Vicki L. Kollross, Relator (A05-1898, A05-1972), Respondent (A05-1943, A05-1944), vs. REC, Inc., Respondent (A05-1898), Relator (A05-1943), Minnstar Builders, Inc., Relator (A05-1944), Respondent (A05-1972), Department of Employment and Economic Development, Respondent.

Vicki L. Kollross, Relator (A05-1898, A05-1972), Respondent (A05-1943, A05-1944), vs. REC, Inc., Respondent (A05-1898), Relator (A05-1943), Minnstar Builders, Inc., Relator (A05-1944), Respondent (A05-1972), Department of Employment and Economic Development, Respondent. A05-1898, A05-1972, A05-1943, A05-1944, Court of Appeals Unpublished, September 19, 2006.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-1898

A05-1972

A05-1943

A05-1944

 

Vicki L. Kollross,
Relator (A05-1898, A05-1972),
Respondent (A05-1943, A05-1944),
 
vs.
 
REC, Inc.,
Respondent (A05-1898),
Relator (A05-1943),
Minnstar Builders, Inc.,
Relator (A05-1944),
Respondent (A05-1972),

Department of Employment and Economic Development,

Respondent.

 

Filed September 19, 2006

Affirmed; motion denied

Peterson, Judge

 

Department of Employment and Economic Development

File Nos. 5307 05; 5308 05; 6863 05; 6864 05

 

Vicki L. Kollross, N1504 Shore Drive, Marinette, WI, 54143 (pro se relator)

 

Thomas A. Harder, Rebecka A. VanderWerf, Foley & Mansfield, 250 Marquette Avenue, Suite 1200, Minneapolis, MN 55401 (for respondents REC, Inc. and Minnstar)

 

Linda A. Holmes, Department of Employment and Economic Development, 332 Minnesota Street, Suite E200, St. Paul, MN  55101-1351 (for respondent Department of Employment and Economic Development)

 

            Considered and decided by Dietzen, Presiding Judge; Peterson, Judge; and Klaphake, Judge.

U N P U B L I S H E D   O P I N I O N

PETERSON, Judge

In these consolidated appeals, REC, Inc. and Minnstar Builders, Inc. challenge a senior unemployment review judge's (SURJ) decision that services performed for them by Vicki Kollross were in covered employment for unemployment tax and benefit purposes, and Kollross challenges the SURJ's decision that she quit her employment at REC, Inc. and Minnstar Builders, Inc.  We affirm.

FACTS

In 1975, Vicki Kollross began working for her brother-in-law, Ron Clark (Clark).  Clark is married to Kollross's sister, Sandy Clark (Sandy).  Clark testified that in 1978, Sandy started an interior-decorating business and registered its name, Image Interiors, with the state.  Sandy also opened a checking account for Image Interiors.  After a few transactions, Sandy lost interest in decorating.  Clark testified that Sandy asked Kollross if she would be interested in doing interior decorating, and from 1978 until December 2003, Kollross worked as a decorator for REC, Inc. and Minnstar Builders, Inc. (collectively "RCC").[1]  About seven months after opening the checking account for Image Interiors, Sandy gave the checkbook to Kollross.  By 1980, Sandy was not involved with Image Interiors.[2]  Kollross testified that she was the primary person operating Image Interiors, she had authority to take money from the Image Interiors account, she did not have an ownership interest in Image Interiors, and the Clarks were the owners.  Kollross also testified that she realized from day one that the Clarks considered her to be an independent contractor. 

Kollross testified that although she had authority to take money from the Image Interiors account, she routinely signed Sandy's name on checks.  Kollross stated that she would sometimes sign her own name on Image Interiors checks "by accident" or when she was signing in front of someone who knew her, and when she signed her own name, the bank would call Sandy, and Sandy would tell her not to sign her own name.[3]  Sandy testified that she was aware that Kollross was signing Sandy's name on Image Interiors checks and that Kollross had been doing so "forever."  A bank employee testified that Kollross's name was added to the Image Interiors checking account in 1988, but Kollross denied knowing that her name had been added to the account, and neither of the Clarks testified that Kollross's name was added to the account.

The address on Image Interiors letterhead was the Clarks' home address, and the telephone number was Kollross's home number.  RCC provided Kollross with a desk and a telephone in its office.  Kollross also conducted business from her home and at suppliers' showrooms.  Kollross did not advertise her services and had no business-telephone listing of her own. 

Kollross was paid when she submitted invoices to RCC.  A $25-per-hour pay rate was established early during her relationship with RCC.  A letter to RCC's vice president, Cindy Volkart, states that Kollross did not add a profit to carpets, pads, labor, or furnishings provided to RCC. 

In early 2002, the professional relationship between Kollross and Volkart deteriorated to the point where they would not talk to each other.  The personal relationships among the Clarks and Kollross and her husband also deteriorated.  In 2002, Kollross stopped providing services to RCC through Image Interiors and began personally providing services to RCC.  Kollross testified that Clark requested that she stop providing services through Image Interiors for tax reasons.  Clark testified that Kollross wanted to shutdown Image Interiors so that she could start a company in Wisconsin called Image Interior Lines and that she informed him that she would use her own name on invoices to RCC.

In April 2002, Kollross's husband sent Sandy a letter stating that Kollross was going to quit and that they were going to move to their house in Wisconsin and try another venture.  But Kollross continued to work at RCC, and the strained relationship between Kollross and RCC management, especially Volkart, continued until December 9, 2003, when Kollross and Volkart met for lunch.  The original purpose of the meeting was for Kollross and Volkart to discuss the scope of Kollross's work.  Kollross and Volkart gave very different accounts of the meeting,[4] but both agreed that nothing was accomplished and Volkart ended up leaving the meeting early. 

            The next day, Volkart left on Kollross's desk a document that described the scope of Kollross's work for RCC.  The document listed addresses of five model homes that needed decorating and contained details regarding model furnishings, payment terms, and future projects.  Kollross testified that the document she received was very different from the document that was introduced at the hearing before the unemployment law judge (ULJ).  Kollross claimed that the document she received listed only one job duty, moving furniture.  Kollross's husband testified that he saw the document limiting Kollross's duties to moving furniture, but he threw it away.

            Along with the scope-of-work document, Volkart left a note stating:  "If you are interested in doing this, please let me know.  Would you also please confirm your hourly rate to do this type of work.  I do need to know by Friday, December 12.  If I do not hear by then we'll pursue other resources."  Kollross did not contact Volkart or the Clarks about any further work. 

Kollross applied for unemployment benefits, and the Department of Employment and Economic Development (DEED) determined that she was an employee of RCC and had quit her employment without good cause.  RCC appealed the determination that Kollross was an employee, and Kollross appealed the determination that she quit without good cause.  A hearing was held before a ULJ, and on May 31, 2005, the ULJ affirmed the initial determinations.  Both RCC and Kollross sought further review, and a SURJ affirmed the ULJ's determinations.  This certiorari appeal from the SURJ's decision followed.

D E C I S I O N

            On certiorari appeal, a reviewing court examines the decision of the SURJ, rather than the decision of the ULJ.[5]  Kalberg v. Park & Recreation Bd., 563 N.W.2d 275, 276 (Minn. App. 1997).  Review of the SURJ's decision is very narrow.  Whitehead v. Moonlight Nursing Care, Inc., 529 N.W.2d 350, 352 (Minn. App. 1995).  An appellate court reviews the SURJ's factual findings in the light most favorable to the SURJ's decision and "will not disturb them as long as there is evidence that reasonably tends to sustain those findings."  Schmidgall v. FilmTec Corp., 644 N.W.2d 801, 804 (Minn. 2002).  "When the parties have presented conflicting evidence on the record, this court must defer to the [SURJ's] ability to weigh the evidence; we may not weigh that evidence on review."  Whitehead,529 N.W.2d at 352.  A reviewing court exercises its independent judgment with respect to questions of law.  Ress v. Abbott Nw. Hosp., Inc., 448 N.W.2d 519, 523 (Minn. 1989). 

 

1.         Employment Status

            RCC argues that the SURJ's conclusion that Kollross was an employee is seriously flawed because the decision does not address the ownership and control of Image Interiors.  RCC contends that if Kollross ran Image Interiors in an independent manner as her own business, she was an independent contractor and not an employee.  But the primary issue before the SURJ was not, as RCC contends, who owned and controlled Image Interiors.  Even if Kollross owned and completely controlled Image Interiors, that fact does not demonstrate that she was an independent contractor.  Image Interiors was simply a business name; it was not a separate legal entity.  Providing services and receiving payment under a business name does not, by itself, establish an independent-contractor status.

Whether a worker is an independent contractor or an employee is a mixed question of law and fact.  Blue & White Taxi v. Carlson, 496 N.W.2d 826, 828 (Minn. App. 1993).  We apply a two-step analysis when reviewing an agency's determination of a worker's employment status.  Neve v. Austin Daily Herald, 552 N.W.2d 45, 47 (Minn. App. 1996).  First, if the facts are disputed, we determine whether the evidence reasonably tends to support the SURJ's findings of fact.  Id.  Although our deference is not without limit, appellate courts view the findings in the light most favorable to the SURJ's decision.  Id. Next, we apply the law to the facts to determine whether an employment relationship existed.  Id. at 48.  Whether an employment relationship exists is a legal issue.  Id. at 47 (quoting Hunter v. Crawford Door Sales, 501 N.W.2d 623, 624 (Minn. 1993)).  We are not bound by the SURJ's conclusions of law.  Ress, 448 N.W.2d at 523.

            The five essential factors used to determine whether an individual is an employee or an independent contractor are: (1) the right to control the means and manner of performance; (2) the right to discharge the worker without incurring liability; (3) the mode of payment; (4) the furnishing of materials and tools; and (5) the degree of control over the premises where the services are performed.  Minn. R. 3315.0555, subp. 1 (2005).  The first two factors are the most important.  Id. Other factors may also be considered if a determination is inconclusive after applying the five factors.  Id.[6]  "The labels that the parties give themselves [are] not determinative; the relationship is determined by the law, not the parties."  Moore Assocs., LLC. v. Comm'r Econ. Sec., 545 N.W.2d 389, 393 (Minn. App. 1996).

            RCC argues that it did not have the right to control the means and manner of Kollross's performance and that "Kollross was very much in control of her own business practices, and was in no way required to comply with any instructions regarding when, where, and how she was to perform interior decorating services."  But there was conflicting testimony regarding the relationship between Kollross and RCC, and we defer to the SURJ's ability to weigh the evidence and make credibility assessments.  See Whitehead, 529 N.W.2d at 352.  Kollross testified that RCC, "told me exactly when to be at places, who to meet with, what to do, and each client I contacted, I was given a directive." With respect to homes built for specific customers, Kollross testified that she would attend a meeting where she would start with the basic plan of a house and ask what needed to be changed.  Then she

would do the drawing and change room designs and whatever for the client.  The coordinator was there and the salesperson for Ron Clark was there and we'd all meet and go through this how they wanted the house built to begin with.  And then from there, selection of materials that they want to add, decorative trim or anything like that, I assisted them.  Then we went to showrooms to pick out tile or carpet.

 

            With respect to model homes, Kollross testified that she would choose the window shades, paint colors, carpeting, and other items

within the parameters of the salesman's sheet.  In other words, if he wanted granite on the countertops instead of Formica, let's say, in the kitchen, he'd indicate that on his sheet of finishing.  And then I would just, I would select what color granite would go with the plan, but he would direct that.  And if he didn't want any more extras, we called them in a home or he would upgrade to different, adding things like crown molding in a room or something like that.  They'd tell me what to do exactly how they wanted it.  Then I would pick out the materials and set the pallet or the color scheme. 

 

Volkart testified that "[Kollross] had never had set hours.  She came and went as she wanted.  She set her own schedule," and "[Kollross] did what she wanted to do."  Volkart also testified that any instruction Kollross received from a sales person

was a guideline, that was not written direction.  It was, yes, I want to put extra money in ceramic.  What was happening was she would spend money in areas that the salespeople didn't feel the customers perceived there was a great value to.  So to keep our costs in line, we wanted to show what, for instance, granite, when they walk in the door, they perceive that as [a] real upgrade.  They may or may not know a doorknob is a certain amount of money.  And those were the guidelines we were trying to give her. 

 

 Although Volkart's testimony indicates that Kollross had a flexible work schedule, it does not demonstrate that there is not evidentiary support for the SURJ's finding that "[RCC] had the right to control Kollross' means and manner of performance, including when she must be at work."  "[I]t is the right to control, rather than the exercise of that right, that is determinative."  Moore Assocs., 545 N.W.2d at 393 (emphasis in original).  Kollross's testimony indicates that RCC could have her attend meetings with RCC coordinators and sales people.  It also indicates that RCC employees had the right to control specific decorating decisions that Kollross made.  The evidence reasonably tends to support the SURJ's finding that RCC had the right to control the means and manner of Kollross's performance.

RCC argues that there is no evidentiary support for the SURJ's findings that Kollross could have quit without incurring liability and that RCC could have terminated Kollross without incurring liability.  But Volkart testified that although RCC had contracts with its other subcontractors, it did not have a contract with Kollross.  The only evidence that RCC cites to support its claim that Kollross could not quit without incurring liability is a statement on an RCC purchase-order form that, "This vendor agrees to conform to all Ron Clark Construction Service and Warranty Standards."  But RCC does not cite any evidence that indicates that RCC had service and warranty standards, and without such evidence, the statement on the purchase-order form does not provide a basis for us to conclude that the evidence does not reasonably tend to support the SURJ's findings that RCC and Kollross could terminate their relationship without incurring liability. 

RCC argues that there is no support in the record for the SURJ's finding that Kollross was paid $25 per hour, rather than by the job.  But Kollross testified that she was paid $25 per hour, and the note that Volkart left on Kollross's desk on December 10, 2003, asked Kollross to confirm her hourly rate for doing the work identified in the scope-of-work document, which suggests that Kollross was paid an hourly rate.  The record also contains copies of numerous invoices that Kollross sent to RCC billing specific dollar amounts for design hours.  The invoices do not state the number of hours worked, but RCC does not cite any evidence indicating that the amounts billed were not calculated by multiplying a number of hours worked by $25 per hour.  The fact that many of the invoices are for even amounts, such as $500 or $1,500, raises a suspicion that they do not reflect a $25-per-hour pay rate.  But this suspicion is not a sufficient basis for us to conclude that the SURJ's finding is not reasonably supported by the evidence.

RCC argues that the SURJ's finding that Kollross did not make her services available to the public runs counter to the evidence in the record.  But the SURJ did not find that Kollross did not make her services available to the public; the SURJ found that "Kollross performed nearly all of her services for [RCC]," and "Kollross did not advertise her services or have a listing in a business or telephone directory."  Kollross and subcontractors with whom Kollross worked testified that over the years, Kollross did not work exclusively for RCC, and they identified others for whom she worked.  But the testimony indicates that most of the work that Kollross did was for RCC, and there is no evidence that Kollross advertised her services or listed Image Interiors in a business or telephone directory.  The evidence reasonably supports the SURJ's finding.

RCC argues that the SURJ's finding that "Kollross would not suffer a loss or realize a profit for the work she performed for [RCC]" is not supported by the record.  But in a letter to Volkart, Kollross stated, "As you know Image Interiors has always worked for [RCC] on a time and material basis.  No profit has been added to carpet, pad, carpet labor or furnishings purchased with Image Interior accounts."  RCC contends that regardless of whether Kollross chose to make a profit on services and materials provided to RCC, she had the ability to realize a profit.  But the SURJ reviewed evidence of what Kollross did, not what she could have done.  The evidence indicates that when Kollross purchased products or services for RCC, she billed RCC for the purchase price without adding an amount for profit and when she provided services directly, she billed at an hourly rate.  This evidence reasonably supports the SURJ's finding.

Although the evidence could have supported different findings of fact, the evidence reasonably tends to sustain the findings that the SURJ made.  Therefore, we will not disturb the findings.  Based on the SURJ's findings that RCC controlled the means and manner of Kollross's performance, that RCC and Kollross could terminate their relationship without incurring liability, and that Kollross was paid $25 per hour and would not suffer a loss or realize a profit for the work she performed for RCC, we conclude that the SURJ did not err in concluding that Kollross was an employee of RCC.

 

 

2.         Good Cause to Quit

            Kollross argues that the SURJ erred in determining that she quit her employment.  Whether an employee quit or was discharged is a question of fact.  Goodwin v. BPS Guard Servs., Inc., 524 N.W.2d 28, 29 (Minn. App. 1994).  "A quit from employment occurs when the decision to end the employment was, at the time the employment ended, the employee's."  Minn. Stat. § 268.095, subd. 2(a) (2004).  "A discharge from employment occurs when any words or actions by an employer would lead a reasonable employee to believe that the employer will no longer allow the employee to work for the employer in any capacity."  Minn. Stat. § 268.095, subd. 5(a) (2004).

The SURJ determined that RCC provided credible testimony and evidence that Kollross could have continued working if she had responded to Volkart's December 9, 2003 memo and found that it was Kollross's decision to end her employment on December 10, 2003.  Volkart's memo described the scope of work for an interior decorator, identified five homes to be decorated during the spring of 2004, and stated the payment terms for the work.  Volkart left the memo on Kollross's desk along with a note stating that if Kollross was interested in doing the work described in the memo, she should let Volkart know by December 12, and if Kollross did not contact Volkart by December 12, RCC would pursue other resources.  Kollross did not contact Volkart about the work.  Because this evidence reasonably tends to sustain the SURJ's finding that it was Kollross's decision to end her employment, we will not disturb the finding.

Kollross argues in the alternative that if she quit, she had a good reason to quit caused by the employer.  An employee who voluntarily quits is not disqualified from receiving unemployment benefits if the employee "quit the employment because of a good reason caused by the employer."  Minn. Stat. § 268.095, subd. 1(1) (2004).  Whether an employee quit for a good reason caused by the employer is a question of law, which this court reviews de novo.  Peppi v. Phyllis Wheatley Cmty. Ctr., 614 N.W.2d 750, 752 (Minn. App. 2000).  A good reason caused by the employer is a reason for which the employer is responsible that is directly related to the employment, is adverse to the worker, and would compel an average worker to quit and become unemployed rather than remaining in the employment.  Minn. Stat. § 268.095, subd. 3(a) (2004).    

"Generally, a substantial pay reduction or unreasonable change in terms of employment gives an employee good cause for quitting."  Rutten v. Rockie Int'l., Inc., 349 N.W.2d 334, 336 (Minn. App. 1984).  But good reason to quit is lacking when an employee has irreconcilable differences with the employer or when an employee is simply frustrated or dissatisfied with the working conditions.  Ryks v. Nieuwsma Livestock Equip., 410 N.W.2d 380, 382 (Minn. App. 1987).

            The SURJ found that Kollross quit because of dissatisfaction with her employment conditions and because she was moving to Wisconsin.  The letter that Kollross's husband sent to Sandy Clark stating that Kollross was going to quit and move to Wisconsin supports the SURJ's finding that Kollross quit because she wanted to move to Wisconsin.  The testimony regarding the personal and professional differences that Kollross had with Volkart and the Clarks supports the SURJ's finding that Kollross quit because she was dissatisfied with her working conditions.  Because these findings are reasonably supported by the record, we conclude that Kollross did not quit for a good reason caused by the employer.

            Kollross moved to supplement the record on appeal.  Generally, the record may be supplemented if "anything material to either party is omitted from the record by error or accident or is misstated in it."  Minn. R. Civ. App. P. 110.05.  Kollross does not argue that the supplemental materials were omitted from the record by error or accident or that anything material to either party was misstated in the record.  Rather, she asks that this court consider for the first time on appeal federal tax documents that were not presented to the ULJ or the SURJ.  Because the documents were not omitted from the record by error or accident and are not related to any misstatement in the record, the motion is denied.

Affirmed; motion denied.

[1] Clark owns 100% of Minnstar and 50% of REC, and Sandy owns the other 50% of REC.

[2] Kollross testified that Sandy dropped out of the business at least 15 years before the 2005 hearing. 

[3] Kollross wrote checks to her husband, her investment club, and to pay her son's tuition.  She testified that these checks were how she took her pay from RCC. 

[4] Kollross contended that Volkart came to the meeting, blamed Kollross for all of the problems, and demanded an apology.  Volkart contended that Kollross blamed Volkart for ruining Kollross's life and taking her family and job away from her. 

[5] The statutory procedure for judicial review of a SURJ's decision was amended by 2005 Minn. Laws ch. 112, art. 2, § 34 at 709-10, and § 43 at 714.  Because the statutory changes apply to unemployment-law-judge decisions issued on or after June 25, 2005, and the unemployment-law-judge decisions in this case were issued on May 31, 2005, the statutory changes do not apply to this case.

[6] The other factors include: (1) availability to public, (2) compensation on job basis, (3) realization of profit or loss, (4) obligation, (5) substantial investment, (6) simultaneous contracts, (7) responsibility, and (8) services in the course of the employing unit's organization, trade, or business.  Minn. R. 3315.0555, subp. 2 (2005).