2019 UT App 43

THE UTAH COURT OF APPEALS

PANY ZAK,

Petitioner,

v.

DEPARTMENT OF WORKFORCE SERVICES AND 

WORKFORCE APPEALS BOARD,

Respondents.

Opinion

No. 20171040-CA

Filed March 28, 2019

Original Proceeding in this Court

Pany Zak, Petitioner Pro Se

Nathan R. White, Attorney for Respondents

JUDGE MICHELE M. CHRISTIANSEN FORSTER authored this Opinion, 

in which JUDGES DAVID N. MORTENSEN and DIANA HAGEN

concurred.

CHRISTIANSEN FORSTER, Judge:

¶1 While many hands make light work, they may also accrue 

liability for contributions to the state’s unemployment 

compensation fund. The Department of Workforce Services

(Department) determined that Pany Zak’s day spa workers were 

employees and not independent contractors. Because the 

workers were employees, the Department concluded that their 

wages were subject to state unemployment compensation fund 

contributions and the Workforce Appeals Board (Board) 

affirmed. Zak petitions for judicial review. We decline to disturb 

the Board’s decision.

¶2 Zak operated a by-appointment-only day spa business 

out of her home and offered a variety of spa-related services to 

customers. While Zak provided most of the services herself, she 
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20171040-CA 2 2019 UT App 43

hired other workers and contacted them when more hands were 

needed. When Zak contacted the workers with an opportunity to 

perform services in her spa, the workers were free to reject the 

offer. But if the workers accepted, Zak expected them to render

their services at her place of business and she would pay the 

workers a percentage of the sale or a commission.

¶3 Under this arrangement, the customers belonged to Zak 

and the workers were directed not to hand out their own 

business cards to the customers. Zak set the price of services, set 

the rate or amount of commissions to workers, collected

payment from customers, and paid the workers. When 

customers called the day spa, Zak or her boyfriend who lived 

with her answered the call and scheduled the appointment. If a 

customer failed to show up for an appointment with a worker or 

was dissatisfied with the services provided by a worker, Zak did 

not pay that worker.

¶4 When providing a service, workers paid no “booth” fees 

and otherwise did not rent space in Zak’s day spa. Rather, Zak 

provided a room and massage table to the workers at no cost, 

and made available, at a cost to the workers, some spa-related 

products. If a customer paid by credit card, Zak charged the 

workers a credit card processing fee.

¶5 Zak generally found workers by placing classified 

advertisements and soliciting resumes. She then had the workers 

sign an agreement in which they agreed to be “classified as 

Contract Labor.” The agreement further stated that Zak’s day 

spa “is not considered [the worker’s] employer and will not be 

held responsible for any tax payments” related to the workers’

employment. Zak issued the workers a 1099-MISC1 form but did 

 

1. A 1099-MISC, or miscellaneous income form, is an Internal 

Revenue Service tax form that reports, among other things, 

(continued...)
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20171040-CA 3 2019 UT App 43

not know what types of tax forms the workers filed with the 

Internal Revenue Service. Zak offered the workers no instruction 

or training on how to perform services and did not ask them to 

show her their own business licenses. Indeed, Zak allowed the 

workers to provide services in their own unique styles.

¶6 In 2016, the Department commenced an audit to 

determine whether Zak’s workers should be classified as 

independent contractors or as Zak’s employees. After an 

investigation, the auditor determined that Zak’s workers were 

employees and, consequently, that the workers’ wages were 

subject to state unemployment compensation fund contributions.

Zak appealed the audit to the Department. Considering Zak’s

appeal, a hearing officer within the Department reviewed 

documents from the original investigation and consulted with 

Zak. The hearing officer weighed the circumstances surrounding 

Zak’s relationship with the day spa workers against several 

factors used to aid in the determination of a worker’s 

independent contractor status. The officer affirmed the auditor’s 

determination that Zak’s spa workers were employees and not 

independent contractors.

¶7 Zak appealed the Department’s decision to an 

administrative law judge (the ALJ). The ALJ affirmed the 

Department’s decision, determining that Zak was an employer 

and that Zak’s day spa workers were employees. As a result, the 

ALJ determined that Zak’s business was subject to 

unemployment contributions. The ALJ observed that Zak had 

the burden to establish that the workers were “independently 

 

(...continued)

earnings paid to an independent contractor or a person who is 

self-employed but has performed work for another. See About 

Form 1099-MISC, Miscellaneous Income, IRS, https://www.irs.gov/f

orms-pubs/about-form-1099-misc [https://perma.cc/TY2T-4437].
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20171040-CA 4 2019 UT App 43

established in their own trade, occupation, profession, or 

business providing similar services as those provided to [Zak] at 

the same time the services were provided to [Zak].” See Aura Spa 

& Boutique v. Department of Workforce Services, 2017 UT App 152, 

¶ 8, 402 P.3d 813; see also Utah Code Ann. § 35A-4-204(3) 

(LexisNexis Supp. 2018). Zak’s evidence in support of this factor 

consisted of her own testimony that the workers told her they 

had their own places of business and business licenses. In 

addition, Zak offered two resumes from workers she had hired 

that indicated those workers were self-employed. The ALJ 

determined that this evidence was hearsay and thus was 

“insufficient to establish a finding of fact that [the workers] had 

their own businesses, had other clients, or had business 

licenses.”

¶8 Zak then appealed the ALJ’s decision to the Board. The 

Board adopted in full the factual findings of the ALJ and 

affirmed the ALJ’s reasoning and conclusions of law. Zak seeks 

review of that decision in this court. Zak primarily argues that 

the Board erred when it concluded that the day spa workers 

were employees and not independent contractors with 

independently established businesses.2

 

2. We note that Zak asserts that the Board misinterpreted the 

language of Utah Administrative Code R944-204-303(1)(b) when 

it considered that provision’s enumerated factors used to 

determine whether a worker is an independent contractor.

However, Zak fails to “explain, with reasoned analysis 

supported by citations to legal authority and the record,” why 

she should prevail on this argument on judicial review. See Utah 

R. App. P. 24(a)(8). She also suggests that the Board’s decision is 

not supported by substantial evidence. In our review of the 

Board’s decision, the Board affirmatively cited substantial and 

undisputed evidence supporting its weighing of all seven 

(continued...)
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¶9 The Employment Security Act generally makes “[s]ervices 

performed by an individual for wages or under any contract 

of hire” subject to contributions to the state unemployment 

compensation fund. Utah Code Ann. § 35A-4-204(3). Zak does 

not dispute that her relationship with the spa workers included 

payment of wages under a contract for hire. Consequently, 

the services of the workers are subject to the Employment 

Security Act “unless it is shown to the satisfaction of the 

[Unemployment Insurance Division] that” an exception for 

independent contractors applies. See id.; see also Evolocity, Inc. v. 

Department of Workforce Services, 2015 UT App 61, ¶ 9, 347 P.3d 

406 (observing that “Utah law presumes that a paid or 

contracted worker is an employee unless the putative employer 

can demonstrate that the worker (1) is independently established 

in work of the same nature and (2) has been free from control or 

direction over the means of performing the work” (quotation 

simplified)). Accordingly, Zak bears the burden to rebut the 

presumption that the workers were employees. See Aura, 2017 

UT App 152, ¶ 8.

¶10 “The determination whether a [worker] is an independent 

contractor involves a fact-sensitive inquiry into the unique facts 

of a particular employment relationship.” Evolocity, 2015 UT 

App 61, ¶ 6. We accordingly grant deference to the Board “in its 

weighing of the relevant factors to arrive at its ultimate decision” 

and “we will disturb that decision only if it is clearly 

erroneous or falls outside the scope of the afforded deference.” 

Id.

 

(...continued)

factors. Because neither of these arguments is adequately 

briefed, we do not consider them further. See State v. Thomas, 961 

P.2d 299, 304 (Utah 1998) (“It is well established that a reviewing 

court will not address arguments that are not adequately 

briefed.”).
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¶11 The Board considered seven factors to aid in its 

determination that the workers were independent contractors.

See Utah Admin. Code R944-204-303(1)(b). These factors

require the reviewing entity to examine whether 

the worker has a separate place of business; has 

substantially invested in his or her own equipment; 

has independent clients; can realize a profit or loss; 

advertises his or her own services; has obtained the 

required and customary professional licenses; and 

maintains records that validate business expenses.

Aura, 2017 UT App 152, ¶ 8. The Board considered the evidence 

presented and, importantly, the lack of evidence supporting the 

conclusion that any of the workers were independent contractors 

under each of the seven factors.

¶12 Zak separately addresses each factor in her briefing but 

does not challenge any of the record evidence. Instead, she asks 

us to consider the same evidence presented in the administrative 

proceedings and reach a different conclusion—that the workers 

were more like independent contractors. However, “[w]e do not 

reweigh the evidence or substitute our decision for that of the 

Department but instead will uphold its determinations if they 

are supported by the record evidence.” Evolocity, 2015 UT App 

61, ¶ 6. Affirming the Department’s decision, the Board adopted 

in full its factual determinations. Because Zak does not confront

the record evidence supporting the Board’s decision, we decline 

to address the majority of Zak’s challenges.

¶13 With regard to the first factor—the worker’s separate 

place of business—Zak argues that the Board improperly 

ignored some of her evidence when it labeled that evidence 

hearsay. In other words, she contends that the Board refused to 

consider legally competent evidence, an argument that 

implicates the residuum rule. See Aura, 2017 UT App 152, ¶ 11.

“The residuum rule requires that an administrative board’s 
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findings of fact be supported by a residuum of legal evidence 

competent in a court of law even if the board has received and 

considered evidence of a lesser quality.” Id. (quotation 

simplified). Here the Board declined to base its findings of fact 

on hearsay evidence alone.

¶14 “‘Hearsay’ is a statement, other than one made by the 

declarant while testifying at the trial or hearing, offered in 

evidence to prove the truth of the matter asserted.” InnoSys, Inc. 

v. Department of Workforce Services, 2011 UT App 169, ¶ 9, 257 

P.3d 489 (quoting Utah R. Evid. 801(c)). “While hearsay is clearly 

admissible in administrative proceedings, the ensuing findings 

of fact may not rely exclusively on inadmissible hearsay

evidence.” Aura, 2017 UT App 152, ¶ 11 (quotation simplified).

¶15 Zak testified that the workers told her in conversations 

that they had their own business licenses and places of business.

She further testified that some of the workers had other jobs

performing spa treatments and she submitted two resumes from 

workers identifying themselves as “self-employed” and showing 

that they maintained other employment. None of the workers 

testified at the administrative hearing and Zak offered no other 

evidence of the workers’ separate businesses. Zak’s testimony 

about what the workers told her and the workers’ resumes are 

hearsay. It constituted statements of others made while not 

testifying and the statements were offered by Zak to prove the 

truth of those statements. Zak offered this evidence to establish 

that the workers had their own business licenses and 

independent places of business. Because Zak did not assert that 

an exception applied to this hearsay evidence, the Board 

correctly concluded that this evidence was hearsay.3

 

3. Hearsay may be “legally competent evidence, given the 

multitude of exceptions to the presumptive bar on the admission 

(continued...)
Zak v. Workforce Services

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¶16 The Board considered Zak’s testimony as well as the

resumes. The ALJ observed that Zak “provided hearsay 

evidence the workers had their own places of business[,] . . . had 

other clients[, and] . . . had business licenses.” Likewise, the 

Board observed that the only evidence supporting the workers 

maintaining a separate place of business “is hearsay in the form 

of the workers’ resumes and their alleged statements to [Zak].”

Because this evidence was hearsay not subject to an exception,

standing alone and without corroboration, it was not competent 

evidence sufficient to support a factual finding contrary to the 

facts found by the ALJ. The ALJ and the Board thus properly 

concluded that Zak’s testimony and the two resumes could not 

support a finding that the workers had business licenses or their 

own places of business. See id.

¶17 Zak has not demonstrated that the Board clearly erred in 

its conclusion that the workers were employees of her day spa. 

Nor has she established that the Board exceeded the scope of its 

 

(...continued)

of hearsay.” Aura Spa & Boutique v. Department of Workforce 

Services, 2017 UT App 152, ¶ 12, 402 P.3d 813. Zak asserts only 

that the public records exception should apply. See Utah R. Evid. 

803(8) (excepting from the general hearsay bar, “[a] record or 

statement of a public office” so long as certain conditions are 

met). She fails, however, to direct us to the portion of the record 

where this argument was presented either to the ALJ or the 

Board for resolution. Consequently, this argument is not 

preserved. Zak does not argue that any exception to preservation 

applies under the circumstances and we therefore decline to 

address this argument further. See State v. Johnson, 2017 UT 76, 

¶ 27, 416 P.3d 443 (explaining that, when an issue is not 

preserved, “the party must argue that an exception to 

preservation applies” in order for the appellate court to address 

that issue).
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afforded deference in determining the facts and weighing them 

in reaching its conclusion. “Further, because independent 

contractor status requires a showing of both independent 

establishment and freedom from direct control, the lack of the 

former obviates the need to discuss the latter.” Id. ¶ 15; see also

Utah Code Ann. § 35A-4-204(3)(a)–(b) (LexisNexis Supp. 2018). 

For these reasons, we decline to disturb the Board’s decision.