No. 88-510 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1989 

LARRY'S POST COMPANY, INC., 

Appellant, 

-vsUNEMPLOYMENT INSURANCE DIVISION, 

CONTRIBUTIONS BUREAU, 

Respondent. 

APPEAL FROM: District Court of the Eleventh Judicial District, 

In and for the County of Flathead, 

The Honorable Michael Keedy, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

C. Eugene ~hillips; Murphy, Robinson, Heckathorn and 

Phillips, Kalispell, Montana 

For Respondent : 

Karl Nagel, Dept. of Labor & Industry, Helena, 

Montana 

Submitted on Briefs: Feb. 3, 1989 

Decided: July 18, 1989 
Mr. Justice William E. Hunt, Sr., delivered the Opinion of 

the Court. 

Larry's Post Company, Inc. appeals from a judgment of 

the District Court of the Eleventh Judicial District, 

Flathead County, which affirmed the determination of the 

Board of Labor Appeals that services performed by individuals 

who contracted with Larry's to harvest timber constituted 

employment within the meaning of the unemployment insurance 

laws. We affirm. 

Larry's raises the following issues on appeal: 

1. Were the facts found by the appeals referee and 

adopted by the Board of Labor Appeals supported by the 

evidence? 

2. Do the facts substantiate the finding of an 

employment relationship for the purpose of unemployment 

insurance? 

Appellant Larry's Post Company, Inc. operated a post 

yard in Flathead County near Columbia Falls. It was engaged 

in the business of procuring, cutting, pointing, curing, 

treating and selling fence posts, poles and rails. 

Larry's arranged with landowners to cut and remove 

timber from certain private properties. In exchange for the 

right to harvest timber, Larry's paid each landowner a 

stumpage fee. 

When the right to harvest a particular tract was 

procured, Larry's contracted with woodcutters to cut and 

remove the timber. Tom Finch, whose claim for unemployment 

insurance benefits initiated this matter, contracted with 

Larry's to cut timber for approximately four weeks in 1986. 

Finch performed services for Larry's after quitting his job 

at the Superior Lumber Mill and while awaiting the completion 
of contractual arrangements with the state of Montana to 

begin harvesting timber on state lands. 

Although Larry's usually executed written contracts with 

its woodcutters, a written contract was not entered into with 

Finch. The evidence indicates, however, that Larry's dealt 

with Finch on the same terms that it dealt with woodcutters 

who signed written agreements. 

Each cutting agreement granted the woodcutter the 

exclusive privilege of cutting post and pole timber from 

areas designated by Larry's. The woodcutter was required to 

conform to performance specifications stipulated by the 

contract, the landowner and statutes. Any failure to 

conform to these specifications constituted cause for 

termination. 

The woodcutters were allowed to set their own hours. 

They could also provide services to others, although no 

evidence was submitted showing that any woodcutter was under 

contract with any other firm while under contract with 

Larry ' s . 

The woodcutters were permitted to hire assistants or 

subcontract out all or part of the work. Tom inch was 

assisted by his son, whom he paid for that assistance. 

However, no evidence was introduced regarding whether inch 

or any other woodcutter paid employment taxes or whether they 

withheld taxes from the earnings of their assistants or 

subcontractors. 

The woodcutters were permitted to sell to other buyers 

the timber cut under the contract with Larry's. When a 

woodcutter sold his posts and poles to another, he was 

obliged to pay stumpage fees to Larry's. 

Larry's paid the woodcutters on a regularly scheduled 

basis--every two weeks--for cut posts and poles. All 

contractors were paid the same rate. The woodcutters did not 
negotiate prices, nor was the work awarded on the basis of 

competitive bids. Certain costs, including stumpage fees 

paid to the landowner, were deducted from each woodcutter's 

paycheck. 

The woodcutters provided their own transportation to and 

from the cutting site. They also furnished their own tools 

and equipment, usually a chain saw and other tools common to 

the woodcutting trade. However, if a woodcutter did not own 

the appropriate tools, he could rent them from Larry's. The 

rental cost was deducted from his paycheck. 

Other than equipment and transportation, the woodcutters 

did not make a significant investment in the job. They did 

not purchase stumpage prior to harvest; they paid only for 

the stumpage they cut; they were under no liability if they 

were unwilling or unable to complete their contracts; they 

faced little opportunity for profit or loss other than their 

success or failure in performing efficiently. 

Each contract provided that the agreement could be 

terminated at any time by either party. Tom Finch's 

agreement with Larry's ended in June, 1986, when the property 

on which he was working was sold by the landowner and was no 

longer available for timber harvesting. From that time until 

September, 1986, Finch was self-employed, buying stumpage and 

cutting timber on state lands. 

In October, 1986, Finch filed a claim for unemployment 

insurance benefits. His claim was denied because he left the 

Superior Lumber Mill to engage in self-employment. In 

November, 1986, he sought a redetermination of the claim, 

this time including his earnings from Larry's as requalifying 

wages. The Unemployment Insurance ~ivision then initiated an 

investigation, resulting in the Division's determination 

that, as the services performed by inch for Larry's 
constituted employment, he was eligible for unemployment 

insurance benefits. 

In May, 1987, Larry's appealed the decision. A hearing 

was held before an appeals referee from the Department of 

Labor and Industry. The appeals referee also concluded that 

the work performed by Finch constituted employment. 

In August, 1987, Larry's again appealed, this time to 

the Board of Labor Appeals. In the absence of a request for 

oral argument, the Board reviewed the matter and affirmed the 

referee's decision. 

Larry's then sought judicial review of the 

determination. After briefing, the District Court dismissed 

the petition and affirmed the agency decision. Larry' s 

appeals to this Court. 

The standard of review of decisions by the Board of 

Labor Appeals is set out in S 39-51-2410(5), MCA, which 

provides in pertinent part: 

(5) In any judicial proceeding under 39-51-2406 

through 39-51-2410, the findings of the board as to 

the facts, if supported by evidence and in the 

absence of fraud, shall be conclusive and the 

jurisdiction of said court shall be confined to 

questions of law. 

Thus, as mandated by statute, we are bound by those facts 

found by the Board of Labor Appeals that are supported by the 

evidence. "Supported by the evidence" means supported by 

substantial evidence, that is, more than a scintilla of 

evidence but less than a preponderance. Gypsy ~ighview 

Gathering Sys. v. Stokes (19861, 221 Mont. 11, 15, 716 P.2d 

620, 623. 

Larry's argues that several of the findings made by the 

appeals referee and adopted by the Board are not supported by 

the evidence. Specifically, Larry's refers to those findings 

ir, which the appeals referee stated that no evidence was 
presented regarding certain matters. Larry's argues that "no 

evidence" is not the same as "substantial evidence" and 

cannot be the basis of any finding of fact. 

The so-called "non-findings" that Larry's challenges 

are : 

[I] [Tlhere was no evidence or testimony submitted 

showing that any woodcutter was ever under contract 

with any other firm while under contract with 

Larry's Post Company. 

[21 [Tlhere is no evidence or testimony on the 

record that the woodcutters pay any employment 

taxes (workers ' compensation, unemployment 

insurance, social security) . Nor was any evidence 

or testimony submitted showing that the woodcutters 

withhold taxes from their assistants/subcontractors 

earnings. 

[31 There is no testimony or evidence in the 

record showing that woodcutters post a hazard 

reduction bond as required by Section 76-13-408, 

et. seq., MCA. 

[4] There was no evidence or testimony submitted 

showing that the woodcutters negotiated prices or 

that work is awarded on the basis of competitive 

bids. 

These "non-findings" are especially pertinent to the 

present case. Each reflects an element indicative of an 

individual's status as an independent contractor. The 

appeals referee's finding of a lack of evidence on these 

points tends to demonstrate that an employment relationship 

existed between Larry's and the woodcutters. 

Furthermore, Larry's, as the employer, had the burden of 

proving that the services performed by the woodcutters did 

not constitute employment. Section 39-51-203(4), MCA (1985). 

The very fact that Larry's neglected to introduce evidence 

indicating that the woodcutters were independent 

contractors--evidence showing that not only did the 
woodcutters have an ~pportunity to work elsewhere, they 

actually did so; evidence showing that while the woodcutters 

occasionally had other individuals assist them, those 

individuals were actual employees of the woodcutters; 

evidence showing that the price of the posts was negotiated 

between two entities of similar bargaining power or that the 

contracts were awarded on the basis of competitive bids; 

evidence showing that the woodcutters were required to invest 

in hazard reduction bonds--established that Larry's failed to 

meet its burden. Under the circumstances, the challenged 

findings were appropriate. 

Larry's next argues that the facts found by the appeals 

referee do not substantiate the finding of an employment 

relationship. Larry's contends that the facts establish that 

the woodcutters were independent contractors and, therefore, 

not covered by the unemployment insurance laws. 

The formula for determining whether individuals are 

independent contractors or employees within the meaning of 

the unemployment insurance laws is commonly known as the ABC 

Test. The test is delineated in S 39-51-203 (4), MCA (1985), 

which provides: 

(4) Service performed 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 department 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 

contract 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 outside 

of all the places of business of the enterprise for 

which such service is performed; and 
(c) such individual is customarily engaged in an 

independently established trade, occupation, 

profession, or business. 

Under the statute, employment is presumed. Refore an 

individual will be deemed an independant contractor, elements 

of all three subsections of the statute must be proven. 

Pioneer Baseball League v. Friedricks (Mont. 1988) , 760 P.2d 

93, 95, 45 St.Rep. 1573, 1576; Standard Chem. Mfg. Co. v. 

Employment Sec. Div. (1980), 185 Mont. 241, 245, 605 P.2d 

610, 613. 

The first and most crucial element of the ABC test is 

the right of the individual who performs services to retain 

control and direction over his labor. Pioneer Baseball, 760 

P.2d at 95, 45 St. Rep. at 1576. Control is necessarily 

implied in every contract that gives the employer the right 

to insist that services be performed according to 

specifications. St. egis Paper Co. v. Unemployment 

Compensation Comm'n (1971), 157 Mont. 548, 553, 487 P.2d 

524, 527. Evidence of Larry's control over the woodcutters 

was demorlstrated by the written contracts, which enumerated 

several performance specifications. Further evidence of 

Larry's control was illustrated by testimony indicating that 

Larry's had the right to specify and change the size of the 

posts to be cut, depending on the orders the post company 

needed to fill. In addition, Larry's monitored the cutting 

area to assure that the woodcutters followed all 

stipulations. If a woodcutter failed to comply, Larry's 

could withhold from the woodcutter's pay any amounts 

necessary to bring the worker into compliance. ~ailure to 

comply could also result in dismissal. 

Evidence of employment was also found in the method by 

which the wooClcutters were paid. Larry's paid the 

woodcutters r twc weeks for the number of posts cut, 
rather than by the job. Moreover, each woodcutter was paid 

the same amount per post, in accordance with a price list 

attached to the written contract. The woodcutters did not 

negotiate the price to be paid per post, nor were the 

contracts awarded on the basis of competitive bids--both 

factors that, if present, would indicate an independent 

contractorship. See pioneer Baseball, 760 P.2d at 95, 45 

St.Rep. at 1576. 

Further evidence of employment was indicated by the fact 

that the woodcutters continued their relationship with 

Larry's through a succession of jobs. heir contracts were 

not renewed each time they were granted a new area in which 

to cut--a factor that, if present, would point to independent 

contractorship. 

Perhaps the most important indication that Larry's 

retained control over the woodcutters was the fact that the 

relationship between the two was terminable at will without 

liability on the part of either party. This fact signified 

the existence of an employment relationship. ~irby Co. of 

Bozeman v. Employment Sec. D~V. (1980), 189Mont. 1, 9, 614 

P.26 1040, 1044. 

The above combination of factors demonstrated that 

Larry's retained control over the woodcutters, thereby 

establishing that their relationship was one of employment. 

As Larry's failed to establish the first leg of the ABC Test, 

we need not consider the remaining two branches. As noted 

earlier, if the employer fails to prove all three elements of 

the AEC test, the services performed will be considered 

employment. 

Affirmed.