to
arbitrary.
In our opinion, the Court of Appeals incorrectly decided to substitute its own
judgment for that of the Commission and the Franklin Circuit Court . This was error.
The fact that a reviewing court may not have come to the same conclusion regarding
the same findings of fact does not warrant substitution of a court's discretion for that of
anadministrative agency. See Federal Communications Comm'n v. WOKO Inc., 13,229
U.S.223,67S.Ct.213, 91L .Ed.204(1946). We do not mean to say that the Court of
Appeals is without power to correct an erroneous administrative decision. Rather, we
hold that a reviewing court, whether it be one of the circuit courts, the Court of Appeals,
or this body, should refrain from reversing or overturning an administrative agency's
decision simply because it does not agree with the agency's wisdom. See Radio Corp.
Of America v .United States ,341U.S.412, 71S.Ct.806,95L .Ed.1062(1951) .
IV. Conclusion
Therefore, for the foregoing reasons, the decision of the Court of Appeals is
hereby reversed . Accordingly, we affirm the judgment of the Franklin Circuit Court and
reinstate the order of the Kentucky Unemployment Insurance Commission .
Lambert, C.J . ; Cooper, Graves and Keller, JJ ., concur. Wintersheimer, J .,
dissents by separate opinion, with Johnstone, J ., joining that dissent.
COUNSELFORAPPELLANTS,
KENTUCKYUNEMPLOYMENTINSURANCECOMMISSION
ANDDIVISIONOFUNEMPLOYMENTINSURANCE:
Randall K. Justice
Workforce Development Cabinet
Office of General Counsel
500 Mero Street
207 Capital Plaza Tower
Frankfort, KY 40621
COUNSELFORAMICUSCURIAE,
KENTUCKYPRESSASSOCIATION,
THE LEXINGTON HERALD-LEADER,
and THE COURIER JOURNAL &
LOUISVILLE TIMESCOMPANY:
Robert F. Houlihan, Jr.
Stoll, Keenon & Park
201 East Main Street
Suite 1000
Lexington, KY 40507
RichardStephenson
Stoll, Keenon & Park, LLP
300 West Vine Street, Suite 2100
Lexington, KY 40507
Lizabeth Ann Tully
Stoll, Keenon & Park, LLP
300 West Vine Street, Suite 2100
Lexington, KY 40507-1801
COUNSELFORAMICUSCURIAE,
KENTUCKYACADEMYOFTRIALATTORNEYS:
TimothyCobertBates
Slone&Bates,P.S .C .
79 West Main Street
P.O. Box 787
Hindman, KY 41822
COUNSELFORAPPELLEE,
LANDMARK COMMUNITYNEWSPAPERS
OF KENTUCKY, INC . :
Kimberly K. Greene
Dinsmore & Shohl, LLP
2000 MeidingerTower
462S. FourthAvenue
Louisville, KY 40202
Mindy Barfield
Dinsmore & Shohl, LLP
Lexington Financial Center
250 West Main Street, Suite 2020
Lexington, KY 40507
COUNSELFORAPPELLEE,
RONALDWARNER:
RonaldWarner
321WestStephen FosterAvenue
Bardstown, KY 40004-1419
COUNSELFORAPPELLEE,
LEONARD FAULKNER:
Leonard Faulkner
1759 Plouvier Road
Hodgenville, KY 42748
RENDERED: DECEMBER 19, 2002
TO BE PUBLISHED
#uVreme Tourt of Xtntuckg
2000-SC-0884-DG
KENTUCKY UNEMPLOYMENT
INSURANCE COMMISSION
AND
DIVISION OF UNEMPLOYMENT INSURANCE APPELLANTS
APPEAL FROM COURT OF APPEALS
V. 1999-CA-2265
FRANKLIN CIRCUIT COURT NO. 1997-CI-0521
LANDMARK COMMUNITY NEWSPAPERS
OF KENTUCKY, INC. ;RONALD WARNER
AND LEONARD FAULKNER APPELANTS
DISSENTING OPINION BY JUSTICE WINTERSHEIMER
I must respectfully dissent from the majority opinion because the Court of
Appeals did not err as a matter of law in finding that the arrangement created an
independent contractor status.
The Court of Appeals followed the correct standard of review in reaching its legal
conclusion that the Commission had improperly applied the Restatement (Second) of
Agency§220(1958) to the facts ofthis case.
The test used in Kentucky to determine the status of either employee or
independent contractor comes from the Restatement(Second)ofAgency§220 (2)
(1958). The principal standard here is the extent of the control which the newspaper
exercised over the details of the work. Landmark did not supply any of the
instrumentalities necessary to deliver the papers other than the papers themselves.
The carriers were paid per unit delivered and the contract clearly stated that the
arrangement was that of an independent contractor. There was little if any control of
the method and means by which the work of delivery was accomplished . Only the
result mattered to the newspaper. The record indicates that the carriers set their own
hours, used their own vehicles, paid their own expenses in connection with the vehicles
and were specifically allowed by the contract to perform delivery services for other
businesses and could subcontract the work of delivery. The provision requiring a dry
newspaper to be delivered on a hook or in a tube by 7a.m .on publication days was not
controlling of the details of the work of delivery but only a statement regarding the end
result to be accomplished by the contract. The carriers had the freedom to plan their
own routes and decide the time of delivery.
The Court of Appeals did not substitute its judgment for that of the Commission,
but only performed an appropriate appellate review. The decision of the Court of
Appeals is in concert with a previous decision of this Court in Locust Coal Co. v.
Bennett ,Ky., 325S.W.2d322(1959), where it was held that under similar
circumstances that the carriers were independent contractors rather than employees .
I would affirm the opinion of the Court of Appeals.
Johnstone, J.,joins this dissent.