COURT OF APPEALS OF VIRGINIA 

Present: Judges Benton, Willis and Annunziata 

Argued at Richmond, Virginia 

BROTHERS CONSTRUCTION COMPANY, INC. 

 OPINION BY 

v. Record No. 0255-97-2 JUDGE JAMES W. BENTON, JR. 

 JANUARY 13, 1998 

VIRGINIA EMPLOYMENT COMMISSION 

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 

Randall G. Johnson, Judge 

 Daniel M. Press (Chung & Press, P.C., on 

briefs), for appellant. 

 John B. Purcell, Jr., Assistant Attorney 

General (James S. Gilmore, III, Attorney 

General; Lisa J. Rowley, Assistant Attorney 

General, on brief), for appellee. 

 Brothers Construction Company, Inc. contends the circuit 

court judge erred in upholding the Virginia Employment 

Commission's ruling that Brothers was not exempt from the payment 

of unemployment insurance taxes on the remunerations paid to its 

siding installers. See Code § 60.2-212(C). We affirm the 

judgment because the evidence supports the commission's findings 

of facts and conclusions of law that (1) services were performed 

by individuals for remuneration, (2) the installers were not free 

from Brothers' direction and control, (3) the services were not 

performed outside all of Brothers' places of business, and (4) 

the installers were not engaged in independently established 

trades, occupations, professions or businesses. 
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 I. 

 Following a random audit for unemployment insurance tax 

compliance, the commission issued to Brothers, which was then 

named Brothers Siding Company, Inc., a letter containing findings 

of fact and a determination that individuals who installed siding 

for Brothers performed services for Brothers that constitute 

employment as defined in Code § 60.2-212. Brothers requested a 

hearing pursuant to Code § 60.2-500. 

 Testimony at the hearing proved that Brothers, which had 

then changed its name from Brothers Siding Company, Inc., to 

Brothers Construction Company, Inc., is in the business of 

installing siding, gutters, and downspouts on residential and 

other buildings. Charlie Hwang, the president of Brothers, 

testified that after Brothers obtained contracts to install 

siding on buildings, Brothers hired installers to work at job 

sites located throughout Virginia, Maryland, and Washington, D.C. 

 The testimony established that during a five year period, 

Brothers issued two hundred federal tax forms No. 1099 to 

installers who performed work for Brothers. 

 Hwang orally negotiated with the installers, most of whom 

did not speak English very well, to pay them at a set rate per 

square foot of installed siding. Each of the installers that he 

hired signed a "self-employment contract" with Brothers that 

reads as follows: 

 I understand that I am an independent 

contractor, and that I am responsible for all 

tax withholdings, FICA and self-employment 
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taxes due. I have specific control over the 

order and sequence of work performed, time of 

completion, and the hours worked. I am paid 

by job production or by completed job, but 

not by my time. Due to these factors, I 

realize that I have the opportunity for 

[entrepreneurial] Profit (and Loss). I also 

understand that I will receive a form 1099 

from BROTHERS SIDING CO. so that I may file 

the proper Self-Employment forms due at the 

end of the year. I understand also that I am 

responsible for filing a quarterly estimate 

of federal taxes to cover Self-Employment 

Income reported to me by BROTHERS SIDING CO. 

 Brothers required the installers to obtain all of their 

materials from Brothers' warehouse and to provide their own tools 

and transportation to the job sites. Even though Brothers 

supplied all the siding materials for the installers, Hwang 

testified that Brothers only employed a few "service work" 

employees who fixed damaged siding. Otherwise, none of Brothers' 

employees installed siding; they only installed gutters and 

downspouts. 

 Brothers set deadlines for completion of the work. If any 

of the work was defective, Brothers required the installers to 

return to the site and make the requisite repairs. The 

installers were paid each week on Saturday based upon the square 

feet of material installed that week. Many of the installers 

hired work crews. Hwang testified that Brothers did not 

supervise the installers or the hiring of the work crews. 

 The evidence proved that Brothers reported, as employees for 

unemployment tax purposes, all its corporate executives, 

officers, warehouse help, and administrative staff. However, 
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Brothers issued to the siding installers federal tax forms No. 

1099 showing "non-employee compensation" paid. A random audit by 

the commission's tax auditor disclosed that approximately two 

hundred tax forms No. 1099 were issued to these siding installers 

between 1989 and 1991. Upon investigation, the auditor found 

that most of the identification numbers on those tax forms were 

individual Social Security numbers. The auditor eliminated from 

his investigation any of the two hundred names of installers that 

he discovered were business names. The auditor also found that 

only three of fifty installers he randomly selected to check had 

business licenses in three of the counties in Northern Virginia 

where Brothers performed siding installation contracts. Based on 

this information, the auditor opined that the installers were not 

independent contractors and issued to Brothers a Notice of Tax 

Liability Determination. 

 Following the presentation of the evidence at the hearing, 

the commission made extensive findings and concluded that "the 

services performed by all installers and their assistants . . . 

constituted services in employment so as to subject [Brothers] to 

the liability for paying unemployment insurance taxes on the 

remuneration paid for such services." The commission ordered 

Brothers to file amended payroll tax reports to cover the 

remuneration in question. Brothers filed for review of that 

decision in the Circuit Court of the City of Richmond. See Code 

§ 60.2-500(B)(1). The circuit court judge affirmed the 
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commission's decision. 
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 II. 

 The taxation provision of the Act provides that "[i]n any 

judicial proceedings . . . , the Commission's findings of facts, 

if supported by the evidence and in the absence of fraud, shall 

be conclusive, and the jurisdiction of the court shall be 

confined to questions of law." Code § 60.2-500(B)(1). For 

unemployment compensation purposes, "[s]ervices performed by an 

individual for remuneration shall be deemed to be employment." 

Code § 60.2-212(C). The parties agree that the commission has 

the initial burden of proving that services were performed by 

individuals for remuneration. See Virginia Employment Comm'n v. 

Thomas Regional Directory, Inc., 13 Va. App. 610, 612, 414 S.E.2d 

412, 414 (1992). 

 In our review of the law, we are guided by the following 

principles: 

 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 Commission v. A.I.M. Corp., 225 Va. 338, 

345-46, 302 S.E.2d 534, 539 (1983) (citations omitted). In 

addition, we must consider the evidence in the light most 
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favorable to the findings of the commission, and we will not 

disturb the commission's findings unless the evidence, as a 

matter of law, is insufficient to support those findings. 

Virginia Employment Comm'n v. Peninsula Emergency Physicians, 

Inc., 4 Va. App. 621, 626, 359 S.E.2d 552, 554 (1987). 

Services Performed by Individuals

 Brothers contends the commission failed to meet its burden 

of proof because the evidence did not establish that services 

were performed by individuals. Brothers argues that even if the 

installers were sole proprietorships, they did not fit within the 

definition of "individual" contained in Code § 60.2-212(C) 

because most of the installers hired assistants. The commission 

found that Brothers was liable for unemployment taxes for the 

installers and the "individuals assisting the installers." The 

record supports this finding of fact. 

 The evidence proved that all but three of the two hundred 

installers used Social Security numbers that were issued to 

individuals. The auditor eliminated any installers from the list 

that were business entities or that had business licenses. The 

evidence provides no rational basis to support a finding that the 

remaining names on the list were anything other than individuals 

as that term is commonly used. Therefore, the commission met its 

burden of proving that services were performed by individuals for 

remuneration. The evidence proved that individual installers and 

their assistants performed work for Brothers and that Brothers 
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paid them for these services. 
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Exemptions

 After the commission met its burden of proof, the burden 

then shifted to Brothers to prove by a preponderance of the 

evidence that it qualified for an exemption under Code 

§ 60.2-212(C). See Thomas Regional Directory, 13 Va. App. at 

612, 414 S.E.2d at 414. Code § 60.2-212(C) provides 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 service is either outside the usual 

course of the business for which such service 

is performed, or such service is performed 

outside of all the places of business of the 

enterprise for which such service is 

performed; or such individual, in the 

performance of such service, is engaged in an 

independently established trade, occupation, 

profession or business. 

 "[I]f the putative employer fails to demonstrate that it is 

within the terms of both subsection (C)(1) and one of the three 

exceptions under subsection (C)(2), it fails to meet its burden 

of proof and an 'employment' relationship exists." Thomas 

Regional Directory, 13 Va. App. at 612, 414 S.E.2d at 414. 

Furthermore, the Supreme Court has ruled that these exemptions 

"should be strictly construed against the alleged employer." 

A.I.M. Corp., 225 Va. at 346, 302 S.E.2d at 539. 
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 Control and Direction 

 Brothers points to the "self-employment contract" signed by 

all of its installers as evidence of Brothers' lack of control 

and direction over the installers. However, "the existence of 

the master-servant relationship under the Unemployment Act 'does 

not depend upon how the parties designate each other in their 

contract.' Rather, the individual's status in relation to the 

alleged employer is to be determined from all the facts and 

circumstances adduced by the evidence, including the provisions 

of any written agreement." A.I.M. Corp., 225 Va. at 347, 302 

S.E.2d at 539 (citations omitted). See Thomas Regional 

Directory, 13 Va. App. at 614-15, 414 S.E.2d at 415-16. 

 "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). "The potential power 

of control, not the actual exercise of control, is the important 

element." A.I.M. Corp., 225 Va. at 347, 302 S.E.2d at 539-40. 

See Hann v. Times-Dispatch Publ'g Co., 166 Va. 102, 106, 184 S.E. 

183, 184-85 (1936). This right of control includes not only the 

power to specify the result to be accomplished but also includes 

the power over the "performance of such services, both under his 

contract of services and in fact." Code § 60.2-203(C)(1). "If 

the party for whom the work is to be done has the power to direct 

the means and methods by which the other does the work, an 

employer-employee relationship exists." A.I.M. Corp., 225 Va. at 
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347, 302 S.E.2d at 540. "Among the tests used to determine if 

the right to control exists are: whether instructions have to be 

obeyed, and whether either of the parties possesses the right to 

terminate services at will without incurring liability to the 

other." Id. Another "'means of ascertaining whether or not this 

right to control exists is the determination of whether or not, 

if instructions were given, they would have to be obeyed.'" 

Hann, 166 Va. at 107, 184 S.E. at 185 (citation omitted). 

 The evidence and the reasonable inferences to be drawn from 

the evidence proved that Brothers had the right to instruct the 

installers as to the work that was to be done and the manner in 

which that work would be performed. While the installers 

provided their own tools and transportation, Brothers provided 

all of the materials for completion of the job. The installers 

were not free to choose their own materials or purchase materials 

from other sources. Furthermore, the work had to be performed to 

Brothers' standards, specifications, and satisfaction. Although 

the installers were not under constant supervision, Brothers 

conducted periodic inspections. If, upon inspection, Brothers 

discovered that the work was defective, Brothers required the 

installers to return to the job site to correct the mistakes 

according to Brothers' specifications. If the installers' work 

was particularly unsatisfactory, the installers would not be 

hired for another job. Brothers also retained the right to 

terminate the installers from a project at will. Thus, we cannot 
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say the commission erred as a matter of law in finding that 

Brothers exercised control over the installers. 

 Although the commission's finding that Brothers exercised 

control over the installers is dispositive of the case, see Code 

§ 60.2-212(C), we briefly discuss the additional requirements 

needed to prove an exemption under Code § 60.2-212(C)(2) because 

the commission addressed them. The exemptions of Code 

§ 60.2-212(C)(2) require proof that service performed by an 

individual for remuneration "is either outside the usual course 

of the business for which such service is performed, or such 

service is performed outside of all the places of business of the 

enterprise for which such service is performed; or such 

individual, in the performance of such service, is engaged in an 

independently established trade, occupation, profession or 

business." The commission found that Brothers failed to prove 

those exemptions. 

Outside Place of Business

 Brothers concedes that it does not meet the first exception 

contained in subsection (C)(2): "[s]uch service is . . . outside 

the usual course of the business for which such service is 

performed." However, Brothers argues that it operates only from 

its headquarters in Lorton, Virginia, and that the installers' 

services were performed throughout Maryland, Virginia, and 

Washington, D.C. on sites that were not its places of business. 

However, "places of business" are not confined to the 
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headquarters or office premises of the employer but embrace all 

of the sites in the territory in which the alleged employees 

worked. See Life & Casualty Ins. Co. v. Unemployment 

Compensation Comm'n, 178 Va. 46, 56, 16 S.E.2d 357, 361 (1941). 

The installers "operated in precisely the same place or places 

where [Brothers] would have operated if [it] had undertaken the 

work [it]self." Unemployment Compensation Comm'n v. Collins, 182 

Va. 426, 436-37, 29 S.E.2d 388, 393 (1944). In each instance, 

the installers worked to install siding on buildings that 

Brothers had agreed by contract to service. Thus, Brothers did 

not meet its burden of proving that the services provided by the 

installers were performed outside of all Brothers' places of 

business. 

Independently Established Businesses

 "[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 and Casualty, 178 

Va. at 55-56, 16 S.E.2d at 361. 

 "It will be observed that in order to escape 

the provisions of the statute the requirement 

is not that the alleged employee be engaged 

in an 'independent business.' He must be 

engaged in one that is 'independently 

established.' An 'established' business is 

one that is permanent, fixed, stable, or 

lasting." 

Peninsula Emergency Physicians, 4 Va. App. at 630, 359 S.E.2d at 

557 (quoting Collins, 182 Va. at 437, 29 S.E.2d at 393). 
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 The evidence failed to prove that the installers either had 

a proprietary interest or were engaged in independently 

established businesses that were permanent, stable and lasting. 

Although the installers had their own tools, the evidence proved 

that Brothers supplied all the materials to perform the work. 

Brothers presented no evidence that the installers had business 

cards, business licenses, business phones, or business locations 

to support a claim of a lasting, independently established 

business. See Thomas Regional Directory, 13 Va. App. at 616, 414 

S.E.2d at 416. No evidence proved that the installers received 

income from any party other than Brothers. See id. at 615, 414 

S.E.2d at 416. "[T]he 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. 

 For these reasons, we hold that the evidence was sufficient 

to support the commission's finding that the services performed 

by the installers and their crews constituted employment so as to 

subject Brothers to unemployment insurance tax liability. For 

these reasons, we affirm the judgment upholding the commission's 

decision. 

 Affirmed.