Opinion ID: 901065
Heading Depth: 1
Heading Rank: 5

Heading: Independently Established Trade or Business

Text: [¶ 17.] In order to meet its burden under SDCL 61-1-11(2), Moonlight must show that the sellers: 1. were engaged in an enterprise that was created and exists apart from their relationship with Moonlight and that the enterprise would survive the termination of that relationship; 2. have a proprietary interest in the enterprise to the extent that they can operate without hindrance from any other individual; 3. due to their skill, are engaged in an economic enterprise such that the sellers bear the risk of unemployment; and 4. remain employed as a function of market forces and the demand for the sellers' skills, rather than the response of an employer to similar economic realities. See Davis v. Frizzell, 504 N.W.2d 330, 331-32 (S.D.1993) (citing Hendrickson, 462 N.W.2d at 659). All four prongs of this test, either explicitly or implicitly, require that the individual have some relationship with an economic enterprise that is independent of the relationship with the company that is allegedly subject to unemployment insurance taxation. [¶ 18.] Our decision in Hendrickson, 462 N.W.2d 655, provides guidance on this issue. Hendrickson's Health Care Services (HHCS) provided in-home nursing services to its clients. HHCS maintained a list of available nurses and nurse's aids with varying skill levels. Id. at 656. When a client contacted HHCS, the health care provider consulted the list to choose a nurse with skills adequate to care for that client. Id. The nurse could choose whether to accept the referral, and if accepted, the nurse and client determined the nurse's work schedule and scope of duties. Id. [¶ 19.] In Hendrickson we listed several relevant factors to determine whether SDCL 61-1-11(2) is satisfied. [I]t is not skill alone which determines whether an individual is established in a trade or business, but whether that individual by reason of such skill engages herself in an economic enterprise such that she bears the risk of her own unemployment. Whether or not she is unemployed is solely a function of market forces and the demand for her skills, not the response of her master to similar economic realities. Here, there was no evidence that the care providers held themselves out to the public as engaged in an independent business which would exist separate and apart from HHCS; they did not advertise their health care services, they did not have any clientele independent of that provided by HHCS, and they did not have business premises or business cards. Furthermore, the care providers could be dismissed from HHCS for violating the provisions of the Subcontractor's Responsibilities document. Thus, it is clear that the care providers were not assuming the risk of unemployment by engaging in an economic enterprise independent of HHCS. They were employed by HHCS and dependent upon it for their livelihood. Consequently, HHCS fails the second prong of SDCL 61-1-11. Id. at 659. [¶ 20.] We find that this case is analogous to Hendrickson. First, sellers did not assume the risk of their own unemployment. Instead, their employment was dependant upon Moonlight's response to economic realities and the market's need for a rose selling service. There is also no evidence that any of the sellers sold flowers independent of their relationship with Moonlight. Significantly, Long testified that if it wasn't for Moonlight he would not sell roses. Second, Moonlight's rose sellers did not hold themselves out as independent businesses by way of business cards or advertising. Third, Moonlight supplied each seller with basically all of the necessary items for this business. Fourth, there is no record evidence that the sellers maintained a business premise for selling flowers apart from Moonlight. Although Moonlight argues that each seller had his or her own peddler's license and that this should weigh in Moonlight's favor, each peddler's license lists Moonlight Rose Company as the seller's business name. Finally, the sellers did not have sales tax licenses, but instead relied on Moonlight's license. The fact that each seller applied for a sales tax license after this proceeding commenced is irrelevant, because before this became an issue, the sales tax could only be paid by Moonlight. The evidence is insufficient to show an independently established economic enterprise in the flower business. [¶ 21.] Moonlight also contends that it should only be considered a flower wholesaler, arguing that sellers had the ability to purchase roses anywhere. This argument fails for several reasons. First, we find it particularly significant that, pursuant to the agreement, Moonlight retained liability for the unsold roses. Sellers had no liability for unsold flowers. If sellers were purchasing their roses from a flower wholesaler, they would have been liable for all roses used. Second, the sellers' written agreement expressly prohibited the sellers from competing against Moonlight. This restriction is not indicative of a wholesaler relationship. Third, Moonlight did much more than simply wholesale flowers. In addition to providing a product, Moonlight supplied the coolers, tubes, baskets, nametags, and uniform, and Moonlight offered no evidence to establish that flower wholesalers generally provide this equipment. Moreover, Long testified that there were no other businesses like Moonlight in the Sioux Falls area. These facts do not indicate a wholesaler/independent contractor relationship.