ELLEN G. FEINSOT v. BOARD OF REVIEW

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1982-04T21982-04T2

ELLEN G. FEINSOT,

Claimant,

v.

BOARD OF REVIEW,

Respondent.

_____________________________

 

Submitted: October 5, 2006 - Decided February 26, 2007

Before Judges A. A. Rodr guez and Collester.

On appeal from a final decision by the Board of Review, Department of Labor.

Pelino & Lentz, attorneys for appellant Assigned Counsel, Inc. (Edward L. Ciemniecki, on the brief).

Stuart Rabner, Attorney General, attorney for respondent Board of Review (Michael J. Haas, Assistant Attorney General, of counsel; Jennifer B. Pitre, Deputy Attorney General, on the brief).

PER CURIAM

In this unemployment compensation dispute, the employer, Assigned Counsel, Inc. (ACI), appeals from the Board of Review's (Board) determination that claimant, Ellen G. Feinsot, was in its "employment," within the meaning of N.J.S.A. 43:21-19(i)(A), from August 12, 1999 to October 29, 1999. We hold that the Board's finding is unsupported by the record and deviates from the governing statute; therefore, we conclude that claimant was not an employee and reverse.

These are the salient facts. ACI is a specialized employment broker. It matches attorneys with clients, law firms or corporate law departments that require legal services for specific projects or for specific periods of time. ACI will verify the attorney's credentials, i.e., the candidate's baccalaureate, legal degrees and standing with the bar.

ACI and the attorneys enter into an agreement called the Attorney Payment Administration Acknowledgment (APAA). The APAA provides that the attorney is an independent contractor. The attorney is not required to have malpractice insurance.

Based on the client's specifications, ACI sends the client approximately two resumes from its database. If the candidate is hired by the client, either party can terminate the arrangement at any time, with or without cause. However, the termination must be done through ACI. Neither the client nor the attorney can terminate the relationship directly.

Although ACI does not set the attorney's work hours or pay, it serves as a billing agent. The attorney will submit time sheets to ACI, who in turn will bill the client. According to ACI's President, Robert Murphy, the client ultimately pays the attorney. Specifically, the sums come from the client; however, ACI issues the paycheck to the attorney on an Internal Revenue Service (IRS) form 1099. In other words, the pay check is for a gross amount, there are no withholdings or deductions. The attorney is responsible for the payment of state and federal taxes. ACI does not provide equipment or supplies to the attorneys and they are not permitted to work on ACI's premises.

In March 1999, claimant registered with ACI after seeing its advertisement in a newspaper. Claimant does not have a law office in New Jersey, nor does she have independent professional insurance. Claimant's only assignment from ACI was to work for Selective Insurance (Selective) from August 1999 through October 1999. Selective provided claimant with a work schedule. She worked Monday through Friday, approximately thirty-five to forty hours a week during that period. She was not permitted to sub-contract work. She worked from Selective's legal department, where she used its computer and desk. At no time did claimant perform work on ACI's premises. Claimant reported the income received from this assignment on IRS Form Schedule C.

ACI does not require an exclusivity agreement. However, claimant testified that while on this assignment, she could not have picked up additional work from other clients. She viewed this job as a full-time, three month commitment. During the period she was working for Selective, claimant did not solicit other work. She had neither business cards nor a business telephone. However, claimant testified that she may have been registered with similar temporary agencies.

When the assignment ended, claimant sought unemployment benefits, asserting that she was an employee of ACI. A Deputy Director issued a "Notice to Employer of Monetary Redetermination," to ACI. In effect, this was a determination that claimant was in ACI's employment. ACI appealed this decision to the Appeal Tribunal. The Appeal Tribunal reversed, finding that claimant was an independent contractor. The Appeal Tribunal found that ACI satisfied the unemployment compensation law (UCL) (N.J.S.A. 43:21-1 to -24.30), ABC test set forth in N.J.S.A. 43:21-19(i)(6)(A)(B)(C).

The Deputy Director appealed to the Board, as did the claimant. The Board remanded to the Appeal Tribunal to take claimant's testimony. Following a second hearing, the Appeal Tribunal reconfirmed its decision that claimant was not in "employment" with ACI because she operated as an independently established professional. In reaching its decision, the Appeal Tribunal relied on Trauma Nurses Inc. v. Bd. of Review, 242 N.J. Super. 135 (App. Div. 1990).

Both the Deputy Director and claimant appealed to the Board. The Board reversed, finding that ACI did not establish claimant worked in an independently established business. The Board found the Deputy's position to be more persuasive and concluded that:

Although the claimant did not work at [ACI's] work site and may have been free of control from the above employer, the evidence presented at the hearing indicates that the claimant was not in an 'independently established business' and therefore, did not meet that portion of N.J.S.A. 43:21-19(i)(6)(A)(B)(C). For instance, there is nothing on the record to show that the claimant used her own stationery or advertised in the yellow pages or professional publications. The claimant did not use her own billing statements or trade name. She did not have a business telephone number or rent/lease office space. Additionally, the claimant is not registered as a State or federal employing unit and there is no evidence that the claimant made any investment in having an independent business. See Carpet Remnant Warehouse, Inc. v. New Jersey Dept. of Labor, 125 N.J. 567 (1991).

On appeal, ACI contends:

ACI SATISFIED ALL THREE PRONGS OF THE ABC TEST THEREBY ESTABLISHING CLAIMANT HAD ACTED AS AN INDEPENDENT CONTRACTOR.

ACI NEITHER EXERCISED NOR RETAINED THE RIGHT TO EXERCISE CONTROL OR DIRECTION OVER THE SERVICES PROVIDED BY CLAIMANT.

THE WORK PERFORMED BY CLAIMANT WAS OUTSIDE THE USUAL COURSE OF ACTI'S BUSINESS AND WAS RENDERED OUTSIDE ACI'S PLACE OF BUSINESS.

CLAIMANT WAS ENGAGED IN AN INDEPENDENTLY ESTABLISHED PROFESSION.

1. Claimant's Status Must Be

Evaluated By Application Of The

Standards Set Forth In The Trauma

Nurses Decision.

2. ACI Has Satisfied The Criteria Set Forth In The [New Jersey] Supreme Court's Carpet Remnant Decision.

3. The Board of Review Abused Its

Discretion By Ignoring Critical Evidence In Concluding That Claimant Was An Employee Of ACI.

We agree.

We are mindful of the narrow scope of our review powers and the presumptive correctness of the administrative agency's determination. Trauma Nurses, supra, 242 N.J. Super. at 141. We are also mindful of the remedial object of the UCL is to protect the welfare of the people by providing a cushion against the shocks and rigors of unemployment and employment disability. Ibid.; see Provident Inst. for Sav. in Jersey City v. Div. of Employment Sec., 32 N.J. 585, 590 (1960). Thus, we begin our analysis well aware of these concepts.

The UCL provides a three-prong test, to determine whether an individual is in "employment." N.J.S.A. 43:21-19(i)(6) states:

Services performed by an individual for remuneration shall be deemed to be employment subject to this chapter unless and until it is shown to the satisfaction of the division that:

(A) Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact;

(B) Such service is either outside the usual course of the business for which such service is performed, or that such service is performed; and

(C) Such individual is customarily engaged in an independently established trade, occupation, profession or business.

This determination is fact-sensitive and requires an evaluation in each case of the substance, not the form, of the relationship. Carpet Remnant Warehouse, supra, 125 N.J. at 582; see also Provident Inst. for Sav. in Jersey City, supra, 32 N.J. at 591; Trauma Nurses, supra, 242 N.J. Super. at 142.

Here, the Board did not reject the Appeal Tribunal's finding that the A and B prongs had been satisfied. It disagreed only as to prong C. We disagree with that conclusion.

To satisfy prong C, there must be a "clear showing that a viable independent [enterprise] exists which would withstand the termination of the relationship in question." Carpet Remnant Warehouse, supra, 125 N.J. at 592; Gilchrist v. Div. of Employment Sec., 48 N.J. Super. 147, 158 (App. Div. 1957). Thus, if the person providing services is dependent on the employer, and on termination of that relationship would join the ranks of unemployment, the C standard is not satisfied. Gilchrist, supra, 125 N.J. at 159; Goldberg & Co. v. Div. of Employment Sec., 21 N.J. 107, 114 (1956); Bloom v. Div. of Employment Sec., 69 N.J. Super. 175, 179-80 (App. Div. 1961). Conversely, this prong is satisfied when a person has a business, trade, occupation, or profession that will carry on, notwithstanding the termination of the challenged relationship. Trauma Nurses, supra, 242 N.J. Super. at 148 (noting that most nurses worked for other brokers and hospitals and could obtain varying types of work, including full-time, part-time and shift work).

Here, the Board found claimant was an employee because she did not have an independently established business because she did not have: business stationery; advertisements; billing statements; trade names; a business telephone; or office space. However, these were choices made by claimant, not requirements set by ACI, nor Selective. Claimant could have advertised, had business stationary and telephone and still functioned in the assignment that ACI procured for her with Selective. Claimant cannot change the relationship with ACI from independent contractor to employee, by her unilateral decision to forego some of the trappings of her profession.

In Trauma Nurses, this court, in addition to analyzing the qualifications of the nursing profession as a whole, also reviewed the individual circumstances of the particular nurses in that case. We concluded:

Clearly, the independent nature of their profession would survive without the existence of TNI. Nurses must fulfill educational and licensure requirements in order to practice their profession. . . . In context of this case, the individual nurses do not work exclusively through TNI. Instead, most work simultaneously for other brokers, hospitals and health care institutions.

[Ibid. (emphasis added) (citations omitted).]

These holdings were cited with approval by the Supreme Court in Carpet Remnant Warehouse, supra, 125 N.J. at 583-84.

Here, the claimant's profession clearly would survive the termination of the relationship with ACI. She will continue to be a lawyer, i.e., she has fulfilled educational and licensure requirements in order to practice her profession. She can obtain full-time and part-time positions as an employee or independent contractor as a lawyer. We note that claimant has been a licensed lawyer since 1991, pre-dating her arrangement with ACI by several years. Moreover, claimant was not registered exclusively with ACI. She testified that she worked for, and received compensation from, an employer other than ACI in 1999. Claimant acknowledged making multiple business deductions on her Schedule C return for tax year 1999.

The Board's decision notes that ACI's argument would stand for the proposition "that no professional who is employed as an employee would ever be in employment if he or she only took work through a referral agency." This argument lacks merit. A professional who took work through a referral agency could still be in employment if any of the prongs set by N.J.S.A. 43:21-19(1)(6)(A)(B)(C) are not satisfied. For example, if a referral agency employs attorneys to work at their premises, maintaining control of their work and paying net wages after withholding deductions, such a referral agency would have an employment relationship with the attorneys. That is not the case here.

ACI also contends that the Board abused its discretion in failing to consider facts critical to a determination as to claimant's independent contractor status. Specifically, ACI submits that the Board: (1) wrongfully ignored the existence of the APAA; and (2) relied on information outside the record. We reject these arguments. First, the existence of the APAA is not determined. Case law has established that contractual language is not determinative of the particular type of relationship. However, in Steel Pier Amusement Co. v. New Jersey Unemployment Compensation Comm., 127 N.J.L. 154 (Sup. Ct. 1941), the Court held that the contract, under which services were rendered by claimant, and also the circumstances surrounding the relationship, must be considered to determine the particular type of relationship. Moreover, "we are obliged to look behind contractual language to the actual situation -- the status in which parties are placed by relationship that exists between them." Trauma Nurses, supra, 242 N.J. Super. at 142 (citations omitted). Similarly, in Provident Inst. for Sav. in Jersey City, supra, 32 N.J. at 591, the court stated that "no matter what the relationship may be called or how careful the parties to it may be in their attempt to create the impression" that an employment relationship did not exist, the court must "look through the form to the substance" to determine if it is exempt from coverage under the act.

Second, ACI complains that the Board's initial order stated, "[T]he claimant is not registered as a state or federal employing unit. . . ." ACI alleges that such information was not contained anywhere in the record and proves that the Board abused their discretion. We agree, but find this to be harmless error because the Board can take judicial notice of this fact. N.J.R.E. 201(b).

We conclude that the Board's decision is wholly unsupported by the undisputed proofs and contrary to the governing statute.

Reversed.

 

(continued)

(continued)

12

A-1982-04T2

February 26, 2007