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Court of Appeals Division III
State of Washington
Opinion Information Sheet
Docket Number: 22517-8-III
Title of Case: Affordable Cabs, Inc. v. Department of Employment
Security, et al
File Date: 11/23/2004
SOURCE OF APPEAL
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Appeal from Superior Court of Spokane County
Docket No: 03-2-01030-2
Judgment or order under review
Date filed: 10/16/2003
Judge signing: Hon. Robert D Austin
JUDGES
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Authored by Stephen M Brown
Concurring: Dennis J. Sweeney
Frank L. Kurtz
COUNSEL OF RECORD
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Counsel for Appellant(s)
Dustin Douglass Deissner
Deissner Law Firm PLLC
1707 W Broadway Ave
Spokane, WA 99201-1817
Counsel for Respondent(s)
Mary Maureen Tennyson
Washington Atty General
1125 Washington St SE
PO Box 40110
Olympia, WA 98504-0110
Jon James (Appearing Pro Se)
PO Box 6491
Spokane, WA 99217
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
AFFORDABLE CABS, INC., ) No. 22517-8-III
)
Appellant, ) Division Three
) Panel Eight
v. )
) PUBLISHED OPINION
DEPARTMENT OF EMPLOYMENT ) SECURITY, STATE OF )
WASHINGTON, ) Respondent. )
BROWN, J.--Affordable Cabs, Inc. (ACI) appeals from an order affirming
the Department of Employment Security's decision to require ACI to make
unemployment contributions for Jon James, a taxicab driver. ACI contends
Mr. James was an independent contractor, not an employee, and thus not
responsible for the unemployment contributions. We disagree, and affirm.
FACTS
ACI hired Mr. James as a taxicab driver on June 21, 2001. Upon employment,
Mr. James signed a contract with ACI, stating he was an independent
contractor. ACI provided Mr. James with a car and maintenance. Mr. James
was required to return the cab after each shift with a full tank of fuel
and to use a portion of the fares to purchase fuel.
Mr. James received his customers in various ways. First, ACI had
several medical patient requests for transportation, which it passed along
to its drivers. These customers received a fare discount based on a
contract between ACI and Special Mobilities Services. Mr. James was free
to refuse these customers. Mr. James also received customers at local taxi
stands and by dispatch. He was free to refuse a dispatch, but he seldom
did so. Fares were set by ACI.
At the end of Mr. James' shift, after buying fuel, he would divide the
remaining fares 35 percent for himself and 65 percent for ACI, plus $12 to
$15 per day for insurance. Mr. James did not personally carry insurance
that would cover him while he was driving the taxi, nor did he have a
special business license.
On March 10, 2002, Mr. James ceased working for ACI. On July 29, the
Department served an order and notice of assessment on ACI for $567.51 for
unemployment contributions for Mr. James's employment. ACI appealed the
issue of whether it was required to contribute. After a hearing, the
Administrative Law Judge (ALJ) affirmed the order and notice of assessment,
deciding Mr. James's work was employment and there was no exemption.
On petition for review, the Department's commissioner affirmed the
ALJ's decision. ACI next appealed to the superior court. The court
affirmed the commissioner's decision. This appeal followed.
ANALYSIS
The issue is whether Mr. James is covered under Washington's Employment
Security Act as an employee thereby requiring ACI to pay assessed
contributions. ACI contends Mr. James was not its employee, but was
instead an independent contractor. ACI alternatively argues Mr. James was
partly an employee and partly an independent contractor, thereby requiring
apportionment of the assessed contributions.
In an appeal from a Department decision, we apply the appropriate
standards of review from RCW 34.05.570 directly to the agency record.
Dermond v. Dep't of Employment Sec., 89 Wn. App. 128, 132, 947 P.2d 1271
(1997). We will grant relief from such decisions when an agency
erroneously interpreted or applied the law or substantial evidence does not
support the decision. RCW 34.05.570(3)(d). ACI as the party challenging
the action has the burden of proving that the agency's action was invalid
for any of these reasons. RCW 50.32.150; RCW 34.05.570(1)(a). In
addressing mixed questions of law and fact, we give the same deference to
the agency's factual findings as in other circumstances, but we apply the
law to the facts de novo. Dermond, 89 Wn. App. at 132. The commissioner's
decision is 'prima facie correct' under RCW 50.32.150; and we will grant
relief only if the petitioner establishes that he 'has been substantially
prejudiced by the action complained of.' RCW 34.05.570(1)(d).
We review an agency's interpretation and application of the law de
novo. City of Redmond v. Central Puget Sound Growth Mgmt. Hearings Bd.,
136 Wn.2d 38, 46, 959 P.2d 1091 (1998). We defer to an agency's
interpretation of the law where the agency has specialized expertise in the
relevant field. Id. We are not bound by the agency's interpretation. Id.
When a party contends an agency decision is not supported by substantial
evidence, we review the entire agency record. RCW 34.05.570(3)(e).
Evidence is substantial if it is of sufficient quantity 'to persuade a fair-
minded person of the truth or correctness of the {agency} order.' City of
Redmond, 136 Wn.2d at 46 (quoting Callecod v. Wash. State Patrol, 84 Wn.
App. 663, 673, 929 P.2d 510 (1997)).
The substantial evidence standard is deferential; therefore, we view 'the
evidence and any reasonable inferences in the light most favorable to the
party that prevailed in the highest forum exercising fact-finding
authority.' Scholfield v. Spokane County, 96 Wn. App. 581, 586-87, 980
P.2d 277 (1999) (citing Davidson v. Kitsap County, 86 Wn. App. 673, 680,
937 P.2d 1309 (1997)). We will not substitute our judgment for that of the
agency regarding witness credibility or the weight of evidence. Callecod,
84 Wn. App. at 676 n.9.
RCW 50.04.100 defines '{e}mployment' as, 'personal service . . . performed
for wages or under any contract calling for the performance of personal
services, written or oral, express or implied.' In other words,
''employment' exists if (1) the worker performs personal services for the
alleged employer and (2) if the employer pays wages for those services (or
pays under any contract calling for personal services).' Western Ports
Transp., Inc. v. Dep't of Employment Sec., 110 Wn. App. 440, 451, 41 P.3d
510 (2002) (citing Penick v. Dep't of Employment Sec., 82 Wn. App. 30, 39,
917 P.2d 136 (1996)). Contract provisions describing workers as
independent contractors are not dispositive; rather, this court 'considers
all the facts related to the work situation.' Western Ports, 110 Wn. App.
at 451 (citing Penick, 82 Wn. App. at 39).
Personal Services
The commissioner concluded Mr. James performed personal services for ACI
based upon the terms of the parties' written contract and the income ACI
derived from Mr. James's services. Whether a work activity constitutes
personal service is a mixed question of law and fact. Penick, 82 Wn. App.
at 39. The test to determine if the worker performed personal services is
whether services performed were clearly for the alleged employer or for its
benefit. Id. at 40. 'Services not directly used to support the alleged
employer's business are not personally provided to the alleged employer;
thus, there is no employment relationship.' Id.; see Cascade Nursing
Servs., Ltd. v. Dep't of Employment Sec., 71 Wn. App. 23, 30, 856 P.2d 421
(1993) (agency nurses did not provide services for the agency that placed
them because the agency did not treat patients; thus, it realized only an
indirect benefit from the nurses' services).
In Penick, Division Two of this court held that the transportation of
goods necessarily relied on truck drivers; therefore, the trucking company
directly used and benefited from its drivers' services. Penick, 82 Wn.
App. at 40. Similarly, ACI's business was based on the transportation of
patrons. To operate its business, ACI directly used and benefited from its
taxi drivers. Based on the benefit test set forth in Penick, Mr. James
provided personal service for ACI.
Wages
Next, we analyze whether Mr. James 'performed for wages or under any
contract calling for the performance of personal services.' RCW 50.04.100
(emphasis added). The word 'or' is a function word indicating
alternatives. In re Marriage of Craven, 136 Wn.2d 800, 808, 966 P.2d 1247
(1998). Thus, Mr. James must either perform personal services for wages or
perform personal services under contract. The commissioner concluded Mr.
James did not work for wages; rather, he worked under a contract calling
for the performance of personal services.
The record shows Mr. James's services were performed pursuant to a
contract. While the contract is not a part of our record, both parties
testify one existed, although Mr. James could not remember the exact
wording. Since Mr. James performed under a contract, the second factor of
RCW 50.01.100 is satisfied.
Based on Mr. James's performance of personal services for ACI and the
parties' contract for personal services, Mr. James was engaged in
employment under RCW 50.04.100. We next discuss whether ACI is exempt from
paying unemployment compensation contributions under RCW 50.04.140.
RCW 50.04.140 Exemptions
Throughout the proceedings the parties have agreed that the relevant
statutory exemption is that of RCW 50.04.140(1). This statute contains a
three-part test:
Services performed by an individual for remuneration shall be deemed to be
employment subject to this title unless and until it is shown to the
satisfaction of the commissioner that:
(1)(a) Such individual has been and will continue to be free from control
or direction over the performance of such service, both under his or her
contract of service and in fact; and
(b) Such service is either outside the usual course of business for which
such service is performed, or that such service is performed outside of all
the places of business of the enterprises for which such service is
performed; and
(c) Such individual is customarily engaged in an independently established
trade, occupation, profession, or business, of the same nature as that
involved in the contract of service.
RCW 50.04.140(1).
'Since the three requirements of the exemption are stated in the
conjunctive, an employer must prove all three parts of the test in order
for its workers to be exempt from unemployment compensation coverage.'
Western Port, 110 Wn. App. at 452. Our Supreme Court has held that an
exemption 'must be strictly construed in favor of the application of the
tax and against any person claiming the exemption.' All-State Constr. Co.
v. Gordon, 70 Wn.2d 657, 665, 425 P.2d 16 (1967) (citing In re St. Paul &
Tacoma Lumber Co., 7 Wn.2d 580, 110 P.2d 877 (1941)). Here, ACI contends
Mr. James was free from control, worked outside the usual place of
business, and was in an established separate trade.
The first prong of the exemption test requires us to consider whether
a worker is free from direction or control during his performance of
services for the employing unit. RCW 50.04.140(1)(a). 'The crucial issue
is not whether the employing unit actually controls, but whether it has the
right to control the methods and details of the worker's performance.'
Western Port, 110 Wn. App. at 452 (citing Risher v. Dep't of Labor &
Indus., 55 Wn.2d 830, 834, 350 P.2d 645 (1960)).
Here, the commissioner correctly noted ACI owned the taxicab, provided
the means to acquire customers, and set the fares. Evidence in the record
supports these findings. While Mr. James had some control over his
performance because he was free to refuse a customer, ACI mainly exercised
control and direction over Mr. James's performance. Accordingly, ACI has
failed to establish the first prong of the exemption test. Even though we
could end our analysis here, we briefly discuss the other two prongs.
Regarding the second prong of the exemption test, ACI fails to show
that Mr. James provided services outside the usual course of its business
or outside all places of business. RCW 50.04.140(1)(b). The critical
service is transporting customers in taxicabs. The record shows Mr. James
drove taxicabs in the usual course of ACI's business. Mr. James drove to
locations specified by ACI, places where Mr. James was engaged in work.
While these places were not owned by ACI, they were places where Mr. James
engaged in work. See Miller v. Dep't of Employment Sec., 3 Wn. App. 503,
506, 476 P.2d 138 (1970) (tract of land on which claimant performed logging
services was the employer's place of business even though employer did not
own the tract).
The third prong of the exemption test requires ACI to prove Mr. James
was engaged in an independently established trade of the same nature as
involved in the service contract. RCW 50.04.140(1)(c). The following
factors indicate an independently established business:
'(1) worker has separate office or place of business outside of
the home; (2) worker has investment in the business; (3) worker
provides equipment and supplies needed for the job; (4) the
alleged employer fails to provide protection from risk of injury or
non-payment; (5) worker works for others and has individual
business cards; (6) worker is registered as independent business
with state; and (7) worker is able to continue in business even if
relationship with alleged employer is terminated.'
Penick, 82 Wn. App. at 44 (citing Jerome v. Dep't of Employment Sec., 69
Wn. App. 810, 815, 850 P.2d 1345 (1993)).
Here, no evidence shows Mr. James solicited, advertised, or otherwise
held himself out to the community as being in a separate business or that
he established himself as a separate business. Mr. James merely sold his
services - he did not own his taxi, records, or customer lists; have a
special business license; or have anything else indicative of an
independent business. Mr. James could not continue his business after
leaving ACI. The most important factor in determining whether an
individual is independently engaged is factor seven; the ability to
continue in business even if the relationship with the alleged employer is
terminated. All-State Constr. Co., 70 Wn.2d at 666. Thus, ACI failed to
establish the third prong of the test.
Other courts have decided taxicab drivers are employees for purposes
of state unemployment compensation laws. In Salt Lake Transportation
Company v. Board of Review of the Industrial Commission Of Utah, Department
of Employment Security, 5 Ut.2d 87, 91, 296 P.2d 983 (1956), the Utah
Supreme Court held that taxicab drivers who leased taxi's from the cab
company, kept the fares collected but paid the company a daily rental fee
and were in employment for purposes of the Employment Security Act.
In sum, Mr. James was an employee of ACI, and his work does not fall
within the exemptions set forth in RCW 50.04.140(1). Given our conclusion
that Mr. James was an employee and not an independent contractor, it is
unnecessary to address ACI's alternative argument that Mr. James was part
employee and part independent contractor. Moreover, the only legal
authority ACI relies on for this argument is RCW 51.08.178, which relates
to the computation of monthly wages following an accident for industrial
insurance purposes. Without relevant legal authority to support an
argument, an assignment of error is waived. Smith v. King, 106 Wn.2d 443,
451-52, 722 P.2d 796 (1986).
Affirmed.
Brown, J.
WE CONCUR:
Sweeney, A.C.J.
Kurtz, J.
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