KIRBY CO v EMPLOYMENT SECURITY DI
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No. 14899 IN THE SUPREME COURT OF THE STATE OF MONTANA KIRBY CO. OF BOZEMAN, INC., A Montana corporation, Petitioner and Appellant, VS. EMPLOYMENT SECURITY DIVISION OF THE MONTANA STATE DEPARTMENT OF LABOR AND INDUSTRY, Respondent and Respondent. Appeal from: District Court of the Eighteenth Judicial District, In and for the County of Gallatin Honorable W. W. Lessley, Judge presiding. Counsel of Record: For Appellant: Poore, Roth, Robischon and Robinson, Butte, Montana For Respondent: Robert Campbell, Helena, Montana Submitted on briefs: April 3, 1980 Decided: July 22, 1980 Filed: jUL23 &d &' l Clerk J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of t h e Court. Mr. A p p e l l a n t Kirby Company of Bozeman ( h e r e i n Kirby) i s a Montana c o r p o r a t i o n w i t h i t s p r i n c i p a l p l a c e of b u s i n e s s i n Bozeman, Montana. A p p e l l a n t Kirby i s a s s o c i a t e d w i t h Kirby Company, a d i v i s i o n of S c o t t and F e t z e r Company, a s a d i r e c t f a c t o r y d i s t r i b u t o r of vacuum c l e a n e r s and r e l a t e d p r o d u c t s manufactured by Kirby Company. In t h a t capacity, appellant i s a u t h o r i z e d t o p u r c h a s e Kirby Company p r o d u c t s d i r e c t from t h e m a n u f a c t u r e r and w h o l e s a l e them t o " a r e a d i s t r i b u t o r s " and " d e a l e r s . " Kirby i s a l s o a u t h o r i z e d t o r e t a i l t h e products t o t h e general public. K i r b y ' s f a c i l i t y i n Bozeman c o n s i s t s of a s m a l l s t o r e c o n t a i n i n g two o f f i c e s and a r e p a i r shop. Ninety-eight p e r c e n t of K i r b y ' s r e t a i l s a l e s a r e made by door-to-door salespersons referred t o a s "dealers." The d e a l e r s a r e r e c r u i t e d by Kirby o r come t o t h e o r g a n i z a t i o n on t h e i r own initiative. S a l e s p e r s o n s s i g n a one-year w r i t t e n agreement when t h e y become d e a l e r s . The agreement i s a u t o m a t i c a l l y renewable a n n u a l l y and s u b j e c t t o t e r m i n a t i o n on t h i r t y days' notice. A s a l e s p e r s o n must be a u t h o r i z e d through a w h o l e s a l e o u t l e t l i k e Kirby t o s e l l Kirby p r o d u c t s . Kirby p r e s i d e n t , David Sward, g i v e s p r o d u c t demonstrat i o n s t o new d e a l e r s and p r o v i d e s them w i t h a s a l e s g u i d e booklet. Sward a l s o c o n d u c t s s a l e s c l i n i c s f o r t h e d e a l e r s , b u t a t t e n d a n c e a t t h e c l i n i c s i s n o t mandatory. New d e a l e r s sometimes accompany e x p e r i e n c e d d e a l e r s on t h e i r i n i t i a l sales calls. $5.00 f e e . Kirby f u r n i s h e s l e a d s t o t h e d e a l e r s f o r a Kirby d o e s n o t s e t t h e h o u r s of t h e d e a l e r s o r impose t e r r i t o r i a l r e s t r i c t i o n s upon them. Dealers a r e n o t reimbursed f o r expenses, g u a r a n t e e d minimum e a r n i n g s , o r p r o v i d e d w i t h any f r i n g e b e n e f i t s such a s v a c a t i o n pay o r s i c k leave. The d e a l e r s a r e f r e e t o s e l l competing prod- u c t s , b u t a p p a r e n t l y few do. use business cards. Kirby e n c o u r a g e s d e a l e r s t o The c a r d i n t r o d u c e d i n t o e v i d e n c e i n t h i s c a s e i n c l u d e d K i r b y ' s name, a d d r e s s and phone number a s w e l l a s t h e d e a l e r ' s name and phone number. provide o f f i c e space f o r t h e dealers. Kirby d o e s n o t However, i t d o e s n o t a p p e a r t h a t any of t h e d e a l e r s m a i n t a i n s e p a r a t e o f f i c e s p a c e f o r s e l l i n g t h e Kirby p r o d u c t s . work door-to-door The d e a l e r s a p p a r e n t l y o r o u t o f t h e i r homes. The d e a l e r s buy p r o d u c t s from Kirby f o r c a s h o r on a t h i r t y - d a y open a c c o u n t . Kirby g i v e s t h e d e a l e r s t h e sug- gested r e t a i l p r i c e f o r t h e products. The d e a l e r s g e n e r a l l y adhere t o t h e set p r i c e s , although they a r e n o t required t o do so. The d e a l e r s s e l l t h e p r o d u c t s t o c u s t o m e r s f o r c a s h o r on a c o n d i t i o n a l s a l e s c o n t r a c t . t h e i r own t e r m s on t h e c o n t r a c t s . The d e a l e r s n e g o t i a t e Kirby i s n o t r e q u i r e d t o p u r c h a s e c o n d i t i o n a l s a l e s c o n t r a c t s n e g o t i a t e d by d e a l e r s b u t d o e s s o on o c c a s i o n . Dealers a r e n o t required t o col- l e c t d e l i n q u e n t a c c o u n t s on purchased c o n t r a c t s and a r e p a i d f u l l commission on s a l e s made even i f t h e p r o d u c t s a r e u l t i m a t e l y repossessed. D e a l e r s a l s o n e g o t i a t e t h e k i n d and v a l u e o f any t r a d e - i n s t a k e n i n c o n n e c t i o n w i t h a s a l e . Kirby i s o b l i g a t e d under t h e w r i t t e n agreement w i t h t h e d e a l e r s t o p u r c h a s e any vacuums t a k e n a s t r a d e - i n s . ~irby i s n o t , however, o b l i g a t e d t o pay t h e d e a l e r t h e s a m e amount t h e d e a l e r gave t h e customer f o r t h e t r a d e - i n s o r t o p u r c h a s e i t e m s o t h e r t h a n vacuums t a k e n i n t r a d e . Kirby r e q u i r e s t h e d e a l e r s t o keep r e c o r d s of t h e s a l e s t h e y make and t o p r o v i d e t h e customer i n f o r m a t i o n n e c e s s a r y f o r t h e w a r r a n t i e s on t h e p r o d u c t s s o l d . Kirby w a r r a n t s t h e products sold and performs all service and repair work under the warranty. Dealers also customarily submit all sales receipts to Kirby. Customer checks are sometimes made out to Kirby rather than to the dealer. Kirby does not require this procedure but does so to enable the dealers to keep a more accurate record of their sales. Under this method, Kirby pays the dealers the amount their receipts exceed the wholesale price of merchandise sold every week to ten days. In February 1977 a tax examiner of the Employment Security Division of the Montana Department of Labor and Industry determined Kirby's dealers were employees within the meaning of Montana unemployment insurance law. Kirby would, therefore, be required to make contributions to the unemployment compensation division on the earnings of the dealers. Kirby appealed the decision to the tax appeals referee of the Employment Security Division who affirmed the decision of the tax examiner. Kirby then appealed the decision to the Board of Labor Appeals. The Board sustained the decision of the referee. Kirby then filed a petition for judicial review of the Board's decision in District Court, Gallatin County. The District Court, the Honorable W. W. Lessley presiding, held a hearing at which the parties presented arguments on the legal issues involved in the case. Judge Lessley subse- quently entered findings of fact and conclusions of law upholding the decision of the Board of Labor Appeals. his appeal followed. Kirby raises the following issues on appeal: 1. Did the District Court err in entering findings of fact different from the findings of fact made by the ~ o a r d of Labor Appeals? Did t h e D i s t r i c t C o u r t err i n c o n c l u d i n g K i r b y ' s 2. d e a l e r s are employees w i t h i n t h e meaning o f Montana's unemployment i n s u r a n c e law? S e c t i o n 39-51-2410(5), MCA, sets o u t t h e scope of j u d i c i a l r e v i e w o f d e c i s i o n s of t h e Board of Labor Appeals. That section reads i n p e r t i n e n t p a r t : " I n any j u d i c i a l p r o c e e d i n g s under 39-51-2406 t h r o u g h 39-51-2410, t h e f i n d i n g s of t h e board a s t o t h e f a c t s , i f s u p p o r t e d by e v i d e n c e and i n t h e absence of f r a u d , s h a l l be conclusive and t h e j u r i s d i c t i o n o f s a i d c o u r t s h a l l be c o n f i n e d t o q u e s t i o n s of l a w . . ." Under t h e p l a i n meaning of t h i s s t a t u t e and t h e case l a w i n t e r p r e t i n g i t , t h e D i s t r i c t C o u r t must t r e a t t h e f i n d i n g s o f t h e Board as c o n c l u s i v e , i f t h e f i n d i n g s a r e s u p p o r t e d by t h e e v i d e n c e and i n t h e a b s e n c e of f r a u d . Noone v. Reeder ( 1 9 6 8 ) , 1 5 1 Mont. 248, 252, 4 4 1 P.2d 309. The D i s t r i c t C o u r t s h o u l d , t h e r e f o r e , l i m i t i t s r e v i e w of t h e f i n d i n g s of t h e Board t o a c o n s i d e r a t i o n of whether t h e y a r e s u p p o r t e d by t h e e v i d e n c e . The D i s t r i c t C o u r t s h o u l d n o t e n t e r f i n d i n g s d i f f e r e n t from t h e B o a r d ' s w i t h o u t f i r s t d e t e r m i n i n g t h e B o a r d ' s f i n d i n g s a r e n o t s u p p o r t e d by t h e evidence. Here, Board. t h e D i s t r i c t C o u r t a f f i r m e d t h e d e c i s i o n of t h e I n d o i n g s o , however, t h e c o u r t e n t e r e d f i n d i n g s of f a c t d i f f e r e n t from t h o s e a d o p t e d by t h e Board. The D i s - t r i c t C o u r t d i d n o t s t a t e t h a t i t f e l t t h e f i n d i n g s of t h e Board w e r e n o t s u p p o r t e d by t h e e v i d e n c e . In fact, the D i s t r i c t C o u r t f i l e d a memorandum i n s u p p o r t of t h e f i n d i n g s and c o n c l u s i o n s i t r e a c h e d . I n t h e memorandum, t h e D i s t r i c t C o u r t s e t o u t a s t h e o n l y i s s u e on a p p e a l whether t h e r e was s u b s t a n t i a l e v i d e n c e t o s u p p o r t t h e d e c i s i o n of t h e Board. Under t h i s s t a n d a r d t h e c o u r t l i s t e d e v i d e n c e from t h e record to support the Board's decision that Kirby exercised sufficient control over the dealers to warrant the finding of an employer-employee relationship between Kirby and the dealers. ~irby now attacks the procedure employed by the District Court in deciding the case as improper because the court entered findings different from those adopted by the Board. Kirby argues it was error for the lower court to enter the different findings under section 39-51-2406, MCA, unless the court first determined the Board's findings are not supported by the evidence. Kirby asks this Court to reverse the decision of the District Court because of this procedural error. Under section 39-51-2410, MCA, it is not proper for the District Court to enter findings of fact different from those affirmed by the Board without first determining the findings are not supported by the evidence. Therefore, we agree with Kirby that the District Court erred in doing so here. We do not, however, agree with Kirby's contention that this procedural error requires reversal of the District Court' s decision. This Court will not reverse or remand a decision of the District Court when the eventual result in the ~istrict Court must be the same. Green v. Green (1978), 176 Mont. 532, 579 P.2d 1235, 35 St.Rep. 800, 803. Here, reversing and remanding because the District Court entered its own findings without first declaring the Board's findings were not supported by the evidence would undoubtedly result in the District Court once again affirming the ~oard'sdecision. The District Court made it clear that it found the Board's findings were supported by the evidence in the memorandum the court filed. In the memorandum the District Court stated the only issue it was considering was whether there was substantial evidence in the record to support the decision of the Board. The court then listed evidence from the record supporting the Board's conclusion that ~ i r b y exercised sufficient control over the dealers to warrant the finding of an employer-employee relationship between Kirby and the dealers. If we reversed the case and remanded it to the District Court, the court would simply withdraw its findings of fact and redeclare its decision based on the memorandum filed. Such an action would be a needless exer- cise on the part of the District Court and would ultimately do no good for Kirby. We will not, therefore, reverse on this issue. The second issue involves the determination of whether the dealers are employees or independent contractors as a matter of law. We recently discussed the distinction be- tween employees and independent contractors in the context of unemployment insurance contributions in Standard Chem. Mfg. Co. v. Employment Sec. (1980), P.2d 610, 37 St.Rep. 105. , Mont. 605 In Standard Chemical we recog- nized that two tests are used to determine whether an employment or independent contract relationship exists. Chemical, 605 P.2d at 612, 37 St.Rep. at 107. Standard The first test is the statutory "ABC" test, which is set out in section 39-51-203(4), MCA: "(4) Service performed wages is considered to to this chapter unless to the satisfaction of by an individual for be employment subject and until it is shown the division that: "(a) such individual has been and will continue to be free from control or direction over the performance of such services, both under his contract and in fact; " ( b ) such s e r v i c e i s e i t h e r o u t s i d e t h e u s u a l c o u r s e of t h e b u s i n e s s f o r which s u c h s e r v i c e i s performed o r t h a t such s e r v i c e i s performed o u t s i d e of a l l t h e p l a c e s of b u s i n e s s of t h e e n t e r p r i s e f o r which s u c h s e r v i c e i s performed; and " ( c ) s u c h i n d i v i d u a l i s c u s t o m a r i l y engaged i n an independently e s t a b l i s h e d t r a d e , occupation, profession, o r business." The second t e s t i s t h e common-law t e s t . W stated the e common-law t e s t i n S t a n d a r d Chemical a s f o l l o w s : "'"An i n d e p e n d e n t c o n t r a c t o r i s one who r e n d e r s s e r v i c e i n t h e c o u r s e of a n o c c u p a t i o n , and r e p r e s e n t s t h e w i l l o f h i s employer o n l y a s t o t h e r e s u l t of h i s work, and n o t a s t o t h e means whereby i t i s accomplished, and i s u s u a l l y n o t p a i d by t h e job. (And s e e Neyman v. P i n c u s , 82 Mont. 467, 267 P. 8 0 5 . ) " " ' T h e v i t a l t e s t i n d e t e r m i n i n g whether a p e r s o n employed t o do a c e r t a i n p i e c e of work i s a contractor o r a m e r e servant, i s the control o v e r t h e work which i s r e s e r v e d by t h e employer. S t a t e d a s a g e n e r a l p r o p o s i t i o n , i f t h e cont r a c t o r i s under t h e c o n t r o l of t h e employer, h e i s a s e r v a n t ; i f n o t under such c o n t r o l , h e i s an independent c o n t r a c t o r . ' " 605 P.2d a t 613, 37 St.Rep. a t 108, q u o t i n g from P a t G r i f f i n Co. v. Employment S e c u r i t y Comm'n ( 1 9 7 4 ) , 1 6 3 Mont. 529, 519 P.2d 147. The s c o p e of o u r r e v i e w i s l i m i t e d i n a p p l y i n g t h e s e tests. 108. S t a n d a r d Chemical, 605 P.2d a t 613, 37 S t - R e p . a t W e w i l l n o t o v e r t u r n t h e d e c i s i o n of t h e D i s t r i c t C o u r t t o uphold t h e d e c i s i o n of t h e Board u n l e s s i t can b e shown t h e lower c o u r t abused i t s d i s c r e t i o n i n d o i n g s o . S t a n d a r d Chemical, 605 P.2d a t 613, 37 St.Rep. a t 109. Under t h i s s t a n d a r d , w e f i r s t c o n s i d e r t h e amount of c o n t r o l Kirby e x e r c i s e d o v e r t h e d e a l e r s h e r e , a s c o n t r o l i s t h e most c r u c i a l f a c t o r which d i s t i n g u i s h e s employees from independent c o n t r a c t o r s . 613, 37 St.Rep. a t 109. S t a n d a r d Chemical, 605 P.2d a t H e r e , a s i n S t a n d a r d Chemical, t h e r i g h t of c o n t r o l i s a c l o s e q u e s t i o n . However, a t a x examiner, a t a x a p p e a l s r e f e r e e , t h e Board of Labor Appeals and t h e ~ i s t r i c C o u r t have a l l reviewed t h e f a c t s a s set o u t above t and r e a c h e d t h e c o n c l u s i o n t h a t Kirby e x e r c i s e d s u f f i c i e n t c o n t r o l o v e r t h e d e a l e r s t o form a n employer-employee r e l a t i o n s h i p f o r t h e p u r p o s e s of t h e unemployment i n s u r a n c e statutes. Although t h e q u e s t i o n may be c l o s e , w e a g r e e . Kirby t r a i n e d t h e d e a l e r s i n t h e method of m a r k e t i n g Kirby p r o d u c t s by g i v i n g them i n i t i a l d e m o n s t r a t i o n s of t h e p r o d u c t s , p r o v i d i n g them w i t h a sales g u i d e b o o k l e t , and conducting s a l e s c l i n i c s . Kirby r e g u l a t e d t h e p r i c e d e a l e r s c h a r g e d f o r t h e p r o d u c t s by s u g g e s t i n g r e t a i l p r i c e s which t h e d e a l e r s g e n e r a l l y adhered t o . Kirby c u s t o m a r i l y re- c e i v e d t h e d e a l e r s ' sales r e c e i p t s and p a i d t h e d e a l e r s t h e i r commissions. F i n a l l y , and p o s s i b l y most i m p o r t a n t l y , d e a l e r s had t o be a u t h o r i z e d t h r o u g h a w h o l e s a l e o u t l e t l i k e Kirby t o s e l l Kirby p r o d u c t s and Kirby c o u l d t e r m i n a t e t h e contract granting t h e dealers t h a t authorization without c a u s e on t h i r t y d a y s ' n o t i c e . Under S t a n d a r d Chemical, t h i s s e t u p r e p r e s e n t s t h e k i n d o f c o n t r o l , a l t h o u g h i n some a s p e c t s i n d i r e c t , t h a t i s s u f f i c i e n t t o e s t a b l i s h an employeremployee r e l a t i o n s h i p w i t h i n t h e meaning of o u r unemployment insurance s t a t u t e s . Given t h e s e f a c t s , w e c e r t a i n l y c a n n o t s a y t h e D i s t r i c t C o u r t abused i t s d i s c r e t i o n i n a f f i r m i n g t h e d e c i s i o n of t h e Board of Labor Appeals f i n d i n g t h e d e a l e r s w e r e employees of Kirby. Therefore, we a f f i r m t h e d e c i s i o n of t h e D i s t r i c t C o u r t h o l d i n g t h e d e a l e r s t o be employees of Kirby f o r unemployment i n s u r a n c e p u r p o s e s . I n so holding, w e note t h a t t h i s d e c i s i o n i s i n accord w i t h t h e m a j o r i t y of o t h e r j u r i s d i c t i o n s t h a t have cons i d e r e d t h e q u e s t i o n of whether vacuum c l e a n e r s a l e s p e r s o n s a r e employees o r i n d e p e n d e n t c o n t r a c t o r s f o r unemployment compensation purposes under similar fact situations. Kirk- patrick v. Peet (1967), 247 Or. 204, 428 P.2d 405; Beaman v. Superior Products, Inc. (1961), 89 Ariz. 119, 358 P.2d 997; Bevan v. California Employment Stabilization Commission (1956), 139 Cal.App.2d 668, 294 P.2d 524; Sudduth v. California Employment Stabilization Commission (1955), 130 Cal.App.2d 304, 278 P.2d 946; Murphy v. Daumit (1944), 387 Ill. 406, 56 N.E.2d 800; In Re Electrolux Corp. (1942), 288 N.Y. 440, 43 N.E.2d 480; Electrolux Corp. v. Board of Review (1942), 129 N.J.L. 154, 28 A.2d 207; cf. Electrolux Corp. v. Danaher (1941), 128 Conn. 342, 23 A.2d 135. Kirby attempts to distinguish the above cases by pointing out facts in each which vary from the facts here. However, the distinctions Kirby attempts to make are far less significant than the similarities between the cases. We, therefore, adopt the above-cited cases as additional authority for affirming the decision of the District Court on this issue. Affirmed. We concur: ~,A.P. Chief Justice I
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