COURT OF APPEALS OF VIRGINIA 

Present: Judge Annunziata, Senior Judges Cole and Baker*

Argued at Richmond, Virginia 

YARD BIRD, INC., T/A TZERS 

 OPINION BY 

v. Record No. 2237-97-2 JUDGE MARVIN F. COLE 

 AUGUST 18, 1998 

VIRGINIA EMPLOYMENT COMMISSION 

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 

Theodore J. Markow, Judge 

 A. Robinson Winn (Outland, Gray, O'Keefe & 

Hubbard, on brief), for appellant. 

 William A. Diamond, Assistant Attorney 

General (Mark L. Earley, Attorney General, on 

brief), for appellee. 

 Yard Bird, Inc., t/a Tzers ("Yard Bird"), appeals the 

circuit court's order denying its petition for judicial review 

and affirming the Virginia Employment Commission's ("VEC" or 

"Commission") ruling that Jackie Pulliam and other exotic dancers 

who perform for Yard Bird, are employees, not independent 

contractors. On cross-appeal, the VEC asserts that the circuit 

court erred when it found that Pulliam and the other dancers were 

free from Yard Bird's control. For the reasons that follow, we 

affirm in part and reverse in part. 

 I. 

 On July 5, 1995, Jackie Pulliam, who formerly performed as 

 

 *Judge Baker participated in the hearing and decision of 

this case prior to the effective date of his retirement on July 

31, 1998 and thereafter by his designation as senior judge 

pursuant to Code § 17-116.01. 
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an exotic dancer for Yard Bird, filed for unemployment benefits 

and listed Yard Bird as one of her former employers. While 

processing Pulliam's claim, the VEC discovered that Yard Bird had 

not been paying unemployment taxes on Pulliam or any of its other 

dancers. Following an investigation, a VEC tax representative 

issued a letter opinion finding that the dancers were Yard Bird's 

employees. Yard Bird appealed this determination to the 

Commission. A VEC special examiner conducted a hearing on the 

matter and issued a decision affirming the earlier letter 

opinion. 

 The Commission found that Yard Bird operates a restaurant, 

bar, and lounge in Chesapeake, Virginia, where it engages 

approximately fourteen exotic dancers each day. Dancers were 

generally engaged by verbal agreement until September 1995, when 

Yard Bird began employing an "Independent Contractor Agreement." 

 Prior to that, Yard Bird had, at least on occasion, utilized 

written employment applications. Yard Bird offered into evidence 

an employment application completed by Pulliam in July 1994, 

attached to which was a form indicating that Yard Bird considered 

the applicant-dancer to be an independent contractor. 

 Dancers are paid five dollars per twenty-minute set and work 

three sets per shift. Most of the dancers' income is derived 

from tips from patrons. Yard Bird prepares a schedule of 

available sets, and dancers call in to schedule their own 

performances on a first-come, first-served basis. Dancers are 
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not required to work a minimum number of hours each week and are 

not penalized for turning down work. The average dancer works 

fours hours per week for Yard Bird and is engaged there for 

approximately eight to ten weeks. Some dancers, however, will 

have as short a tenure as one week, and others will only work 

around the Christmas season in order to earn additional money for 

the holidays. 

 Dancers are not told by Yard Bird how to perform on stage 

but are required to comply with Virginia Alcoholic Beverage 

Control ("ABC") laws and regulations applicable to Yard Bird's 

licensing status. Yard Bird has authority to order a dancer from 

the stage during a set if the dancer violates an ABC regulation. 

 On the advice of ABC, Yard Bird also requests that dancers not 

leave the building between sets, and the Commission found that 

Yard Bird "attempts to enforce such a rule." Yard Bird is a 

"pasties and t-bar" club, and dancers provide their own 

performance outfits. 

 Yard Bird owner Shirley Stephenson testified that dancers 

will frequently work at other clubs in the Tidewater area. 

Dancers generally have their own "business" cards listing their 

dance schedules. Yard Bird offered into evidence three such 

business cards and also submitted as evidence an application for 

business license for the City of Virginia Beach that had been 

completed by dancer Janet Taylor. Yard Bird began "requiring" 

its dancers to secure local business licenses in approximately 
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1995. Nevertheless, Stephenson testified that she does not 

enforce this requirement and uses dancers who do not have 

business licenses. The only evidence presented concerning 

details of the dancers' business activities outside of Yard Bird 

was an affidavit from one woman stating that she was "currently 

employed by more than one establishment in the Greater Tidewater 

area." 

 Dancers are told when they audition that Yard Bird does not 

withhold taxes from their earnings and that as soon as the 

dancers earn $600, they are issued 1099s. The dancers are also 

required to fill out a form W-9 Request for Taxpayer 

Identification Number and Certification form. This latter 

requirement is imposed by the Internal Revenue Service in 

connection with Yard Bird's use of 1099s. In a 1995 opinion 

letter solicited by Yard Bird, an IRS group manager advised Yard 

Bird that the IRS considered certain Yard Bird workers to be 

employees, not independent contractors.1

 The group manager 

explained, however, as follows: 

 Section 530 of the Tax Reform Act of 1978 

provides a safe haven for taxpayers who can 

show (1) judicial precedent, (2) prior audit 

by the IRS, or (3) industry practice. Since 

you meet the requirements of Section 530, we 

will not change the way you report the 

earnings of the below mentioned worker[s]. 

 1Although the letter is silent on the jobs performed by the 

workers, Yard Bird presents the letter as an opinion on the 

employment status of its dancers. The VEC does not challenge 

this assertion, and we will assume that the letter does indeed 

refer to Yard Bird's dancers. 
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The dancers generally use their residential addresses for these 

tax forms and their business licenses. 

 The special examiner ruled that Pulliam and the other 

dancers were employees, not independent contractors. The special 

examiner held that Yard Bird had not met its burden of proving it 

did not exert control over the dancers and had not proved the 

dancers were engaged in independently established businesses. 

The Commission further rejected Yard Bird's argument that the 

"safe haven" granted Yard Bird by the IRS was binding on the VEC, 

or at least should be dispositively persuasive. 

 Yard Bird filed a timely petition for judicial review with 

the circuit court. The circuit court disagreed with the 

Commission on the issue of control, but it concurred that the 

dancers were not engaged in independent businesses. The circuit 

court also rejected Yard Bird's "safe haven" argument. 

 II. 

 "Initially, we note that in any judicial proceedings `the 

findings of the commission as to the facts, if supported by 

evidence and in the absence of fraud, shall be conclusive, and 

the jurisdiction of the court shall be confined to questions of 

law.'" Israel v. Virginia Employment Comm'n, 7 Va. App. 169, 

172, 372 S.E.2d 207, 209 (1988) (citation omitted). In accord 

with our usual standard of review, we "consider the evidence in 

the light most favorable to the finding by the Commission." 

Virginia Employment Comm'n v. Peninsula Emergency Physicians, 
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Inc., 4 Va. App. 621, 626, 359 S.E.2d 552, 554 (1987). 

 Our review of questions of law on the definition of 

"employment" is guided by the following: 

 The meaning of "employment" in the 

unemployment compensation context is 

controlled by statute. . . . The Act is to 

be liberally construed to effect its 

beneficent purpose and in borderline cases 

"employment" should be found to exist. 

Exemptions in the Act should be strictly 

construed against the alleged employer, the 

rule requiring liberal construction in favor 

of the taxpayer not being applicable. As 

defined in the Act, the term "employment" 

should be accorded a broader and more 

inclusive meaning than in the common-law 

context of master and servant. 

Virginia Employment Comm'n v. A.I.M. Corp., 225 Va. 338, 345-46, 

302 S.E.2d 534, 539 (1983) (citations omitted). Employment, in 

the context of unemployment compensation and taxation, is defined 

by Code § 60.2-212(C) as follows: 

 Services performed by an individual for 

remuneration shall be deemed to be employment 

subject to this title unless: 

 1. Such individual has been and will continue 

to be free from control or direction over the 

performance of such services, both under his 

contract of service and in fact; and 

 

 2. Such . . . individual, in the performance 

of such service, is engaged in an 

independently established trade, occupation, 

profession or business. 

 The VEC has the initial burden of proving that the services 

are performed by individuals for remuneration;2 however, once the 

 

 2Yard Bird concedes that the dancers perform services for 

remuneration. 
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VEC has met its burden, the burden shifts to the putative 

employer to prove, by a preponderance of the evidence, that it 

qualifies for an exemption under Code § 60.2-212(C). See

Virginia Employment Comm'n v. Thomas Regional Directory, Inc., 13 

Va. App. 610, 612, 414 S.E.2d 412, 414 (1992). If the employer 

does not meet its burden of proof, then an employment 

relationship will be found to exist. See id. Further, "the 

failure to produce evidence on a factor is held against the party 

having the burden of proof, not against the party that does not 

have the burden of proof." Id. at 616, 414 S.E.2d at 416. 

 III. 

 "The power of control is the most significant indicium of 

the employment relationship . . . ." Richmond Newspapers, Inc. 

v. Gill, 224 Va. 92, 98, 294 S.E.2d 840, 843 (1982). We look not 

only to actual control but also the potential control an alleged 

employer can exert over the putative employee. See Thomas 

Regional Directory, 13 Va. App. at 614, 414 S.E.2d at 416. 

"[T]he individual's status in relation to the alleged employer is 

to be determined from all the facts and circumstances adduced by 

the evidence, including[, but not limited to,] the provisions of 

any written agreement." A.I.M. Corp., 225 Va. at 347, 302 S.E.2d 

at 539. 

 The power of control includes not only the power to specify 

the result to be accomplished but also to control the manner in 

which the service is performed. See id. at 347, 302 S.E.2d at 
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540. In determining "whether a right to control exists, a court 

must determine whether instructions have to be obeyed by an 

individual and whether either party has the right to terminate 

services at will without incurring liability to the other party." 

Thomas Regional Directory, 13 Va. App. at 614, 414 S.E.2d at 

416. "[I]f the alleged employer [has] the power to discharge the 

alleged employee from its service because of disobedience, then 

the alleged employer [has] the right to control and the service 

is 'employment' under the statute." Virginia Employment Comm'n 

v. Porter-Blaine Corp., 27 Va. App. 153, 164, 497 S.E.2d 889, 895 

(1998). 

 Yard Bird attempts to enforce its rule that dancers not 

leave the premises between sets. While the dancers are 

responsible for providing their own costumes, the fact that Yard 

Bird is a "pasties and t-bar" establishment, as a practical 

matter, places significant limits on the dancers' discretion in 

choosing a costume. The dancers may choose the times they work 

but only in conformity with the schedule established by Yard 

Bird. See Cy Investment, Inc. v. National Council on 

Compensation Ins., 876 P.2d 805, 807 (Or. App. 1994) (factors 

indicating control include defining the length of a dancer's 

shift). Finally, Yard Bird requires dancers to comply with ABC 

laws and regulations that govern Yard Bird's licensing status. 

 Yard Bird also failed to prove it could not terminate the 

services of any of the dancers at will. The "Independent 
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Contractor Agreement" was silent on this matter, and Stephenson 

conceded she could not envision a situation where she would sue a 

dancer for leaving Yard Bird. The agreement sets no limits on 

how long the dancers will perform for Yard Bird and guarantees 

them no minimum amount of service. Stephenson also indicated she 

could order a dancer from the stage, mid-performance, if she felt 

the dancer had committed an act of lewdness or disorderly 

conduct. While dancers are paid a flat rate for dancing, they 

are paid for a set of fixed duration. For all intents and 

purposes, therefore, this payment constitutes a guaranteed hourly 

rate of pay. Cf. Elizabeth River Tunnel District v. Beecher, 202 

Va. 452, 459, 117 S.E.2d 685, 691 (1961) (the existence of an 

agreement providing for the performance of a job at a fixed price 

is indicative of independent contractor status). 

 The evidence proved that, in several significant aspects, 

Yard Bird exercised actual or potential control over the dancers. 

 Accordingly, based on the totality of the circumstances, 

including the "Independent Contractor Agreement," we hold that 

Yard Bird failed to meet its burden of proving that Pulliam and 

the other dancers were free from its control. 

 IV. 

 Even were we to hold that the dancers were free from Yard 

Bird's control, Yard Bird still had the burden of proving that 

the dancers were engaged in independently established businesses 

in order to be exempt from paying unemployment taxes on them. 
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See Code § 60.2-212(C)(2). 

 "[I]t is elemental that one engaged in an independent 

enterprise, business or profession has a proprietary interest 

therein to the extent that he can operate it without hindrance 

from any individual or force whatsoever." Life & Casualty Ins. 

Co. v. Unemployment Compensation Comm'n, 178 Va. 46, 55-56, 16 

S.E.2d 357, 361 (1941). Furthermore, the alleged employer has 

the burden of proving that the putative employee's business is 

independently established. See Thomas Regional Directory, 13 Va. 

App. at 615, 414 S.E.2d at 416. "An [independently] 

'established' business is one that is permanent, fixed, stable, 

or lasting." Unemployment Compensation Comm'n v. Collins, 182 

Va. 426, 437, 29 S.E.2d 388, 393 (1944). 

 Yard Bird failed to present sufficient evidence proving that 

any of the dancers were engaged in "permanent, fixed, stable, or 

lasting" business enterprises. Some dancers will dance at Yard 

Bird for only a week; others will dance only during the holiday 

season to earn additional money for Christmas. The average 

dancer stays at Yard Bird for eight to ten weeks. Little 

evidence was presented as to how long dancers continue in the 

"business" of exotic dancing after leaving Yard Bird. The 

evidence suggests that the exotic dancing "enterprises" of Yard 

Bird's dancers are temporary and short-lived. 

 Yard Bird presented only one business license and three 

"business" cards in support of its position that the dancers are 
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independent contractors. Yard Bird's owner conceded that, 

although the "Independent Contractor Agreement" indicates the 

dancers must have business licenses, not all of the dancers have 

licenses and this "requirement" is not enforced. While business 

licenses and business cards are both indicia of independently 

established businesses, the fact that an individual has a 

business license and a business card is not dispositive. This 

conclusion is especially true where the worker obtains the 

business license only at the request of the putative employer. 

 The evidence that the dancers perform at other clubs does 

not conclusively prove they are engaged in independently 

established businesses. The other clubs might treat the dancers 

as employees. Yard Bird presented a single affidavit from one 

dancer to corroborate Stephenson's testimony regarding the 

dancers' activities outside of Yard Bird. Moreover, the 

affidavit suggested the dancer was not an independent contractor 

because she indicated she was "employed" by more than one 

establishment. The fact that a person may work several part-time 

jobs, even in the same industry, does not necessarily make him or 

her an independent contractor. 

 Finally, the fact that Yard Bird issues 1099s to its dancers 

is largely immaterial under the circumstances. Yard Bird's own 

evidence proved that the IRS allows the dancers to be considered 

as independent contractors merely because of a special exemption 

in the tax code. The IRS specifically found that it considered 
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the dancers to be employees. 

 Accordingly, Yard Bird's evidence falls short of proving 

that the dancers were engaged in independently established 

businesses. 

 V. 

 "[T]he fact that an exemption [from employment] may exist 

under federal law is not determinative of whether an exemption 

exists under the Virginia [Unemployment Compensation] Act." 

Peninsula Emergency Physicians, 4 Va. App. at 627, 359 S.E.2d at 

555. We are governed by the definition of "employment" contained 

in Code § 60.2-212. Accordingly, we reject the contention that 

we are, or should be, bound by the "safe haven" granted to Yard 

Bird by the IRS. 

 VI. 

 For the reasons stated above, we hold that Pulliam and the 

other dancers were under the control and direction of Yard Bird, 

that they were not engaged in independently established 

businesses, and that the VEC correctly determined they were 

employees. Accordingly, we reverse the circuit court's judgment 

that the dancers were free from Yard Bird's control, but we 

affirm its ruling that the dancers were employees. The matter is 

remanded for further proceedings consistent with this opinion. 

 Affirmed in part,

reversed in part,

and remanded.