Spar Marketing Services, Inc. v. Unemployment Insurance Appeal Board.
Annotate this Case
Download PDF
IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
IN AND FOR KENT COUNTY
SPAR MARKETING SERVICES, INC.,
Employer/Appellant,
v.
UNEMPLOYMENT INSURANCE
APPEAL BOARD,
Appellee,
and
TAMMY BARR,
Employee/Appellee.
:
: C.A. No. K11A-03-003 WLW
:
:
: Supreme Court
: No. 143,2012
:
:
:
:
:
:
:
Findings of Fact and Conclusions of Law
Upon Remand from the Delaware Supreme Court
Submitted: July 9, 2013
David B. Anthony, Esquire of Berger Harris, LLC, Wilmington, Delaware and
Thomas J. Vollbrecht, Esquire of Hammargren & Meyer, P.A., of counsel; attorneys
for Spar Marketing Services, Inc.
Thomas H. Ellis, Esquire of Department of Justice, Wilmington, Delaware; attorney
for Unemployment Insurance Appeal Board.
WITHAM, R. J.
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
I. Introduction
This is the Court’s findings of fact and conclusions of law on remand from the
April 11, 2013 order of the Delaware Supreme Court.1 This Court was given the
limited task of determining whether the Unemployment Insurance Appeal Board’s
determination that Appellant Spar Marketing Services, Inc. (hereinafter “Appellant”
or “Spar”), had failed to meet its burden of proof under prongs “B” and “C” of the
tripartite test for employment codified at 19 Del. C. § 3302(10)(K)(i)-(iii) (hereinafter
“the ABC test”) is supported by substantial evidence and free of legal error. The
parties have submitted their supplemental briefs and this matter is ready for this
Court’s response.
II. Relevant Factual and Procedural Background
The Court will briefly summarize the salient facts and the present posture of
this case. On September 19, 2010, Tammy Barr (hereinafter “Barr”), a merchandiser
who worked for Spar, filed a claim for unemployment benefits.2 The Delaware
Department of Labor (hereinafter “the DOL”) charged John Avera (hereinafter
“Avera”), an Unemployment Insurance Field Agent, with investigating Spar’s
absence from the registry of employers maintained by the DOL’s Division of
Unemployment Insurance (hereinafter “the Division”).3 Following this investigation,
1
Spar Mktg. Servs., Inc. v. UIAB, Del. Supr., No. 143, 2012, Jacobs, J. (Apr. 11, 2013)
(ORDER).
2
Id. at *1.
3
R. at 1, 19.
2
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
Avera concluded that an employer/employee relationship existed between Spar and
Claimant as defined by 19 Del. C. § 3302(10)(K).4 As an employer, Spar was liable
for tax assessments on Claimant’s wages.5 A letter dated October 12, 2010, followed
apprising Spar of its employer status and its assessed tax rate.6
In a letter dated October 20, 2010, Heidi Savage, Spar’s Director of Human
Services and Administration (hereinafter “Savage”), disputed the DOL’s tax
assessment on compensation paid to Claimant.7 Spar asserted that it classifies all
merchandisers, including Claimant, as independent contractors and not employees;
accordingly, Spar contended that it was not liable for tax assessment.8 Spar thereafter
appealed the DOL’s determination to the Unemployment Insurance Appeal Board
(hereinafter “the Board”).9
The Board held a hearing on January 26, 2011 to consider Spar’s appeal.10
Savage was the sole witness to testify on behalf of Spar.11 Savage testified that
merchandisers contract with retailers to stock shelves and other display spaces at
4
R. at 19.
5
R. at 22-23.
6
R. at 65.
7
R. at 24-27.
8
R. at 27.
9
R. at 68.
10
R. at 72.
11
R. at 73.
3
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
retail locations with products.12 Savage explained that Spar posts jobs on the Internet
and the merchandisers are free to select them, but there is no obligation for a
merchandiser to take a particular job offer.13
Savage further stated that Spar has always treated merchandisers in its service
as independent contractors.14 Savage noted that Spar does not have any offices in
Delaware, and that Spar’s only business locations are in Auburn Hills, Michigan, and
Tarrytown, New York.15 The merchandisers do not perform work at either location.16
Savage stressed that the merchandisers are not economically dependent on Spar.17
Rather, merchandisers work for several different agencies and use a website
maintained by the National Association for Retail Merchandising Specialists
(“NARMS”) to advertise their services and hunt for jobs.18
When asked about how merchandisers are paid, Savage testified that when a
job is completed, the merchandiser submits an invoice for compensation.19 The fee
12
Id.
13
Id.
14
See Tr. of Administrative Hearing, Ex. E., Spar Mktg. Servs., Inc.’s Opening Brf. On
Remand, at 4 [hereinafter “UIAB Hearing Tr.”].
15
UIAB Hearing Tr. at 6.
16
Id.
17
Id. at 7.
18
Id. at 6-7.
19
Id. at 8.
4
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
received by the merchandiser depends on the particular client, although most fees are
paid on a flat, rather than hourly, rate.20 The merchandiser is not free to negotiate the
fee for any given project and must accept what is offered.21 Spar pays the
merchandiser regardless of whether Spar ultimately receives payment from the
retailer.22 However, the store managers direct the behavior of the merchandiser while
the merchandiser is on the premises.23 According to Savage, store managers will, on
occasion, refuse to allow a merchandiser to complete an assignment.24 On such
occasions, the merchandiser is not penalized and still receives payment from Spar.25
Katherine Rauso, a representative of the Division, also testified.26 Rauso
pointed out that the merchandisers who work for Spar are required to complete an
employment application and be accepted by Spar in order to perform certain tasks for
Spar’s retail store clients.27 According to Avera’s investigation, merchandisers are not
told that they’re independent contractors until after they have accepted the position
20
Id.
21
Id.
22
Id. at 13.
23
Id. at 12.
24
Id. at 13.
25
Id.
26
R. at 74; UIAB Hearing Tr. at 13.
27
R. at 74.
5
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
at Spar.28 Additionally, Rauso testified that Spar, and not the retailer, gives any
negative feedback to the merchandisers.29
The Board issued its decision on March 20, 2011.30 In it, the Board examined
the statutory definition of “employment” for the purposes of unemployment insurance
taxes, codified by 19 Del. C. § 3302(10).31 The Board then evaluated whether Spar
satisfied the statutory exclusion, commonly known as the ABC test.32 The Board
concluded that Spar failed to show that its services fell outside those of employment
by satisfying each of the three prongs of the ABC test.33 The Board relied in large part
on the 1982 Superior Court decision in Department of Labor v. Medical Placement
Services, in which the court found that Medical Placement Services failed to meet its
burden of establishing all three prongs of the ABC test, and thus was an employer of
the medical technicians it supplied to institutions and private individuals on a
temporary basis for a fee.34
Spar thereafter filed a timely appeal of the Board’s decision to this Court
28
Id.
29
Id.
30
R. at 74-76.
31
R. at 74.
32
R. at 75.
33
R. at 74-75.
34
R. at 75.
6
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
pursuant to 19 Del. C. § 3344.35 In a decision issued on February 28, 2012, this Court
concluded that substantial evidence supported the Board’s conclusion that Spar did
not meet its burden with respect to prong A of the ABC test.36 Having concluded that
the ABC test is conjunctive, this Court did not evaluate whether substantial evidence
supported the Board’s findings with respect to the second and third prongs.37 The
holding was reached without the benefit of briefing by the Board, which had declined
to participate.38
Spar filed a timely appeal to the Delaware Supreme Court.39 The Supreme
Court directed the Board to participate in Spar’s appeal.40 In its answering brief, filed
on October 25, 2012, the Board abandoned its previous position and conceded that
Spar satisfied prong A of the ABC test.41 However, the Board continues to contend
35
R. at 82.
36
Spar Mktg. Servs., Inc. v. UIAB & Barr, 2012 WL 1414097, at *3 (Del. Super. Feb. 28,
37
Id.
38
Id. at *1.
39
Spar Mktg. Servs., Inc.’s Opening Brf. On Remand at 1 [hereinafter “SMS’s Opening
40
Id.
2012).
Brf.”].
41
See Ans. Brf. of Appellee Unemp’t Ins. App. Bd., E-File 47328945, at 6. This Court notes
that it is unfortunate that the UIAB chose not to participate at the Superior Court level which would
have been helpful.
7
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
that Spar has not carried its burden with respect to prongs B and C.42 The Supreme
Court heard oral argument on April 3, 2013.43 During the course of argument, the
Supreme Court determined that the record was not adequately developed with respect
to prongs B and C, and remanded the case in an order issued on April 11, 2013.
The Court will now ascertain whether the Board’s findings and conclusions
with respect to prongs B and C are supported by substantial evidence and free from
legal error.
III. Standard of Review
Appellate review of an administrative agency decision is limited.44 This Court’s
role in reviewing a decision of the UIAB is to determine whether the Board’s factual
findings are supported by substantial evidence and whether its decision is free of legal
error.45 Substantial evidence means such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.46 This Court does not substitute its
judgment for that of an administrative body, even if it would have reached a different
conclusion.47
42
Id. at 7-15.
43
See SMS’s Opening Brf. Ex. A.
44
E.I. DuPont De Nemours & Co. v. Faupel, 859 A.2d 1042, 1046 (Del. Super. 2004).
45
19 Del. C. § 3323(a); Histed v. E.I. DuPont de Nemours & Co., 621 A.2d 340, 342 (Del.
46
Olney v. Cooch, 425 A.2d 610, 614 (Del. 1981).
47
Id. at 613.
1993).
8
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
IV. Discussion
Unemployment insurance taxes are governed by the definitions provided in 19
Del. C. § 3302. Subsection (10)(K) provides that individuals who perform services
for others for wages are presumed to be employees, unless the recipient of the
services satisfies the statutory exclusion, commonly known as the “ABC” test. That
test provides that wages are to be assessed by an employer unless and until it has been
shown to the satisfaction of the Department of Labor that:
(i) Such individual has been or will continue to be free from control and
direction in connection with the performance of such service, both under the
individual’s contract for the performance of services 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 all of 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.48
This test is conjunctive; failure to satisfy any one of the prongs will render the
enterprise subject to the act.49
The first issue to be decided on remand is whether the Board’s determination
that Spar did not meet its statutory burden of proof with respect to Section
3302(10)(K)(ii) (hereinafter “Prong B”) is supported by substantial evidence and free
of legal error. In its March 20, 2011 decision, the Board determined that Spar failed
48
19 Del. C. § 3302(10)(K)(i)-(iii).
49
State Dep’t of Labor v. Med. Placement Servs., Inc., 457 A.2d 382, 384 (Del. 1982).
9
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
to show that the services its merchandisers provide are performed outside the usual
course of business or are performed outside all places of business of the enterprise for
which the service is performed. Spar now contends that this conclusion is
unsupported by substantial evidence in the record, and relied upon a misreading of
the plain language of 19 Del C. § 3302(10)(K)(ii). The Court disagrees.
Prong B of the ABC test required Spar to show that Barr’s “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.”50 When tasked with interpreting this subsection, the
Board looked to this Court’s decision in State Department of Labor v. Medical
Placement Services, Inc., for guidance.51 In Medical Placement Services, the Court
was tasked with determining whether M.P.S., a supplier of medical technicians, was
an employer for unemployment insurance tax purposes.52 In that case, the Court
concluded that the very nature of the supplier’s enterprise was that business could not
transpire on its premises; that is, “the enterprise in which M.P.S. is engaged involves
supplying technicians to medical facilities and private homes.”53 Drawing an analogy
between Spar’s merchandisers and the medical technicians employed by Medical
Placement Services, the Board determined that the merchandisers’ work is inherently
50
§ 3302(10)(K)(ii) (emphasis added).
51
R. at 74.
52
Medical Placement, 457 A.2d at 383.
53
Id. at 386.
10
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
transient, and as such, the retail locations at which Spar’s merchandisers work are
subsumed within the “place of business” as contemplated by Section
3302(10)(K)(ii).54
Spar argues that this analogy is not sound and that the Board’s reliance upon
the Medical Placement opinion constitutes a reversible error of law. It urges this
Court to narrowly construe the phrase “the places of business” as used in Section
3302(10)(K)(ii) to exclude the retail establishments in which the merchandisers
perform their services. I decline to do so. This Court has, on at least one occasion,
declined to narrowly define this phrase.55 However, it has not yet explicitly defined
this phrase for the purposes of unemployment compensation. When confronted with
a novel issue of statutory construction, it is the policy of this Court to defer to an
administrative agency’s construction of its own regulations and statutes administered
by that agency, unless the Court finds such construction clearly erroneous.56
Furthermore, the Unemployment Compensation Act is remedial, and, consequently,
it should be liberally construed in favor of its beneficiaries.57 As such, the Court finds
that the Board did not clearly err in determining that the retail establishments in
54
R. at 74.
55
See Medical Placement, 457 A.2d at 386 n.5 (citing Bluto v. Dep’t of Emp’t Sec., 373 A.2d
518 (Vt. 1977), for its definition of “place of business,” which was held to include the business area
in which the employer operated).
56
Toccafondi v. Bd. of Pension Trustees, 1994 WL 234004, at *3 (Del. Super. May 11,
57
White v. Security Link, 658 A.2d 619, 623 (Del. Super. 1994).
1994).
11
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
which the merchandisers perform their services are necessarily included within Spar’s
enterprise and are, thus, subsumed within “place of business” as contemplated by
Section 3302(10)(K)(ii).
Moreover, there is substantial evidence in the record to support the Board’s
conclusion that Spar did not satisfy the requirements of Prong B. A careful review of
the record reveals that Spar has only two business locations, and neither are located
in Delaware. Furthermore, Savage testified that the merchandisers Spar utilizes do not
perform work at either the Michigan or New York location. Instead, it is the nature
of Spar’s business enterprise that the merchandisers it utilizes perform their services
at Spar’s clients’ retail stores. Accordingly, the retail establishments in which the
merchandisers work are virtually indistinguishable from the locations considered by
the Superior Court in Medical Placements.
In sum, because there is substantial evidence in the record to support the
Board’s factual findings and the Board committed no legal error, the Board’s
conclusion that Spar did not satisfy Prong B of the ABC test is affirmed.
Drawing an analogy between Spar’s merchandisers and the claimants in
Medical Placement, the Board found that the substantial weight of the evidence
demonstrates that Spar controlled its merchandisers within the meaning of 19 Del. C.
§ 3302(10)(K)(i). Turning to the second prong, the Board also found that the
merchandisers’ services were not performed either outside of Spar’s usual course of
business or performed outside of all of the place of business of the enterprise for
which the services were performed.
The Court next considers whether the Board properly applied the third prong
12
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
of the ABC test to the facts presented. Spar takes issue with the Board’s finding that
the merchandisers were not “customarily engaged in an independently established
trade, occupation, profession or business of the same nature” as Spar, as required by
Section 3302(10)(K)(iii) (hereinafter “Prong C”). Appellant contends that it fully
satisfied its obligation under this prong by presenting evidence in the form of
Savage’s testimony and documentation that Barr customarily engaged in an
independently established business of the same nature as that of Spar. Appellant
points to a wealth of evidence supporting this conclusion: merchandisers are free to
accept and reject projects; maintain their own general liability and workers’
compensation insurance; market their services to Spar and more than ninety other
merchandising companies through an independent trade association and website; and
work for other companies, including Spar’s competitors.
Although Appellant demonstrated that it regarded and treated the
merchandisers as independent contractors, it did not establish particular facts
demonstrating that Barr herself maintained an independently established
merchandising business. Barr did not testify at the hearing, and the record does not
indicate whether she actually performed merchandising services for other companies,
nor does it conclusively establish whether her livelihood depended on her continued
relationship with Spar. Evidence that the merchandisers, as a class, were contractually
free to accept assignments from Spar’s competitors and other merchandising
companies leads to no different conclusion. The dictates of Section 3302(10)(K)(iii)
are clear. The enterprise seeking to invoke the statutory exception must provide
support, in the form of testimonial or documentary evidence presented at the
13
Spar Marketing Servs. Inc. v. UIAB
C.A. No. K11A-03-003 WLW
July 9, 2013
administrative hearing, that the claimant “is customarily engaged in an independently
established trade, occupation, profession, or business of the same nature as that
involved in the service performed.”58 Savage’s testimony, without more, is not
enough to satisfy Prong C of the ABC test. Accordingly, the Board’s conclusion that
Appellant failed to satisfy the requirements of Section 3302(10)(K)(iii) is affirmed.
CONCLUSION
For the reasons stated above, Appellant has failed to satisfy, by a
preponderance of credible evidence, prongs B and C of the ABC test. Therefore, I
continue to recommend that the decision of the Unemployment Insurance Appeal
Board be affirmed.
NOW, THEREFORE, IT IS ORDERED that the Prothonotary shall forthwith
transmit these findings and conclusions of law to the Clerk of the Supreme Court of
Delaware.
Resident Judge
WLW/dmh
oc: Prothonotary
xc: Counsel of Record
Delaware Supreme Court
58
19 Del. C. § 3302(10)(K)(iii).
14
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.