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, Judge presiding. 

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 

For Amicus Curiae: 

Richard M. Baskett; Datsopoulous, MacDonald & Lind, 

Missoula,,Montana 

D Submitted on Briefs: ~pril 15, 1992 

FEB B 0 1993 Decided: February 10, 1993 

Filed: l/ q,":f! a -2. e.,l~:t 

CLER$< 0.7 ~i.j:~'@?il~?~ <:QORT 

STATE 01: iii;Ui.iTAigA 
Justice Karla M. Gray delivered the Opinion of the Court. 

Northwest publishing (Northwest) appeals a decision of the 

District Court forthe Eleventh ~udicial ~istrict, Flathead County, 

affirming a decision of the Board of Labor Appeals. We affirm. 

The issue is whether the District Court erred in aff inning 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 sole proprietorship which prints 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 for all advertisements sold. They are provided lodging, sales 

forms, reporting forms, a company telephone credit card number, and 

company gas credit cards; one salesperson occasionally was provided 

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 Industry determined that commission 

sales representatives working for Northwest were employees of 

Northwest for purposes 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 decision of the Board of Labor Appeals. 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 they are supported by the evidence and there has been 

no fraud, and the jurisdiction of a reviewing court is confined to 

questions of law. "Supported by the evidence" means supported by 

substantial evidence, which is 18something more than a scintilla of 

evidence, but may be less than a preponderance of the evidence." 

Gypsy Highview Gathering System v. Stokes (1986), 221 Mont. 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 sales persons 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, for which he sold advertising, prior to working for Northwest. However, the brief reference to the paper indicates that the 

business in which the person was engaged was publishing a paper, 

not selling advertising. The other salesperson who testified 

stated that she worked in sales for another employer after working 

for Northwest. Owning or operating a sales business is different 

from working in sales for someone else. We conclude that the 

finding that the salespeople did 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 independent contractors or employees is 

an issue of law. 

Section 39-51-201(14), MCA, provides: 

"Independent contractorn means an individual who renders 

service in the course of an occupation and: 

(a) has been and will continue to be 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 "andr1 is used in the definition of 

"independent contractor," 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) 

component was 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 profession and that the ability 

to make a sale is an independent skill, together with the fact that 

one of the salespeople was re-employed as a salesperson after 

leaving Northwest, are sufficient to establish that 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, it has met the "B" part of the independent contractor test. 

Accepting such a premise would equate the '*B1' test of being engaged 

in an independently established business or occupation with merely 

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 interpretation would render the *IBs1 requirement a nullity. 

We have previously rejected the notion that possessing a 
saleable skill was the equivalent of being engaged in an 

independently established business, trade or occupation. In our 

leading case on this subject, Standard Chem. 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 in which 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 attention to 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 

dependent on 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 independently 
established business. Indeed, the fact that one of the salespeople 

subsequently was re-employed as a salesperson by a different entity 

supports our conclusion that these salespeople are employees, not 

independent contractors. When that person's relationship with 

Northwest terminated, her 9vbusiness" terminated as 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, as well as their lack of authority to hire 

subordinates, indicated employment--rather than independent 

contractor--status. - Id. at 616. Similarly here, Northwest's 

salespeople retained the right to terminate their employment and to 

do so without liability. Of the factors we specifically applied in 

Standard Chem. relatingto the "independently established business" 

question, the only one which might 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 to mandate a conclusion that the "B" part of 

the independent contractor test is met here. 

Northwest contends that both Standard Chem. 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 associate was an employee 

rather than an independent contractor. There, we applied five 

criteria in reaching our determination; employee status was 
indicated 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 in which 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 

established business" 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 service being performed 

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, that prong of the earlier test was deleted 

by the 1987 legislature. Id. 

Therefore, as we did in standard Chem. on a similar record, so 

we conclude here that the I1B" portion of the "A Bll independent 

contractor test contained in 5 39-51-201 (14) , MCA, was not met. 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 for purposes of unemployment insurance taxation. 

Northwest also argues that the decision of a hearing examiner 

in a case involving a business known as canyon ~ublications 

effectively overrules the determination of 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 that matter unless and until it is properly 

before us. 

Af f inned. 

We concur: 

Chief Justice 
for 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. I would 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 ~ivision of 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.