### No. 91-530 

### IN THE SUPREME COURT OF THE STATE OF MONTANA 1993



### NORTHWEST PUBLISHING, Plaintiff and Appellant,

MONTANA DEPARTMENT OF LABOR AND

- - 

### INDUSTRY,UNEMPLOYMENT INSURANCE 

### DIVISION, CONTRIBUTIONS BUREAU, Defendant and Respondent.

APPEAL FROM: District Court of the Eleventh Judicial District, In and 

### for the County of Flathead, The Honorable Michael H. Keedy, Judgepresiding.

COUNSEL OF RECORD: For Appellant: Dana L. Christensen, Kendra L. Kawaguchi; Murphy, Robinson,Heckathorn & 

### Phillips,Kalispell,Montana For Respondent: Melanie A. Symons: Board of Labor Appeals, Department of Labor and Industry,Helena, Montana ForAmicus Curiae: Richard

### M. Baskett; Datsopoulous,MacDonald & 

### Lind, Missoula,,Montana 

# D Submitted on Briefs: ~pril 15, 1992 

## FEBB01993 Decided: February 10, 1993 

### Filed: 

# l/ q,":f! a -2. e.,l~:t CLER$<0.7~i.j:~'@?il~?~ <:QORT STATE 01: iii;Ui.iTAigAJustice Karla M. Gray delivered the Opinion of the Court.

Northwest 

### publishing (Northwest) appeals a decision of the District Court fortheEleventh~udicial ~istrict, Flathead County, affirming a decision of the Board of Labor Appeals. We affirm. The issue iswhether the District Court 

### erred inaffinning the decision of the Board of Labor Appeals that traveling salespeople under contract with Northwest are not Itindependent contractors" as defined by 5 39-51-201(14), MCA. Northwest is a soleproprietorship whichprints and publishes vacation and travel guides in Kalispell, Montana. Its sales representatives travel throughout the northwestern United States and Canada soliciting the purchase of advertisements to appear in 

### Northwest's magazines. These salespeople operate under 

### an "Independent Contractor Agreement" and receive a set commission rate forall advertisements sold. They areprovided lodging, sales forms, reporting forms,acompanytelephonecreditcardnumber,and companygas creditcards;one salesperson occasionallywasprovided

a car owned by Northwest's owner for 

### use on sales trips. In 

### January 1990, the Unemployment Insurance Division of the Montana Department of Labor and Industrydetermined that commission sales representatives working for Northwest were employees of Northwest forpurposes of unemployment insurance 

### taxation. Morthwest unsuccessfully appealed that determination to the Department of Labor and Industry and the Montana Board of Labor Appeals, arguing 

### that the salespeople 

### are independent contractors. It then appealed to the Eleventh Judicial District Court, which affirmed

### the decisionof theBoard of LaborAppeals. This appeal followed.

Did the District Court err in affirming the decision of the Board of Labor Appeals that traveling salespeople under contract with Northwest are not "independent contractor st^ 

### as defined by 5 

### 39-51-201(14), MCA? Under 

### 5 39-51-2410(5), MCA, factual findings of the Board are conclusive if theyare supportedby the evidenceand there has been

no fraud,and the jurisdiction of 

### a reviewing court is confined to questions of law. "Supportedby the evidence" means supported by substantial evidence,which is 18somethingmore than a scintillaof evidence, but may be less than a preponderance of the evidence." GypsyHighviewGathering Systemv. Stokes (1986), 221Mont. 11, 15, 716 P.2d 620, 623. Once disputes about the underlying facts are resolved, the issue of whether salespeople are independent contractors or employees is a question of law. Carlson

### v. Cain (1983), 204 Mont. 311, 317, 664 P.2d 913, 916;appeal after remand (1985), 216 Mont. 129, 700 P.2d 607. Our standard of review of a question of law is whether the conclusion is correct. Steer, Inc. v. Department of 

### Revenue (1990), 245 Mont. 470, 474, 803 P.2d 601, 603. Northwest specifically challenges the finding that I8[t]he two commission salespersons testifying at the hearing did not have an advertising sales business which they owned or operated either before or after association with [North~est].~ Northwest points out that one of the salespeople testified that he had published a

### paper, forwhich he sold advertising,prior to working for Northwest. However,thebrief reference to thepaper indicates that the business in which the person was engaged was publishing a paper, not selling advertising. The other salesperson who testified stated that sheworked in sales for another employer afterworking for Northwest. Owning or operating a salesbusiness is different from working in sales for someone else. We conclude that the findingthat the salespeopledid not own or operate their own sales businesses was supported by substantial evidence. Therefore, the finding is conclusive under 5 

### 39-51-2410(5), MCA. Northwest's chief arguments relate to the definition of an "independent c~ntractor~~ set forth at 5 

### 39-51-201(14), MCA, and commonly called the "A B 

### test." As stated above, the issue of whether the salespeople are independentcontractorsor employees is

an issue of law. Section 39-51-201(14), MCA, provides: "Independent contractornmeans an individual who renders service in the course of an occupation and: 

### (a)hasbeen andwill continue tobe free from control or direction over the performance of the services, both under his contract and in fact; and

(b) is engaged in an independently established trade, occupation, profession, or business. Because the conjunctive "andr1is used in the definition of "independentcontractor," the absence of either the I8A'* or the "Brf part of the test results in a conclusion of employment. Thus, Northwest must establish both "A" and "BN 

### in order to prevail, as a matter of law, on its contention that the salespeople 

### are

### independent contractors. Because we determine that the Board did not err in concluding that Northwest failed to establish the "B" part of the test, we need not address whether the "A1' 

### (control) componentwas met. Quoting the definition of a "profession1*from Black's Law Dictionary, Northwest argues that sales is an independently established profession within the purview of 5 

### 39-51-201(14)(b), MCA. It cites no legal authority for such an assertion, and we have discovered none. Northwest claims that the salespeople's belief that sales is an independent professionand that the ability tomake a 

### sale is an independent skill,together with the fact that one of the salespeople was re-employed as a salesperson after leavingNorthwest,are sufficienttoestablishthat its salespeople

are "engaged in an independently established trade, occupation, profession, or business1'under 5 

### 39-51-201(14) (b)

## ,MCA. Notwithstanding the trend in recent years for people in many occupations to prefer the term **professiont* to "occupation, 

## '' Northwest's argument boils down to an assertion that because sales is a recognized occupation or profession involving marketable skills, ithasmet the "B"part of the independent contractor test. Accepting such apremisewould equate the '*B1' test of being engaged in an independentlyestablishedbusiness or occupation withmerely rendering services in the course of an occupation, as is already separately required in the first clause 

### of 5 39-51-201(14), MCA. 

### Such an interpretationwould render the *IBs1 requirement a nullity. We have previously rejected the notion that possessing 

### asaleable skill was the equivalent of being engaged in an independently established business, trade or occupation. In our leading case on this subject,StandardChem. Mfg. Co. v. Employment Sec. (1980), 185 Mont. 241, 605 P.2d 610, Standard Chemical asserted that its commission salespeople were independent contractors rather than employees. With specific regard to the "independently established businessn criterion and based on its finding that the salespeople had a saleable skill, the district court determined that they were independent contractors. We reversed, holding that the salespeople were employees. Standard Chem., 605 P.2d at 616. Standard Chem. was the first case inwhich we interpreted the "independently established business" component of the statutory independent contractor test. We surveyed both the case law and statutes from our sister states and set forth much of that law before turning our attentionto the case before us and the findings of the district court therein. Our holding that the salespeople were employees was premised on the following specifics: (1) no

"business" existed independently and apart from the salespeople's relationship with Standard chemical: (2) the salespeople were dependenton Standard Chemical for their employment;and (3) should the relationship with Standard Chemical terminate, the "business" would terminate as well. 

# a.at 615-16. The record before us is nearly devoid of evidence in support of Northwest's position with regard to these fundamental questions of whether its salespeople were engaged in an independentlyestablished business. Indeed,the fact that one of the salespeople subsequentlywas re-employedas a salespersonby a differententity supports our conclusion that these salespeople are employees, not independent contractors. When that person's relationship with Northwest terminated,her 9vbusiness" terminatedas well,until such time as she could find another job as a salesperson. We did consider additional criteria in Standard Chem. Specifically, we determined that the salespeople's right to terminate their employment and to do so without liability for a peremptory termination,aswell as their lack of authority to hire subordinates, indicated employment--rather than independent contractor--status. - Id. at 616. Similarly here, Northwest's salespeopleretained the right to terminate their employmentand to do sowithout liability. Of the factorswe specifically applied in StandardChem. relatingtothe "independently established business" question, the only one whichmight indicate independent contractor status here is the ability of Northwest's salespeople to hire subordinates if they choose to do so. The existence of this one factor is insufficient tomandate a conclusion that the "B"part of the independent contractor test is met here. Northwest contends thatboth StandardChem. and Zimmer-Jackson Assoc. v. Dept. of Labor (1988), 231Mont. 357, 752 P.2d 1095, are distinguishable from the case before us. We note that in ZimmerJackson, we also concluded that a sales associatewas an employee rather than an independent contractor. There, we applied five criteria in reaching our determination; employee status wasindicated by each. Again, as in Standard Chem., one or two of those criteria might indicate independent contractor status here. None overcomes the basic and very fundamental fact, however, that Northwest's salespeople were not "engaged in an independently established business" of their own. Nor does anything in ZimmerJackson suggest that those five criteria constitute a "bright line test" for purposes of 

### 5 39-51-201(14)(b), MCA. Northwest's main argument with regard to both Standard Chem. and zimmer-Jackson is that our decisions there hinged on the fact that the "businessu1 inwhich the llemployers" were engaged--sales-- was inseparable from the business or occupation in which the salespeople were engaged. However, the fact that the entities in both cases were involved, at least in part, in sales did not form the basis for our holdings relating to the "independently establishedbusiness"prong of the independent contractor test. In Standard Chem., the fact that the employer was 

### a Nebraska corporation engaged in the manufacturing, distributing and wholesaling of livestock nutritional products merely was noted in

our recitation of the facts of the case. Standard Chem., 605 P.2d at 611. And while we did address that matter in Zimmer-Jackson, our discussion related to the existence of what was then the "B" part of an "ABC" test: namely,whether the servicebeingperformed is "either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise. 

# . . ." Section 39- 51-203(4), MCA (1983); Zimmer-Jackson, 752 P.2d at 1099. As we

### noted in ~immer-~ackson, thatprong of the earlier testwas deleted by the 1987 

### legislature. 

### Id. Therefore,aswe did 

### instandardChem. on a similar record, so

we 

### conclude here that the I1B" 

### portion of the "A Bll 

### independent contractortest contained in5 39-51-201 (14)

## ,MCA,

### was notmet. We hold 

### that the 

### Board did not err in concluding, and the District Court did not 

### err 

### in affirming, that Northwest's salespeople are employees 

### forpurposes of 

### unemployment insurance taxation. Northwest also argues that the decision of ahearing examiner in a case involving a business known as 

### canyon ~ublications effectively overrules the determinationof employee status in 

### this



### case. The Canyon Publications case 

### apparently 

### is now on appeal 

### before the Board of 

### Labor Appeals and 

### Canyon Publications was 

### permitted to file an 

### amicus brief 

### in this case. 

### Whatever the status 

### or ultimate outcome of the Canyon Publications case, 

### this Court cannot consider thatmatter unless and until it is 

### properly before 

### us. Aff

### inned.

We 

### concur:

Chief Justicefor Justice Terry N..~rieweiier

### Justice John Conway Harrison dissenting.

As noted in the majority's opinion, the leading case on this subject is Standard Chem. Mfg. Co. v. Employment Sec. (1980), 185 Mont. 241, 605 P.2d 610. Iwould have difficulty disagreeing with Standard Chem. in view of the fact that 

### I am the author of that opinion, However, the record here discloses a fact situation which, in

### my opinion, 

### is different than 

### that set forth in Standard Chem. Further, the fact situation herein 

### is different enough that I believe the Unemployment Insurance ~ivisionof the Montana Department of Labor and Industry 

### is hunting for contributions rather than attempting to be perfectly fair to the independent contractors 

### in this matter, the traveling salespeople under contract 

### with Northwest Publishing. For that reason, 

### I would

reverse.