### No. 14899 IN THE SUPREME COURT OF THE STATE OF MONTANA

KIRBY CO. OF BOZEMAN, INC., A Montana corporation, Petitioner and Appellant,

VS. 

### EMPLOYMENT SECURITY DIVISION OF THE MONTANA STATE DEPARTMENT OF LABOR AND INDUSTRY, Respondent and Respondent.

Appeal from: District Court of the Eighteenth Judicial District, In and for the County of Gallatin Honorable

### W. W. Lessley, Judge presiding. Counsel of Record: For Appellant: Poore, Roth, Robischon and Robinson, Butte,Montana For Respondent: Robert Campbell, Helena,Montana

Submitted on briefs: April 

### 3, 1980 Decided: July 22, 1980 Filed:

## jUL23

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### ClerkMr. Justice John Conway Harrison delivered the Opinion of theCourt. Appellant Kirby Company of Bozeman (hereinKirby) is a Montana corporation with itsprincipal place of business in Bozeman, Montana. Appellant Kirby 

### is associatedwith Kirby Company, a division of Scottand Fetzer Company, asa direct factory distributor of vacuum cleaners and related products manufactured by Kirby Company. In that capacity, appellant 

### isauthorized topurchase Kirby Company products directfrom themanufacturer and wholesale them to "area distributors" and "dealers." Kirby isalso authorized toretail the products tothe general public. Kirby's facilityinBozeman consists of a small store containing two officesand a repair shop. Ninety-eight percent of Kirby's retail sales aremade by door-to-door salespersonsreferred toas "dealers." The dealers are recruited by Kirby or come tothe organization on their own initiative. Salespersons sign a one-year written agreement when they become dealers. The agreement is automatically renewable annually and subject to termination on thirty days' notice. A salespersonmust be authorized through a wholesale outlet likeKirby to sell Kirby products. Kirby president, David Sward, gives product demonstrations tonew dealers and provides them with a sales guide booklet. Sward alsoconducts sales clinics for the dealers, but attendance atthe clinics isnotmandatory. New dealers sometimes accompany experienced dealers on their initial sales calls. Kirby furnishes leads tothe dealers for a $5.00 fee. Kirby does not set the hours of the dealers or impose territorialrestrictions upon them. Dealers are not reimbursed for expenses, guaranteed minimum earnings, orprovided with any fringe benefits such asvacation pay or sick leave. The dealers arefree to 

### sell competing products, but apparently few do. Kirby encourages dealers to

use business cards. The card introduced intoevidence in thiscase included Kirby's name, address and phone number as 

### wellasthe dealer's name and phone number. Kirby does not provide office space for the dealers. However, it does not appear that any of the dealersmaintain separate office space for selling the Kirby products. The dealers apparently work door-to-door oroutof their homes. The dealersbuy products from Kirby for cash or on a thirty-day open account. Kirby gives the dealers the suggested retailprice for the products. The dealers generally adhere to the 

### setprices, although they arenotrequired to do so. The dealers sell the products tocustomers for cash

or on a conditional salescontract. The dealers negotiate their own 

### termson the contracts. Kirby isnotrequired to purchase conditional salescontracts negotiated by dealers but does soon occasion. Dealers arenotrequired to collect delinquent accounts on purchased contracts and arepaid fullcommission on salesmade even if the products are ultimately repossessed. Dealers alsonegotiate thekind and value of any trade-ins taken inconnection with a sale. Kirby isobligated under the written agreement with the dealers topurchase any vacuums taken as trade-ins. ~irby isnot, however, obligated topay the dealer the sameamount the dealer gave the customer for the trade-ins or topurchase itemsother than vacuums taken intrade. Kirby requires the dealers tokeep records of the sales they make and toprovide the customer information necessary for thewarranties on theproducts sold. Kirby warrants the

### products sold and performs all service and repair work under the warranty. Dealers also customarily submit all sales receipts to Kirby. Customer checks are sometimesmade out to Kirby rather than to the dealer. Kirby does not require this procedure but does so to enable the dealers to keep a

more accurate record of their sales. Under this method, Kirby pays the dealers the amount their receipts exceed the wholesale price of merchandise sold every week to ten days. In February 1977 a tax examiner of the Employment Security Division of the Montana Department of Labor and Industry determined Kirby's dealers were employees within the meaning of Montana unemployment insurance law. Kirby would, therefore,be required to make contributions to the unemployment compensation division on the earnings of the dealers. Kirby appealed the decision to the tax appeals referee of the Employment Security Divisionwho affirmed the decision of the tax examiner. Kirby then appealed the decision to the Board of Labor Appeals. The Board sustained the decision of the referee. Kirby then filed a petition for judicial review of the Board's decision in District Court, Gallatin County. The District Court, the Honorable W. W. Lessley presiding, held

a hearing atwhich the parties presented arguments on the legal issues involved in the case. Judge Lessley subsequently entered findings of fact and conclusions of law upholding the decision of the Board of Labor Appeals. his 

### appeal followed. Kirby raises the following issues on appeal: 1. Did the District Court err in entering findings of factdifferent from the findings of factmade by the ~oard of LaborAppeals?2. Did the DistrictCourt 

### err inconcluding Kirby's dealers 

### are employees within the meaning of Montana's unemployment insurance law? Section 39-51-2410(5), MCA, sets out the scope of judicial review of decisions of the Board of Labor Appeals. That section reads inpertinent part: "In any judicial proceedings under 39-51-2406 through 39-51-2410, the findings of the board 

### as to the facts, if supported by evidence and inthe absence of fraud, shallbe conclusive and the jurisdiction of said court shall be confined toquestions of law

# . .

# ." Under theplain meaning of this statuteand the case 

### lawinterpreting it, the DistrictCourt must treat the findings of the Board 

### as conclusive, if the findings 

### are supported by the evidence and in the absence of fraud. Noone v. Reeder (1968), 151Mont. 248, 252, 441P.2d 309. The DistrictCourt should, therefore, limititsreview of the findings of the Board toa consideration of whether they

are supported by the evidence. The DistrictCourt should not enter findingsdifferent from the Board's without first determining the Board's findings arenot supported by the evidence. Here, the District Court affirmed the decision of the Board. In doing so, however, the court entered findings of factdifferentfrom those adopted by the Board. The DistrictCourt did not state thatit feltthe findings of the Board 

### were not supported by the evidence. In fact, the DistrictCourt filed a memorandum insupport of the findings and conclusions itreached. In thememorandum, the District Court set outasthe only issue on appeal whether there was substantial evidence to support the decision of the Board. Under this standard the court listed evidence from the

### record to support the Board's decision that Kirby exercised sufficient control over the dealers to warrant the finding of an employer-employee relationshipbetween Kirby and the dealers. ~irby now attacks the procedure employed by the District Court in deciding the case as improper because the court entered findings different from those adopted by the Board. Kirby argues itwas error for the lower court to enter the different findings under section 39-51-2406,MCA, unless the court firstdetermined the Board's findings are not supported by the evidence. Kirby asks this Court to

reverse the decision of the District Court because of this procedural error. Under section 39-51-2410,MCA, it is not proper for the DistrictCourt to enter findings of factdifferent from those affirmed by the Board without firstdetermining the findings are not supported by the evidence. Therefore,we agree with Kirby that the District Court erred in doing so here. We do not, however, agree with Kirby's contention that this procedural error requires reversal of the District Court's decision. This Courtwill not reverse or remand a decision of the District Courtwhen the eventual result in the ~istrict Court must be the same. Greenv. Green (1978), 176 Mont. 532, 579 P.2d 1235, 35 St.Rep. 800, 803. Here, reversing and remanding because the District Court entered its own findings without firstdeclaring the Board's findings were not supported by the evidencewould undoubtedly result in the District Court once again affirming the ~oard'sdecision. The District Courtmade it clear that it found the Board's findings were supported by the evidence in the

### memorandum the court filed. In the memorandum the District Court stated the only issue itwas considering was whether there was substantial evidence in the record to support the decision of the Board. The court then listed evidence from the record supporting the Board's conclusion that ~irby exercised sufficient control over the dealers to warrant the finding of an employer-employee relationship between Kirby and the dealers. If we reversed the case and remanded it to the District Court, the courtwould simply withdraw its findings of fact and redeclare its decision based on the memorandum filed. Such an actionwould be a needless exercise on the part of the District Court and would ultimately do no good for Kirby. We will not, therefore, reverse on this issue. The second issue involves the determination of whether the dealers are employees or independent contractors as a matter of law. We recently discussed the distinctionbetween employees and independent contractors in the context of unemployment insurance contributions in Standard Chem. Mfg. Co. v. Employment Sec. (1980), Mont. 

## , 605 P.2d 610, 37 St.Rep. 105. In Standard Chemical we recognized that two tests are used to determine whether an employment or independent contract relationship exists. Standard Chemical, 605 P.2d at 612, 37 St.Rep. at 107. The first test is the statutory "ABC" test, which is set out in section 39-51-203(4), MCA: "(4) 

### Serviceperformed by an individual for wages is considered 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 services,both under his contractand in fact;"(b) such service iseither outside the usual course of the business forwhich such service isperformed or that such service isperformed outside of all the places of business of the enterprise forwhich such service isperformed; and "(c) such individual iscustomarily engaged in an independently established trade, occupation, profession, orbusiness." The second test is the common-law test. We stated the common-law test inStandard Chemical asfollows: "'"An independent contractor isone who renders service in the course of an occupation, and represents the 

### willof his employer only as to the result of hiswork, and not asto the means whereby it isaccomplished, and 

### isusually not paid by the job. (And see Neyman v. Pincus, 82 Mont. 467, 267 P. 805.)"

"'The vital test indetermining whether a person employed todo a certainpiece of work is a contractor or a 

### mere servant, 

### is the control over the work which isreserved by the employer. Stated asa general proposition, if the contractor is under the control of the employer, he is a servant; if not under such control, he is an independent contractor.'" 605 P.2d at 613, 37 St.Rep. at108, quoting from Pat GriffinCo. v. Employment Security Comm'n (1974), 163Mont. 529, 519 P.2d 147. The scope of our review is limited inapplying these tests. Standard Chemical, 605 P.2d at613, 37 St-Rep. at 108. We

### willnot overturn the decision of the District Court touphold the decision of the Board unless it can be shown the lower court abused its discretion indoing so. Standard Chemical, 605 P.2d at613, 37 St.Rep. at109. Under this standard, we firstconsider the amount of control Kirby exercised over the dealers here, ascontrol is themost crucial factor which distinguishes employees from independent contractors. Standard Chemical, 605 P.2d at 613, 37 St.Rep. at 109. Here, as inStandard Chemical, the right of control 

### is a close question. However, a tax examiner,a tax appeals referee, the Board of Labor Appeals and the ~istrict Court have allreviewed the facts as set outabove and reached the conclusion that Kirby exercised sufficient control over the dealers to form an employer-employee relationship for the purposes of the unemployment insurance statutes. Although the questionmay be close, we agree. Kirby trained the dealers inthe method of marketing Kirby products by giving them initialdemonstrations of the products, providing them with a sales guide booklet, and conducting sales clinics. Kirby regulated the price dealers charged for the products by suggesting retail prices which the dealers generally adhered to. Kirby customarily 

### received the dealers' 

### sales receipts and paid the dealers their commissions. Finally, and possibly most importantly, dealers had tobe authorized through a wholesale outlet like Kirby to sell Kirby products and Kirby could terminate the contract granting the dealers that authorization without

cause on thirty days' notice. Under Standard Chemical, this setup represents the kind of control, although in some aspects indirect, that is sufficient to establish an employeremployee relationshipwithin the meaning of our unemployment insurance statutes. Given these facts, 

### we certainly cannot say the DistrictCourt abused its discretion inaffirming the decision of the Board of Labor Appeals finding the dealers were employees of Kirby. Therefore, 

### we affirm the decision of the DistrictCourt holding the dealers tobe employees of Kirby forunemployment insurance purposes. In so holding, we note that this decision is inaccord with themajority of other jurisdictions thathave considered the question of whether vacuum cleaner salespersons

are employees or independent contractors for unemployment

### compensationpurposes under similar fact situations. Kirkpatrick v. Peet (1967),247 Or. 204, 428 P.2d 405; Beaman v. Superior Products, Inc. (1961),89 Ariz. 119, 358 P.2d 997; Bevan v. California Employment StabilizationCommission

(1956),139 Cal.App.2d 668, 294 P.2d 524; Sudduth

### v. California Employment Stabilization Commission (1955),130 Cal.App.2d 304, 278 P.2d 946;Murphy v. Daumit (1944),387 Ill. 406, 56 N.E.2d 800; In Re Electrolux Corp. (1942),288 N.Y. 440, 43N.E.2d 480;Electrolux Corp. v. Board of Review

(1942),129 N.J.L. 154, 28 A.2d 207; cf. Electrolux Corp. v. Danaher (1941), 128 Conn. 342, 23 A.2d 135. Kirby attempts to distinguish the above cases by pointing out facts in each which vary from the facts here. However, the distinctionsKirby attempts to make are far less significant than the similarities between the cases. We, therefore,adopt the above-cited cases as additional authority for affirming the decision of the District Court

on this issue. Affirmed.

We concur: 

# I ~,A.P. Chief Justice