No. 93-606 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1994 

S.E.A. TRUCKING 

Petitioner and Appellant, 

-vTHE STATE OF MONTANA, bv and throush 

the Department of ~abor-and the ~o&d 

of Labor Appeals, and THE MONTANa DK 2 2 1994 

DEPARTMENT OF LABOR AND INDUSTRY 3, r d d .I 

Sunith 

Respondents and Respondents CLERK OF SUPREME COURT 

STATE OF MONTANA 

APPEAL FROM: District Court of the Fourth Judicial District, 

In and for the County of Missoula, 

The Honorable John W. Larson, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Patrick G. Frank and W. Carl Mendenhall, Worden, 

Thane & Haines, Missoula, Montana 

For Respondent: 

Daniel B. McGregor, Montana Department of Labor & 

Industry, Helena, Montana 

For Amicus State Compensation Mutual Insurance Fund: 

Stephen M. Frankino, Hughes, Kellner, Sullivan & 

Alke, Helena, Montana 

Submitted on Briefs: August 25, 1994 

~~~id~d: December 22, 1994 

Filed: 
Justice James C. Nelson delivered the Opinion of the Court. 

This is an appeal from a Fourth Judicial District Court, 

Missoula County, order on a petition for judicial review, affirming 

the Board of Labor Appeals' decision that SEA's base of operations 

has been in Missoula, Montana, since June of 1988, and hence, SEA 

should have been reporting its employees' wages to the State of 

Montana for the purpose of unemployment insurance. We affirm. 

The sole issue on appeal is whether the District Court 

correctly affirmed the Board of Labor Appeals' decision that SEA's 

base of operations was in Missoula, Montana, and therefore, the 

corporation should have been reporting its employees' wages and 

paying unemployment insurance to the State of Montana. 

FACTUAL AND PROCEDURAL BACKGROUND 

SEA, a motor carrier, was incorporated in July of 1988 in the 

State of Wyoming. Robert Evers (Evers), of Casper, Wyoming, owned 

51% of the corporation and Stan Spencer (Spencer), of Missoula, 

Montana, owned 49% of the corporation. SEA, a =-licensed carrier 

leased 20 over-the-road hauling trucks from Allstate, a Minnesota 

company, and then re-leased the trucks to Bitterroot International 

Systems, Inc. (Bitterroot), a motor carrier solely owned by 

Spencer. Bitterroot is a federallv licensed motor carrier with its 

headquarters in Missoula, Montana. SEA leased exclusively to 

Bitterroot but Bitterroot had lease agreements with other 

individual carriers in addition to SEA. 

In July and August of 1990, because of a concern that proper 

unemployment insurance coverage was not being provided to SEA 

2 
employees, SEA was audited by the Unemployment Insurance Division 

of the Department of Labor and Industry (DO11 of the State of 

Montana to determine whether drivers and their wages should be 

reported to the state of Wyoming, as SEA claims, or the state of 

Montana. On September 7, 1990, the Department determined that the 

wages of SEA'S drivers should have been reported in Montana under 

Bitterroot's account because the DOLI had determined that SEA 

drivers were Montana workers employed by Bitterroot. SEA requested 

a redetermination of the decision, and on December 10, 1990, the 

initial determination was sustained. 

SEA appealed this determination to the Department's Hearing 

Examiner who heard the case on May 21, 1991, and on January 29, 

1992, issued his decision reversing the initial determination that 

SEA'S drivers should have been reported as Bitterroot employees, 

but he sustained the determination that SEA should have been 

reporting their driversf wages to Montana, rather than Wyoming. 

This decision was appealed to the Department's Board of Labor 

Appeals (Board), and on March 30, 1992, the Board adopted the 

Hearing Examiner's Findings and Conclusions. SEA sought judicial 

review in the Fourth Judicial District Court of the Board's 

decision. The District Court affirmed the decision of the Board in 

an Opinion and Order on the Petition for Judicial Review on October 

22, 1993. In affirming the Board's affirmance of the Hearing 

Examiner's Findings of Fact, the District Court particularly 

addressed and subsequently modified certain findings which SEA 

contended were either irrelevant or not supported by the evidence. 
These findings, as amended by the District Court, state: 

4. SEA rented a small administrative off ice/sbop facility 

in Casper, Wyoming where Evers and his secretary worked. 

The firm also rented space from the Bitterroot 

International Systems Complex in Missoula ..., All trucks 

were dispatched ... in Missoula. SEA assigned a manager to 

the Missoula terminal to supervise ... the drivers .... The 

Missoula manager was able to conveniently confer with 

Spencer since their offices were Located in the same 

building. 

5. The terminal manager advertised job openings, 

interviewed and hired the drivers out of Missoula. Due 

to the geographical location of the Missoula terminal, 

nearly all of the drivers were Montana residents. 

According to the 1989 W-2 forms issued by SEA, 146 out of 

160 drivers on the payroll were Montana residents with 

Montana drivers licenses. 

6. SEA processed its payroll records in its Montana 

facility .... While business files were kept at the 

Casper office, most, if not all, such data was a 

duplication of records compiled and maintained in the 

Missoula terminal. 

SEA now requests that this Court review the decision of the Hearing 

Examiner and the subsequent reviews of that decision, including 

that of the District Court. 

STANDARD OF REVIEW 

The correct standard of review in the instant case is set out 

in g 39-51-2410(5) and (6), MCA, and provides: 

(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. . . . (6) An appeal may be taken from the decision of the 

district court to the supreme court of Montana in the 

same manner, but not inconsistent with the provisions of 

this chapter, as is provided in civil cases.... 

We have stated that: 

[sl upported by the evidence means supported by 

substantial evidence, which is 'something more than a 
scintilla of evidence, but may be less than a 

preponderance of the evidence.' 

Potter v. Dept. of Labor and Industry (1993), 258 Mont. 476, 479, 

853 P.2d 1207, 1209. (Citation omitted.) Moreover, in Potter, we 

stated that "the District: Court must limit its review of the 

Board's findings to a consideration of whether they are supported 

by substantial evidence, and the same standard applies to this 

Court. With regard to questions of law, however, our task is to 

determine whether the agency's interpretation of the law is 

correct." Potter, 853 P.2d at 1209. (Citations omitted.) 

Further, we have stated that: 

"The court is not permitted to balance conflicting 

evidence in support of and in opposition to the [Board's] 

findings of fact, nor to determine which is the more 

substantial evidence, nor to consider where the 

preponderance of evidence lies; for to do so would be to 

substitute the Court's view of the evidence for that of 

the [Board,] and effectively nullify the conclusive 

character of the [Board's] findings of fact as provided 

by statute. I' 

Thus, the reviewing court must decide whether 

substantial evidence supports the Board's decision and 

not whether on the same evidence it would have arrived at 

the same conclusion. 

Ward v. Johnson (1990), 242 Mont. 225, 228, 790 P.2d 483, 485. 

(Citations omitted. ) 

DISCUSSION 

ISSUES OF FACT 

SEA argues that substantial evidence does not exist to support 

certain of the agency's findings which supported the conclusion 

that SEA'S base of operations was in Montana. After a careful 

review of the transcript, we conclude that substantial evidence 

supports the Hearing Examiner's Findings of Fact as amended by the 

5 
District Court. 

There was testimony presented to the effect that SEA had 

office space in Missoula, trucks were dispatched out of Missoula, 

and all drivers were supervised by the manager of SEA, Jhan 

Sorensen, who worked out of the Missoula office. Moreover, 

testimony was presented that it was the Missoula manager who 

maintained day-to-day contact and communication with the drivers 

from his Missoula office; he also prepared payroll in Missoula. 

Further, the majority of the SEA workforce were Montana residents. 

Testimony also demonstrated that the interview process for the 

hiring of drivers was a job shared between Evers in Wyoming and 

Sorensen in Montana although the positions were advertised out of 

Missoula, and the final hiring of drivers was accomplished in 

Montana. All testing of drivers occurred solely in Montana through 

Bitterroot by virtue of its Interstate Commerce Commission license. 

Finally, there was testimony that 40% of the maintenance on trucks 

occurred in Montana, according to Allstate's instructions. 

Although SEA argued that many activities were performed in Missoula 

because the agencies with which SEA contracts, Bitterroot and 

Allstate, required that these activities occur there, that does not 

change the fact that these activities did occur in Montana and they 

are activities basic to the operation of a trucking company. 

Clearly, substantial evidence supports the findings of fact at 

issue here. Furthermore, as stated above: 

"The court is not permitted to balance conflicting 

evidence in support of and in opposition to the [Board's] 

findings of fact, nor to determine which is the more 

substantial evidence, nor to consider where the 
preponderance of evidence lies; for to do so would be to 

substitute the Court's view of the evidence for that of 

the [Board, I and effectively nullify the conclusive 

character of the [Board's] findings of fact as provided 

by statute. " 

Thus, the reviewing court must decide whether 

substantial evidence supports the Board's decision and 

not whether on the same evidence it would have arrived at 

the same conclusion. 

Ward, 790 P.2d at 485. (Citations omitted.) 

We conclude that substantial evidence supports the Findings of 

Fact made by the Hearing Examiner and modified by the District 

Court. We hold that the District Court did not err in affirming 

the Hearing Examiner's Findings of Fact which were challenged by 

the Appellant. 

ISSUES OF LAW 

The Findings of Fact also support the conclusion that SEA'S 

base of operations was in Missoula, Montana, from the inception of 

the corporation, and therefore, the employees' wages should have 

been reported to the State of Montana's Unemployment Insurance 

Division. Both parties agree that the statute to be applied in 

determining whether SEA employees' wages should be reported to the 

State of Montana is § 39-51-203, MCA, and particularly 

subsection (2) (a) (ii) (A) , which provides : 

(2) (a) The term l'employment" includes an 

individual's entire service performed within or both 

within and without this state if: 

(ii) the service is not localized in any state but 

some of the service is performed in this state and: 

(A) the base of operations or, if there is no base 

of operations, then the place from which such service is 

directed or controlled, is in this state. ... 

The portion of the statute which is at issue in the instant 
case is subsection (ii) (A), which premises the place of employment 

in Montana on a company's "base of operations. " If SEA'S "base of 

operations1' is in Montana, then the place of employment is in 

Montana, and the employees' wages should be reported to and 

unemployment insurance premiums paid to the Unemployment Insurance 

Division in the State of Montana. In order to determine whether 

SEA employees' wages should have been reported to Montana and not 

Wyoming, the company's base of operations would have to be in 

Missoula, Montana. 

The DOLI used the following definition of "base of operations" 

in its determination. "Base of operations," which, as stated 

above, is the essential element at issue in the case, was defined 

as: 

. . . the place of more or less permanent nature 

from which the employee starts his work and to which he 

customarily returns to perform the terms of his contract 

with his employer, to seek other employment or to apply 

for unemployment benefits. 

The Department states that this definition was taken from a U.S. 

Department of Labor Unemployment Insurance Program Letter # 291, 

dated July 1, 1952, which purports to explain "employment for 

employers employing in several states." The letter contains four 

tests for determining whether an employee is covered by Montana 

unemployment law, one of the tests being the "base of operations" 

test which is at issue here. We note that the letter also states 

that the tests apply to the emplovees, not the employer. 

The District Court applied a definition for "base of 

operations," from a Montana regulation, which is similar to the 
DOLI1s definition and provides: 

[tlhe term "base of operations" is the place of more 

or less permanent nature from which the employee starts 

his work and to which he customarily returns in order to 

receive instructions from the taxpayer or communications 

from his customers or other persons, to replenish stock 

or other materials, repair equipment, or to perform any 

other function necessary to exercise his trade or 

profession at some other point or points. . . . 

Rule 42.26.202 (7), ARM. Rule 42.26.202 (7), ARM, is a Montana 

Department of Revenue regulation promulgated to implement the 

Multistate Tax Compact. The District Court correctly pointed out 

that s 15-1-601, Art, IV (l4), MCA, ( [part of] the ~ultistate Tax 

Compact) '!uses the exact same language as 39-51-203 (2) (a) to 

define when compensation is considered paid in Montana. The court 

also stated, correctly, that " [tlhe Annotations to the Multistate 

Tax Compact state that Article IV is based on the Model 

Unemployment compensation Act, upon which the Montana Unemployment 

Compensation Act is also based. [See Commission Notes for Section 

15-1-601, Article IV (14), MCA, Annotations at 30-31.1 Thus the 

language of the ~ultistate Tax Compact and of § 39-51-203 (2) (a) 

have the same source and the same meaning." We agree that these 

sections of the Multistate Tax Compact and the pertinent section of 

the Montana Unemployment Compensation Act are the same and provide 

a sound justification for approving of the use of the particular 

definition of "base of operations" used by the DOLI and cited 

above. We therefore conclude that the definition of "base 

operations" used by the DOLI is a proper and acceptable definition 

of the term, and we approve of its use. 

We also agree that the test to determine the place of 
employment applies to the emplovee, not the employer. As stated 

above, the letter from the U.S. Department of Labor states that the 

"base of operations" test should be determined from the standpoint 

of the employee. Moreover, the Montana regulation cited above 

defines "base of operations" from the standpoint of the employee 

and case law from other jurisdictions concerning the same issue 

also focuses upon the employee in applying the base of operations 

test. See Walco Leasing v. Bilich (Minn. App. 1986), 383 N.W.2d 

374; Iverson Const. v. Dept. of Emp. Services (Iowa 1989), 449 

N.W.2d 356. There is substantial support for the Hearing 

Examiner's determination that the "base of operations" test should 

focus on the employee, and we conclude that the Hearing Examiner 

and the Board placed the proper focus of the test on the employee, 

not the employer as suggested by SEA. 

Walco, cited above, also provides guidance in determining the 

meaning of the term "base of operations" because it enumerates 

factors to be considered in determining whether a given location is 

a company's base of operations. Walco states: 

Factors such as the place of beginning the service 

for which compensation is being paid, place of resupply 

of materials needed in the service, if any, place of 

repair of the machinery used in the service, the source 

of orders or directions for the services rendered and the 

permanency of any of these places if they exist should be 

considered in determining if there is a base of 

operations and where it is located. 

Walco, 383 N.W.2d at 377, citing Heller v. International Transport, 

Inc. (1971) , 481 P .2d 602. In the instant case, drivers were 

dispatched out of Missoula and if they needed instructions, 

direction or information, they spoke to Sorensen, SEA'S manager. 

10 
Moreover, payroll was prepared in Missoula and many repairs were 

made in Montana. Clearly, many activities basic to the operation 

of a trucking company and listed in Walco as determinative factors 

in determining the "base of operations" occurred in Montana. 

Applying the >'base of operationsn definition used by the DOLI, 

and the Walco factors, we conclude that substantial evidence 

existed to support the conclusion that SEA'S base of operations was 

in Montana since 1988, and not in wyoming. We hold that the 

District Court did not err in affirming the Board's affirmance of 

the Hearing Examiner's conclusion that SEA1s base of operations was 

in Missoula, Montana, and therefore, its employees' wages should 

have been reported to and unemployment insurance premiums paid to 

Montana, not Wyoming. 

AFFIRMED. 

'7 

We Concur: 
December 22, 1994 

CERTIFICATE OF SERVICE 

I hereby certify that the following certified order was sent by United States mail, prepaid, to the 

following named: 

Patrick G. Frank & W. Carl Mendenhall 

WORDEN, THANE & HATNES, P. C. 

P. 0. Box 4747 

Missoula, MT 59806 

Daniel B. McGregor 

DEPARTMENT OF LABOR & INDUSTRY 

P. 0. Box 1728 

Helena, MT 59624 

Stephen M. Frankino, Esq. 

Hughes, Kellner, Sullivan & Alke 

P.O. Box 1166 

Helena, MT 59624-1 166 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE OF MONTANA