I N T H E SUPR EM E C O UR T O F M I SS I SS I PPI NO. 2 0 1 2 - CC- 0 1 5 2 2 - S CT EART HGRAI NS BAKERY

GROUP, I

NC. f / k / a S ARA L EE BAK

ERY GROUP, I

NC.
v. M I S S I S S I P P I DEP AR T M EN T OF EM PLOY M EN T SECUR I TY
D A T E O F JU D G M E N T : 09/ 04/ 2012 TRI AL J UD GE: HO N. TOM I E T. GR EEN C O U R T F R O M W H IC H A P P E A L E D : H IN D S C O U N T Y C IR C U IT C O U R T , F I RS T J UDI CI AL DI S TRI CT AT T OR NE YS F OR AP P E L L ANT : T I M OT HY W
. L I NDS AY KR I S T I HAS KI NS J OHNS ON ATTO RN EYS FOR A PP ELLEE: ALB ERT B. W HI TE L E ANNE F RA NKL I N B RA DY NA TUR E OF THE C ASE: CI VI L - STATE BO AR DS A ND AG ENC I ES D I SPO SI T I O N : R E V E R SE D A N D R E N D E R E D - 02/ 13/ 2014 M OT I ON F OR RE HE AR I NG F I L E D: M ANDAT E I S S UE D: B E F O R E R A N D O L P H , P . J. , K I N G A N D C O L E M A N , JJ. CO LEM AN, J UST I CE, FOR TH E COU RT: ¶1. T he M i ssi ssi pp i D epart m ent of E m ploym ent Sec uri t y (M D E S ) det erm i ned that d istri b u tors for S ara L ee B ak ery G rou p , Inc
. (no w E arthg rains B ak ery G rou p , Inc
. ) w ere agentdr i ver s a nd c om m i s s i on dr i ver s f orSar a L ee, r athert han i ndepende ntcontr act or s , s uch t hatSar a Lee w as r equi r ed t o pay unempl oym entinsur ance t axes f ort he di s t r i but or s . T he ci r cui tcour taf

f i r m ed, and Sar a Lee appe al ed. Fi ndi ng t hatM D E S f ai l ed t o appl y the l aw
corr ect l y and thati t s deci s i on w as nots uppor t ed by s ubs t ant i al evi dence , w e r ever s e.

### The Em ploym ent Sec uri ti es Law was ame nded ef fe ctiveJuly 1, 2007, and Se ction 1 

### 71-5- 11(I )( 14) be cameSec ti on 71-5- 11(J)( 14). The brie fs re fe r t o (J)(1 4), but the rear e re fe re nce s t o (I )( 14) throughout the re cord. These ction num ber s we rechanged a gain af te r a 2 01 3 amendment, an d th e relevant sectionis again(I)(14 ). See Mis s. Code Ann. § 71-5- 11(I )( 14) ( Supp. 2013) . Howe ver , c onsi st ent with theparti es ’ brie fs , were fe r t o (J)( 14). Subse ction ( J) (14) def

ine s e mpl oyme nt a s: “Se rvi ce s pe rf orm ed by an individua l f

or 2 

### wa ge s s ha l lb e d e e m e d t o bee mpl oym e nt s ub j e c t t o thi s c ha

pt e r unl e s s and

unti li t i s s ho wn to th e satisfacti on of the departm ent that s uch indivi dualhas bee n and wi llcontinueto be fr eefrom c ontrol and direc ti on over theper for

ma nceof s uch se rvi ce s both unde r hi s c ontrac t of s er vic e and in f

ac t; and the r el ations hip of em ploye r and em

ployee shal l bedet er

mined in a cc ordancewith theprinc ipl es of the common law governing the re lati on of m as te r and se rvant. ” Mi ss . CodeAnn. § 71- 5-11( J) (14) (Re v. 2011)
. 2 F act s and P roce dural H i s t ory ¶2
. I n 2006, S ar a L ee r e s t ruc tur e d i t s di s t r i bu t i on pr oc e s s i n M i s s i s s i pp i f r om havi ng emp l oy ee d i s t r i but or s t o i ndepende ntcontr act ordi s t r i but or s . H ow ever , i n J anuary 2007, M D E S d eterm ined that S ara L ee ’s i n d ep en d en t con tr ac tor d istri b u to rs a ctua ll y w ere empl oyees underM i s s i s s i ppi C ode Sect i on 71- 5- 11(J) (14) because t hey w ere “c ontr ol l ed and di r ect ed i n t he per f

or m ance of

thei rw or k. ” M D E S f ound t he exi s t ence of an 1 ,2 empl oyer/ empl oyee r el at i onship and requi red Sara L ee t o p ay u nem ploym ent i ns ur ance t axes f ort he di s t r i but or s . Sar a Lee appe al ed the dec i s i on. A t el ephoni c hea r i ng w i t h an
a d m in is tr a tiv e la w ju d g e (A L J ) w a s h e ld o n O c to b e r 2 6 , 2 0 0 7
. ¶3. S ara L ee’s fi rs t w i t ness w as R ob ert F anell i , w ho w orked for t he con sul t i ng bu si ness t hathel ped Sar a Lee putt he i ndepende ntcontr act ordi s t r i but i on syst em i n pl ace . T he t r ans i t i on w as m ade i n M i s s i s s i ppi i n 20 06 , and by t he t i m e of t he hea r i ng, Sar a Lee had
r es t ructur ed i n f

our t een s t at es . Pr i ort o 2004, Sar a Lee had a f l eetof t rucks f ordi s t r i but i on and empl oyed al l of

i t s di s t r i but or s nat i onw i de. Sar a Lee t er m i nated i t s di s t r i but or empl oyees , and the di s t r i but or s w er e gi ven the opt i on t o s etup t heiro w n com pani es and

### 3

p u rc h a se d istrib u tio n ter rito rie s fr o m S a ra L e e ; th e y w o u ld h a v e th e e x c lu siv e rig h ts to di s t r i but e Sar a Lee’ s pr oduct s i n t he geogr aphi cal ar ea thatt hey pur chas ed. Sar a L ee i s the
m anuf actur er , buti tno l ongerhas a di s t r i but i on arm i n the s t at es t hathave c onvert ed t o t he i n d e p e n d e n tc o n t r a c t o rs y s t e m; t h e t e r r i t o r y o wn e r s a r e th e d i s t r i b u t o r s , o p e r a t i n g th e i ro wn in d e p e n d e n t d is tr ib u tio n b u s in e s s e s . ¶4
. T he t e r r i t ory owner s ar e corpor at i ons , and Sar a Lee has a contr actw i t h eac h di s t r i but orcorpor at i on, notw i t h i ndi vi dual s . Fanel l i expl ai ned thatt hes e ar e “s etup t o be tru ly ind ep en d en t distribu tor co n tr ac tor relati o n sh ips.” H e sa id the co n tr ac t betw ee n S ara L ee a nd t he di s t r i but ori s m eantt o be cl eart hatS ar a L ee “doe s notr et ai n any r i ghtt o contr ol t he mannerand means of pe r f or m ance ” of

the di s t r i but or , a nd the agr eements peci f i es t hat t he di s t r i but ori s t o “be an i ndepende ntcontr act orf oral l purpos es . ” D i s t r i but or s ar e al l ow ed to se ll all o r p a rt o f th e ir ter rito ry to th ird p a rties . T h e y a re a llo w e d to b u y a n d d istrib u te
o ther p rod u cts, e x c e p t pro d u cts th at are d ir ec t com p eti tors to S ara L ee . T h ey ca n h ir e
em ployees or agen t s t o d o an y p artof the bu si ness, s uch as dri ve t rucks orneg oti at e pri ces. T h e te rr ito ry o w n e rs a re re sp o n sib le f o r b u y in g o r le a sin g th e ir o w n tru c k s, a s o p p o se d to S a r a Le e p r o v i d i n g t ru c k s a s i td i d f o ri t s e mp l o y e e s u n d e rth e o l d s y s t e m. ¶5
. T h e d istri b u tors ha v e the op ti o n of pu tt ing a S ara L ee log o o n their truc k s, an d S ara L ee pa ys t hem a w eekl y a dver t i s i ng f ee of $50 i f they choos e t o do that
. T hey ca n earn an addi t i onal $50 perw eek by pur chas i ng and w ear i ng s hi r t s w i t h Sar a Lee’ s l ogo on t hem. T he
s hi r t s have the w or ds “I ndepende ntO per at or ” underthe Sar a Lee l ogo. D i s t r i but or s ar e not
r equi r ed t o do ei t herof

t hes e t hi ngs , and s om e choos e nott o. Sar a Lee does notpay w ages
o r sa lar ies to th e d istrib u to rs, o th e r th a n th e w e e k ly a d v e rtisin g fe e if th e d istrib u to rs o p t to

### 4

par t i c i pa t e . The di s t r i bu t or s ’ pr of i t s c ome f

r om s e l l i ng the pr od uc t s a ta hi gh e rpr i c e t ha n th e y p a id S a ra L e e fo r th e m . D istrib u to rs in c u r th e ir o w n e x p e n se s in o p e ra tin g th e ir bus i nes s es , i ncl udi ng t he cos tof f uel , vehi cl e mai nt enanc e and i ns ur ance , of f i ce a nd adm i nis t rat i ve ex pen ses, health insur ance, and t axes. ¶6
. F an ell i t esti fi ed tha t S ara L ee d o es n o t pro v ide instruc ti o n s fo r h o w the d istri b u tors
s houl d oper at e thei rdi s t r i but i on bus i nes s es; Sar a Lee does nothave a ny contr ol overhi r i ng
orf i r i ng t he di s t r i but or s ’ empl oyees ort he hour s t hey w or k; Sar a Lee does notpr ovi de of f i ce sp a c e ; an d th e d istrib u to rs d o n o t su b m it re p o rts to S a ra L e e . S a ra L e e d o e s h a v e a rig h t to t erm i nat e i t s contr actw i t h a di s t r i but orf orbr each of c ontr act( i
. e. , f ai l ur e t o del i ver p rod u cts). If th e d istri b u tor w an ts t o g et o u t of the b u sine ss, he h as to se ll the territ o ry. S ara L ee ha s a r i ghtt o r ej ecta buyeri n a f ew l i m i t ed s i tuat i ons , s uch as if the bu yerhas had several con vict i on s f

or dri ving un der the i nfl uen ce or a hi st ory of cr i m i nal act i vity, and t ho se t erm s ar e i n t he contr act . Sar a L ee al s o has a f i r s tri ghtof r ef

us al t o buy t he t err i t ory back att he di s t r i but or ’ s as ki ng pr i ce. ¶7. Sar a Lee’ s s econd w i t nes s w as John S hep ard, D i rec t orof A l t ernat i ve D i s t r i but i on Syst ems f

orSar a Lee. Shepar d expl ai ned how Sar a Lee co nv ert ed f r om an empl oyee di s t r i but i on s ys t em t o an i ndepende ntcontr act ordi s t r i but i on s ys t em by off eri ng curr ent di s t r i but or s t he oppor tuni t y t o pur chas e t err i t or i es . H e corr obor at ed Fanel l i ’ s t es t i m ony t hat t he di s t r i but or s ar e i ndepende ntcontr act or s , notSar a Lee empl oyees . Shepar d expl ai ned that th e d istrib u to rs r e sig n e d a s S a ra L e e e m p lo y e e s, se t u p S -c o rp o ra tio n s, a n d n o w o p e ra te underthei row n na m es . Shepar d s ai d thatthe di s t r i but or s mustbe S- corpor at i ons , and they
c a n n o tb e i n d i v i d u a l s o rs o l e p r o p r i e t o r s h i p s . Be c a u s e th e d i s t r i b u t o r s o p e r a t e th e i ro wn

### 5

di s t r i but i on compani es , t hey are a l l ow ed t o s el l any pr oduct s i n oroutof thei rt err i t or i es
ex ce p t pro d u cts th at direc tl y co m p ete w ith S ara L ee . S h ep ard testi fi ed that the d istri b u tors d o n o tr e c e i v e wa g e s o rb e n e f i t s f r o m S a r a L e e ; t h e d i s t r i b u t o r s c a n h i r e th e i ro wn empl oyees ; Sar a Lee does nothave c ontr ol overt he hour s t he dis t r i but or s w or k; Sar a Lee does notpr ovi de tr ai ni ng t o t he di s t r i but or s ; Sar a Lee does notof f erheal t h i ns ur ance ortruck i ns ur ance t o t he di s t r i but or s ; the di s t r i but or s a r e r es pons i bl e f orthei row n t axes ; and Sar a Lee d o e s n o t h a v e a n y in v o lv e m e n t w ith ru n n in g th e d istrib u to rs’ d a y -to -d a y b u sin e ss e s. H e sa id t he di s t r i but or s ar e r es pons i bl e f oral l as pect s of

thei rbus i nes s es , i ncl udi ng as s um i ng “al l t he ri s k a s s o c ia te d w ith o w n in g a n d o p e ra tin g th a t b u s in e s s .” ¶8. M arl ene H arper , C hi ef of T echni cal Ser vi ces f or M D E S’ s t ax depart m ent , t es t i f i ed f orM D E S. M D E S as s er t ed thatan agr eementi s notpr oof of an i ndependentcontr act or
r el at i ons hi p and t hatS ar a L ee coul d not“w r i t e t hemsel ves outf r om underU nempl oym ent I ns ur ance L aw ” by s ayi ng i n t hei rcontr actthatthey had a n i ndepende ntcontr act or
r el at i ons hi p. M D E S di d notpr es entany addi t i onal w i t nes s es orevi dence
. ¶9
. A f

t ert he t el ephoni c hea r i ng , o n N ov e mber2 1, 2 00 7, M D E S se ntan A m ended D eci s i on t o S ara Lee s t at i ng t hat , i n addi t i on t o bei ng empl oyees underM i s s i s s i ppi C ode S ec ti o n 7 1 -5-1 1(J) (14), M D E S found that the d istri b u tors w ere “c o m m issi o n d ri v ers” o f S ara L e e u n d e r S e c tio n 7 1 -5 -1 1 (J) (2 ). S a ra L e e se n t a le tter to th e A L J s tatin g its o p p o sitio n to M D E S bei ng al l ow ed t o amend i t s deci s i on after t he t el ephoni c hea r i ng. Sar a Lee m ai nt ai ned t hatbot h t he or i gi nal de ci s i on of J anuary 31, 2007, a nd the amended dec i s i on of N ovember 21, 2007, w er e i ncorr ect , as t he i ndepende ntoper at ordi s t r i but or s di d n ots a t i s f y the s t andar ds f or“empl oym ent ” underei t hers ubs ect i on (J ) ( 2) or ( J ) ( 14)
. Sar a L ee as ked f orthe N ovember

### 6

21 amende d de c i s i on t o be d i s mi s s e d, b uti n t he a l t e r na t i ve , i tr e qu e s t e d a h e a r i ng a nd an oppor tuni t y t o br i ef

t he i s s ue f

ul l y. ¶10. O n D ece m ber13, 2007 , the A L J i ss ued a de ci s i on i n w hi ch he c oncl uded that the ind ep e n d e n t o p era tor d istri b u tors w ere n o t em p loy ee s u n d er S ec ti o n 7 1 -5-1 1 (J)(14 ), n o r w ere t hey “c om m i s s i oned dr i ver s ” underSec t i on 71- 5- 11( J ) ( 2)
. H ow ever , t he A L J i ndi cat ed that t her e w as a ques t i on as t o w hethert he di s t r i but or s m ay be “ agentdr i ver s ” unders ubs ect i on (J )( 2)( a). T he A L J conti nu ed t he case on t hat i ssue and gav e t he p art i es tw o w eeks t o reque st t hatt he mat t erbe r econve ned t o s ubm i taddi t i onal evi dence
. Sara Lee r eques t ed thatt he t el ephoni c hea r i ng be r econve ned w i t h t he l i m i t ed purpos e of pr es ent i ng evi dence on t he agent - dr i veri s s ue. ¶11. T he s econd t el ephoni c hea r i ng w as hel d o n F ebruary 6 , 2008, atw hi ch addi t i onal
ev iden ce w as p rese n ted a n d sev era l dis tri bu tors w ere ca ll ed as w itn esse s. Jo h n S h ep ard , S ara L ee’ s D i r ect orof

A l t ernat i ve D i s t r i but i on Syst ems, t es t i f i ed agai n. I n addi t i on t o af f i r m i ng h is e a rlier tes tim o n y , S h e p a rd p ro v id e d fu rth e r e x p lan a tio n re g a rd in g th e d istrib u to rs’ p ro fit
a n d th e ir e x p e n se s. S h e p a rd e x p la in e d th a t th e d istrib u to rs’ p ro fits c o m e fro m th e ir “oper at i ng m ar gi n, ” w hi ch he s ai d i s eas y t o conf us e w i t h comm i s s i on. Shepar d w as adamantt hatt he di s t r i but or s do notm ake comm i s s i on, sayi ng, “[ T ] her e i s no s uch thi ng as
a co m m i s s i on on a s al e. T he mar gi n i s w hat[ t hey] oper at e underbas ed on thei rcos tof g o o d s a n d i n tu r n wh a tt h e y s e l l t h e p r o d u c tt o t h e c u s t o me ra t . T h a ti s th e i rma r g i n . ” He t es t i f i ed thatt he di s t r i but or s i ncurexpens es s t art i ng w i t h t he pur chas e of t hei rr out e, w hi ch
ran g es fro m $ 3 5 , 0 0 0 to $ 1 0 0 , 0 0 0
. T h e d istri b u tors a lso h av e to p u rch ase o r l ea se a d eli v ery tru c k , p u rc h a se v e h icle in su ra n c e , p a y fo r fu e l an d m a in ten a n c e o f th e tru c k , o b tain h e a lth

### Fivedis tribut ors wer e avai la bleto t es ti fy, but t

he other threewe renot

c al le d, a s the 3 

### parti es agr ee d that t

heir t es timony woul d be c umul ative
.

7 insu ran ce , an d co v er o ffi ce an d ad m inistrati v e e x p en ses. S h ep ard sa id d istri b u tors ca n h ir e empl oyees i f

they choos e t o, and Sar a Lee has no contr ol overori nvol vementi n the s el ect i on of t hos e empl oyees ordr i ver s hi r ed t o f i l l i n. H e s ai d Sar a Lee does notpr ovi de s upervi s i on or trai ning and i tdo es not m on i t or w ho i s run ning t he routes. ¶12. M D E S cal l ed t w o di s t r i but or s t o t es t i f y dur i ng t he s econd hear i ng, D evon W hi t l ock and J ef f ery L i nd l ey. W hi t l ock w as an empl oyee di s t r i but orf orSar a Lee pr i ort o t he 3
conver s i on t o i ndepende ntope r at or s i n 2006. H e pur chas ed hi s t err i t ory f r om Sar a Lee f

or $ 5 9 ,0 0 0 . W h itl o c k tes tified th a t S a ra L e e d o e s n o t p ro v id e tra in in g ; h e d o e s n o t su b m it
re p o rts to S a ra L e e lik e h e d id a s a n e m p lo y e e ; S a ra L e e d o e s n o t co n tro l h o w h e ru n s h is
r out e; and he pa ys hi s ow n expens es , i ncl udi ng f uel , truck mai nt enance, and i ns ur ance . W h i t l o c k s a i d t h a ta g r o u p o f d r i v e r s i n h i s a r e a g o tt o g e th e ra n d h i r e d two r e l i e f d r i v e r s . He
s ai d Sar a Lee di d notappr ove the r el i ef dr i ver s ; Sar a L ee does notpa y them; a nd he does not g e t p e rm iss io n fro m S a ra L e e to u se a re lief d riv e r. H e tes tified th a t h e w a s n o t a b le to
n e g o t i a t e p r i c e s wi t h l a r g e c h a i n s t o r e s , b u tt h a th e c o u l d n e g o t i a t e wi t h s ma l l e rs t o r e s . He t es t i f i ed thathe r ece i ved ei ght een t o t w enty- one per cent“comm i s s i on” f r om Sar a Lee. ¶13. L i ndl ey w as a rout e sa l es m an and t hen a r out e spe ci al i s tforSar a Lee bef or e becomi ng an indep end ent operat or di stri bu t or. H e provi ded a t ho rough exp l anati on of the d i stri bu t ors’ resp o n sibil it ies an d relati o n sh ip to S ara L ee . L ind ley p u rch ase d his r o u te from a d istri b u tor, notf r om Sar a Lee, an d he pai d $51, 000. L i ndl ey s ai d t hatdi s t r i but or s do notm ake “comm i s s i on, ” as W hi t l ock had s ai d. H e expl ai ned that , pr evi ous l y, as a Sar a Lee empl oyee,

### 8

he had r ece i ved a ba s e s al ary pl us s even pe r centcomm i s s i on; how ever , as an i ndependent d istrib u to r h e p u rc h a se s p ro d u c t fro m S a ra L e e a t a d isc o u n ted p ric e a n d th e n s e lls it t o
c us t omer s a ta whol e s a l e p r i c e , a nd h i s p r of i tc omes f

r om the d i f

f e r e nc e b e t w e en t he d isc o u n ted ra te a n d th e w h o les a le p ric e . H e sa id so m e p e o p le c o n fu se th a t w ith “comm i s s i on, ” buti ti s notc om m i s s i on. T he di s count ed r at e i s betw een tw el ve and tw entyone per cent , dependi ng on t he cus t om er . L i ndl ey t es t i f i ed t hathe m akes m or e money as an i ndepende ntcontr act ort han he di d as an empl oyee, buthe has t o pay m or e expens es , s uch as tax es, fue l, an d o ffi ce sup p li es. L ind ley testi fi ed that h e is n o t cl o sely su p erv ised b y S ara L e e ; S a r a L e e d o e s n o th a v e a s a y i n th e h o u r s h e wo r k s o rh o w h e ru n s h i s r o u t e . He conf i r m ed Fanel l i ’ s and Shepar d’ s t es t i m ony thathe oper at es a Subchapt erS- C orpor at i on and thathe i s notan age ntof Sar a Lee. ¶14. T he A L J i s s ued t w o deci s i ons on M ar ch 26, 2008. Fi r s t , consi s t entw i t h his ear l i er opi nion, he concl uded thatan empl oyer/ empl oyee r el at i ons hi p di d notexi s tunderSect i on 7 1 -5 -1 1 (J) (1 4 ). In th a t o p in io n , h e e x p lain e d th a t S a ra L e e m a d e “ n o d ire c t p a y m e n ts to di s t r i but or s . . . f

orthe s al e of

i t s pr oduct s , ” and beca us e w ages w er e notpai d by Sar a Lee, t h e i s s u e o f

S a r a Le e ’ s c o n t r o l o v e rt h e d i s t r i b u t o r s n e e d n o te v e n b e a d d r e s s e d
. He
ex p lai n ed th at th e d istri b u tors’ pro fi t co m es fro m “the d if feren ce b etw ee n w h at th ey p ay S ara L ee f orthe pr oduct s a nd w hatthey ar e abl e t o s el l the pr oduct [ s ] f ort o t he r et ai l er s [ , ] ” and he s ai d t hatarr angementdi d “noteven c ons t i tut e a true comm i s s i on. ” ¶15. I n hi s second opi ni on, addr es s i ng Sect i on 71- 5- 11( J ) ( 2) ( a) , t he A L J concl uded that t he d istri bu t ors w ere “com m i ssi on ed d ri vers” and “effect i vely agen t s of Sara L ee. ” T hu s, he f ound t hatt her e w as , i n f act , an em ploye r/ empl oyee r el at i ons hi p betw een Sar a Lee and

### MDES cros s- appe al ed theALJ’s deci si on on subs ec ti on (J) (14) , and the Board of 4 

### Rev iew affirmed ; MD ES didno t app eal to th e circuit co urt. 9 it s d istri b u tors u n d er S ec ti o n 7 1 -5-1 1 (J)(2)(a) an d that S ara L ee w as su b ject t o M issi ssipp i’ s
u n e m p lo y m e n t in su ra n c e law s fo r th e d istrib u to rs. T h e s e c o n d o p in io n c o n tra d icte d th e first, i n w hi ch the A L J had concl uded t hatthe di s t r i but or s w er e notpai d com m is s i on by Sar a Lee. Sar a Lee appe al ed the A L J ’ s decis i on re gar di ng s ubs ect i on ( J ) ( 2) t o the M D E S B oar d of R evi ew . I n a tw o- page deci s i on – w i t h onl y one par agr aph devot ed t o “f i ndi ngs of

f actand 4 opi ni on” – the B oard of R evi ew af

f i r m ed the A L J ’ s deci s i on. Sar a Lee appe al ed t o t he ci r cui tcour t . O n Sept em ber 4, 2012, t he ci r cui tcour tj udge ent er ed a one
- page or der
a ffirm in g th e B o a rd o f R e v iew ’s d e c isio n . S a ra L e e filed a n o tice o f a p p e a l. St andard of R evi ew ¶16. A l i m i t ed s t andar d of r evi ew appl i es t o appea l s f r om admi ni s t r at i ve agenc i es , and an agenc y’ s deci s i on w i l l notbe di s turbed unl es s t he dec i s i on ( 1) i s nots uppor t ed by s ubs t ant i al evi dence , ( 2) i s arbi t r ary orcapr i ci ou s, ( 3) i s beyond the s cope of author i t y gr ant ed t o t he
a g e n c y , o r ( 4 ) v io la te s a c o n s titu tio n a l r ig h t. S p ro u se v . Miss. E m

p loym en t Se c. Co m m ’n , 639 So. 2 d 90 1, 902 ( M i s s . 1994)
. “A r ebut t abl e pr es um pt i on exi s t s i n f avorof t he admi ni s t r at i ve agenc y, and t he chal l engi ng par t y has the bur den of pr ovi ng ot herw i s e. ” I

d. T he M i s s i s s i ppi E m pl oym entSecur i t y L aw pr ovi des thatthe C ou r t ’ s r evi ew on appea l sh o u ld b e lim ited to q u e s tio n s o f la w , an d th e B o a rd o f R e v iew ’s f in d in g s o f fa c t “if
s uppor t ed by evi dence and i n the abs ence of f r aud, s hal l be conc l us i ve. ” M i s s . C ode A nn. § 71- 5-531 (R ev. 2011)
. H ow ever , w e have s ai d t hat“empl oym ents ecur i t y contr i but i on
as s es s m ent s ar e an e xci s e t ax and, ther ef or e, ever y do ub tas t o thei rappl i cat i on m us tbe

### 10

r es ol ved i n f

avorof t he t axpaye rand aga i ns tt he t axi ng pow er . ” Mis s . Employm ent Sec. Com m ’n v. P

D N , I nc. , 5 8 6 S o . 2 d 8 3 8 , 8 4 0 (M is s . 1 9 9 1 ).

D i s cus s i on ¶1 7
. T h e p u rp o se o f th e M iss iss ip p i E m p lo y m e n t S e c u rity L a w is to c o m p e n sa te unempl oyed i ndi vi dual s . M i s s . C ode A nn. § 71- 5- 1 ( R ev. 2011)
. E m pl oyer s ar e r equi r ed t o setasi de “une m pl oym entr es erves t o be us ed f orthe bene f

i tof per s ons unempl oyed t hr ough no f

aul tof t hei row n. ” M i s s . C ode A nn. § 71-5- 3 ( R ev. 2011)
. T he i s s ue on appe al i s w hetherSar a Lee’ s di s t r i but or s ar e empl oyees of Sar a L ee – s peci f

i cal l y, agentdr i ver s or
comm i s s i on dr i ver s u nd er M i s s i s s i ppi C ode Sect i on 71- 5- 11( J ) ( 2) ( a) – f ort he purpos e of
re c e iv in g u n e m p lo y m e n t b e n e fits. U n d e r S u b se c tio n (J) (2 ), “e m p lo y m e n t” is d e fin e d , in pert i nen tpart , as f

oll ow s: S e rv ice s p e rfo rm e d fo r re m u n e ra tio n fo r a p rin c ip a l: ( a) A s a n a ge nt - dr i ve rorc omm i s s i on - dr i ve re ng a ge d i n d i s t r i bu t i ng meat pr oduct s , veget abl e pr oduct s , f rui tpr oduct s , bakery pr oduct s , bever ages (o th e r t h a n m ilk ), o r l a u n d ry o r d ry -c le a n in g s e rv ic e s ; . . . . H ow ever , f

orpurpos e s of

thi s s ub s ect i on, the t erm “empl oym ent ” s hal l i ncl ude serv ices d esc ri b ed in su b sec ti o n J(2)(a) a n d (b) o f th is secti o n , o n ly if: ( i ) T he cont r act of s ervi ce cont empl at es t hat subst ant i al l y al l of the se rv ice s a re to b e p e rfo rm e d p e rso n a lly b y su c h in d iv id u a l; ( i i ) T he i ndi vi dual does not have a s ubs t ant i al i nves t m ent i n f aci l i t i es us ed i n connec t i on w i t h the per f or m ance o f t he s ervi ces ( other t han i n f aci l i t i es f ort r ans por t at i on) ; and ( i i i ) T he s ervi ces ar e noti n t he natur e of a si ngl e t r ans act i on thati s not par tof a cont i nui ng r el at i ons hi p w i t h the per s on f or w ho m the s ervi ces ar e per f

or m ed.

### 11

M i s s . C ode A nn. § 71- 5- 11( J ) ( 2) (Rev. 2011). N ei t herpar t y ci t ed, and w e have notf ound,
an y ca ses d ir ec tl y ad d ressing su b sec ti o n (J)(2)(a). ¶1 8
. S ara L ee asse rt s tha t th e A L J’s d ec isi o n th a t th e in d e p en d en t op era tor d istri b u tors
w er e agentdr i ver s and comm i s s i on dr i ver s f orSar a Lee w as err oneous beca us e the dec i s i on
w as arbi t r ary and capr i ci ous , nots uppor t ed by the evi dence , and contr ary t o l aw , beca us e the A L J f ai l ed t o c ons i derthe f

act or s i n Sect i on 71- 5- 11( J ) ( 2) ( i
- i i i )
. Sar a Lee al s o as s ert s t hat th e a p p lica tio n o f M iss iss ip p i C o d e S e c tio n 7 1 -5 -1 1 (J) (2 )(a ) w a s u n c o n stitu tio n a l. W het her t he A L J’ s deci s i on t hat t he i ndepend ent op erat or di s t ri butor s w ere ag en t and com m i ssi on d ri vers for S ara L ee w as erro n eou s beca u se t h e ALJ f

a i l e d t o c o r r e c t l y a p p l y t h e l a w. ¶1 9
. T h e A L J co n clud ed that the d istri b u tors w ere ag en t an d co m m issi o n d ri v ers for S ara L ee unde rM i s s i s s i ppi C ode Sect i on 71- 5- 11( J ) ( 2) ( a) , w hi ch pr ovi des t hatemp l oym ent i ncl udes “s ervi ces per f

or m ed f or r em un erat i on f

ora pr i nci pal
. . . [ a] s an age nt - dr i veror
comm i s s i on- dr i verengage d i n di s t r i but i ng . . . bakery pr oduct s [
. ] ” M i s s . Code A nn. § 71- 5- 1 1 (J)(2) (R ev . 2 0 1 1 ). A . Servi ces P erf

orm ed f or R em unerat i on ¶20
. F or s ervi ces t o b e con si dered “em ploym ent” und er Sect i on 71 -5- 11 (J )( 2), i tm ust fi rs t be det erm i ned thatt he s ervi ces w er e “pe r f or m ed f orr emuner at i on f

ora pr i nci pal
. ” Id
. In t he A L J ’ s opi ni on r egar di ng Sect i on 71- 5- 11( J ) ( 14) , he s t at ed t hat“Sar a Lee m akes no di r ect pay m ents t o d i stri bu t ors . . . fort he sal e of i t s produc t s, ” and that “M D E S fai l ed to est abli sh
w ages w er e pai d by Sar a L ee t o t he di s t r i but or s . ” H ow ever , i n hi s s econd opi ni on – i s s ued t he s ame day – t he A L J r emoved t hatl anguage and hel d t hatt he di s t r i but or s w er e “a gentand
com m i ssi on ed d ri vers. ” H e reas on ed as fol l ow s:

### Wi th re gard t o the ALJ’ s st at em ent that Sara Le e negotiate s pri ces withlarge 5 

### retailers andMD ES ’s argument th atS ara L ee has co ntro l ov er the d istributors b ecause it negotiate s pric es to whi ch the distributor s must adhe re , wenotetheexpr es s t er ms of the distrib utio n ag reement: SALES TO CHAINS: In ord er to enable D IST RIB UT ORto p ursu e bu siness opport unitie s wi th Chains , whi ch m ay r equirestan dard pri ce , de liver y and othe r s al es te rm s f

or al l of it s Outl et s (both in and out si de of theSal es Are a) , DISTRI BUTOR her eby desi gnat es COMPANY and COMPANY he reby agr ee s t o ac t, asDISTRI BUTOR’s age nt f or the s pecific purposeof negotiating suc h te rm s wi th Chains having Outl et s in theSale s Area , and for no othe r pur

pose . . . Thi s a

ppointme nt of

COMPANY as DISTRI BUTOR’s agent shall n ot p revent D IS TRIBU TO R fro m hav ing the rig ht to neg otiate pri ce s and

t e rm s dir e c t ly wi th aC hai n or s e l l i ngP r od

uc t s t o theC hai n at what eve r pric es and t er ms DISTRI BUTOR can negotiate . In addi ti on, DI ST RI BU TO R s ha l lhavetheri ght t o r e vo kethede s i gn at i onof CO MP ANY as DIS TRIBU TO R’s ag ent at any time o n th irty (3 0) d ays n otice. . . . This se ction c le arly indic at es that thedis tribut ors se t up an age ncy a gre em ent with Sara Le e to a ss is t in negotiating pric es , whic h the dis tributors m ay re voke at their opti on. F anelli exp lainedthat th e agreement inclu dedthis p rov isionbecau se local managers of larg e chain st ore s of te n do not have theauthori ty t o negotiatepri ce s. Ins te ad, thedis tribut or woul d have to t ravelto s omefar away c it y to ne goti at e pric es at

a c entra l of

fi ce . Thus, thedis tribut ors can e l e c t t o s e nd S ar aL e e t o tho s e l oc at i on s t o ne go t i at e o n the i r b e ha l f . Shoul d the dis tribut or wis h t o ne goti at e with l arge cha in st ore s on i ts own beha lf, the ag ree me nt expl ic itly provide s f

or that . Under

the te rm s of thi s agr ee me nt, then, Sara Lee doe s not

have controlover

thedis tribut ors – theagr ee me nt e xpre ssly conte mpl at es that Sara Leeis the age nt, whic h thedis tribut or may t er minat e at any tim e, and the dis tribut or is theprinciple
. 12 Di s t r i b u t o r s r e c e i v e r e mu n e r a t i o n f r o m S a r a Le e f

o rt h e i rs e r v i c e s i n t h e f

o r ms o f a d v e rtisin g m o n e y fo r w e a rin g u n ifo rm s a n d h a v in g S a ra L e e lo g o s o n th e ir tru c k s, a n d in th e fo rm o f w e e k ly c h e c k s fr o m S a ra L e e . T h e y m a k e a p ro fit f r om t he di f

f er ence betw een w hatthey pay Sar a Lee f ort he pr oduct s and w hat th e y a re ab le t o sell th e p rod u ct[ s] for t o th e sm all er retai lers w ith in th e ir ter rito rie s, b u t th e y m a k e m o st o f th e ir in c o m e fr o m th e s a le o f p ro d u c ts to l ar ge r et ai l er s , w i t h w hom S ar a Lee has negot i at ed the pr i ce, and f ur t herunder t hi s arr angementSara L ee buys the cr edi tvoucher s f r om the di s t r i but or , and c o llec ts th e p a y m e n ts fro m th e re taile rs. T h e d istrib u to r d o e s e ffe c tiv e ly s e ll t he pr oductt o t he r et ai l erata pr i ce, w hi ch the r et ai l erpays Sar a Lee f orthe pr oduct , and Sar a Lee pays t he di s t r i but ora per cent age f r om the s al e. Sar a Lee as s er t s t hatt he A L J ’ s f i ndi ng i s contr ary t o l aw and nots uppor t ed by t he evi dence
. 5

### Seeals o Matt er of Bal horn- Moyl e Petroleum Co. , 31 5 N
. W. 2d 48 1, 48 4 ( S. D. 6 

### 1982) ( “a lt

hough theagr ee me nt us es theter m ‘c omm is si on,’ Heme nway’ s e ar nings , whi ch fl ow from s el f- em

ploym ent , c annot

be wa ges ”) ; Holman Ent er . Tobac co Warehou se v

. Cart er , 536 S. W.2d 461, 462-63 ( Ky. 1976) (c iting Med lin , 171 So. 2d 496); Micca v. Ad mi ni s t rat or , Unemployment

Comp. Act, 2 0 9 A .2 d6 8 2 , 6 8 4 (C o nn . 1 9 6 5 ) ( “i t s ee ms qu ite cl ear that a pe rs on see king se lf

-e mpl oyme nt is not expos ing hims el f t o thela bor m ar ket but has infact with drawn fro m it to b ecome inv olv ed in his o wnenterp rise. In su ch a case, h is earnin gs are n ot w ages as d efinedbystatute ”)
. A lth ou ghthe cases citedhere d ealt with indivi du a l s wh o h a d l e f

t e m pl oym e nt t o p ur s ues e l f

- e m pl oym e nt , then s ought

un e m pl oym e nt comp ensatio n, th e defi n it io no f “wag es” sho uldbe th e same for all matters p ertainin g to un emplo yment comp ensatio n an d the respectiv e states’ un emplo yment compen sationacts. 13 ¶2 1. A l t ho ug h “ r e mune r a t i on ” i s n otd e f i ne d i n t he a c t , i n othe rc ont ext s i nvol vi ng t he E m p lo y m e n t S e c u rity L a w , the C o u rt h a s h e ld th a t “r e m u n e ra tio n fo r p e rso n a l se rv ice s” is equi val entt o “w ages , ” def i ni ng i tas “cons i der at i on pai d by a n e m pl oyert o a n empl oyee f or
s ervi ces r ender ed by t he empl oyee t o empl oyer . ” Mis s . E m ploym ent

Sec. Com m ’n v. Jones , 826 So. 2d 77, 81 ( ¶ 14) ( M i s s . 2002) ( quot i ng Miss . E m p lo y m e n t S e c . Co m m ’n v. Me dlin , 252 M i s s . 146, 171 So. 2d 496, 499 ( 1965) )
. T he Me dl in C our tw enton t o s ay that , under the term s o f th e U n em p loy m en t C o m p en sa tio n A ct (no w the E m p loy m en t Se cu ri ty L aw ), “m o n ey earn ed by self -em p loy ed pe rson s can n o t in an y w ay be co n side red a s ‘w a g e s. ’” Me dlin , 171 So. 2d at499. T he di s tr i but or s a ti s s ue ar e s el f
- empl oyed or , m or e ac cur at el y, 6 empl oyees of

t hei row n corpor at e ent i t i es . T he di s t r i but i on agr eement s ar e betw een Sar a Lee and the dis t ri bu t i on com pan i es, no tw i t h the i nd i vidual dis t ri bu t ors w ho m M D E S w oul d l abel
e m p lo y e e s o f S a ra L e e . T h e p ro fit m a d e b y th e d istrib u tio n c o m p a n ies d o e s n o t o rig in a te
w i t h Sar a Lee and c annotbe cons i der ed “w ages . ” Me dlin , 1 7 1 S o . 2 d a t 4 9 9
. ¶22. Sar a L ee ar gues t hatt he w eekl y advert i s i ng f ee doe s notcons t i tut e r emuner at i on f r om Sar a Lee, as t he A L J found. T he di s t r i but or s have an oppor tuni t y t o earn an extr a $100 per

### This is akin to theanalysi s a ppli ed unde r f

ede ra l s ec uri ty l aw t o cor porateoff ic er s 7 

### who per for

m only minor s er

vic es for a c orporation. Othe r j uris dic ti ons have he ld t hat an off ic er of a c orporation who “per for ms only m inor

s er vic es f or thec orporation is not an em ploye e[ .] ” Idaho Ambucare Ctr ., Inc . v . Uni ted Stat es , 57 F.3d 752, 755 (9th Cir . 1995) (di sc uss ing 26 U. S.C. A. § 3121(d) (1) and the c orr es ponding Em ploym ent Tax Re gulati ons foundat 26 C .F.R . §§ 31 .31 21 (d)-1 (b), 3 1.3 30 6(I)-1 (e)). See a lso Nu-Look Des ign, Inc . v . C.I .R. , 85 T.C .M. (C CH ) 92 7 (T .C. 2 00 3), aff ’d, 3 56 F .3d2 90 (3d Cir. 2004) ( same ); Wes tern Mgmt

., Inc . v . Uni ted Stat es , 45 Fe d. Cl . 543, 549 (Fe d. Cl . 2000) (s am e)
. Similarly , se e Cent

. I ll . Pub. Serv. Co. v

. Uni ted Stat es , 435 U.S. 21, 23-24 ( 1978) 8 

### (r ei mb urs ement fo r emplo yees’ lunchexp enses d id n ot qualifyas “wag es” sub ject to withholding bec aus e lunc h payme nt was “unre late d t o the em ploye e’ s spe ci fi c job ti tl e, the nat ureof hi s wor

k, or his rateof pay”)
. 14 w eek by putt i ng a Sar a Lee l ogo on t hei rt ruck and by w ear i ng a shi r tw i t h a S ar a L ee l ogo. N o tably , the s h irts say “In d ep en d en t O p era tor” u n d er the S ara L ee log o . H o w ev er, d istrib u to rs a re n o t re q u ire d to d o e ith e r o f th e se thin g s. W e fin d th a t th e o p tio n to e n ter in to an adve r t i s i ng agr eement , w hi ch i s no tr equi r ed, f orpaymentof

a maxi m um of

$100 per
w eek i s nots uf

f i ci entt o be cons i der ed r emuner at i on f ors ervi ces per f

orm ed. T he se r vi ce p erfo rm ed is distri b u ti o n o f pro d u cts, n o t adv erti sing
. T h e $ 1 0 0 ad v ertisi n g fee is f o r a
m in o r s e rv ice u n re late d to th e p rim a ry se rv ice o f d istrib u tio n , a n d it d o e s n o t co n stitu te 7 8
re m u n e ra tio n fo r d is tr ib u tio n s e rv ic e s . ¶23. Sar a Lee does notpay t he di s tr i but or s a com m i s s i on, w hi ch w oul d be a s et per cent age
o f S a ra L e e ’s p ro fi t f

ro m th e p ro d u c t s o ld b y th e d is tr ib u to r. See Bl ack’s Law D i ct i onar y 272 ( 6t h ed. 1990). T he di s t r i but or s pur chas e pr oduct s f r om Sar a Lee ata di s count ed pr i ce, t hen
s el l t he pr oduct s t o cus t om er s at a w ho l es al e pr i ce. T he di f f er ence i n t he di s count ed pr i ce and the w hol es al e pr i ce i s t hei r“oper at i ng m ar gi n” orpr of i t . O ne di s t r i but or , W hi t l ock, cal l e d t he metho d of

p a ymen t“ c omm i s s i on , ” b uth e d i d no tc on t r a di c tthe t e s t i mony f r om

### The f ac t t hat some customer s e le ct

to pay by line of

cr edi t rather

than paying the 9 

### di stri b uto rs directlyin cashdo es no t rend er Sara L ee’s purchase o f tho se lines o f credit a for m of commi ss ion. In Missi

ss ippi Employment

Sec uri ty Commission v. PDN, I

nc. , 586 So . 2d83 8 (M iss. 19 91 ), nurses placedbyPD N, a med ical placement servic e, w er e “p aid bythe service recipient or PD N, a matter determin ed solelyby the agreement of th e nurse and r ec ipi ent .” Id. at

842. The C ourt distingui she d othe r c as es in whi ch “ cl ie nts wer e contra ct ual ly f orbi dden t o pay the nur se s direc tly” and “the worke rs werepai d sol ely by the re fe rrala genc y who bil le d and c oll ec te d f rom t he se rvi cerec ipi ent .” Id. (ci tati ons om itte d). 15 L in d ley a n d S h e p a rd re g a rd in g th e a c tu a l m e th o d o f e a rn in g , w h ich , as th e A L J c o rre c tly f ound t he f

i r s tt i m e, w as noti n f

acta comm i s s i on. ¶24. Fors m al l ers t or es , t he di s t r i but orpur chas es pr oduct s f r om Sar a Lee att he di s count ed
r at e, s el l s t he pr odu ct t o t he cus t om erata w hol es al e pr i ce, and the cus t om erpays t he di s t r i but or di r ect l y; Sar a Lee neve rs ees the money. T he di s t r i but or ’ s pr of i t , then, i s t he d if feren ce i n w h at he pa id S ara L ee an d w h at he ch arg ed th e cu stom e r. T h e d istri b u tor’s p ro fit is th e sa m e fo r la rg e r sto re s, b u t th e lar g e r sto re s – u su a lly c h a in re tail sto re s w ith
m ult i ple l ocati on s – pu rchase t he go od s fr om the dis t ri bu t or i n on e of t w o w ays: cash or a l i ne of cr edi t . T he di s t r i but or s t hen hav e the opt i on t o s el l t hei racc ount s r ece i vabl e – the l i nes of c r edi t– t o Sar a L ee. W hen Sar a L ee pur chas es a n a ccountr ece i vabl e thatexce eds
w hatt he di s t r i but oral r eady ow es Sar a Lee f orpur chas i ng i t s pr oduct s , Sar a Lee w r i t es the di s t r i but ora s et t l ementchec k f ort he di f f er ence , w hi ch cr eat es t he di s t r i but or ’ s pr of i t . T he p ro fit the d istrib u to r re c e iv e s, th e n , w o u ld b e e q u a l to th e w h o les a le p ric e th e c u sto m e r p a id ei t heri n cas h ort hr ough a l i ne of cr edi t– w hi ch Sar a L ee m ay pur chas e s o t hatt he di s t r i but ordoes nothave t o col l ectf r om i t s acc ount s re cei vabl e – l es s t he di s count ed pr i ce
o f th e p ro d u c t. T h e larg e r ch a in sto re s o fte n ele c t t o p a y b y li n e o f cr e d it, s o th e a c c o u n ts
r ece i vabl e thatSar a Lee pur chas es f r equent l y come f

r om t hes e l ar gers t or es . T hus , Sar a Lee 9

### Wei ghing t he m ethod of payment along with othe r f ac tor s, theCourt

conc lude d that an emplo yer/emp loy ee relation ship didno t exist b etweenPD N an d th e nurses. Id. at 842-43. 16 i s notpayi ng t he di s t r i but or s w ages orcomm i s s i on, i ti s pur chas i ng acc ount s r ece i vabl e f r om t hem. Sar a Lee does notpay the di s t r i but or s any comm i s s i on orw ages , and ther ef or e, t he dis t ri bu t ors canno tbe co nsi dered t o b e rem un erat ed for pers on al services
. ¶25. Si m i l ar l y, the po rt i on o f t he M i s s i s s i ppi A dm i ni s t r at i ve C ode thatpert ai ns t o the M i s s i s s i ppi E m pl oym entSecur i t y L aw addr es s es new s paperand magazi ne di s t r i but or s and p ro v id e s th a t th o se d istrib u to rs a re n o t em p lo y e e s o f th e p u b lish e r fo r w h o m th e y d istrib u te produ ct s: A new s paperdi s t r i but orw ho ow ns hi s ow n truck, hi r es ordi s char ges hi s orher o wn e mp l o y e e s o rh e l p e r s , d i s t r i b u t e s n e ws p a p e r s o rma g a z i n e s i n h i s o wn t err i t ory, and keep s t rack o f hi s or he r ow n records as t o sal es and c oll ect i on s, w i t h al l s al es t o s uch di s t r i but orby the publ i s herand al l m agaz i nes or new s paper s r etur ned w i t hi n cert ai n l i m i t ed per i od bei ng credi t ed t o t he di s t r i but or , w ho rec ei ves no s al ary, w ages orot herr emuner at i on f r om the publ i s her , no recor d bei ng kepton w her e the di s t r i but ordi s pos es of the m agaz i nes or ne w s paper s w hi ch ar e t aken by hi m orher , i s notan empl oyee of t he publ i s herf

ort he r eas on thatt he di s t r i but or ’ s r emuner at i on f orhi s orher s ervi ces oract i vi t i es i n di s t r i but i on of m agaz i nes ornew s paper s i s der i ved sol el y fr om t he resal e of m agazines or new spapers t o cu st om ers . M i s s . A dm i n. C od e 2 0- 1- 101: 603. 07 ( 2012)
. T he di s t r i but or s ati s s ue ar e much l i ke the
n e ws p a p e ra n d ma g a z i n e d i s t r i b u t o r s d e s c r i b e d a b o v e . T h e d i s t r i b u t o r s f o rS a r a L e e o wn t hei row n t rucks , hi r e thei row n empl oyees , di s t r i but e pr oduct s i n t hei rt err i t or i es , keep up
w i t h t hei row n s al es , and r etur n out dat ed pr od ucts to S ar a Lee f ora cr edi t . T hey do not provide report s t o S ara Le e, and t hey do no trecei ve a sal ary or w ages fr om S ara Le e. T hu s,
a n a lo g o u s to th e n e w sp a p e r a n d m a g a z in e d istrib u to rs, th e d istrib u to rs fo r S a ra L e e w o u ld notbe empl oyees of

Sar a Lee “f

ort he r eas on t hatthe di s t r i but or ’ s r emuner at i on f orhi s or

### 17

hers ervi ces oract i vi t i es in di s t r i but i on of [ Sar a Lee pr oduct s ] i s der i ved s ol el y f r om t he
r es al e of [ Sar a Lee pr oduct s ] t o cus t om er s . ” M i s s . A dm i n. C ode 20- 1- 101: 603. 07. ¶26. W e conc l ude t hatt he di s t r i but or s ’ i ncome com es f r om t he di f

f er ence i n t he pr i ce they pay Sar a Lee f

orpr oduct s and the pr i ce the cus t om er s pay, l es s t he di s t r i but or s ’ bus i nes s and
o p e ra tin g ex p en ses. T h e m e th o d b y w h ich th e d istrib u to rs r e c e iv e in c o m e d o e s n o t co n stitu te “r emuner at i on of

s ervi ces ” bec aus e the di s t r i but or s ar e notbei ng pai d a sal ary, w ages, or
com m i ssi on b y S ara L ee. E ven if the arr ang em ent di d con st i tute r em un erat i on forservices , t he di s t r i but or s w oul d be pr ecl uded f r om c l as s i f

i cat i on a s “age ntdr i ver s ” and “ comm i s s i on d r i v e r s ” b y t h e r e q u i r e d f a c t o r s i n s u b s e c t i o n ( J ) ( 2 ) , a s d i s c u s s e d b e l o w. B . R equi red Fact ors und er Sec t i on 71- 5- 11( J) ( 2) ¶2 7
. S ara L ee arg u es that the A L J’s fi n d ing that the ind ep en d en t o p era tor d istri b u tors are “agen tdri vers” and “co m m i ssi on dri vers” und er s ub sect i on (J )( 2)( a) w as erroneou s becau se t he A L J f

ai l ed t o cons i dert he f

act or s i n Sect i on 71- 5- 11( J ) ( 2) ( i
- i i i )
. U nd erthats ect i on,

“ e m p lo y m e n t” in c lu d e s “ [s]erv ice s p erfo rm ed for rem u n era ti o n for a p ri n cipa l” by a n “ a g e n td riv e r o r c o m m iss io n -d riv e r e n g a g e d in d istrib u tin g . . . b a k e ry p ro d u c ts” o n ly if: ( i ) T he contr actof

s ervi ce c ont empl at es t hatsubs t ant i al l y al l of t he s ervi ces a re to b e p e rfo rm e d p e rso n a lly b y su c h in d iv id u a l; (ii) T h e in d iv id u a l d o e s n o t h a v e a s u b sta n tial in v e stm e n t in fa c ili ties u se d in connec t i on w i t h the pe r f ormanc e of

t he s e r vi c e s ( othe rt ha n i n f a c i l i t i es f ort r ans por t at i on) ; and ( i i i ) T he s ervi ces ar e noti n the natur e of a s i ngl e tr ans act i on t hati s notpar tof a c o n ti n u ing relati o n sh ip w ith the p erso n for w h o m the se rv ice s are per f or m ed.

### 18

M iss. C o d e A n n . § 7 1 -5-1 1 (J)(2)(i -i ii ) (R ev . 2 0 1 1 ). T h e a b sen ce o f an y o n e o f th ese fac tors
w oul d pr ecl ude the appl i cabi l i t y of the “e m pl oym ent ” r el at i ons hi p des cr i bed i n s ubs ect i on ( J ) ( 2) ( a)
. T he s t atut e pr ovi des t hat“the t erm ‘ empl oym ent ’ s hal l i ncl ude s ervi ces des cr i bed in s u b s e c tio n J (2 )( a ) . . . o n ly i f ” the thr ee l i s t ed f

act or s ar e pr es ent . T he i ncl us i on of t he
w o rd “ an d ” a fter the sec o n d fac tor i s ev iden ce that all three fac tors m u st be p rese n t. S ara L e e a ss e rts th a t th e A L J “ c o m p lete ly ig n o re d ” th e se fa c to rs, th e re fo re , th e A L J’s a n a ly sis
w as i nco m plet e and con t rary to l aw . W e agree t hat a di scussi on of the ap pli cabil i t y o f these f act or s i s abs entf

r om t he A L J ’ s opi ni on, thus , the A L J f ai l ed t o appl y t he l aw corr ect l y. ¶2 8. T he f

i r s tr e qu i r e mentf

orb r i ng i ng a r e l a t i on s hi p un de rs ub s e c t i on ( J ) ( 2) ( a) i s t hat “[ t ] he contr actof

s ervi ce c ont empl at es t hats ubs t ant i al l y al l of t he s ervi ces ar e to be p erfo rm ed p erso n a lly b y su c h in d iv id u a l[. ]” M iss . C o d e A n n . § 7 1 -5 -1 1 (J) (2 )(i) (R ev . 2 0 1 1 ). S ara L ee arg u es th at th e d istri b u ti o n ag ree m en ts be tw ee n the d istri b u tors a n d S ara L ee “a re notper s onal s ervi ce c ont r act s and do notcont empl at e thats ubs t ant i al l y al l ( orany) of t he
serv ices are t o be pe rform ed by an ind ividu al, ” the refo re, sub sec ti o n (i ) ca n n o t app ly. Sa ra L ee st at es that the d i stri bu t i on agreem ents are betw een S ara Le e and dis t ri bu t i on com pan i es, noti ndi vi dual s . Fur t her , Sar a Lee m ai nt ai ns thatthe di s tr i but i on com pan i es have the author i t y t o hi re any empl oyees t hey nee d orw antt o handl e the ac tual di s t r i but i on orany
o th e r se rv ice s, a n d n o o n e in d iv id u a l is re q u ire d p e rso n a lly to fu lfill th e ter m s o f th e c o n tra c t. W e f i nd t hes e s t at ement s t o be ac cur at e bas ed on t he t erm s of the di s t r i but i on agr eementand t he tes t i m on y fr om t he h eari ng s. ¶29. T he di s t r i but i on agr eement r equi r es t hat t he di s t r i but or be a “bus i nes s ent i t y. ” J ohn S h e p a rd tes tified th a t th e d istrib u to rs m u st b e S -c o rp o ra tio n s, an d th e y c a n n o t b e in d iv id u a ls

### 19

ors ol e pr opr i et or s hi ps . T he di s t r i but i on agr eementi s exec ut ed on beha l f of a company, not an i ndi vi dual , and t he agr eementdoes notre qui r e a cert ai n i ndi vi dual t o per f or m t he w or k. T he f act s athand do nots at i s f y t he f i r s tr equi r ementthat“[ t ] he contr actof s er vi ce cont empl at es t hats ubs t ant i al l y al l of t he s ervi ces ar e t o b e p erf orm ed per s onal l y by s uch i ndi vi dual
. ” M i s s . C ode A nn. § 71- 5- 11( J ) ( 2) ( i ) ( R ev. 2011)
. T her ef or e, the i ndepende nt oper at ordi s t r i but or s coul d notbe c l as s i f i ed as a gentorcomm i s s i on dr i ver s underSect i on 71- 5- 11( J ) ( 2) ( a)
. T he abs ence of onl y one of the t hr ee r equi r ed f act or s pr ecl udes cl as s i f

i cat i on of an empl oym ent r el at i on shi p u nd er Sect i on 71- 5- 11( J ) ( 2) ( a) , thus , the i ndepende ntoper at or d istri b u tors c o u ld n o t be a g en t drive rs o r co m m issi o n d ri v ers u n d er S ec ti o n 7 1 -5-1 1 (J)(2)(a). ¶3 0. A gai n, w e bea ri n m i nd t he s t andar d t ha ta ny d ou bt s a s t o t he appl i cat i on of empl oym ents ecur i t y contr i but i on as s es s m ent s “mustbe r es ol ved i n f avo rof the t a xp a ye ra nd agai ns tt he t axi ng pow er . ” P DN, 5 8 6 S o . 2 d a t 8 4 0 . W e c o n c lu d e th a t th e A L J e rre d in det erm i ni ng t hatt he i ndepende ntoper at ordi s t r i but or s w er e agentorcomm i s s i on dr i ver s f or S a ra L e e , be ca u se h is d eterm ination w as n o t su p p o rt ed by th e ev iden ce , an d he fai led to ap p ly the law co rrectl y . T h e d istri b u tors d o n o t r ec eive rem u n era ti o n for se rvice s from S ara L ee a nd t hey do notha ve per s onal s ervi ce contr act s w i t h Sar a L ee, s o they do nots at i s f y the
r equi r ement s f

orcl as s i f

i cat i on as empl oyees underSect i on 71-5-11(J) ( 2)
. B eca us e the f or goi ng i s s ue i s di s pos i t i ve, w e dec l i ne t o addr es s Sar a Lee’ s al t ernat i ve ar gum ent s t hatt he A L J ’ s deci s i on i s arbi t r ary and ca pr i ci ous and thatthe a pp l i c a t i on of Sect i on 71- 5- 11( J ) ( 2) ( a) is u n c o n s titu tio n a l. C oncl usi on

### 20

¶3 1. T he A LJ ’ s d e c i s i on t hatt he i ndepende ntoper at ordi s t r i but or s w er e age nt and
comm i s s i oned dr i ver s f orSar a Lee w as err oneous beca us e the A L J f ai l ed t o appl y t he l aw
corr ect l y and the dec i s i on w as notsuppor t ed by subs t ant i al evi dence
. T he B oar d of R evi ew and ci r cui tcour terr ed i n af f i r m i ng t he A L J
. W e r ever s e t he ci r cui tcour t ’ s af f i r m ance of

t he B o a rd o f R e v ie w a n d th e A L J , a n d w e re n d e r j u d g m e n t in fa v o r o f S a ra L e e . ¶ 3 2
. RE VE RS ED AND RE NDE RE D. W A LL E R , C . J. , D I C K I N SO N A N D R A N D O LP H , P. JJ . , LA M A R , K I TC H EN S, CH AND LER, AND PI ERCE, JJ . , C ON CUR . KI NG , J . , CO NCU RS I N RESULT ONLY W I THOUT S EP ARAT E W RI TT EN OP I NI ON.