Court Opinion

ID: 4070252
Source: CourtListenerOpinion
Date Created: 2016-09-30 01:08:21.656995+00
Date Added: 2024-06-11T14:33:03.804022
License: Public Domain

ACCEPTED
                                                                                      06-15-00078-cv
                                                                          SIXTH COURT OF APPEALS
                                                                                TEXARKANA, TEXAS
                                                                               12/30/2015 7:05:47 PM
                                                                                    DEBBIE AUTREY
                                                                                              CLERK

                                NO. 06-15-00078-CV
                  ______________________________________________
                                                                 FILED IN
                                                          6th COURT OF APPEALS
                      IN THE COURT OF APPEALS FOR THE TEXARKANA, TEXAS
                   SIXTH DISTRICT OF TEXAS AT TEXARKANA   12/31/2015 9:24:00 AM
                  ______________________________________________
                                                               DEBBIE AUTREY
                                                                   Clerk
                            TOCHRIL INCORPORATED,
                                   Appellant

                                        VS.

                       TEXAS WORKFORCE COMMISSION,
                                     Appellee
                  ______________________________________________

             ON APPEAL FROM 53rd JUDICIAL DISTRICT COURT OF
                           TRAVIS COUNTY, TEXAS
                ______________________________________________

                              BRIEF OF APPELLANT
                  ______________________________________________

                                       JULIANN H. PANAGOS
                                       State Bar No. 06861100
                                       jpanagos@craincaton.com
                                       MICHAEL D. SEALE
                                       State Bar No. 00784938
                                       mseale@craincaton.com
                                       1401 McKinney Street, Suite 1700
                                       Houston, Texas 77010
                                       Telephone: 713-752-8696
                                       Facsimile: 713-658-1921

                                       Counsel for Appellant

ORAL ARGUMENT REQUESTED

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                         Identity of Parties and Counsel

      The following is a complete list of all parties to the trial court judgment, and
the names and addresses of all trial and appellate counsel:

         Parties                                    Counsel

Appellant Tochril Incorporated                Juliann H. Panagos
                                              Michael D. Seale
                                              Crain, Caton & James, P.C.
                                              1401 McKinney Street Suite 1700
                                              Houston, Texas 77010

Appellee Texas Workforce                      Peter E. Laurie
Commission                                    Assistant Attorney General
                                              Financial and Tax Litigation
                                              PO Box 12548
                                              Austin, Texas 78711-2548

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                                               Table of Contents

Identity of Parties and Counsel ...................................................................................i 

Table of Contents ...................................................................................................... ii 

Table of Authorities ................................................................................................... v 

Statement of the Case.............................................................................................. vii 

Statement Regarding Oral Argument .................................................................... viii 

Statement Regarding Record References and Hyperlinks ..................................... viii 

Issues Presented ........................................................................................................ix

                                                        Issue 1

         Health Force included a lenghtly summary of evidence to its
         response to the motion for summary judgment pursuant to
         Texas Rule of Evidence 1006, which allows for presentation of
         summary evidence when the underlying evidence is too
         voluminous. The underlying sumarized evidence supporting
         Health Force’s summary judgment response was also attached
         to the response. The TWC filed a motion to strike this
         summary judgment evidence. The trial court sustained the
         TWC’s objections and struck the evidence. Did the trial court
         err by excluding Health Force’s summary evidence?

                                                        Issue 2

         Did the trial court err in finding the twenty worker
         classification factors weighed in favor of the TWC?

                                                        Issue 3

         In a 2007 Memorandum of Understanding, the Internal
         Revenue Service (the “IRS”), Department of Labor (the
         “DOL”) and a number of state workforce agencies (including
         Texas) agreed to work towards achieving consistent worker
         classification determinations across state and federal agencies.
                                                            ii
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         Both the IRS and DOL conducted worker classification audits
         of the workers offered work opportunities by Health Force and
         determined the nurses and other professional healthcare
         providers were independent contractors. In this case, the trial
         court granted summary judgment for the Texas Workforce
         Commission finding these same workers were employees of
         Health Force. Did the trial court erroneously grant summary
         judgment for the TWC on the issue of worker classification?

Overview .................................................................................................................... 1 

Statement of Facts ...................................................................................................... 1 

1.       Background of the Parties................................................................................ 1 

         A.        Tochril Incorporated (“Health Force”).................................................. 1 

         B.        Texas Workforce Commission .............................................................. 2 

2.       Texas Workforce Commission Investigation and Decision ............................ 3 

3.       Procedural History ........................................................................................... 5 

         A.        Suit is filed............................................................................................. 5 

         B.        The motion for summary judgment....................................................... 6 

         C.        Objections to Health Force’s summary judgment
                   evidence ................................................................................................. 7 

         D.        Rulings on evidence and motion for summary judgment ..................... 8 

Summary of the Argument......................................................................................... 8 

Argument.................................................................................................................. 10 

1.       Standard of Review........................................................................................ 10 

2.       The trial court erred in excluding Health Force’s summary chart and
         by ignoring the underlying evidence. ............................................................ 11 

         A.        Use of Summary Evidence for Alonzo and Pappillion
                   Testimony was Proper in this Case. .................................................... 12 

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         B.        Alonzo and Pappillion Provided Proper Witness
                   Statements. ........................................................................................ 16 

         C.        Alonzo and Pappillion had Personal Knowledge of
                   Relevant Facts. .................................................................................... 17 

3.       The Twenty Factor Test Demonstrates Genuine Issues of Material
         Fact      18 

         A.        Prior Precedent Indicates the Workers are Independent
                   Contractors .......................................................................................... 18 
         B.        Review of Health Force’s Evidence Demonstrates the Workers
                   were Independent Contractors ............................................................. 20 

4.       The Memorandum of Understanding between the IRS, DOL and State
         Agencies Favors a Finding that the Health Force Workers are
         Independent Contractors. ............................................................................... 33 

         A.        The IRS Audit of the Workers ............................................................35 
         B.        The DOL Audit of the Workers ..........................................................36 
Conclusion ............................................................................................................... 37 

Certificate of Compliance ........................................................................................ 38 

Certificate of Service ............................................................................................... 39 

Index to Appendix .................................................................................................... 40 

                                                             iv
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                                            Table of Authorities

Cases 
Avchen v. Kiddo, 200 Cal. App. 3d 532 (Cal. 1988) ................................................18

C.M. Asfahl Agency v. Tensor, Inc., 135 S.W.3d 768 (Tex. App.–
     Houston [1 Dist.] 2004, no pet.) ....................................................................13

Cascade Nursing v. Employment Security Department, 856 P.2d 421
     (Wash. 1993)..................................................................................................18

Champlin Oil & Ref. Co. v. Chastain, 403 S.W.2d 376 (Tex.1965) .......................13

Contract Management Services, Inc. of Texas v. State of Louisiana,
     745 So.2d. 194 (La. Ct. App. 1999) ..............................................................18

Cooper Petroleum Co. v. LaGloria Oil & Gas Co., 436 S.W.2d 889
     (Tex.1969) .....................................................................................................13

Elgin Nursing & Rehabilitation Center v. U.S. Department of Human
      Health Services, 718 F.3d 488 (5th Cir. 2013) ...............................................20

Flutobo, Inc. v. Holloway, 419 S.W.3d 622 (Tex. App.—Houston
      [14th Dist.] 2013, pet. denied) .......................................................................11

Ford Motor Company v. Auto Supply Company, Inc., 661 F.2d 1171
     (8th Cir.1981) ................................................................................................13

Goodyear Tire & Rubber Co. v Mayes, 236 S.W.3d 754 (Tex.2007) .....................10

Guevara v. Lackner, 447 S.W.3d 566 (Tex. App.-Corpus Christi
     2014), reh’g overruled (Dec. 11, 2014) .........................................................14

Health Care Associates, Inc. v. Oklahoma Employment Security
      Commission, 26 P.3d 112 (Okla. 2001) .........................................................18

HRP of Tennessee, Inc. d/b/a Hospital Resources Personnel v. State of
     Tennessee, Department of Employment Security, No. E2005-
     01176-COA-R3-CV (Tenn. June 28, 2006) ..................................................18

McAllen State Bank v. Linbeck Construction Corp., 695 S.W.2d 10
     (Tex.App.–Corpus Christi 1985, writ ref'd n.r.e.) .........................................13
                                     v
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Mississippi Employment Security Commission v. PDN, Inc., 586 So. 2d
838 (Miss. 1991) ............................................................................................18

Rosenberg v. Collins, 624 F.2d 659 (5th Cir.1980) .................................................13

Speier v. Webster College, 616 S.W.2d 617 (Tex. 1981) ........................................13

Trucks, Inc. v. Tamez, 206 S.W.3d 572 (Tex. 2006) ...............................................10

Statutes/Regulations/Other 
20 C.F.R., Section 639.3 ..........................................................................................34

40 Tex. Admin. Code, Section 815.134 ............................................ 7, 11, 20, 21, 40

40 Tex. Admin. Code, Section 821.5 .......................................................................33

Rev. Rul. 87-41, 1987-1 C.B. 296 ...........................................................................33

Revenue Act of 1978, Section 530 ..........................................................................36

Small Business Job Protection Act of 1996, Section 1122......................................36

Tex. Labor Code, Section 201.029 ............................................................................6

Tex. Labor Code, Section 212.021 ............................................................................5

Tex. Labor Code, Section 213.073 ........................................................................... 5

Tex. R. Civ. P., Rule 166a ................................................................................. 16-17

Tex. R. Evid. 1006 .................................................................................. 11-13, 16-17

TUCA Section 201.041 ..................................................................................... 15, 18

                                                         vi
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                           Statement of the Case

Nature of the Case:       Worker classification dispute under the Texas
                          Labor Code (the Texas Unemployment
                          Compensation Act).

Trial Court:              The Honorable Stephen Yelenosky, 53rd Judicial
                          District Court, Harris County, Texas

Course of Proceedings:    Appellant Tochril Incorporated (“Health Force”)
                          filed a petition in district court challenging the
                          administrative decision of the Texas Workforce
                          Commission (the “TWC”) classifying certain
                          workers offered work opportunities by Health
                          Force as employees (C8). Health Force sought a
                          declaratory judgment that the workers were
                          independent contractors and made a claim for
                          reimbursement of the unemployment taxes it
                          paid to the TWC under protest (C8). The TWC
                          answered the suit (C3) and filed a motion for
                          summary judgment in response to Health
                          Force’s claims (C41). Health Force responded
                          to the motion for summary judgment and
                          attached supporting evidence for its claims to
                          the response (C503). The parties exchanged
                          supplemental summary judgment statements
                          (C931 and C1226). The TWC filed objections
                          and motion to strike Health Force’s summary
                          judgment evidence (C1394). Health Force filed
                          a response to the TWC’s objections and motion
                          to strike its summary judgment evidence
                          (C1417).

Trial Court’s Disposition: The trial court sustained most of the TWC’s
                           objections and struck most of Health Force’s
                           summary judgment evidence (C1505-1517) and
                           granted summary judgment in favor of the TWC
                           (C1518).

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                          Statement Regarding Oral Argument

         Appellant believes oral argument will assist the Court in dealing with the

issues of law raised in this appeal, as well as clarify any factual or procedural

questions that arise from this record.

                  Statement Regarding Record References and Hyperlinks

         The Clerk’s Record in this case is one volume labeled Original Clerk’s

Record. Each page is numbered sequentially. References to the Original Clerk’s

Record will be shown by “C page number.”

         Record references to items in the Appendix are hyperlinked (shown by blue

underlining), as are two non-Westlaw authorities included in the Appendix.

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                                     Issues Presented

                                          Issue 1

      Health Force included a lenghtly summary of evidence to its response to the
motion for summary judgment pursuant to Texas Rule of Evidence 1006, which
allows for presentation of summary evidence when the underlying evidence is too
voluminous.1 The underlying sumarized evidence supporting Health Force’s
summary judgment response was also attached to the response. The TWC filed a
motion to strike this summary judgment evidence. The trial court sustained the
TWC’s objections and struck the evidence. Did the trial court err by excluding
Health Force’s summary evidence?

                                          Issue 2

     Did the trial court err in finding the twenty worker classification factors
weighed in favor of the TWC?

                                          Issue 3

       In a 2007 Memorandum of Understanding, the Internal Revenue Service (the
“IRS”), Department of Labor (the “DOL”) and a number of state workforce
agencies (including Texas) agreed to work towards achieving consistent worker
classification determinations across state and federal agencies. Both the IRS and
DOL conducted worker classification audits of the workers offered work
opportunities by Health Force and determined the nurses and other professional
healthcare providers were independent contractors. In this case, the trial court
granted summary judgment for the Texas Workforce Commission finding these
same workers were employees of Health Force. Did the trial court erroneously
grant summary judgment for the TWC on the issue of worker classification?

1
  Eight witnesses were deposed in the underlying case and 5 witnesses testified in the Rule 13
administrative hearing.
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                                       Overview

         This dispute is an appeal of a Texas Workforce Commission (the “TWC”)

worker classification decision. The issue arose when the TWC conducted an audit

of Tochril Incorporated (“Health Force”)’s records and business medel to

determine if workers offered work opportunities by Health Force were

“employees” under the Texas Labor Code. The TWC found the workers to be

“employees” and assessed unemployment taxes against Health Force for the

workers. Health Force paid the taxes under protest and challenged the TWC’s

finding and tax assessment in trial court. The TWC filed a motion for summary

judgment which the trial court granted. Health Force appealed because the trial

court (i) improperly excluded evidence, (ii) ignored the abundant fact issues raised

by Health Force in the summary judgment proceeding and (iii) ignored and acted

inconsistently with findings made by two federal agencies regarding the same

workers.

                                  Statement of Facts

1.       Background of the Parties
         A.       Tochril Incorporated (“Health Force”)

         Health Force is a multi-faceted provider of healthcare related services on a

state wide basis and, on a relatively small scale, a provider of ancillary

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medical/nursing staff relief for its health care and other business clients. Health

Force has always maintained unemployment compensation coverage for each of its

acknowledged employees. Health Force is comprised of several business segments

within the healthcare industry, including the following: (1) Health Force

Comprehensive Outpatient Rehabilitation Facility emphasizing unique pediatric

rehabilitation services (approximately 20 employees), (2) Health Force Home

Health Care (approximately 40 employees) and (3) Health Force Medical Staff

Relief (approximately 10 employees). For its medical/nursing staff relief business

component, Health Force does business as “Health Force Medical Staff Relief”

operating as a referral or placement agency for this purpose.           Through an

independent contractor relationship, Health Force Medical Staff Relief provides

healthcare professionals, specifically Registered Nurses, Licensed Vocational

Nurses and Certified Nurse Assistants with opportunities for contract work at

healthcare institutions, including hospitals and health care facilities. (C8-C9, C29-

30).

         B.       Texas Workforce Commission

         The TWC is a state agency established to operate an integrated workforce

development system in Texas through the consolidation of job training,

employment and employment-related educational programs and to administer the

unemployment compensation insurance program in Texas. (C9).
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2.       Texas Workforce Commission Investigation and Decision

         On October 9, 2008, at the request of the TWC, Health Force submitted (1) a

TWC Form C-1 (Amended Status Report) and (2) a TWC Form C-102 (Pre-Audit

Questionnaire). (C809-C818). Three weeks later, on October 31, 2008, TWC

auditor Mary Zerda concluded her “investigation” and the TWC issued its letter

setting forth the results of the purported investigation finding the workers were

employees. (C926). In her February 23, 2010 deposition, Ms. Zerda concedes she

interviewed only three (3) workers after she made her October 31, 2008

determination in preparation for the February 19-20, 2009 Rule 13 administrative

hearing. (C570).

         The following additional events occurred prior to filing suit in the district

court:

          On October 14 and 16, 2008, the TWC issued its TWC Form C-7 Wage
           List Adjustment Schedules for the period April 1, 2007 through
           September 30, 2008) (6 quarters). (C819-C913).

          On October 16, 2008, the TWC issued its TWC Form C-5 Adjustment
           Reports for the period October 1, 2005 through September 30, 2008) (12
           quarters). (C914-C925).

          On November 14, 2008, the TWC issued its Employer’s Default Notice
           stating Health Force owed a total of $25,677.99 of which approximately
           $20,291.06 was assessed taxes and approximately $5,386.93 was interest
           assessed on the taxes. (C927).

          On November 25, 2008, Health Force requested an administrative Rule
           13 hearing regarding the miscalculated and incorrect assessment of
           unemployment taxes for its independent contractors. (C928-C929).
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          On December 3, 2008, the TWC issued its administrative determination
           that unemployment taxes were owed for Health Force's independent
           contractors. (C930).

          On December 15, 2008, the TWC issued its Statement of Employer
           Account insisting the assessment of unemployment taxes for Health
           Force’s contractors was due and owing. (C546).

          On December 29, 2008, Health Force paid under protest, duress and
           business compulsion, the miscalculated and incorrect amounts for taxes
           (including interest) for 12 calendar quarters from October 1, 2005
           through September 30, 2008. Health Force simultaneously requested a
           refund of all such tax payments and interest payments it made. (C547-
           C548). Health Force appealed to the TWC for a refund, but the refund
           request was denied through the TWC’s May 13, 2009 decision. (C928-
           C929 and C552-C563).

         On May 13, 2009, the TWC Commissioners issued their decision making an

administrative finding approximately 600 workers for whom Health Force was

compelled to pay taxes for 12 calendar quarters from October 1, 2005 through

September 30, 2008 were employees and not independent contractors. (C552-

C563). The May 13, 2009 decision also denied Health Force’s request for a refund

and adjustment of miscalculated taxes Health Force was compelled to pay by

stating “[Health Force, Inc.] has paid outstanding taxes due on all workers,

including Debra Franklin, and asks for a refund of the taxes paid” and

“[u]nemployment insurance contributions, plus penalties accrued and incurred, are

payable to the Texas Workforce Commission.” (C555 and C562).

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         The May 13, 2009 decision was a split decision, with TWC Chairman Tom

Pauken issuing a dissent in favor of independent contractor status stating:

         I dissent from the decision of the majority in this case.

         The nurses in question are not subject to the direction and control of
         the company, may determine their own shifts, and pay for their own
         professional licenses. They are already experienced professionals and
         do not require training. Further, it is important to note that any
         supervision of these professionals by doctors or charge nurses is more
         for the appearance under specific state practice laws than a reflection
         of practical reality. Finally, the company's role was that of a broker of
         services, rather than as an employer of these licensed professionals.
         Given that other states have found that similar professionals are not
         employed by such services, and that there is no published Texas court
         decision on this issue, I believe the Tax Department position is
         without clear legal basis. Under these circumstances, I do not believe
         that the registered nurses, licensed vocational nurses, and the certified
         assistants are in the company’s employment.

         For the above reasons, I respectfully dissent from the decision of my
         fellow Commissioners. (C563).

         Health Force subsequently challenged the decision of the TWC in an Austin

district court. (C8-C40).

3.       Procedural History
         A.       Suit is filed

         On November 12, 2010, Plaintiff Health Force filed its First Amended

Original Petition. (C8). The petition alleged a suit under (a) Section 213.073 of the

Texas Labor Code to recover a refund of miscalculated taxes Health Force was

compelled to pay and (b) Section 212.021 of the Texas Labor Code to obtain

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declaratory relief (i) for violation of the United States and Texas Constitutions and

the Texas Administrative Code, and (ii) to require the TWC to properly classify

Health Force’s independent contractors and refrain from assessing miscalculated

taxes. The TWC answered the suit (C3).

         B.       The motion for summary judgment

         The TWC filed a Motion for Summary Judgment on October 25, 2013.

(C41). It sought to dismiss Health Force’s claims and award judgment for the

TWC. The TWC alleged three grounds for why Health Force’s claims should be

dismissed: (i) Health Force is a “temporary help firm” required to pay

unemployment taxes under Section 201.029 of the Texas Labor Code, (ii) Health

Force cannot overcome the presumption that the workers are employees under the

Texas Labor Code, and (iii) Health Force’s common law claims are redundant of

its statutory causes of action and such common law claims are barred by sovereign

immunity.

         On December 12, 2013, Health Force responded to the motion for summary

judgment. (C503). In conjunction with its response, Health Force attached worker

declarations, deposition testimony, IRS documents, the TWC hearing transcript

and other evidence to demonstrate the TWC did not meet its burden of showing

that there was no genuine issue of material fact. The body of the response also

contained a summary chart of the TWC Rule 13 hearing where, pursuant to Texas
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Rule of Evidence 1006, Health Force summarized the testimony of a Health Force

employees Holly Alonzo and Lita Pappillion.

         The parties exchanged supplemental briefing in late July and early August of

2015. (C931 and C1226). In Health Force’s supplemental response, it attached

additional worker testimony and another chart summarizing the testimony of five

additional workers deposed in the case after the initial motion for summary and

response were filed. (C1226). Health Force relied on this testimony to demonstrate

material fact issues existed under application of the Twenty Factor Test mandated

under Section 815.134 of the Texas Administrative Code.

         C.       Objections to Health Force’s summary judgment evidence

         The TWC filed objections to and motion to strike Health Force’s summary

judgment evidence on August 18, 2015. (C1395). The objections focused on

striking the summary chart used by Health Force in its response and striking the

testimony of Holly Alonzo, Chief Operating Officer of Health Force and Lita

Pappillion, President of Health Force, on various grounds including a failure to

include detailed citations to their testimony. Other objections included striking

alleged conclusory statements in the twenty worker affidavits attached to Health

Force’s response and striking portions of counsel for Health Force, Michael

Seale’s affidavit. Health Force responded to the objections on August 19, 2015.

(C1417).
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         D.       Rulings on evidence and motion for summary judgment

         The trial court ruled of the objections in late August 2015. (C1505). In its

ruling, the trial court struck the summary charts, the testimony of Alonzo and

Pappillion, portions of the 20 declarations, and portions of Michael Seale’s

affidavit. Without such evidence, the court also ruled on the TWC’s motion for

summary judgement, granting the motion and dismissing Health Force’s suit.

(C1518). This appeal followed. (C1519).

                              Summary of the Argument

         The decision of the trial court should be reversed because the trial court (i)

improperly excluded evidence, (ii) ignored the abundant fact issues raised by

Health Force in the summary judgment proceeding and (iii) ignored and acted

inconsistently with findings made by two federal agencies regarding the same

workers.

         Texas law mandates summary judgment should only be granted if there is no

genuine issue of material fact. When reviewing a determination of an

administrative agency, the court should provide a certain level of deference to the

agency, however, this deference is not absolute. If it was, an administrative agency

would allow an agency to function not only as judge, but jury and executioner.

         Health Force’s response to the TWC’s motion for summary judgment

contains a chart summarizing the testimony of the President and Chief Operating
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Officer of Health Force. The chart walked the trial court through the testimony of

these executives at a TWC hearing and applied the executives’ testimony to the

Twenty Factor analysis required to be examined in a worker classification case.

The TWC objected to the evidence on numerous grounds, but essentially because

the summary chart did not contain proper citations to record testimony. The trial

court sustained the objections. The Texas Rules of Civil Procedure only require a

nonmovant to point the evidence and the Texas Rules of Evidence allow for the

summary of testimony. Therefore, this evidence should have been considered and

the TWC’s motion for summary judgment should have been denied.

         Even if this court determines that the summary chart evidence should be

excluded, Health Force presented further evidence in its supplemental response

after the deposition of five additional workers. This evidence was not struck by the

trial court.      This worker testimony on each of the Twenty Factors alone

demonstrates that there is a genuine issue of material fact.

         Apart from the testimonial evidence presented by Health Force, Health

Force attached audit investigation findings from two federal agencies, the IRS and

DOL. Both of these agencies found the workers to be independent contractors.

Based upon a Memorandum of Understanding between Texas, the IRS and DOL

which notes the importance of consistency in tax determinations, the trial court

should have made a closer examination at the TWC’s decision (made after a three

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week investigation) that is inconsistent with the IRS and DOL investigations

collectively lasting 49 months. The failure to do so is a failure to recognize

genuine issues of material fact.

         For these reasons, the TWC’s motion for summary judgment should have

been denied.             

                                           Argument

1.       Standard of Review

         Summary judgments are reviewed de novo and this Court must consider all

the evidence in the light most favorable to the nonmovant, crediting evidence

favorable to the nonmovant if reasonable jurors could, and disregarding contrary

evidence unless reasonable jurors could not.2 The evidence raises a genuine issue

of fact if reasonable and fair-minded jurors could differ in their conclusions in light

of all of the summary judgment evidence.3 In a traditional motion for summary

judgment, if the movant’s motion and summary judgment evidence factually

establish its right to judgment as a matter of law, the burden shifts to the

nonmovant to raise a genuine, material fact issue sufficient to defeat summary

2
    Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006).

3
    Goodyear Tire & Rubber Co. v Mayes, 236 S.W.3d 754, 755 (Tex.2007).

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judgment.4 The non-movant “is not required to marshal [his] proof; [his] response

need only point out evidence that raises a fact issue on the challenged elements.”5

2.       The Trial Court Erred in Excluding Health Force’s Summary Chart
         and by Ignoring the Underlying Evidence.

         In both its response to the TWC’s motion for summary judgment and its

supplemental brief, Health Force incorporated charts summarizing the testimony of

13 witnesses under Texas Rule of Evidence 1006. (C503 and C1226). The charts

demonstrate the testimony of these witnesses is consistent with an independent

contractor classification when compared to the twenty worker classification factors

found in Section 815.134 of the Texas Administrative Code (“Twenty Factor

Test”). The TWC and the trial court were required to review the Twenty Factor

Test as part of their inquiry into the relationship between Health Force and its

worker.

         The TWC did not dispute the accuracy of Health Force’s summaries.

Instead, the TWC filed an objection to the use of the first summary chart arguing

the following:

4
  Flutobo, Inc. v. Holloway, 419 S.W.3d 622, 629-30 (Tex. App.—Houston [14th Dist.] 2013,
pet. denied).

5
    Tex. R. Civ. P. 166a(i) cmt.1.

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               Statements attributed to Alonzo and Pappillion do not reference
                summary judgment evidence.

               Objections to summary of testimony under Tex. R. Evid. 1006.

               Alonzo and Pappillion have not provided proper witness statements.

               Alonzo and Pappillion have not demonstrated that they have personal
                knowledge of relevant facts.

(C1394). The trial court sustained the TWC’s objections and struck the summary

evidence (C1505). Texas Rule of Evidence 1006 allows for the use of summary

evidence (even a summary of testimony), the trial court erred in excluding this

vital evidence.

         A.       Use of Summary Evidence for Alonzo and Pappillion Testimony
                  was Proper in this Case.

         Texas Rule of Evidence 1006 states:

         The proponent may use a summary, chart, or calculation to prove the
         content of voluminous writings, recordings, or photographs that
         cannot be conveniently examined in court. The proponent must make
         the originals or duplicates available for examination or copying, or
         both, by other parties at a reasonable time and place. And the court
         may order the proponent to produce them in court.

                                           12
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          Texas courts recognize the value in allowing the use of summary evidence

especially when the underlying records supporting the summary are voluminous.6

Many courts have found charts and diagrams that summarize, or perhaps

emphasize, testimony are admissible if the underlying information is admissible.7

As illustrated above, the main requirement for a summary chart under Texas Rule

of Evidence 1006 is that the underlying records must be available for inspection by

the opposing counsel. The court may require the party presenting the summary to

produce all of the underlying records.8 (In this case, Health Force attached the

summarized testimony the TWC already had it in its possession long before the

summary judgment hearing.)

6
  See Speier v. Webster College, 616 S.W.2d 617, 618–19 (Tex.1981) (charts and diagrams that
summarize testimony are admissible if the underlying information has been admitted into
evidence); Ford Motor Company v. Auto Supply Company, Inc., 661 F.2d 1171, 1176 (8th
Cir.1981) (trial court properly admitted into evidence product line profitability analyses made
annually and compiled from numerous “spread sheets”); Rosenberg v. Collins, 624 F.2d 659, 665
(5th Cir.1980) (trial court properly admitted a summary of the commodity firm's yearly trading
activities); C.M. Asfahl Agency v. Tensor, Inc., 135 S.W.3d 768, 800 (Tex. App.–Houston [1
Dist.] 2004, no pet.) (one page summary of eighty-seven pages of supporting data was
admissible if it upheld the standards of TRE 1006 and was prepared by a qualified individual);
c.f. McAllen State Bank v. Linbeck Construction Corp., 695 S.W.2d 10, 16 (Tex.App.–Corpus
Christi 1985, writ ref'd n.r.e.) (trial court admitted into evidence two computer printout summary
breakdowns, each a summary of underlying labor and material records; the court held that the
printouts were entitled to be treated as business records, a not just as summaries of business
records).
7
 See Speier v. Webster College, 616 S.W.2d 617, 618–19 (Tex.1981); Cooper Petroleum Co. v.
LaGloria Oil & Gas Co., 436 S.W.2d 889, 891 (Tex.1969); Champlin Oil & Ref. Co. v.
Chastain, 403 S.W.2d 376, 389 (Tex.1965).

8
    See id.
                                               13
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          To defeat a motion for summary judgment, the non-movant “is not required

to marshal [his] proof; [his] response need only point out evidence that raises a fact

issue on the challenged elements.”9 Attaching an entire document or deposition to

a response to a motion for summary judgment and referencing them only generally

does not relieve the party of the need to point out to the trial court where in the

documents the issues set forth in the response are raised.10 The requirement to

point out portions of evidence prevents parties from casually referring to

voluminous evidence (e.g. see attached deposition testimony) and creates a level of

efficiency for the court to make its decision.

          In this case, Health Force’s response went well beyond a casual reference to

hearing testimony as the TWC implies. Health Force prepared two summary

charts to assist the trial court in examining the Twenty Factor Test.11 The first

chart contained both direct quotations and summary of the testimony of Health

Force’s President and Chief Operating Officer from the February 19, 2009

administrative hearing before the TWC. Health Force also attached the hearing

testimony to its response in order to make the document available to the TWC.

9
    Tex. R. Civ. P. 166a(i) cmt.1.
10
  Guevara v. Lackner, 447 S.W.3d 566, 572 (Tex. App.-Corpus Christi 2014), reh’g overruled
(Dec. 11, 2014).
11
     See Appendix 1 and 2.
                                           14
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         The TWC’s objection focused on the fact that Health Force did not provide

direct citations to the pages and lines where the quoted and other summarized

testimony is found in the attached transcripts.12 Texas Rule of Civil Procedure

166a(i) at its comment 1 simply requires a party point to the testimony. This rule

was not intended to provide a party with the ability to escape the substance of

testimony on a mere technicality. Health Force’s summary chart meets the spirit of

Texas Rule of Civil Procedure 166a and the trial court erred in excluding it.

         The chart provided in Health Force’s supplemental response did contain

direct citations to the testimony of five worker witnesses.13 While this chart was

challenged in the TWC’s objections and motion to strike, it appears the trial court

ignored this evidence. As will be discussed in Section 3 below, both of the charts

overwhelmingly demonstrate a genuine issue of material fact existed with regard to

the issue of workers classification on each of the Twenty Factors.14

12
   The TWC does not contest any transcript quotation or point to any transcript quotation to be
an inaccurate quotation. The transcripts are in the possession of the TWC and are searchable.
13
     See Appendix 2.
14
   Application of the Twenty Factors to a particular worker or class of workers is intended to
determine whether such worker (or class of similarly situated workers) “has been and will
continue to be free from control or direction under the contract and in fact” and therefore not an
employee under Section 201.041 of the Texas Unemployment Compensation Act.
                                               15
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         B.       Alonzo and Pappillion Provided Proper Witness Statements.

         The witness statements of Alonzo and Pappillion are proper evidence and

are authenticated by the Declaration of Juliann H. Panagos. (C737-C739). As

stated, Health Force provided a summary chart in its response pursuant to Texas

Rule of Evidence 1006. The entire transcribed record of the February 19, 2009

hearing was also attached to the response along with the court reporter’s certificate.

Juliann H. Panagos authenticated these records by making the following statement

in her affidavit attached to the response:

         7.    I attended the February 19, 2009 TWC Rule 13 hearing before
         Hearing Officer Thomas Mann. A copy of the February 19-20, 2009
         hearing transcript (the “Transcript”) is attached to this
         Declaration as Exhibit D(S). I prepared a summary of (a) the hearing
         testimony given by witnesses [Pappillion, Alonzo and TWC auditor
         Mary Zerda] on the Twenty Factors and (b) the TWC discovery
         responses regarding the Twenty Factors. In accordance with Rule
         1006 of the Texas Rules of Evidence, this summary is necessary
         because the “voluminous underlying materials” (the Transcript)
         cannot conveniently be examined by the Court. A copy of the
         summary is attached to this Declaration as Exhibit D(6). A copy of
         the TWC's March 18, 2010 Letter Responses to Health Force’s
         Discovery Requests is attached to this Declaration as Exhibit D(7).

         In addition, Health Force complied with Texas Rule of Civil Procedure

166a(d) providing:

         Appendices, References and Other Use of Discovery Not
         Otherwise on File.
         Discovery products not on file with the clerk may be used as summary
         judgment evidence if copies of the material, appendices containing the
         evidence, or a notice containing specific references to the discovery or
         specific references to other instruments, are filed and served on all
                                             16
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         parties together with a statement of intent to use the specified
         discovery as summary judgment proofs: (i) at least twenty-one days
         before the hearing if such proofs are to be used to support the
         summary judgment; or (ii) at least seven days before the hearing if
         such proofs are to be used to oppose the summary judgment.

         The TWC did not allege that the first summary chart was inaccurate. The

TWC is merely trying to create a technicality in order to exclude critical evidence

that creates clear fact issues in this case. Because the spirit of both Texas Rule of

Civil Procedure 166a and Texas Rule of Evidence 1006 were met, the trial court

erred in excluding the summary chart and testimony of Alonzo and Pappillion.

         C.       Alonzo and Pappillion had Personal Knowledge of Relevant Facts.

         At the February 19, 2009 Rule 13 hearing, both Alonzo and Pappillion were

placed under oath and testified to their personal knowledge, experience and

operations of Health Force.15         In sum, for the above described reasons, the

testimony and summary chart containing the testimony of Alonzo and Pappillion

were improperly excluded in this case. Such evidence was important evidence to

Health Force’s claims. The trial court erred in excluding this evidence and such

error caused the rendition of an incorrect judgment in favor of the TWC.

15
   See C593-C643 (Pappillion Rule 13 hearing transcript pp. 107-12 et seq.; See Pappillion Rule
13 hearing transcript pp. 45-47 et seq.).
                                              17
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3.       The Twenty Factor Test Demonstrates Genuine Issues of Material Fact

         As stated above, summary judgment should not be granted if there is a

genuine issue of material fact.         Through its various responses and associated

evidence, Health Force demonstrated that genuine issues of material fact existed

under each of the Twenty Factors with regard to the workers offered work

opportunities by Health Force.

         A.       Prior Precedent Indicates the Workers are Independent
                  Contractors
         Courts finding hospital workers to be independent contractors is not without

precedent. There are at least seven states that have addressed cases involving

nurse workers, unemployment tax and the application of the “control or direction”

standard under virtually identical statutes to the TUCA Section 201.041.16 In most

or all circumstances, the judicial courts overturned the state unemployment

commission’s assessment of unemployment tax against the referral/placement

agency and classification of the workers as employees.

16
   HRP of Tennessee, Inc. d/b/a Hospital Resources Personnel v. State of Tennessee, Department
of Employment Security, No. E2005-01176-COA-R3-CV (Tenn. June 28, 2006); Mississippi
Employment Security Commission v. PDN, Inc., 586 So. 2d 838 (Miss. 1991); Health Care
Associates, Inc. v. Oklahoma Employment Security Commission, 26 P.3d 112 (Okla. 2001);
Contract Management Services, Inc. of Texas v. State of Louisiana, 745 So.2d. 194 (La. Ct. App.
1999); Avchen v. Kiddo, 200 Cal. App. 3d 532 (Cal. 1988); Cascade Nursing v. Employment
Security Department, 856 P.2d 421 (Wash. 1993).

                                              18
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         Indeed, three of the workers the TWC determined were employees and

for whom Health Force paid associated taxes under protest had been

previously determined to be independent contractors by the TWC:

               On January 14, 2009, the TWC issued its Appeal Tribunal Decision in
                Appeal No. 10897280102 regarding worker Debra Franklin. After an
                evidentiary hearing, the TWC found Ms. Franklin was an independent
                contractor and thus, not entitled to unemployment benefits. (C575-
                C580).

               On September 11, 2009, the TWC issued its Appeal Tribunal Decision
                in Appeal No. 1122881-1-1 regarding worker Lucy Reyna. After an
                evidentiary hearing, the TWC found Ms. Reyna was an independent
                contractor and thus, not entitled to unemployment benefits. (C582-
                C585).

               On October 29, 2009, the TWC issued its Appeal Tribunal Decision in
                Appeal No. 1206651-1-1 involving worker Maria Guzman. After an
                evidentiary hearing, the TWC found Ms. Guzman was an independent
                contractor and thus, not entitled to unemployment benefits. (C587-
                C589).

(C513-C514). The TWC collected unemployment taxes from Health Force for

these three nurses. However, when the nurses filed for unemployment benefits,

after three evidentiary administrative hearings, the TWC found the nurses to be

independent contractors.       These three workers are identically situated to the

approximately 600 hospital staff workers that were found to be “employees” by the

TWC on October 31, 2009.

                                          19
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         B.       Review of Health Force’s Evidence Demonstrates the Workers
                  were Independent Contractors
         The trial court was imbued with the power to review the TWC’s decision to

classify all approximately 600 workers as “employees.” As stated by the Fifth

Circuit Court of Appeals regarding a Texas state agency’s interpretation of its own

statute:

         …granting deference to [the agency]’s interpretation…would leave no
         role for the courts—taken to its logical conclusion, it could effectively
         insulate agency action from judicial review. It is not within the
         province of the Executive Branch to determine the final meaning of a
         vague document…any more than it would be to interpret the final
         meaning of a contract entered into by the Executive Branch…[and]
         would allow agencies to punish “wrongdoers” without first giving fair
         notice of the wrong to be avoided.
                                           ***
         Affording deference to agency interpretations…would allow the
         agency to function not only as judge, jury, and executioner...17

         In all instances, the TWC must satisfy the Twenty Factor Test found in

Section 815.134 of the Texas Administrative Code. There is no presumption of

employment, rebuttable or otherwise, under TUCA or Texas case law upon

payment alone to a worker.18 In all instances, the TWC must satisfy the Twenty

Factor Test and the trial court must verify the TWC correct applied the Twenty

Factor Test.

17
   Elgin Nursing & Rehabilitation Center v. U.S. Department of Human Health Services, 718
F.3d 488 (5th Cir. 2013) found at http://www.ca5.uscourts.gov/opinions/pub/12/12-60086-
CV0.wdp.pdf.
18
  If there was such a presumption, simply paying an individual to mow a lawn would make the
worker an employee of the homeowner.
                                            20
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         It appears, however, when granting summary judgment, the trial court

overlooked or discounted many of the genuine fact issues raised by Health Force’s

evidence. For example, the second summary chart above contains testimony from

five workers.19 This testimony creates genuine issues of material facts, since many

of the factors point to an independent contractor relationship. In the testimony of

Kay Strahan alone (C1251-C1264 and C1339-C1366), the following factors

favored a finding of independent contractor relationship:

                         Factor                           Kay Strahan
                  40 TAC Section 815.134                  Testimony

       1. Instructions:                    LVNs are subcontractors. They
       An Employee receives instructions work when they want, if they want,
       about when, where and how the and where they want.20
       work is performed.
       An Independent Contractor does
       the job his or her own way with
       few, if any, instructions as to the
       details or methods of the work.

       1. Instructions: An employee must
       comply with instructions about
       when, where, and how to work.
       Even if no instructions are given,
       the control factor is present if the
       employer has the right to give
       instructions.
       2. Training:                         Doesn’t recall any training provided
                                            by Health Force.21

19
     See Appendix 1.
20
     See Appendix 2 (Kay Strahan Testimony, Tr. p. 69).
                                               21
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                         Factor                               Kay Strahan
                  40 TAC Section 815.134                      Testimony

       Employees are often trained by a
       more experienced Employee or are
       required to attend meetings or take
       training courses.

       An Independent Contractor uses
       his or her own methods and thus
       need not receive training from the
       purchaser of those services.

       2. Training: An employee is
       trained to perform services in a
       particular manner, independent
       contractors ordinarily use their own
       methods and receive no training
       from the purchasers of their
       services.

       3. Integration:                            Did not spend much time at the
       Services of an Employee are                Health Force office. Mainly, would
       usually merged into the firm’s             stop by to drop off time sheets or
       overall operation; the firm’s success      pick up a check.22
       depends on those Employee
       services.
       An Independent Contractor’s
       services are usually separate from
       the client’s business and are not
       integrated or merged into it.

       3. Integration: An employee’s
       services are integrated into the

21
     See Appendix 2 (Kay Strahan Testimony, Tr. p. 97).
22
     See Appendix 2 (Kay Strahan Testimony, Tr. pp. 63-65).
                                               22
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                         Factor                Kay Strahan
                  40 TAC Section 815.134       Testimony

      business operations because the
      services are important to the success
      or continuation of the business.
      This shows that the employee is
      subject to direction and control.
      Integration of worker’s services in
      the business operation of Health
      Force generally indicated that the
      worker is subject to control or
      direction. The corporation Health
      Force is principally engaged in a
      nurse placement business.
      4. Services Rendered Personally:
      An Employee’s services must be
      rendered personally; Employees do
      not hire their own substitutes or
      delegate work to them.
      A true Independent Contractor is
      able to assign another to do the job
      in his or her place and need not
      perform services personally.

      4. Services Rendered Personally:
      An employee renders services
      personally. This shows that the
      employer is interested in the
      methods as well as the results.
      5. Hiring, Supervising & Paying
      Helpers:
      An Employee may act as a foreman
      for the employer but, if so, helpers
      are paid with the employer’s funds.
      Independent Contractors select,
      hire, pay and supervise any helpers
      used and are responsible for the
      results of the helpers’ labor.
                                          23
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                         Factor                               Kay Strahan
                  40 TAC Section 815.134                      Testimony

       5. Hiring Assistants: An employee
       works for an employer who hires,
       supervises, and pays assistants. An
       independent     contractor      hires,
       supervises, and pays assistants
       under a contract that requires
       him/her to provide materials and
       labor and to be responsible only for
       the results. Nurses cannot hire
       assistants to do patient care for
       them.
       6. Continuing Relationship:                Could have worked for other
       An Employee often continues to             placement companies or hospitals.23
       work for the same employer month
       after month or year after year.            Declined employment opportunities
       An Independent Contractor is               at hospitals because he would lose
       usually hired to do one job of             the independence he had at Health
       limited or indefinite duration and         Force.24
       has no expectation of continuing
       work.

       6. Continuing Relationship: An
       employee       has     a  continuing
       relationship with an employer. A
       continuing relationship many exist
       where work is performed at
       frequently      recurring   although
       irregular intervals.

23
     See Appendix 2 (Kay Strahan Testimony, Tr. pp. 77-78).
24
     See Appendix 2 (Kay Strahan Testimony, Tr. pp. 77-78).
                                               24
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                         Factor                                   Kay Strahan
                  40 TAC Section 815.134                          Testimony

       7. Set Hours of Work:              “[I] provide my own schedule. They
       An Employee may work “on call” [Health Force] do not provide a
       or during hours and days as set by schedule for me.”25
       the employer.
       A true Independent Contractor is
       the master of his or her own time
       and works the days and hours he or
       she chooses.

       7.     Set Hours of Work:         An
       employee has set hours or work
       established by an employer. An
       independent contractor is the master
       of his or her own time.
       8. Full Time Required:                     LVNs are subcontractors. They
       An Employee ordinarily devotes             work when they want, if they want,
       full-time service to the employer, or      and where they want.26
       the employer may have a priority on
       the employee’s time.                       Could have worked for other
       A true Independent Contractor              placement companies or hospitals.27
       cannot be required to devote full-
       time service to one firm exclusively.

       8. Full Time Work: An employee
       normally works full time for an
       employer.       An independent
       contractor can work when and for
       whom he or she chooses. Nurses
       are worker 30, 40, and even 60
       hours a week this constitutes full

25
     See Appendix 2 (Kay Strahan Testimony, Tr. pp. 38, 43-44).
26
     See Appendix 2 (Kay Strahan Testimony, Tr. p. 69).
27
     See Appendix 2 (Kay Strahan Testimony, Tr. pp. 77-78).
                                                25
084891/000006
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                         Factor                                 Kay Strahan
                  40 TAC Section 815.134                        Testimony

       time.
       9.      Location where services LVNs are subcontractors. They
       performed.                         work when they want, if they want,
       Employment is indicated if the and where they want.28
       employer has the right to mandate
       where services are performed.
       Independent            Contractors
       ordinarily work where they choose.
       The workplace may be away from
       the client’s premises.

       9. Work Done on Premises: An
       employee works on the premises of
       an employer, or works on a route or
       at a location designated by an
       employer.
       10. Order or Sequence Set:          Health Force does not direct LVNs
       An Employee performs services in how to do their job.29
       the order or sequence set by the
       employer. This shows control by
       the employer.
       A true Independent Contractor is
       concerned only with the finished
       product and sets his or her own
       order or sequence of work.

        10.    Order or Sequence Set:
       Employee must perform services in
       the order or sequence set by an
       employer. This shows that the
       employee is subject to direction and
       control. Nurses are not permitted to

28
     See Appendix 2 (Kay Strahan Testimony, Tr. p. 69).
29
     See Appendix 2 (Kay Strahan Testimony, Tr. pp. 131-132).
                                                26
084891/000006
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                         Factor                           Kay Strahan
                  40 TAC Section 815.134                  Testimony

       follow his/her own pattern of work
       but rather must follow the
       established routines/schedules of
       the facilities.

       11. Oral or Written Reports:
       An Employee may be required to
       submit regular oral or written
       reports about the work in progress.
       An Independent Contractor is
       usually not required to submit
       regular oral or written reports about
       the work in progress.

       11. Reports: Employee submits
       reports to an employer. This shows
       that the employee must account to
       the employer for his or her actions.
       12. Payment by the Hour, Week or Hospitals pay Tochril and Tochril
       Month:                                pays the LVNs after taking out a
       An Employee is typically paid by referral fee.30
       the employer in regular amounts at
       stated intervals, such as by the hour
       or week.
       An Independent Contractor is
       normally paid by the job either a
       negotiated flat rate or upon
       submission of a bid.

       12. Payments: Employees are paid
       by the hour, week or month. Nurses
       are paid through Health Force.
       13. Payment of Business & Travel Health Force does not pay for CPR

30
     See Appendix 2 (Kay Strahan Testimony, Tr. p. 37).
                                                27
084891/000006
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                         Factor                               Kay Strahan
                  40 TAC Section 815.134                      Testimony

       Expenses:                                  and LVN licenses.31
       An Employee’s business and travel
       expenses are either paid directly or       Provides his own transportation. Not
       reimbursed by the employer.                reimbursed for any business
       Independent            Contractors         expenses by Health Force.32
       normally pay all of their own
       business and travel expenses
       without reimbursement.

       13. Expenses: An employee’s
       business and travel expenses are
       paid by an employer. This shows
       that the employee is subject to
       regulation and control.
       14. Furnishing Tools & Equipment: Provides his own transportation. Not
       Employees are furnished all reimbursed for any business
       necessary tools, materials and expenses by Health Force.33
       equipment by their employer.
       An     Independent      Contractor
       ordinarily provides all of the tools
       and equipment necessary to
       complete the job.

       14. Tools and Materials: An
       employee is furnished significant
       tools,   materials,    and   other
       equipment by an employer.
       15. Significant Investment:         Invests in business by buying
       An Employee generally has little or uniforms, cellphone, blood pressure
       no investment in the business. cuff, stethoscope, and shoes.34

31
     See Appendix 2 (Kay Strahan Testimony, Tr. p. 97).
32
     See Appendix 2 (Kay Strahan Testimony, Tr. p. 54).
33
     See Appendix 2 (Kay Strahan Testimony, Tr. p. 54).
34
     See Appendix 2 (Kay Strahan Testimony, Tr. pp. 56-58).
                                                28
084891/000006
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                         Factor                               Kay Strahan
                  40 TAC Section 815.134                      Testimony

       Instead,      an     Employee         is
       economically dependent on the              Provides own     transportation      to
       employer.                                  assignments.35
       True Independent Contractors
       usually have a substantial financial
       investment in their independent
       business.
       15. Investment: An independent
       contractor     has     a    significant
       investment in the facilities he/she
       uses in performing services for
       someone else.
       16. Realize Profit or Loss:                Could lose money          if   hospital
       An Employee does not ordinarily            cancels her shift.36
       realize a profit or loss in the
       business. Rather, Employees are
       paid for services rendered.
       An Independent Contractor can
       either realize a profit or suffer a loss
       depending on the management of
       expenses and revenues.

       16. Profit or Loss: An independent
       contractor can make a profit or
       suffer a loss.
       17. Working For More Than One              LVNs are subcontractors. They
       Firm At A Time:                            work when they want, if they want,
       An Employee ordinarily works for           and where they want.37
       one employer at a time and may be
       prohibited     from   joining    a         Could have worked for other
       competitor.                                placement companies or hospitals.38

35
     See Appendix 2 (Kay Strahan Testimony, Tr. p. 54).
36
     See Appendix 2 (Kay Strahan Testimony, Tr. pp. 94-95).
37
     See Appendix 2 (Kay Strahan Testimony, Tr. p. 69).
                                                29
084891/000006
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                         Factor                               Kay Strahan
                  40 TAC Section 815.134                      Testimony

       An Independent Contractor often
       works for more than one client or
       firm at the same time and is not
       subject to a non-competition rule.

       17. Works For More Than One
       Person or Firm: An independent
       contractor gives his/her services to
       two or more unrelated persons or
       firms at the same time.
       18. Making Service Available to No advertising budget. He will
       the Public:                           sometimes buy gifts for coworkers
       An Employee does not make his or as a form of advertising.39
       her services available to the public
       except through the employer’s
       company.
       An Independent Contractor may
       advertise, carry business cards, hand
       out a shingle or hold a separate
       business license.

       18.    Offer Services to General
       Public: An independent contractor
       makes his/her services available to
       the general public or more unrelated
       persons or firms at the same time.

38
     See Appendix 2 (Kay Strahan Testimony, Tr. pp. 77-78).
39
     See Appendix 2 (Kay Strahan Testimony, Tr. pp. 40-41).
                                               30
084891/000006
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       19. Right to Discharge Without
       Liability:40
       An Employee can be discharged at
       any time without liability on the
       employer’s part.
       If the work meets the contract
       terms, an Independent Contractor
       cannot be fired without liability for
       breach of contract.

       19. Right to Fire: An employee
       can be fired by an employer. An
       independent contractor cannot be
       fired so long as he or she produces a
       result that meets the specifications
       of the contract.
       20.      Right To Quit Without
       Liability:41

40
     At the Rule 13 hearing, Health Force’s CEO Holly Alonzo testified:
         13     Q. If you were to discharge a nurse in the middle of the job, could that nurse
         14 sue your company and hold you financially liable?
         15     A. We don’t discharge, so, they are aware that there is no relationship; just
         16 come and go, work as you please.

C512; February 19, 2009 Holly Alonzo Rule 13 Hearing Testimony, Tr. p. 39; 2013 Response p.
27.
41
     At the Rule 13 hearing, Health Force’s CEO Holly Alonzo testified:
         25     Q. If the worker accepts a shift as offered by the hospital, is that worker
          1 expected to work that shift?
          2     A. They're expected, but, that, at many times, cannot happen, or does not happen.
          3 They have the right to accept a shift and cancel it.
          4     Q. What happens if they do cancel?
          5     A. They don’t get paid, obviously, for the shift, but, there's no repercussions
          6 as far as discipline.
                                                     ***
          9     Q. If a nurse quits in the middle of the job, can your company sue that nurse and
         10 hold that nurse financially liable?
         11     A. No. But, I mean, as a licensed individual, they can get in big trouble; it's
         12 abandonment of patients. But, you know, that's through the state.

                                                 31
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       An Employee may quit work at any
       time without liability on the
       Employee’s part.
       An Independent Contractor is
       legally   responsible for    job
       completion and, on quitting,
       becomes liable for breach of
       contract.

       20. Right To Quit: An employee
       can quit his/her job at any time
       without incurring liability.       An
       independent contractor usually
       agrees to complete a specific job
       and is responsible for its
       satisfactory completion, or is legally
       obligated to make good for failure
       to complete it.

         Health Force counts at least 15 of Twenty Factors listed above weigh in

favor of an independent contractor relationship between Health Force and Kay

Strahan. The similarly cited testimony of the other four workers demonstrates a

similar number of factors weighing in favor of a finding the worker are

independent contractors.42 The above testimony and summary chart were not

objected to by the TWC (see C1394) and struck by the trial court. Therefore, this

uncontested evidence confirms there are genuine issues of material fact in this

C512; February 19, 2009 Holly Alonzo Rule 13 Hearing Testimony, Tr. pp. 37-39; 2013
Response p. 28.
42
     See Appendix 2.
                                            32
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case.      Even if this Court upholds the ruling by the trial court striking other

evidence, there are numerous portions of Health Force’s summary charts and the

worker declarations that were filed, admissible and weigh heavily in favor of

finding the workers were independent contractors.

         The trial court thus erred in granting summary judgment in favor of the

TWC.

4.       The Memorandum of Understanding between the IRS, DOL and State
         Agencies Favors a Finding that the Health Force Workers are
         Independent Contractors.

         Beyond the failure to consider important evidence in the summary judgment

proceeding, the need to create consistency with other agency interpretations

compels a finding that the workers are independent contractors. The IRS and the

DOL both audited Health Force’s records and business model. Both agencies

determined Health Force workers to be independent contractors for tax purposes.

The TWC should be compelled to follow such precedent. It is important to note

both the IRS and the TWC use the same Twenty Factors to classify workers as

either employees or independent contractors.43 The DOL and state and federal

courts use the “economic reality test” which is a partial list of five of the same

43
 See Rev. Rul. 87-41, 1987-1 C.B. 296 (providing guidance with respect to Section 530 of the
Revenue Act of 1978); 40 Tex. Admin. Code § 821.5.
                                            33
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Twenty Factors with the remaining Twenty Factors collapsed into one factor “the

degree of control exercised by the alleged employer.”44

         In a November 2007 Information on the Questionable Employment Tax

Practices Memorandum of Understanding (the “MOU”), the IRS, the DOL and a

number of state workforce agencies agreed to be consistent with worker

classification determinations.45 The MOU enables agencies to share information

and coordinate enforcement efforts with states in order to “create a level playing

for all employers” and ensure employees receive the protections to which they are

entitled under federal and state law, e.g., proper overtime compensation, FICA and

Unemployment Insurance taxes or workers’ compensation premiums. Twenty-nine

states, including Texas, have signed the MOU. The MOU states its important

objectives:

         The IRS and the states will strive to be consistent with their
         examination results, reducing the chances that states might classify a
         worker as an employee while the IRS classifies the worker as an
         independent contractor, or vice versa.

                                                ***

         [F]ocus on reducing taxpayer burden and confusion, promote fairness
         and confidence in the tax system.

44
  20 C.F.R. § 639.3(a)(2) and United States Department of Labor WH Publication 1297 (5 DOL
Factors).
45
  C543-C545 (See IRS November 2007 Information on the Questionable Employment Tax
Practices Memorandum of Understanding).

                                           34
084891/000006
375 - 1842976v1
(Emphasis added).

         State and federal laws are not designed or intended to foster inconsistencies

to financially punish a company. Requiring Health Force, or any business, to treat

and classify the same workers differently under the Texas Unemployment

Compensation Act (“TUCA”) (i.e., as employees) than under the Fair Labor

Standards Act and Internal Revenue Code (i.e., as independent contractors) forces

Health Force to maintain two sets of financial and payroll related records and

reports.46 Given current governmental policies favoring and encouraging

uniformity in the treatment and classification of the same workers by all governing

agencies, the TWC’s position that the workers are Health Force’s employees and

not independent contractors for purposes of TUCA and unemployment taxes is

irrational and wrong. Such a result would require Health Force to treat the same

workers differently for purposes of complying with TUCA where employment

taxes and wage and hour obligations for the same workers are not required by the

IRS, the DOL or any other governmental agency.

         A.       The IRS Audit of the Workers
         On April 4, 2012, the IRS issued its Summary of Employment Tax

Examination (IRS Form 4666). The Form 4666 reflects findings made by IRS

agent Maureen Molyneaux regarding her 34 month audit of Health Force. The IRS

46
  For example, Health Force is not required to pay Federal Unemployment Tax Contributions
(“FUTA”), but is being asked to pay state unemployment taxes for the same workers.
                                           35
084891/000006
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audit reviewed the independent contractor worker classification status of the nurses

and other healthcare providers contracting with Health Force for work

opportunities. After an investigation using, examining and applying the same or

substantially the same Twenty Factors,47 after close to three years, the IRS made

the following determination:

         The examination of [Health Force] employment tax returns as
         reflected on this report [Form 4666 Summary of Employment Tax
         Examination] included an examination for employment tax purposes
         of whether any individuals should be treated as employees of the
         taxpayer [Health Force] for the purpose of Section 530 of the Revenue
         Act of 1978, as amended by Section 1122 of the Small Business Job
         Protection Act of 1996. The examination concluded that the following
         classes of workers should not be treated as employees: Hospital
         staffing workers.48

         According to the IRS, Health Force properly classifies the Workers as

independent contractors.

         B.       The DOL Audit of the Workers

         In addition to and consistent with the IRS’s determination, on March 29,

2012, the DOL informed Health Force it completed its 15 month wage and hour

47
  As opposed to Mary Zerda’s investigation undertaken in large part after she made her October
31, 2008 determination (HF 0011) in preparation for the February 19-20, 2009 Rule 13 hearing.
C567-C574 (See November 23, 2010 Deposition of Mary Zerda pp. 36-37, 77 (“Q. And that's
something you consider in your investigation, what the...worker considers herself to be? A. Yes”
and on January 23, 2009, one of the three workers told Ms. Zerda “self-employed, prefer to be
self-employed”)).
48
  C538-C545 (See Declaration of Michael D. Seale 3; Form 4666 (HF 753-54)). Note Ms.
Molyneaux’s handwritten note on the first page of Form 4666 (C541): “Mike [Seale]. My group
manager said this should suffice for informing you or TWC, etc. that we looked at Staff relief
Worker, but did not reclassify them. Maureen.”
                                              36
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compliance audit involving the workers provided work opportunities by Health

Force. The DOL did not request or demand that Health Force make any changes to

the independent contractor status of the workers or any other business or

operational practices.49

          According to the DOL, Health Force properly classifies the Workers as

independent contractors.

                                          Conclusion

          The trial court granted summary judgment for the TWC. In doing so, it the

trial judge improperly struck important evidence and ruled without considering the

numerous fact issues shown in the testimony of the numerous workers and two

Health Force employees. There is no basis for sustaining the grant of a motion for

summary judgment in favor of the TWC in this case because it did not establish

there are no genuine issues of material fact regarding the Twenty Factors as a

matter of law.

          The proceeding in this Court involves three overlapping issues. Evidence

was improperly struck by the trial court and should be considered in determining

whether the workers are independent contractors. The Twenty Factor Test the trial

court and the TWC are required to apply under the Texas Administrative Code

demonstrates that genuine issues of material fact exist. Lastly, the TWC should

49
     C538-C545 (Declaration of Michael D. Seale).
                                               37
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maintain consistency with the determinations of the IRS and DOL. As both the IRS

and DOL found the workers to be independent contractors, the trial court erred in

failing to overturn the TWC’s decision.

         Each of the above legal principles provides a basis for this Court to reverse

and remand this case back to the trial court.        Appellant Tochril Incorporated

requests that relief and any further relief to which it may be entitled.

                                         Respectfully submitted,

                                         /s/ Juliann H. Panagos
                                         JULIANN H. PANAGOS
                                         State Bar No. 06861100
                                         jpanagos@craincaton.com
                                         MICHAEL D. SEALE
                                         State Bar No. 00784938
                                         mseale@craincaton.com
                                         1401 McKinney Street, Suite 1700
                                         Houston, Texas 77010
                                         Telephone: 713-752-8696
                                         Facsimile: 713-658-1921

                                         Counsel for Appellant
                              Certificate of Compliance

      Pursuant to TRAP 9.4(i)(3), the undersigned certifies that this document,
excluding those parts not counted pursuant to TRAP 9.4(i)(1) contains 8,161
words.

                                                    /s/ Juliann H. Panagos
                                                    Juliann H. Panagos

                                           38
084891/000006
375 - 1842976v1
                              Certificate of Service

      I certify that a true and correct copy of this document has been served on the
following counsel of record through the electronic filing manager on December 30,
2015:

                                 Peter E. Laurie
                           Assistant Attorney General
                           Financial and Tax Litigation
                                 PO Box 12548
                            Austin, Texas 78711-2548

                                                  /s/ Juliann H. Panagos
                                                  Juliann H. Panagos

                                        39
084891/000006
375 - 1842976v1
                                Index to Appendix

1.       Twenty Factor Chart – Alonzo and Papillion Testimony (C515-C530).

2.       Twenty Factor Chart – Sabala, Sifuentes, Chapman, Strahan and Rojas
         Testimony (C1251-C1265).

3.       Orders on the Texas Workforce Commission’s Objections to Plaintiff’s
         Summary Judgment Evidence (C1505-C1517).

4.       Order Granting Texas Workforce Commission’s Motion for Summary
         Judgment (C1518).

5.       40 Tex. Admin. Code § 815.134.

6.       40 Tex. Admin. Code § 821.5

7.       T.R.C.P. 166a

8.       Tex. R. Evid. 1006

9.       20 C.F.R. § 639.3

10.      Rev. Rul. 87-41, 1987-1 CB 296

                                          40
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              C. Fact Issues Regarding the Twenty Factors

                         In its Motion, and without citation to any authority, the TWC incorrectly states " ... under

              the plain language ofTUCA [Section 201.041], once workers are paid any remuneration for their

              services, those workers are presumed to be employees of the remunerating employer." There is

              no presumption of employment, rebuttable or otherwise, under TUCA or Texas case law upon

              payment alone to a worker. 28 In all instances, the TWC must satisfy the Twenty Factor test.

                         Health Force creates facts issues on each of the Twenty Factors identified by the TWC in

              its Motion 29 as follows: 30

           Factor                   Holly Alonzo                      Lita Pappillion                      l\1:ary Zerda                 TWC Discovery
 40 TAC Section 815.134                                                                            (Bates No.· Indicated Hearing            Responses
             vs ..                                                                                     Tninscript Page No.)              (3-18-10 Letter
   TWC 03•18-10 Letter                                                                                                                     Responses)
1. Instructions:               If a nurse has a problem     On a sporadic and informal basis,                                      Facts: The nurses referred
An Employee receives           while working at a           I go out and visit these facilities                                    by Health Force are
instructions about when,       facility and doesn't         that we send the nurses to for                                         instructed as to when and
where and how the work         know how to handle           work. I visit the nurses as well,                                      where there services are
is performed.                  that problem, the nurse      but it is nothing set in advance. I                                    required. Once the nurse
An Independent                 will go to someone at        see the nurses a little more                                           reports to work they are
Contractor does the job        the facility to resolve it   regularly because they come in                                         supervised in the
his or her own way with        (e.g. doctor, charge         and out of here with wanting to be                                     performance of their
few, if any, instructions as   nurse, HR, etc.). We         paid for their services.                                               services by either a charge
to the details or methods      have no policies                                                                                    nurse or a house nurse
of the work.                   addressing how the           I don't have meetings. I may drop                                      supervisor, both of whom
                               workers are to dress,        in there to see a nurse, more for                                      are employees of the
1. Instructions: An            where to smoke, drug         marketing of home health care                                          medical facility where the
employee must comply           use, etc.                    services because our patients                                          services are performed.
with instructions about                                     come from these facilities.
when, where, and how to        The facilities, however,     Keeping a good relationship with
work. Even if no               likely do maintain such      the nurses in the facility is my
instructions are given, the    policies.                    goal, how are you, whoever's
control factor is present if   Health Force does not        there who I talk to; nothing
the employer has the right     counsel or provide           formal, no meetings. The typical
to give instructions.          discipline or instruction    scenario is I go in there with a bag
                               on any type of work          of cookies and drop it off at the

              28
                 If there was such a presumption, simply paying an individual to mow a lawn would make the worker an
              employee of the homeowner.
              29
                   Motion Section V(C) pp. 24-31.
              30
                 In accordance with Rule 1006 of the Texas Rules of Evidence, the following Twenty Factors chart is a summary
              of the testimony presented at the February 19-20, 2013 administrative hearing (the "Summary Chart"). The
              summary is necessary because the "voluminous underlying materials" (the transcript) cannot conveniently be
              examined by the Court. See Declaration of Juliann H. Panagos~ 7, attached as Exhibit D; February 19-20, 2009
              hearing transcript, attached as Exhibit D(5); Summary Chart, attached as Exhibit D(6); TWC's March 18, 2010
              Letter Responses to Health Force's Discovery Requests, attached as Exhibit D(7).

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                                                                                                                                                     515
       Factor                   Holly Alorizo                     Lita Pappillion                     Mary Zenia              TWC Discovery
40 TAC Section 815.134                                                                        (Bates No. Indicated Hearing·     Responses
         vs.                                                                                      Transcript Page No.)        (3-18-10 Letter
 TWC 03-18-10 Letter                                                                                                            Responses)
                           performance relating to      nurses' station. Pretty much
                           services provided by the     whoever is there is who I see.
                           nurse workers.
                                                        I did not go there to supervise any
                           No hiring process            of the independent contracting
                           because they're not          nurses. We market to them, as
                           employees. We do             well as to their facilities. More
                           have them fill out           than anything, we like to see the
                           certain paperwork to         patients of those facilities,
                           verify credentials as        ultimately, be patients of Health
                           licensed professionals.      Force.
                           Paperwork completed
                           consists of health info,
                           e.g. TB questionnaires,
                           immunization records,
                           work references to
                           verify licensure history.
                           We obtain information
                           such as names,
                           addresses, phone
                           numbers, driver's
                           license numbers, Social
                           Security, tax ID
                           numbers for tax
                           purposes and issue
                           l 099s. They're not
                           required to complete
                           anything that they
                           choose not to. They
                           seek our services. For
                           credentialing purposes,
                           they can provide a
                           resume if desired. An
                           application seeks
                           current and prior
                           employment history and
                           references to verify they
                           are licensed
                           professionals.

                           We don't do interviews
                           with them, but we do
                           ask them for their
                           preferences as far as
                           where do they like to
                           go, what shifts do they
                           like to work so we can
                           better fill their needs.

                           Tochril does not have a
                           leave of absence policy
                           for the nurses. If the
                           nurse wants a day off or
                           is ill, he or she does not
                           have to call in or
                           request it, but it is wise
                           to call if cancellation is
                           necessary to maintain

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                                                                                                                                         516
        Factor                    Holly Alorizo           Lita Pappillion           Mazy Zenia                   TWC Discovery
 40 TAC Section 815.134                                                     (Bates No. Indicated Hearing·          Responses
          vs.                                                                   Transcript Page No.)             (3-18-10 Letter
  TWC 03-18-10 Letter                                                                                              Responses)
                             good business relations.
                             We do not set work
                             related deadlines for the
                             nurses. Unsure about
                             any facility imposed
                             deadlines.
                             They are not subject to
                             the policies and
                             procedures that our
                             employees are subject
                             to.

2. Training:                 We do not provide any                                                          Facts: Nurses are licensed
Employees are often          kind of training or                                                            and have accomplished
trained by a more            related manuals to the                                                         sufficient training and
experienced Employee or      nurses. I don't know if                                                        passed state testing.
are required to attend       or to what extent the                                                          Health Force places nurses
meetings or take training    hospitals, doctors or                                                          in shifts and facilities to
courses.                     nursing homes provide                                                          provide nursing services
An Independent               any training. We do not                                                        within the scope of their
Contractor uses his or her   hold regular meetings                                                          authorized practice and as
own methods and thus         with the nurses or give                                                        requested by the health
need not receive training    instructions to the                                                            facility. Nurses may be
from the purchaser of        workers on how they do                                                         provided training at the
those services.              their work.                                                                    facilities on facility
                                                                                                            procedures.
2. Training: An              The doctors and charge
employee is trained to       nurses at the facilities
perform services in a        provide general
particular manner,           instructions to the
independent contractors      nurses, such as location
ordinarily use their own     oflunchroom, smoking
methods and receive no       policies, parking
training from the            policies, general
purchasers of their          information about the
serv1ces.                    facility, or any strange
                             or uncommon policies
                             within their facility, but
                             instructions on their
                             duties is dictated by the
                             Texas Board of Nursing
                             and licensure rules.
                             I assume (but don't
                             know for sure) the
                             facilities have medical
                             protocols they ask the
                             nurses to follow,
                             including patient care
                             instructions.
                             Tochril does not
                             provide any orientation
                             prior to offering an
                             opportunity for a nurse
                             to work at a particular
                             facility or hospital.

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                                                                                                                              517
3. Integration:               If Health Force Medical     We regard the staff relief aspect    Bates No. 0677                     Facts: Integration of
Services of an Employee       Staff Relief is unable to   of Tochril's business primarily as   The nurses said they worked        workers' services in the
are usually merged into       work through its            a way to market or cross-sell        continuously as they were          business operation of
the firm's overall            independent                 Tochril's primary business           called for assignments. They       Health Force generally
operation; the firm's         contractors, there would    purpose. Tochril, of course, uses    work at a rate set by Health       indicated that the worker
success depends on those      be no significant impact    many other methods to market or      Force and not the facility.        is subject to control or
Employee services.            on the overall business     cross-sell it's business, the                                           direction. Health Force is
An Independent                ofTochril.                  business of Health Force.            MZ also bases the importance       principally engaged in a
Contractor's services are     Tochril does not            For example, we may have home        of the staffing unit on the        nurse placement business.
usually separate from the     employ any nurses at        health staff cross-sell pediatric    wages reported to TWC and the      A form provided showing
client's business and are     Health Force Medical        rehab services through the care      l 099s provided by the             set rates that RN's, LVN's
not integrated or merged      Staff Relief. The l 0       provided home health services.       company.                           & CNA's are paid. They
into it.                      employees that we have      Health Force's business would                                           do not get to negotiate the
                              are non-nurse, which is     not be significantly diminished if   Bates No. 0716                     rate with the facilities.
3. Integration: An            clerical staff. Neither!    the company no longer provided       The fact that Health Force pays    Health Force bills the
employee's services are       nor Lita Pappillion is a    staff relief services.               money to advertise and exerts      facilities for the services
integrated into the           nurse.                                                           efforts in locating these nurses   provided by said nurses.
business operations           State regulations require   Our website has an employment        also indicates integration.        Health Force pays the
because the services are      nurses to have photo        opportunities web page available                                        nurses. Nurses wear a
important to the success or   identification while        to the general public. If one was    Bates No. 0718                     badge to identify
continuation of the           working in a medical        interested in applying, they could   Independent contractors            themselves as Health
business. This shows that     facility. That is their     apply online for home health and     advertise on their own and         Force nurses. Without the
the employee is subject to    badge with their photo      rehab positions. There is nothing    negotiate their own contracts.     nurses Health Force
direction and control.        ID on it.                   about medical staffing on the        These nurses are not               Medical Staff Relief
Integration of worker's       Some facilities require     employment opportunity page.         negotiating their own contracts    Division would not be in
services in the business      they carry their nursing                                         with the facilities. It is clear   operation.
operation of Health Force     license and their CPR                                            that if they did, they would be
generally indicated that      while working.                                                   making a profit, not going
the worker is subject to                                                                       through a third person.
control or direction. The
corporation Health Force                                                                       [Comments: Using MZ's
is principally engaged in a                                                                    logic, a nurse dealing directly
nurse placement business.                                                                      with the facilities makes them a
                                                                                               contractor whereas they are an
                                                                                               employee if they go through
                                                                                               Health Force. What happened
                                                                                               to the delegation theory i.e.
                                                                                               transfer of direction and
                                                                                               control?]

                                                                                               Bates No. 0688
                                                                                               The integration of the workers
                                                                                               into the business, operations of
                                                                                               the business, and services were
                                                                                               rendered personally, the
                                                                                               continuum relationship,
                                                                                               employer/employee
                                                                                               relationship, set work hours.
                                                                                               The work was done at the
                                                                                               premises of the facilities that
                                                                                               the medical staff relief was
                                                                                               instructed to attend. The
                                                                                               payments, expenses, tools,
                                                                                               materials, investment, profit
                                                                                               and loss were rendered
                                                                                               personally, whether they offer
                                                                                               their services to the general
                                                                                               public.

                                                                                               Bates No. 0711
                                                                                               They have the right to fire, the

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                                                                                                                                                    518
                                                                                                 right to quit, whether they work
                                                                                                 for more than one person or
                                                                                                 firm.

                                                                                                 Bates No. 0717
                                                                                                 The definition that the
                                                                                                 commission goes by to identify
                                                                                                 independent contractors are
                                                                                                 integrated into the common
                                                                                                 factors.

                                                                                                 Information was not provided
                                                                                                 in regards to the integration
                                                                                                 factor other than what the
                                                                                                 nurses said they worked and
                                                                                                 were continuously called for
                                                                                                 assignments. The integration is
                                                                                                 clear that Health Force is
                                                                                                 making a profit, by having the
                                                                                                 nurses and sending them out
                                                                                                 for assignments.

                                                                                                 Bates No. 0683, 0685
                                                                                                 Zerda's two witnesses both
                                                                                                 indicated that they wore badges
                                                                                                 identifying themselves and they
                                                                                                 have continuous contact with
                                                                                                 Health Force. If any changes
                                                                                                 as far as addresses, phone
                                                                                                 numbers, or changes in the
                                                                                                 schedules they contact Health
                                                                                                 Force.

4. Services Rendered          The nurses can              The nurses may delegate or             The following documents or         Facts: Health Force
Personally:                   subcontract or delegate     subcontract the work. The nurses       information support the            nurses render his/her
An Employee's services        the staff relief work out   that come through us to utilize the    factor that services were          services personally.
must be rendered              to someone else in place    services that we provide to them       provided personally:
personally; Employees do      of the nurse. The           are independent contractors. If the
not hire their own            facility needs a nurse.     nurse that chooses to work selects     Bates No. 0681
substitutes or delegate       They really do not care     another nurse to work in her           Time sheets submitted to
work to them.                 which agency. They          stead, and we have records on that     Health Force and signed by the
A true Independent            need a nurse to take        nurse, that nurse can get a check      individual nurses stating the
Contractor is able to         care of their patients.     from us. She could also send it        dates and times worked. If
assign another to do the                                  through another staffing agency.       they turn in the time record to
job in his or her place and                               She can contact another nurse          someone else they work under
need not perform services                                 from any other source. The             and report to when they are
personally.                                               hospital gets staff from multiple      assigned to a facility (i.e.
                                                          sources. These nurses are able to      Health Force), the nurse is an
4. Services Rendered                                      substitute however they desire. If     Health Force employee.
Personally: An employee                                   the initial nurse and the substitute
renders services                                          nurse are both registered with us,     Bates No. 0681
personally. This shows                                    then whoever works, we just get        Time sheets are submitted and
that the employer is                                      told who to pay. If they,              copies of the sheets are signed
interested in the methods                                 however, substitute that same          by individual nurses stating the
as well as the results.                                   shift through another agency or        dates and times that were
                                                          through another nurse that's           worked.
                                                          independent, then, that is not our
                                                          lSSUe.                                 Bates No. 0682
                                                                                                 If a person goes to a personnel
                                                                                                 staffing service or Goodwin
                                                                                                 Personnel to be sent on an
                                                                                                 assignment then they would be

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                                                                                                                                                      519
                                                                    Goodwin Personnel employee.

5. Hiring, Su11ervising &     Some nurse workers                    Bates No. 0718                      Facts: Nurses cannot hire
Paying Hel11ers:              have assistants or                    Nurses do not hire staff or         assistants to do patient
An Employee may act as        helpers, some do not.                 helpers and independent             care for them. Nurses
a foreman for the             For example, they keep                contractors advertise on their      provide the services
employer but, if so,          up with all their                     own. They are not able to           themselves.
helpers are paid with the     information for tax                   negotiate their own contracts
employer's funds.             purposes, sort of like                with the facilities. Nurses are
Independent                   their own little CPA or               not negotiating their own
Contractors select, hire,     their own little person               contracts with the facilities. If
pay and supervise any         who keeps up with the                 independent contractors
helpers used and are          whole business aspect -               negotiate the contracts with the
responsible for the results   bookkeeping, mileage,                 facilities, they would make a
of the helpers' labor.        travel expenses,                      profit. They have a right to
                              business expenses.                    hire assistance, the nurses, or
5. Hiring Assistants: An                                            staff nnder them to bring in
employee works for an                                               revenue for profit and loss.
employer who hires,                                                 They maintain their own place
supervises, and pays                                                of business.
assistants. An
independent contractor
hires, supervises, and pays
assistants nnder a contract
that requires him/her to
provide materials and
labor and to be responsible
only for the results.
Nurses cannot hire
assistants to do patient
care for them.

6. Continuing                 The nurse contractors                 Bates No. 0684-6                    Facts: Nurses remain on
Relationshii1:                do not work exclusively               The nurses wear a badge that        Health Force list for
An Employee often             through Tochril or at                 says Health Force on it, they       referrals and are in
continues to work for the     the same facility month               turn in time sheets to Health       continued contact with
same employer month           after month or year after             Force and sign independent          Health Force and Health
after month or year after     year. Some of them                    contractor agreements. The          Force with the nurses.
year.                         may work only one shift               nurses are being contacted          This resembles an
An Independent                and then they go away                 by Health Force. They go            employer-employee
Contractor is usually         for a while and come                  through an initial interview        relationship. Nurses are
hired to do one job of        back. We have no                      with Health Force.                  referred for shifts over a
limited or indefinite         control over it.                      Backgronnd information is           continued period of time.
duration and has no           Tochril enters into                   investigated by Health Force.       Nurses can be referred to
expectation of continuing     written contracts with                They're not given a choice if       multiple shifts and to
work.                         the nurses.                           they want to be employees or        multiple clients. A new
                              Tochril does not enter                not, only the choice of whether     contract is not signed with
6. Continuing                 into a new contract each              they want taxes deducted. The       the nurses with each new
Relationshi11: An             time a nurse works at a               nurses have continuous contact      referral.
employee has a continuing     facility. However,                    with Health Force and contact
relationship with an          the relationship between              Health Force when there are
employer. A continuing        Health Force and the                  any changes in addresses,
relationship many exist       nurses is based strictly              phone numbers or schedules
where work is performed       on a contractual                      they're going to work. Health
at frequently recurring       relationship. We                      Force also provides workers'
although irregular            provide numerous                      comp and liability insurance.
intervals.                    opportnnities for nurses              They are not providing it for
                              throughout south Texas                themselves. (I do know
                              to provide services at                employers and non-employers
                              the facilities. The                   can volnntarily provide
                              written contract                      workers' compensation

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                             confirms they are                      insurance to whoever they
                             independent                            want).
                             contractors, not
                             employees.                             [Comments: MZ is incorrect-
                                                                    Health Force does not pay for
                                                                    the nurses' liability insurance.]

                                                                    Bates No. 0683
                                                                    From the two nurses there is a
                                                                    continuing relationship as far as
                                                                    the time sheets, the contract
                                                                    agreement that was signed and
                                                                    the facility's agreement.

7. Set Hours of Work:        The workers may work                   Bates No. 0688                       Facts: Nurses are called
An Employee may work         shift by shift at their                Health Force is instructing the      by Health Force with
"on call" or during hours    choosing. We don't                     nurse that if they take the          predetermined
and days as set by the       assign them to a                       assignment, to go at a certain       time/place/date of where
employer.                    particular shift or series             hour or shift and it's going to      worker needs to report to.
A true Independent           of shifts - we give them               extend to a certain hour and a       This work schedule is set
Contractor is the master     opportunities to work.                 certain location. Thus, Health       by Health Force clients.
of his or her own time and   We have no control                     Force is setting the time, date      This factor indicates
works the days and hours     whether they choose to                 and the facility where they are      control or direction
he or she chooses.           work a shift, multiple                 working. The hospitals call          because it bars the worker
                             shifts in a row or                     Health Force. The hospitals are      from being master of
7. Set Hours of Work:        several days in a row as               the ones in need of the nurses       his/her own time. The
An employee has set hours    that is their choice and,              and Health Force provides that       evidence shows that the
or work established by an    at times, when they go                 need to them.                        medical facilities set the
employer. An                 to facilities, they                                                         hours for the workers.
independent contractor is    schedule themselves.                   Bates No. 0688                       The clients tell Health
the master of his or her     We don't have                          Health Force is giving the           Force when it needs a
own time.                    knowledge of it, and                   nurses instruction to take the       worker, what shift the
                             that's fine because they               assignments or shifts and it         worker is needed for, and
                             work for themselves.                   extends to a certain hour and a      the time/place for the
                                                                    certain location. Health Force       worker to report. This
                             Work shifts vary, but                  is setting the time, date, and the   shows that through
                             typically 6 A.M. to 6                  facility that they are working.      delegation to their clients,
                             P.M. There is no                                                            Health Force sets the
                             "typical" or average                   Bates No. 0689                       hours of work for the
                             number of hours                        Health Force can't change the        nurses, and also
                             worked; some nurses                    instructions provided by the         constitutes evidence of an
                             work once a year, some                 hospital. If Health Force            employment relationship.
                             work once a week. It                   changes the instructions from
                             can be anywhere from                   the hospital the hospital will
                             zero to 60 plus.                       probably go somewhere else to
                                                                    find someone to work the shift
                                                                    that is needed Health Force has
                                                                    a contract with the hospital.
                                                                    The hospitals call Health Force
                                                                    and are the ones that need
                                                                    nurses.

8. Full Time Reguired:       The nurses' work                       Bates No. 0687                       Facts: Nurses work 30,
An Employee ordinarily       schedule is what they                  Zerda's interviews with the          40, or even 60 hours a
devotes full-time service    choose it to be, which                 nurses where full-time nurses        week and constitutes full
to the employer, or the      could be any number of                 who were taking assignments.         time. The evidence shows
employer may have a          hours, day or night, and               And were working to earn extra       that some nurses have full
priority on the employee's   at one facility or at                  money. This makes them an            time employment and are
time.                        many facilities.                       employee in this relationship.       picking up shifts for extra

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A true Independent            The doctor, hospital or                                                      money. Others are just
Contractor carmot be          nursing home will                       Bates No. 0712                       working on referrals
required to devote full-      inform us what work is                  By the restrictions of the hours     through Health Force and
time service to one firm      available. We then call                 that they can work for Health        can picking up as many as
exclusively.                  the nurse and let them                  Force.                               60 hours. Shifts are 12
                              know what work the                                                           hours and nurses can
8. Full Time Work: An         facility requests. The                                                       reject a shift with Health
employee normally works       nurses can either choose                                                     Force calls but are
full time for an employer.    to accept what the                                                           expected to work if shift is
An independent contractor     facility offers, be late or                                                  accepted.
can work when and for         even earlier. It's their
whom he or she chooses.       choice.
Nurses are worker 30, 40,
and even 60 hours a week
this constitutes full time.
9. Location where             If the nurses choose, we                Bates No. 0690-l                     Facts: Nurses are
services 12erformed.          may refer them to the                   Health Force has a contract          expected to show up at the
Employment is indicated       same client hospital,                   with the facility to provide the     facility for the shift they
if the employer has the       doctor or nursing home                  nurses as needed. While Health       have accepted to work.
right to mandate where        more than once. We                      Force is not a hospital, it is an    All work is done at the
services are performed.       give them the                           employment agency for these          facilities where assigned
Independent                   opportunity. The                        nurses to go and work and            and all work is done in
Contractors ordinarily        location of work is                     make extra money. I agree the        person. Nurses wear a
work where they choose.       mandated by location of                 nurse's can say "no, I'm not         badge to identify
The workplace may be          the patients and patient                going," but this is no different     themselves with their
away from the client's        care.                                   than what employees can do if        name and Health Force
premises.                                                             the employer agrees to it.           appears on the badge.

9. Work Done on                                                       Bates No. 0691
Premises: An employee                                                 MZ contends it depends on the
works on the premises of                                              understanding or guidelines
an employer, or works on                                              whether one can be fired in a
a route or at a location                                              traditional employment sense if
designated by an                                                      the nurse tells Health Force
employer.                                                             he/she is not coming to work
                                                                      for e.g. a month. MZ believes
                                                                      Health Force can hire a nurse
                                                                      as an employee and provide
                                                                      work hours flexibility to the
                                                                      nurse, allowing the nurse to
                                                                      choose what hours they're
                                                                      going to work.

                                                                      [Comment: MZ does not
                                                                      recognize the greater the work
                                                                      flexibility becomes, the less
                                                                      "direction and control" there
                                                                      is.]

                                                                      Bates No. 0688
                                                                      Health Force is giving nurses
                                                                      the instruction to take the
                                                                      assignments and to go at a
                                                                      certain hour or shift. It could
                                                                      extend to a certain hour and a
                                                                      certain location. Health Force
                                                                      is in fact setting the time, date,
                                                                      and the facility that they are
                                                                      working.

l 0. Order or Sequence        Tochril does not set the                                                     Facts: Nurses are required
Set:                          order or sequence of the                                                     to follows the order and

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An Employee performs          nurse workers' tasks.                                                  sequence set by the head
services in the order or      Not sure about the                                                     nurse or facility. The
sequence set by the           doctors and facilities -                                               order or sequence of work
employer. This shows          they could. As nurses,                                                 is delegated to Health
control by the employer.      they have to keep their                                                Force clients and is
A true Independent            license.                                                               evidence of control and
Contractor is concerned       There are certain things                                               direction through
only with the finished        they have to comply                                                    delegation.
product and sets his or her   with under licensure
own order or sequence of      laws and I assume the
work.                         facility nurses and
                              doctors will do this to
 I 0. Order or Seguence       comply with the law.
Set: Employee must
perform services in the
order or sequence set by
an employer. This shows
that the employee is
subject to direction and
control. Nurses are not
permitted to follow his/her
own pattern of work but
rather must follow the
established
routines/schedules of the
facilities.

II. Oral or Written           The nurses are not                                                     Facts: Nurses submit
Reports:                      required to provide                                                    reports to doctor or head
An Employee may be            reports or logs to                                                     nurse as to patient care
required to submit regular    Tochril, the facilities or                                             provided which would
oral or written reports       doctors regarding the                                                  consist of vitals of patients
about the work in             work they do.                                                          and med's administered to
progress.                                                                                            patients during shift.
An Independent
Contractor is usually not
required to submit regular
oral or written reports
about the work in
progress.

II. Reports: Employee
submits reports to an
employer. This shows
that the employee must
account to the employer
for his or her actions.

12. Payment by the Hour,      We agree to pay the                    Bates No. 0694                  Facts: Nurses are paid by
Week or Month:                workers for the work                   The checks the nurses are       the hour and must submit
An Employee is typically      performed. It's not in                 receiving are from Health       to Health Force time cards
paid by the employer in       the contract. Once work                Force and Health Force bank     initialed by charge nurse
regular amounts at stated     is completed, we                       accounts.                       at facilities. Health Force
intervals, such as by the     verbally agree to pay                                                  pays the nurse the next
hour or week.                 them for their work                    [Comments: MZ does not          day or the next week
An Independent                generally within the                   understand the money source     depending on what the
Contractor is normally        following hourly rate                  issues and how the facilities   nurse wants to get paid.
paid by the job either a      ranges (depending on                   pay Health Force for the        Deductions are applied if
negotiated flat rate or       the facility):                         nurses' services.]              nurse wants deductions
upon submission of a bid.     RNs- $32.00-$38.00.                                                    taken out of the pay.
                              LVNs- $22.00-$28.00.                   Bates No. 0685                  Health Force bills the

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12. Payments:                CNAs- $10.00-$12.00.                   Nurses are not given a choice if   facilities for those nurses
Employees are paid by the    These rates are                        they want to be employees or       referred to the facilities.
hour, week or month.         determined through                     not. They are also given the
Nurses are paid through      negotiations between                   choice of whether they want
Health Force.                the facilities and the                 taxes to be deducted.
                             nurse contractors based
                             on their experience,                   Bates No. 0692
                             specialty areas, etc.                  Health Force is paying the
                             Both are our clients.                  nurses who are not getting paid
                             Through this process,                  directly from the facilities.
                             we negotiate a Bill Rate
                             with the facility clients.             Bates No. 0694
                             The nurses can                         Checks that the nurses are
                             negotiate the rate                     receiving are from Health
                             directly with the facility             Force and are not from a
                             if they choose, at                     facility like Detar or Citizens.
                             whatever rate they
                             choose. The facility
                             client pays us directly
                             for the Bill Rate and we
                             in turn pay the
                             negotiated contractor
                             rate to the contracted
                             nurse.
                             The nurses are paid
                             when they choose and
                             when they bring in their
                             service record. Normal
                             practice is to turn in the
                             completed and signed
                             service records to verify
                             the shift was completed.
                             There is no time or date.
                             Some hold them for
                             weeks and some turn
                             them in immediately.
                             No taxes are withheld
                             from the nurses' pay
                             unless they request it.
                             All income is reported
                             on IRS 1099 forms
                             annually. No
                             deductions are taken
                             from the nurses' pay.
                             The workers are not
                             eligible for bonuses,
                             fringe benefits (e.g.
                             sick, vacation, holiday
                             or severance pay,
                             insurance) or pay
                             advances. They are not
                             eligible for 40l(k),
                             PTO, vision, dental,
                             Aflac.
13. Payment of Business      Tochril does not                       Bates No. 0695                     Facts: Health Force pays
& Travel Ex12enses:          reimburse the nurses for               While the meals and gas to         for Worker Comp
An Employee's business       any business or travel-                travel to the facility is not      Insurance and the Nurses
and travel expenses are      related expenses. The                  reimbursed by Health Force         liability insurance. Nurses
either paid directly or      nurses can and some do                 and the nurses buy their own       do not pay for their own
reimbursed by the            carry malpractice                      uniforms (scrubs), this is no      liability insurance or
employer.                    insurance at their                     different from expenses            insurance if they get hurt
Independent                  expense. Tochril carries               incurred by an employee. Take      on the job.

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Contractors normally pay     professional                                                       myself, I go to work, I pay for
all of their own business    malpractice insurance                                              my own gas to get there. I pay
and travel expenses          for the for the company                                            for my own meal, and I also
without reimbursement.       and its employees, but                                             pay for my own business attire.
                             not for the staff relief                                           Due to the nature of the nurses'
13. Ex12enses: An            nurse workers. The                                                 work, they wear the scrubs and
employee's business and      nurses claim business                                              pay for their own meals as
travel expenses are paid     related expenses as                                                anyone else that's employed
by an employer. This         income tax deductions                                              working outside of the home.
shows that the employee is   and declare themselves
subject to regulation and    as self-employed nurses                                            Bates No. 0696
control.                     on their federal income                                            MZ recognizes an independent
                             tax returns.                                                       contractor deducts the above
                                                                                                types ofbusiness expenses on
                                                                                                their income tax (Schedule C)
                                                                                                and receives a l 099 and that
                                                                                                this is inconsistent with
                                                                                                employee behavior.

                                                                                                Bates No. 0685
                                                                                                Health Force is providing
                                                                                                workmen's comp insurance and
                                                                                                liability insurance.

                                                                                                Bates No. 0695
                                                                                                Meals and the gas to travel to
                                                                                                the facility are reimbursed by
                                                                                                Health Force. Nurses buy their
                                                                                                own uniforms and scrubs. This
                                                                                                is no different from expenses
                                                                                                incurred by an employee.

                                                                                                Bates No. 0696
                                                                                                Well, when you are getting a
                                                                                                l 099 and you file a Schedule
                                                                                                C, then, yes, you're going to
                                                                                                deduct certain different
                                                                                                expenses.

                                                                                                Bates No. 0697
                                                                                                Zerda advised them of different
                                                                                                procedures and benefits of
                                                                                                being an employee versus
                                                                                                being a contract laborer. Both
                                                                                                nurses stated they would prefer
                                                                                                to be employees. Although,
                                                                                                Zerda is not going to tell them
                                                                                                they have to amend their l 040.

14. Furnishing Tools &       Tools and equipment         Our company does not furnish           Bates No. 0698                       Facts: Nurses provide
Egui12ment:                  that are important to the   any tools, equipment and               While the nurses have their          their own stethoscope,
Employees are furnished      work include;               materials to the contracted nurse      own stethoscopes, scissors,          scrubs, shoes, gloves,
all necessary tools,         stethoscope, uniforms,      workers for doing the work. The        maybe blood pressure cuff, if        scissors, and blood
materials and equipment      medical bags, tablets,      doctors, the hospitals, and the        they don't take them to the          pressure cuffs, however
by their employer.           scissors, shoes, tape       nursing homes furnish anything         facility, the facility can provide   the facilities prefer nurses
An Independent               measures, pill crushers,    patient specific for the duration of   those to them. They initially        to use their (facility)
Contractor ordinarily        blood pressure cuffs,       their work stay, but the nurses do     purchase equipment in order to       equipment for accuracy.
provides all of the tools    and other things of that    bring in much of their own             complete their training and          Health Force clients
and equipment necessary      nature, personal vehicle,   equipment.                             schooling (e.g. stethoscope,         provide the major tools
to complete the job.         nursing equipment,                                                 blood pressure, etc.). They get      and equipment for doing
                             anything else needed to                                            old and they don't need to buy       the work. The clients
14. Tools and Materials:     do theirjob and provide                                            them again if they are               provide the EKG

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                                                                                                                                                        525
An employee is furnished        care for patients.                      furnished. So, at least some         machines, pulse
significant tools,              Tochril does not                        would prefer to use equipment        oximeters, beds, linen,
materials, and other            provide any of these                    at the facilities because they are   gloves, wheel chairs, Cat
equipment by an                 things.                                 updated and working correctly.       Scan machines, equipped
employer.                       The nurses have their                                                        emergency rooms and
                                own equipment, but,                     Bates No. 0700                       equipped operating rooms.
                                there is some equipment                 The nurses do not carry MRI
                                needed for the patients                 machines or X-ray or
                                that would be held at                   cardiovascular machines and
                                the facility, such as IV s,             like equipment with them to the
                                hospital bed,                           hospital. All the expensive
                                wheelchair, CAT scan,                   machinery investments are
                                some facilities have                    furnished at the hospital.
                                EKG machines, bed
                                linens, gloves. Some                    Bates No. 0699
                                nurses bring Pulse-ox                   Zerda knows from going to
                                machines. Some nurses                   different stores that you can
                                have them, some don't.                  buy scrubs anywhere and
                                                                        doesn't understand why nurses
                                                                        would want scrubs that say
                                                                        Detar Hospital if they're not
                                                                        employees of Detar Hospital.
15. Significant                 The nurses have                         Bates No. 0702                       Facts: Nurses do not have
Investment:                     financial investment in                 They do not advertise. They          a substantial investment in
An Employee generally           their own business                      do not invest in advertising in      facilities or equipment.
has little or no investment     related to                              newspaper ads, TV ads, which         They have a relatively
in the business. Instead,       Providing nursing                       are quite expensive. They do         small investment in
an Employee is                  services. Some                          not offer their services to the      stethoscope, scrubs, shoes,
economically dependent          examples are; tools,                    public. They do not have the         gloves, scissors, and blood
on the employer.                their equipment, their                  expensive equipment furnished        pressure cuffs. By
True Independent                cars, travel, gas,                      by the facilities.                   contrast facilities have
Contractors usually have        housing when they                                                            substantial investment in
a substantial financial         travel, expenses relating               Bates No. 0702                       equipment such as EKG
investment in their             to professional license,                MZ recognizes the Texas Nurse        machines, pulse
independent business.           continuing education,                   Practices Act precludes nurses       oximeters, beds, linen,
                                license renewal fees,                   from advertising nursing             gloves, wheel chairs, Cat
15. Investment: An              cost of CPR courses,                    services to the general public.      Scan machines, equipped
independent contractor has      tuberculosis screening.                                                      emergency rooms and
a significant investment in                                                                                  equipped operating rooms.
the facilities he/she uses in
performing services for
someone else.

16. Realize Profit or Loss:     The nurses make a                       Bates No. 0703                       Facts: No profit or loss is
An Employee does not            profit or suffer a loss                 The nurses do not invest in          suffered by the nurses in
ordinarily realize a profit     doing the work that they                expensive equipment. If the          doing the work and no
or loss in the business.        do. For example, the                    only loss is they do not take an     substantial investment in
Rather, Employees are           expense of traveling to                 assignment, there is no profit       the business is made by
paid for services rendered.     a facility that could be                there. They're just working to       the nurses. Nurses are
An Independent                  far away, the gas                       make extra money to make             paid a predetermined
Contractor can either           involved. If they have a                ends meet and support their          amount, which is dictated
realize a profit or suffer a    12-hour shift, and they                 families.                            by Health Force's client.
loss depending on the           are sent home after two                                                      The nurses do not make a
management of expenses          hours, that could be a                  Bates No. 0706                       significant financial
and revenues.                   great loss, i.e. expecting              These nurses do not have staff       investment in equipment
                                to work and it does not                 under them. They do not have         used by him/her in
16. Profit or Loss: An          occur for some reason                   revenues coming in to offset         rendering his/her services.
independent contractor          (e.g. personal issues                   their expenses. Thus, the            All essential equipment is
can make a profit or suffer     requiring them to leave                 expense (e.g. gas expense            provided by the facilities.
a loss.                         early).                                 incurred when an assignment is
                                                                        cancelled or cut short) would
                                                                        not be classified as a profit and

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                                                                   loss.

                                                                   Bates No. 0706
                                                                   MZ recognizes a nurse can
                                                                   deduct an expense (e.g. apt rent
                                                                   loss when an assignment
                                                                   cancels) on his Schedule C, but
                                                                   she does not consider it a loss
                                                                   because the nurse would have
                                                                   the tax deduction on Schedule
                                                                   C to offset the tax.

                                                                   Bates No. 0707
                                                                   [MZ Quote - "I don't know
                                                                   what the Schedule C is based
                                                                   on all the expenses he's going
                                                                   to put on there, whether there's
                                                                   going to be a loss or a gain as
                                                                   far as what he's going to gain
                                                                   on the benefits of saving the
                                                                   tax."]
17. Working For More          An independent                       Bates No. 0711-3                     Facts: Nurses make their
Than One Firm At A            contracting nurse can                From my interviews with the          services available to
Time:                         work for more than one               nurses, they had full-time jobs,     Health Force, but can also
An Employee ordinarily        hospital, different                  and were working to earn extra       be on the list for referrals
works for one employer at     employers, different                 money. This places restrictions      with other firms offering
a time and may be             agencies                             on the hours they can work for       same type of service.
prohibited from joining a     Simultaneously, in                   Health Force. The 90 day             However, nurses cannot
competitor.                   sequence, or not work                "non-compete" clause of the          advertise their services.
An Independent                at all. The relationship             staffing agreement (2.06) also
Contractor often works        between Tochril and a                restricts the nurses from
for more than one client or   contracting nurse is not             working for more than one
firm at the same time and     permanent or exclusive.              facility.
is not subject to a non-      The nurses work
competition rule.             through multiple                     [Comments: Nurse contractors
                              agencies and at more                 are not parties to the staffing
17. Works For More Than       than one facility, or                agreement and therefore not
One Person or Firm: An        with an employer,                    bound to any restrictions on
independent contractor        performing similar                   work or employment at
gives his/her services to     serv1ces.                            facilities]
two or more unrelated
persons or firms at the                                            Bates No. 0713
same time.                                                         The non-compete clause says
                                                                   that a facility caunot hire a
                                                                   nurse to work for them unless
                                                                   it's been 90 days. Health Force
                                                                   is excluding nurses from
                                                                   working at the facility or
                                                                   becoming their employee and is
                                                                   penalizing the facility if the
                                                                   nurses are hired on at the
                                                                   facility.

                                                                   Bates No. 0715
                                                                   Because Health Force is saying
                                                                   by having that restriction in
                                                                   there, they are saying that if the
                                                                   facility is going to hire them,
                                                                   then they are taking a qualified
                                                                   person that they could use
                                                                   elsewhere to work at the
                                                                   facility. Therefore, Health

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                                                                                                                           527
                                                                    Force would not be making a
                                                                    profit off of them.

                                                                    Bates No. 0716
                                                                    If you consider them to be
                                                                    contract employees or contract
                                                                    labor, what gives you the right
                                                                    to limit them to where they're
                                                                    going to work full-time and put
                                                                    that clause into the contract?

18. Making Service            They seek our services                Bates No. 0688                    Facts: The Nurses do not
Available to the Public:      and hire us. It could be              Health Force contacts the         offer their services to the
An Employee does not          by working in facilities              nurses to see if they want to     general public. They can
make his or her services      or for other agencies.                work. The nurses do not           work at a health facility by
available to the public       They come in and seek                 advertise their services. They    referral or by being an
except through the            our services. I'm not                 rely on getting calls from        employee of that facility.
employer's company.           sure how they find out                Health Force, which is
An Independent                about us. It is mostly                advertising for the nurses (see
Contractor may                by word of mouth.                     Factor 3 integration).
advertise, carry business     They come to us, we
cards, hand out a shingle     verify credentials, we                Bates No. 0702
or hold a separate business   verify that they are a                Nurses do not advertise
license.                      licensed professional.                because they offer their
                              Once that happens, they               services to the public.
18. Offer Services to         tell us where they want
General Public: An            to work. They tell us if
independent contractor        they want to work.
makes his/her services        The nurses can carry
available to the general      business cards if they
public.                       choose.
                              The nurses can
                              represent themselves to
                              the public or to others
                              as being in business to
                              provide nursing
                              services, but not sure if
                              they do. They do work
                              at multiple agencies.
                              They have the option to
                              tell people about their
                              services to get more
                              work for their personal
                              business.
                              I don't know whether
                              they do any advertising
                              in the newspapers or the
                              Yellow Pages.

                              There are even
                              occasions where we
                              have been offering
                              opportunities to these
                              nurses by telephone or
                              email and, for extended
                              periods of time, we
                              wouldn't know if you
                              ran into them on the
                              street. They are free
                              and independent
                              workers.

                                                          Page 26
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                                                                                                                         528
19. Right to Discharge        We don't discharge, so               Bates No. 0707-8                    Facts: Health Force has
Without Liabili!J'.:          the nurses are aware                 Section 2.02 of the facility        the right to discharge a
An Employee can be            there is no relationship             supplemental staffing               worker. The right to
discharged at any time        whereby we can                       agreement between the facility      discharge is a factor of
without liability on the      discharge them; they                 and Health Force states that the    control or direction
employer's part.              come and go and work                 facility can dismiss if they're     through the ever-present
If the work meets the         as they please.                      unhappy with the work that          threat of dismissal. Health
contract terms, an                                                 they're doing. For whatever         Force gives their clients
Independent Contractor                                             reason, they can dismiss them.      through contract the right
carmot be fired without                                            That's a right to fire. It is an    to dismiss a nurse and
liability for breach of                                            agreement between Health            request another to replace
contract.                                                          Force and the facility whereby      the nurse for the shift.
                                                                   Health Force is delegating the
19. Right to Fire: An                                              right to discharge control over
employee can be fired by                                           to the facility.
an employer. An
independent contractor                                             Bates No. 0710
cannot be fired so long as                                         Health Force can also evaluate
he or she produces a result                                        the nurses and send a report.
that meets the                                                     2.05 says the nurses
specifications of the                                              periodically report to Health
contract.                                                          Force. If it is a negative
                                                                   evaluation, then they will not
                                                                   be sent to that facility or be
                                                                   assigned another assignment.

                                                                   Bates No. 0710
                                                                   MZ says the nurses she
                                                                   interviewed were not aware of
                                                                   any such evaluations and she is
                                                                   not aware 2.05 has ever been
                                                                   implemented.

                                                                   [Comments: the nurse
                                                                   contractors are not parties to
                                                                   the staffing agreement and are
                                                                   not bonnd by them.]

                                                                   Bates No. 0693
                                                                   If Health Force is going to hire
                                                                   a nurse, and they're going to
                                                                   have the flexibility of the hours
                                                                   that they work then that
                                                                   flexibility is given to the nurse
                                                                   to choose what hours they're
                                                                   going to work.

                                                                   Bates No. 0707
                                                                   Right to fire. If you go back to
                                                                   your facility supplemental
                                                                   staffing agreement between the
                                                                   facility and Health Force. The
                                                                   facility can dismiss which is
                                                                   the right to fire.

                                                                   Bates No. 0709
                                                                    "And the dismissal of staffing
                                                                   personnel will not be assigned
                                                                   to the facility thereafter." That

                                                         Page 27
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                                                                                                                         529
                                                                            is firing. They do not want
                                                                            them to return. But it's an
                                                                            agreement between Health
                                                                            Force and the facility
                                                                            delegating Health Force is
                                                                            delegating that control over the
                                                                            facility with this agreement.
20. Right To Quit             If the worker accepts a                       Bates No. 0710-l                   Facts: Nurses can
Without Liabili!J'.:          shift offered by the                          The nurses have the right to       terminate or quit the work
An Employee may quit          hospital or facility, they                    quit and can take their name off   without incurring a
work at any time without      are expected to work it,                      the list by contact Health Force   liability by refusing to
liability on the              but many times, that                          and say they no longer want to     work the shifts assigned or
Employee's part.              cannot or does not                            work additional shifts or they     requesting to be removed
An Independent                happen. They have the                         no longer want to work, to earn    from the list. Also, the
Contractor is legally         right to accept a shift                       extra money.                       contract between Health
responsible for job           and cancel it. If the                                                            Force and its clients the
completion and, on            nurse cancels, the nurse                                                         client is prohibited from
quitting, becomes liable      worker does not get                                                              hiring the nurses referred
for breach of contract.       paid for the shift, but                                                          to the clients by Health
                              there are no disciplinary                                                        Force within a 90 day
20. Right To Quit: An         repercussions.                                                                   period after the last
employee can quit his/her     If a nurse quits in the                                                          referral.
job at any time without       middle of the job, we
incurring liability. An       carmot sue and hold that
independent contractor        nurse financially liable.
usually agrees to complete    But, as a licensed
a specific job and is         individual, they can get
responsible for its           in big trouble by the
satisfactory completion, or   state if they abandon
is legally obligated to       patients. They
make good for failure to      necessarily wouldn't
complete it.                  quit since they were not
                              hired in the first place,
                              but they can stop all
                              communication at any
                              time, or not even show
                              up.

             D. The TWC Cannot Rely on the Temporary Help Firm Statute

                       1. The Temporary Help Firm Statute Does Not Presume Employee Status

                       Section 201.029 of the Texas Labor Code states:

                       TEMPORARY HELP FIRM. For purposes of this subtitle, a temporary help firm
                       is the employer of an individual employed by the firm as a temporary employee.

             (the "THF Statute"). Sections 201.011(20) and 201.011(21) of the Texas Labor Code defines

             "temporary employee" and "temporary help firm" as follows:

                       (20) "Temporary employee" means an individual employed by a temporary help
                       firm for the purpose of being assigned to work for the clients of a temporary help
                       firm.
                                                            Page 28
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                                                                                                                                 530
                                                           20 FACTOR CHART
                                                Deposition Testimony of Worker Witnesses
                                              Sabala, Sifuentes, Chapman, Strahan, and Rojas

        Factor                     Patricia Sabala         Salvador Sifuentes       Erika Chapman            Kay Strahan           Rosa Rojas
 40 TAC Section 815.134              ExhibitC                  ExhibitD                ExhibitE               Exhibit F            Exhibit G

1. Instructions:                 Licensed Vocational     Health Force does not   She can work for        LVNs are             Doctors determine the
An Employee receives            Nurses ("LVNs") are      require a specific      other placement         subcontractors.      services performed by
instructions about when,        not committed to         schedule. 4             companies (like         They work when       the LVNs orRNs and
where and how the work          accepting                                        Health Force)           they want, if they   direct their work. 11
is performed.                   assignments from         Health Force does not   wherever she wants. 7   want, and where
An Independent                  Health Force. 1          set the hours                                   they want. 10        Health Force does not
Contractor does the job                                  worked. 5               She can apply at                             have doctors on
his or her own way with         Instructions regarding                           hospitals not                                staff. 12
few, if any, instructions as    services performed       Health Force does not   associated with
to the details or methods       come from the            supervise the work at   Health Force. 8
of the work.                    hospital directly. 2     the hospitals or
                                                         facilities. 6           Health Force does not
l. Instructions: An             LVN s can say "yes"                              supervise the LVN s
employee must comply            or "no" to a shift                               or Registered Nurses
with instructions about         offered by Health                                ("RNs") work at
when, where, and how to         Force. 3                                         facilities or
work. Even if no                                                                 hospitals. 9
instructions are given, the
control factor is present if
the employer has the right
to give instructions.

              1
                   Patricia Sabala Testimony, Tr. pp.43-44, 45.
              2
                   Patricia Sabala Testimony, Tr. pp.48.
              3
                   Patricia Sabala Testimony, Tr. pp.61-62.
              4
                   Salvador Sifuentes Testimony, Tr. p. 79.
              5
                   Salvador Sifuentes Testimony, Tr. p. 79.
              6
                   Salvador Sifuentes Testimony, Tr. p. 80.
              7
                  Erika Chapman Testimony, Tr. pp. 53-54.
              8
                  Erika Chapman Testimony, Tr. p. 54.
              9
                  Erika Chapman Testimony, Tr. pp. 57-58.
              10
                   Kay Strahan Testimony, Tr. p. 69.
              11
                   Rosa Rojas Testimony, Tr. p. 74.
              12
                   Rosa Rojas Testimony, Tr. p. 74.

                                                                                                                           EXHIBIT B 1251
2. Training:                 Health Force does         Health Force has not    Never took any           Doesn't recall any        Health Force would
                            not provide training. 13   given any training to   training or classes at   training provided by      provide an orientation
Employees are often                                    RNs.                    Health Force. 14         Health Force. 15          on some facilities. No
trained by a more                                                                                                                 other training
experienced                                                                                                                       provided. 16
Employee or are
required to attend
meetings or take
training courses.

An Independent
Contractor uses his
or her own methods
and thus need not
receive training from
the purchaser of those
services.

2. Training: An
employee is trained to
perform services in a
particular mam1er,
independent
contractors ordinarily
use their own
methods and receive
no training from the
purchasers of their
services.

3. Integration:             Never performed any        Never provided          Never performed          Did not spend much
Services of an              LVN services or other      services at Health      services at Health       time at the Health
Employee are usually        work at Health             Force's company         Force's office. 19       Force office. Mainly,
merged into the firm's      Force's office. 17         office. 18                                       would stop by to drop
overall operation; the                                                                                  off time sheets or pick
firm's success                                                                                          up a check. 20
depends on those
Employee services.
An Independent
Contractor's services
are usually separate
from the client's

               13
                    Patricia Sabala Testimony, Tr. p. 58.
               14
                    Erika Chapman Testimony, Tr. pp. 39-40.
               15
                    Kay Strahan Testimony, Tr. p. 97.
               16
                    Rosa Rojas Testimony, Tr. pp. 50-51.
               17
                    Patricia Sabala Testimony, Tr. p. 53.
               18
                    Salvador Sifuentes Testimony, Tr. p. 81.
               19
                    Erika Chapman Testimony, Tr. p. 59.
               2
                   °Kay Strahan Testimony, Tr. pp. 63-65.

               0848911000006
               375 - 1704437vl
                                                                                                                               EXHIBIT B 1252
business and are not
integrated or merged
into it.

3. Integration: An
employee's services
are integrated into the
business operations
because the services
are important to the
success or
continuation of the
business. This shows
that the employee is
subject to direction
and control.
Integration of
worker's services in
the business operation
of Health Force
generally indicated
that the worker is
subject to control or
direction. The
corporation Health
Force is principally
engaged in a nurse
placement business.
4. Services Rendered                            Could have a
Personally:                                     coworker take over
An Employee's                                   his shift, if needed. 21
services must be
rendered personally;
Employees do not
hire their own
substitutes or delegate
work to them.
A true Independent
Contractor is able to
assign another to do
the job in his or her
place and need not
perform services
personally.

4. Services Rendered

              21
                Salvador Sifuentes Testimony, Tr. pp. 46-47. In addition, Health Force's CEO Holly Alonzo testified at the Rule
              13 hearing:
                          5     Q. You said that some do have helpers or assistants?
                          6     A. They can.
                          7     Q. Well, do you know if they have them?
                          8     A. Yes.
                          9     Q. And how are you aware of that fact?
                          10    A. The nurses tell us.

             February 19, 2009 Holly Alonzo Rule 13 Hearing Testimony, Tr. p. 41, attached as Exhibit F; 2013 Response p. 18.

              0848911000006
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                                                                                                             EXHIBIT B 1253
Personally: An
employee renders
services personally.
This shows that the
employer is interested
in the methods as well
as the results.
5. Hiring,                                       Could have a
Su11ervising & Paying                            coworker take over
Hel11ers:                                        his shift, if needed. 22
An Employee may
act as a foreman for
the employer but, if
so, helpers are paid
with the employer's
funds.
Independent
Contractors select,
hire, pay and
supervise any helpers
used and are
responsible for the
results of the helpers'
labor.

5. Hiring Assistants:
An employee works
for an employer who
hires, supervises, and
pays assistants. An
independent
contractor hires,
supervises, and pays
assistants under a
contract that requires
him/her to provide
materials and labor
and to be responsible
only for the results.
Nurses caunot hire
assistants to do
patient care for them.

             22
                Salvador Sifuentes Testimony, Tr. pp. 46-47. In addition, Health Force's CEO Holly Alonzo testified at the Rue
              13 hearing:
                          5    Q. You said that some do have helpers or assistants?
                          6     A. They can.
                          7     Q. Well, do you know if they have them?
                           8    A. Yes.
                          9     Q. And how are you aware of that fact?
                          10    A. The nurses tell us.

             February 19,2009 Holly Alonzo Rule 13 Hearing Testimony, Tr. p 41; 2013 Response p. 18.

             0848911000006
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                                                                                                            EXHIBIT B 1254
6. Continuing             While providing           Able to work at other   LVNs and RNs can         Could have worked        Can refuse an
Relationshi11:            services for Health       hospitals other than    work for other           for other placement      assignment from
An Employee often         Force, she worked for     the ones Health Force   companies if they        companies or             Health Force. 33
continues to work for     other companies. 23       offered assignments     want. 29                 hospitals. 31
the same employer                                   at.27                                                                     Can work for other
month after month or      Not committed to                                  LVNs and RNs can         Declined employment      hospitals that do not
year after year.          accepting assignments     Has worked at places    apply for positions at   opportunities at         have a contract with
An Independent            from Health Force. 24     other than those        hospitals not            hospitals because he     Health Force. 34
Contractor is usually                               assignments offered     associated with          would lose the
hired to do one job of    Could refuse patient      by Health Force. 28     Health Force. 30         independence he had
limited or indefinite     assignments. 25                                                            at Health Force. 32
duration and has no
expectation of            Could say "yes" or
continuing work.          "no" to a shift offered
                          by Health Force. 26
6. Continuing
Relationshi11: An
employee has a
continuing
relationship with an
employer. A
continuing
relationship many
exist where work is
performed at
frequently recurring
although irregular
intervals.
7. Set Hours of                                     Health Force does not   Shifts are determined    "[I] provide my own      Hours for a shift are
Work:                                               require a specific      by the facility, not     schedule. They           predetermined by the
An Employee may                                     schedule. 35            Health Force; Health     [Health Force] do not    hospital. 39
work "on call" or                                                           Force does not set the   provide a schedule for
during hours and days                               Health Force does not   LVNs or RNs hours        me."3s                   Can refuse an
as set by the                                       set the hours           worked in a day. 37                               assignment. 40
employer.                                           worked. 36

             23
                  Patricia Sabala Testimony, Tr. p. 50.
             24
                  Patricia Sabala Testimony, Tr. pp. 43-45.
             25
                  Patricia Sabala Testimony, Tr. p. 61.
             26
                  Patricia Sabala Testimony, Tr. p. 62.
             27
                  Salvador Sifuentes Testimony, Tr. p. 77.
             28
                  Salvador Sifuentes Testimony, Tr. p. 77.
             29
                  Erika Chapman Testimony, Tr. p. 53.
             30
                  Erika Chapman Testimony, Tr. p. 54.
             31
                  Kay Strahan Testimony, Tr. pp. 77-78.
             32
                  Kay Strahan Testimony, Tr. pp. 77-78.
             33
                  Rosa Rojas Testimony, Tr. pp. 37-38.
             34
                  Rosa Rojas Testimony, Tr. pp. 63-64.
             35
                  Salvador Sifuentes Testimony, Tr. p. 79.
             36
                  Salvador Sifuentes Testimony, Tr. p. 79.

             0848911000006
             375 - 1704437vl
                                                                                                                           EXHIBIT B 1255
A true Independent                                                                                                          LVNs and RNs are in
Contractor is the                                                                                                           control of their own
master of his or her                                                                                                        schedule. 41
own time and works
the days and hours he
or she chooses.

7. Set Hours of
Work: An employee
has set hours or work
established by an
employer. An
independent
contractor is the
master of his or her
own time.
8. Full Time              While providing           Able to work at other   Can work for other       LVNs are               Can refuse an
Required:                 services for Health       hospitals other than    placement companies      subcontractors. They   assignment from
An Employee               Force, she worked for     the ones Health Force   (like Health Force)      work when they want,   Health Force. 51
ordinarily devotes        other companies. 42       offered assignments     wherever she wants. 47   if they want, and
full-time service to                                at.45                                            where they want. 49
the employer, or the      Not committed to                                  Can apply at hospitals
employer may have a       accepting                 Has worked at places    not associated with      Could have worked
priority on the           assignments from          other than those        Health Force. 48         for other placement
employee's time.          Health Force. 43          assignments offered                              companies or
A true Independent                                  by Health Force. 46                              hospitals. 50
Contractor carmot be      Could say "yes" or
required to devote        "no" to a shift offered
full-time service to      by Health Force. 44
one firm exclusively.

             37
                  Erika Chapman Testimony, Tr. pp. 55-57.
             38
                  Kay Strahan Testimony, Tr. pp. 38, 43-44.
             39
                  Rosa Rojas Testimony, Tr. pp. 37-38.
             40
                  Rosa Rojas Testimony, Tr. pp. 37-38.
             41
                  Rosa Rojas Testimony, Tr. pp. 64-65.
             42
                  Patricia Sabala Testimony, Tr. p. 50.
             43
                  Patricia Sabala Testimony, Tr. pp. 43-45.
             44
                  Patricia Sabala Testimony, Tr. p. 62.
             45
                  Salvador Sifuentes Testimony, Tr. p. 77.
             46
                  Salvador Sifuentes Testimony, Tr. p. 77.
             47
                  Erika Chapman Testimony, Tr. pp. 53-54.
             48
                  Erika Chapman Testimony, Tr. p. 54.
             49
                  Kay Strahan Testimony, Tr. p. 69.
             5
              °Kay Strahan Testimony, Tr. pp. 77-78.
             51
                  Rosa Rojas Testimony, Tr. pp. 37-38.

             0848911000006
             375 - 1704437vl
                                                                                                                           EXHIBIT B 1256
8. Full Time Work:
An employee
normally works full
time for an employer.
An independent
contractor can work
when and for whom
he or she chooses.
Nurses are worker 30,
40, and even 60 hours
a week this constitutes
full time.
9. Location where          Could say "yes" or        Has worked at places   Health Force would      LVNs are               Can tell Health Force
services 12erformed.       "no" to a shift offered   other than those       contact LVNs orRNs      subcontractors. They   Where she is going to
Employment is              by Health Force. 52       assignments offered    about different         work when they want,   work.6o
indicated if the                                     by Health Force. 54    assignments. 56 Could   if they want, and
employer has the right     Never performed any                              refuse a shift or       where they want. 59    Can refuse an
to mandate where           LVN services or           Never provided         assignment. 57                                 assignment from
serv1ces are               other work at Health      services at Health                                                    Health Force. 61
performed.                 Force's office. 53        Force's company        Never performed
Independent                                          office. 55             services at Health                             Can work for other
Contractors                                                                 Force's office. 58                             hospitals that do not
ordinarily work where                                                                                                      have a contract with
they choose. The                                                                                                           Health Force. 62
workplace may be
away from the client's
premises.

9. Work Done on
Premises: An
employee works on
the premises of an
employer, or works on
a route or at a location
designated by an
employer.

              52
                   Patricia Sabala Testimony, Tr. p. 62.
              53
                   Patricia Sabala Testimony, Tr. p. 53.
              54
                   Salvador Sifuentes Testimony, Tr. p. 77.
              55
                   Salvador Sifuentes Testimony, Tr. p. 81.
              56
                   Erika Chapman Testimony, Tr. p. 19.
              57
                   Erika Chapman Testimony, Tr. pp. 29-30.
              58
                   Erika Chapman Testimony, Tr. p. 59.
              59
                   Kay Strahan Testimony, Tr. p. 69.
              60
                   Rosa Rojas Testimony, Tr. pp. 66.
              61
                   Rosa Rojas Testimony, Tr. pp. 37-38.
              62
                   Rosa Rojas Testimony, Tr. pp. 63-64.

              0848911000006
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                                                                                                                       EXHIBIT B 1257
10. Orderor               Instructions regarding    Health Force does not   Health Force does not     Health Force does not   Doctors at the
Seguence Set:             a LVN's work come         supervise a RN s'       supervise the LVN s       direct LVN s how to     facilities/hospitals had
An Employee               from the hospital and     work.64                 or RNs at the             do their job. 66        the final say on how
performs services in      its doctors, not Health                           facilities. 65                                    patients are treated. 67
the order or sequence     Force. 63
set by the employer.
This shows control by
the employer.
A true Independent
Contractor is
concerned only with
the finished product
and sets his or her
own order or
sequence of work.

 10. Order or
Seguence Set:
Employee must
perform services in
the order or sequence
set by an employer.
This shows that the
employee is subject to
direction and control.
Nurses are not
permitted to follow
his/her own pattern of
work but rather must
follow the established
routines/schedules of
the facilities.
11. Oral or Written       No requirement that a     Only required to        Other than time                                   Reports regarding
Reports:                  weekly or monthly         report time and         sheets, not required to                           patient status updates
An Employee may be        report was turned into    licensing to Health     submit any reports to                             were provided to
required to submit        Health Force. 68          Force. 70               Health Force. 71                                  hospital staff and
regular oral or written                                                                                                       doctors, not Health
reports about the work    Only time sheets                                                                                    Force. 72
in progress.              were turned in. 69
An Independent
Contractor is usually

             63
                  Patricia Sabala Testimony, Tr. pp. 48, 59.
             64
                  Salvador Sifuentes Testimony, Tr. p. 80.
             65
                  Erika Chapman Testimony, Tr. pp. 57-58.
             66
                  Kay Strahan Testimony, Tr. pp. 131-132.
             67
                  Rosa Rojas Testimony, Tr. p. 54.
             68
                  Patricia Sabala Testimony, Tr. p. 58.
             69
                  Patricia Sabala Testimony, Tr. pp. 57-58.
             70
                  Salvador Sifuentes Testimony, Tr. p. 60.
             71
                  Erika Chapman Testimony, Tr. pp. 40-41.
             72
                  Rosa Rojas Testimony, Tr. pp. 54-55.

             0848911000006
             375 - 1704437vl
                                                                                                                          EXHIBIT B 1258
not required to submit
regular oral or written
reports about the work
in progress.

 ll. Re11orts:
Employee submits
reports to an
employer. This shows
that the employee
must account to the
employer for his or
her actions.
12. Payment by the                               Hospitals pay Health     Hospitals pay Health      Hospitals pay Tochril
Hour, Week or                                    Force and Health         Force and Health          and Tochril pays the
Month:                                           Force pays the RNs.      Force pays the LVN s      LVN s after taking out
An Employee is                                   Health Force keeps       or RNs, after keeping     a referral fee. 76
typically paid by the                            some of the money        a fee. 74
employer in regular                              paid by hospitals. 73
amounts at stated                                                         Rate of pay could be
intervals, such as by                                                     different based on the
the hour or week.                                                         hospital assignment. 75
An Independent
Contractor is
normally paid by the
job either a negotiated
flat rate or upon
submission of a bid.

12. Payments:
Employees are paid
by the hour, week or
month. Nurses are
paid through Health
Force.
13. Payment of            Health Force never     Registered nurses        Deducted business         Health Force does not    Pays for her own
Business & Travel         provided uniforms,     utilized by Health       expenses on federal       pay for CPR and          business expenses,
Ex11enses:                equipment,             Force pay for their      tax returns. 80           LVN licenses. 82         including gas and
An Employee's             medication, or other   own expenses. 78                                                            car. 84
business and travel       items that were used                            Never submitted           Provides his own
expenses are either       to work as a LVN. 77   He has deducted his      business expenses for     transportation. Not      She has deducted
paid directly or                                 expenses on federal      reimbursement form        reimbursed for any       expenses on her
reimbursed by the                                tax returns, including   Health Force. 81          business expenses by     federal tax return,
employer.                                        such items as                                      Health Force. 83         including for mileage,
Independent                                      uniforms,                                                                   uniforms, and
Contractors normally                             stethoscopes,                                                               cellphone. 85
pay all of their own                             cellphone, continuing

             73
                  Salvador Sifuentes Testimony, Tr. pp. 74-75.
             74
                  Erika Chapman Testimony, Tr. pp. 67-68.
             75
                  Erika Chapman Testimony, Tr. p. 71.
             76
                  Kay Strahan Testimony, Tr. p. 37.
             77
                  Patricia Sabala Testimony, Tr. p. 54.
             78
                  Salvador Sifuentes Testimony, Tr. pp. 84-85.

             0848911000006
             375 - 1704437vl
                                                                                                                           EXHIBIT B 1259
business and travel                              education classes,
expenses without                                 CPR certification,
reimbursement.                                   license fees, and
                                                 mileage. 79
13. Ex11enses: An
employee's business
and travel expenses
are paid by an
employer. This shows
that the employee is
subject to regulation
and control.
14. Furnishing Tools      Health Force never     Deducted uniform,         Purchased own            Provides his own        Deducted uniform and
& Egui11ment:             provided uniforms,     cellphone,and             equipment, including     transportation. Not     cellphone on federal
Employees are             equipment,             stethoscope on federal    blood pressure cuff,     reimbursed for any      tax return. 91
furnished all             medication, or other   tax returns. Health       stethoscope, and fax     business expenses by
necessary tools,          items that were used   Force does not            machine. 88              Health Force. 90
materials and             to work as a LVN. 86   provide these items. 87
equipment by their                                                         Deducted uniform,
employer.                                                                  stethoscope, and other
An Independent                                                             expenses on her
Contractor ordinarily                                                      federal tax return. 89
provides all of the
tools and equipment
necessary to complete
the job.

14. Tools and
Materials: An
employee is furnished
significant tools,
materials, and other
equipment by an
employer.

             80
                  Erika Chapman Testimony, Tr. p. 64.
             81
                  Erika Chapman Testimony, Tr. p. 65.
             82
                  Kay Strahan Testimony, Tr. p. 97.
             83
                  Kay Strahan Testimony, Tr. p. 54.
             84
                  Rosa Rojas Testimony, Tr. p. 47.
             85
                  Rosa Rojas Testimony, Tr. p. 72.
             79
                  Salvador Sifuentes Testimony, Tr. pp. 87-88.
             86
                  Patricia Sabala Testimony, Tr. p. 54.
             87
                  Salvador Sifuentes Testimony, Tr. pp. 87-88.
             88
                  Erika Chapman Testimony, Tr. pp. 38-39.
             89
                  Erika Chapman Testimony, Tr. pp. 64.
             9
              °Kay Strahan Testimony, Tr. p. 54.
             91
                  Rosa Rojas Testimony, Tr. p. 72.

             0848911000006
             375 - 1704437vl
                                                                                                                           EXHIBIT B 1260
15. Significant             Purchased uniforms,        Purchased a              Purchased equipment,     Invests in business by   Pays for her own
Investment:                 equipment (a               stethoscope and          including blood          buying uniforms,         business expenses,
An Employee                 stethoscope), and          cellphone for work as    pressure cuff,           cellphone, blood         including gas and
generally has little or     other items that were      a registered nurse. 94   stethoscope, and fax     pressure cuff,           car. 100
no investment in the        used to work as a                                   machine. 97              stethoscope, and
business. Instead, an       LVN. 92                    Provides his own                                  shoes. 98                She has deducted
Employee is                                            transportation. 95                                                         expenses on her
economically                She paid for licenses                                                        Provides own             federal tax return,
dependent on the            LVN s are required to      He has deducted his                               transportation to        including for mileage,
employer.                   have. 93                   expenses on federal                               assignments. 99          uniforms, and
True Independent                                       tax returns, including                                                     cellphone. 101
Contractors usually                                    such items as
have a substantial                                     uniforms,
financial investment                                   stethoscopes,
in their independent                                   cellphone, continuing
business.                                              education classes,
15. Investment: An                                     CPR certification,
independent                                            license fees, and
contractor has a                                       mileage. 96
significant investment
in the facilities he/she
uses in performing
services for someone
else.
16. Realize Profit or       If her shift was           He would incur a loss    If her shift was         Could lose money if      Took a loss and end
Loss:                       cancelled by a             for the day if a shift   cancelled, she was       hospital cancels her     up paying back
An Employee does            hospital, it could         was cancelled. 103       only paid for 2 hours.   shift. 105               taxes. 106
not ordinarily realize      result in a loss for the                            She considers this to
a profit or loss in the     day. 102                                            be a loss for the
business. Rather,                                                               day.1o4
Employees are paid
for services rendered.

              92
                    Patricia Sabala Testimony, Tr. pp. 39, 54.
              93
                    Patricia Sabala Testimony, Tr. p. 58.
              94
                    Salvador Sifuentes Testimony, Tr. p. 56.
              95
                    Salvador Sifuentes Testimony, Tr. p. 54.
              96
                    Salvador Sifuentes Testimony, Tr. pp. 87-88.
              97
                    Erika Chapman Testimony, Tr. pp. 38-39.
              98
                    Kay Strahan Testimony, Tr. pp. 56-58.
              99
                    Kay Strahan Testimony, Tr. p. 54.
              100
                    Rosa Rojas Testimony, Tr. p. 47.
              101
                    Rosa Rojas Testimony, Tr. p. 72.
              102
                    Patricia Sabala Testimony, Tr. pp. 53-54.
              103
                    Salvador Sifuentes Testimony, Tr. p. 81.
              104
                    Erika Chapman Testimony, Tr. pp. 69-70.
              105
                    Kay Strahan Testimony, Tr. pp. 94-95.
              106
                    Rosa Rojas Testimony, Tr. pp. 32-33.

              0848911000006
              375 - 1704437vl
                                                                                                                                EXHIBIT B 1261
An Independent
Contractor can either
realize a profit or
suffer a loss
depending on the
management of
expenses and
revenues.

 16. Profit or Loss:
An independent
contractor can make a
profit or suffer a loss.
 17. Working For             While providing         Has worked at places   Can work for other       LVNs are               Can work for other
More Than One Firm           services for Health     other than those       placement companies      subcontractors. They   hospitals that do not
At A Time:                   Force, she worked for   assignments offered    (like Health Force)      work when they want,   have a contract with
An Employee                  other companies. 107    by Health Force. 108   wherever she             if they want, and      Health Force. 114
ordinarily works for                                                        wants. 109               where they want. 112
one employer at a
time and may be                                                             Can apply at hospitals   Could have worked
prohibited from                                                             not associated with      for other placement
joining a competitor.                                                       Health Force. 110        companies or
An Independent                                                                                       hospitals. 113
Contractor often                                                            Never worked
works for more than                                                         exclusively for Health
one client or firm at                                                       Force.m
the same time and is
not subject to a non-
competition rule.

17. Works For More
Than One Person or
Firm: An
independent
contractor gives
his/her services to two
or more unrelated
persons or firms at the
same time.

               107
                     Patricia Sabala Testimony, Tr. p. 50.
               108
                     Salvador Sifuentes Testimony, Tr. p. 77.
               109
                     Erika Chapman Testimony, Tr. p. 53-54.
               110
                     Erika Chapman Testimony, Tr. p. 54.
               111
                     Erika Chapman Testimony, Tr. p. 67.
               112
                     Kay Strahan Testimony, Tr. p. 69.
               113
                     Kay Strahan Testimony, Tr. pp. 77-78.
               114
                     Rosa Rojas Testimony, Tr. pp. 63-64.

              0848911000006
              375 - 1704437vl
                                                                                                                           EXHIBIT B 1262
18. Making Service                                He could spend his     Does not spend          No advertising
Available to the                                  own money on           money on advertising,   budget. He will
Public:                                           advertising, but       but that is her         sometimes buy gifts
An Employee does                                  chooses not to. 115    decision. 116           for coworkers as a
not make his or her                                                                              form of
services available to                                                                            advertising. 117
the public except
through the
employer's company.
An Independent
Contractor may
advertise, carry
business cards, hand
out a shingle or hold a
separate business
license.

18. Offer Services to
General Public: An
independent
contractor makes
his/her services
available to the
general public or
more unrelated
persons or firms at the
same time.
19. Right to
Discharge Without
Liability: ill.
An Employee can be
discharged at any time
without liability on
the employer's part.
If the work meets the
contract terms, an
Independent
Contractor carmot be
fired without liability
for breach of contract.

19. Right to Fire: An
employee can be fired
by an employer. An

              115
                    Salvador Sifuentes Testimony, Tr. p. 85.
              116
                    Erika Chapman Testimony, Tr. p. 76.
              117
                    Kay Strahan Testimony, Tr. pp. 40-41.
              118
                    At the Rule 13 hearing, Health Force's CEO Holly Alonzo testified:
                          13     Q. If you were to discharge a nurse in the middle of the job, could that nurse
                          14 sue your company and hold you financially liable?
                          15     A. We don't discharge, so, they are aware that there is no relationship; just
                          16 come and go, work as you please.

             February 19, 2009 Holly Alonzo Rule 13 Hearing Testimony, Tr. p. 39, attached as Exhibit F; 2013 Response p. 27.

              0848911000006
              375 - 1704437vl
                                                                                                                       EXHIBIT B 1263
independent
contractor cannot be
fired so long as he or
she produces a result
that meets the
specifications of the
contract.
20. Right To Quit                                                                                                      Once an assignment is
Without Liabili!J'.: 119                                                                                               accepted, a LVN or
An Employee may                                                                                                        RN is expected to
quit work at any time                                                                                                  perform. 120
without liability on
the Employee's part.
An Independent
Contractor is legally
responsible for job
completion and, on
quitting, becomes
liable for breach of
contract.

20. Right To Quit:
An employee can quit
his/her job at any time
without incurring
liability. An
independent
contractor usually
agrees to complete a
specific job and is
responsible for its
satisfactory
completion, or is
legally obligated to
make good for failure
to complete it.

               119
                     At the Rule 13 hearing, Health Force's CEO Holly Alonzo testified:
                           25     Q. Ifthe worker accepts a shift as offered by the hospital, is that worker
                            1 expected to work that shift?
                            2     A. They're expected, but, that, at many times, cannot happen, or does not happen.
                            3 They have the right to accept a shift and cancel it.
                            4     Q. What happens if they do cancel?
                            5     A. They don't get paid, obviously, for the shift, but, there's no repercussions
                            6 as far as discipline.
                                                                              ***
                            9    Q. If a nurse quits in the middle of the job, can your company sue that nurse and
                           10 hold that nurse financially liable?
                           11    A. No. But, I mean, as a licensed individual, they can get in big trouble; it's
                           12 abandonment of patients. But, you know, that's through the state.

              February 19, 2009 Holly Alonzo Rule 13 Hearing Testimony, Tr. pp. 37-39, attached as Exhibit F; 2013 Response
              p. 28.
               120
                     Rosa Rojas Testimony, Tr. p. 38.

               0848911000006
               375 - 1704437vl
                                                                                                                      EXHIBIT B 1264
0848911000006
375 - 1704437vl
                  EXHIBIT B 1265
                                           DC                BK15252 PG1272
                                                                                       Filed in The District Court
                                                                                        of Travis County, Texas

                                      CAUSE NO. D-1-GN-09-001957

    TOCHRIL, INC.,                                                        IN THE DISTRICT COURT

         Plaintiff,

    v.                                                                        53rd JUDICIAL DISTRICT

    TEXAS WORKFORCE
    COMMISSION,
                                                                              TRAVIS COUNTY, TEXAS
               Defendants.

    ORDERS ON THE TEXAS WORKFORCE COMMISSION'S OBJECTIONS TO
             PLAINTIFF'S SUMMARY JUDGMENT EVIDENCE

             After considering the Texas Workforce Commission's (TWC) objections to
Plaintiffs summary-judgment evidence, the Court orders as follows:

I.           OBJECTIONS TO PAGES 13-28 OF PLAINTIFF'S RESPONSE TO
             MOTION FOR SUMMARY JUDGMENT.
A.           Statements attributed to Alonzo and Pappillion do not reference summary
             judgment evidence.

             The TWC object to Plaintiffs attempt to introduce evidence in its response to the

TWC motion for summary judgment that is not supported by references to admissible

summary judgment evidence. No statement by Alonzo or Pappillion include citations to

specific supporting evidence.

             A party cannot rely on factual statements contained in its own motion for summary

judgment as proof. 1 A party may not use general citations to support a summary judgment

1
    Hidalgo v. Surety S&L Ass 'n, 462 S.W.2d 540, 545 (Tex. 1971 ).

                                                                                                           /~·--
                                                                                                             .. :.-...
                                                j_                                                            :.i\ '.)
                                                                                                                     j

                                                                                                                     I
                                                                                                               _/.

                                                                                                                1505
                                            DC               BK15252 PG1273

motion. 2 When presenting summary-judgment proof, a party must specifically identify the

supporting proof that it wants the court to consider; generally referencing the documents

does not relieve the party of pointing out to the court where in the documents the evidence

can be found. 3 Courts must not consider summary judgment evidence that is offered

without guidance as to where specific support can be found. 4 For summary judgment
evidence to be considered, the motion should at least have a substantial number of citations

to that evidence. 5

           The Alonzo and Pappillion columns do not include any citations to evidence

whatsoever. Because the statements contained in those columns do not contain citations to

evidence as required, the TWC objects to and move to strike those columns from Plaintiffs
response to the TWC's motion for summary judgment.

ORDER:_L
Sustained                             Overruled- - -

B.         Alonzo and Pappillion have not provided proper witness statements.

           The TWC objects to the Alonzo and Pappillion columns on the grounds that the

statements contained therein do not qualify as an affidavit or an unsworn declaration and

thus are incompetent summary-judgment evidence. The statements attributed to Alonzo
2
    Rogers v. Ricane Enters., Inc., 772 S.W.2d 76, 81 (Tex. 1989).
3
    Arredondo v. Rodriguez, 198 S.W.3d 236,238-39 (Tex. App.-San Antonio 2006, no pet.).
4
    Guthrie v. Suiter, 934 S.W.2d 820, 826 (Tex. App.-Houston [1st Dist.] 1996, no pet.).
5
    Barraza v. Eureka Co., 25 S.W.3d 225, 229-30 (Tex. App.-EI Paso 2000, pet. denied)

                                                     2
                                                                                               1506
                                           DC                BK15252 PG1274

and Pappillion do not comply with Texas Government Code section 312.011(1), which

defines an affidavit as "a statement in writing of a fact or facts signed by the party making

it, sworn to before an officer authorized to administer oaths, and officially certified to by

the officer under his seal of office. " 6 The statements also fails as an unsworn declaration

because it does not comply with Texas Civil Practice & Remedies Code section 132.001
because none are made under penalty of perjury.

           Because the Alonzo and Pappillion columns are a series of unsworn statements, they

are not competent summary-judgment proof. 7 Because the statements are not competent

summary-judgment proof, the TWC objects to those statements and moves to strike them.

ORDER:_j
Sustained                            Overruled- - -

C.         Objections to summary of testimony under Tex. R. Evid. 1006

           The TWC further objects to Plaintiff's use of summaries instead of specific citations
to summary judgment evidence. On page 13, footnote 30, Plaintiff explains that, pursuant

to Tex. R. Evid. 1006, it is not providing citations to summary judgment evidence from a

hearing on its administrative appeal before the TWC because the transcript is too

voluminous. Instead, Plaintiff summarizes Alonzo's and Pappillion's testimony from that

hearing and presents that summary in the chart on pages 13-28.

6
    Mansions in the Forest, L.P. v. Montgomery Cnty., 365 S.W.3d 314,316-17 (Tex. 2012).
7
    Jd; Perkins v. Crittenden, 462 S.W.2d 565, 568 (Tex. 1970).

                                                       3
                                                                                                   1507
                                            DC                BK15252 PG1275

          Rule 1006 applies to documents, not testimony. 8

ORDER:               I
Sustained~                           Overruled- - -

           Also, the evidence Plaintiff attempts to summarize 1s testimony Alonzo and

Pappillion provided under oath. Any "summary" of that testimony is hearsay. Hearsay

statements are not competent summary-judgment evidence. 9

ORDER:

Sustained- - -                       Overruled- - -

           In addition, allowing Plaintiff to take advantage of Rule 1006 in this fashion would

undermine long-standing rules requiring parties to specifically cite summary judgment

evidence. When presenting summary-judgment proof, a party must specifically identify the

supporting proof that it wants the court to consider. 10 Summaries do not excuse Plaintiff of

its obligation to specifically identify evidence that supports its arguments.

ORDER:

Sustained     _L                     Overruled- - -

8
 United States v. Winn, 948 F .2d 145, 158 (5th Cir. 1991) (Summary of purely testimonial evidence is not within
purview of rule which provides that contents of voluminous writings, may be presented in form of chart, summary
or calculation.)
9
    Kerlin v. Arias, 274 S.W.3d 666, 668 (Tex. 2008); Southland Corp. v. Lewis, 940 S.W.2d 83, 85 (Tex. 1997); Fid
& Cas. Co. v. Burts Bros., 744 S.W.2d 219, 224 (Tex. App.-Houston [1st Dist.] 1987, writ denied).
10
     Arredondo v. Rodriguez, 198 S.W.3d 236, 238-39 (Tex. App.-San Antonio 2006, no pet.).

                                                                                                                       1508
                                           DC               BK15252 PG1276

           Finally, even if Rule 1006 applied to transcripts of testimony, to take advantage of

Rule 1006, Plaintiff must prove that records are (1) voluminous; (2) have been made

available to the opponent for inspection; and (3) are admissible. II Plaintiff has established

none of these elements. Thus it cannot rely on Rule 1006, even if that rule applied to

testimony offered as summary judgment evidence.
ORDER:

Sustained          /                 Overruled- - -
                                                                                                  /
                                                                                                        ~
                                                                                                        f'o
                                                                                                                      (} l'}oi,.J
                                                                                                                            lL
                                                                                                                                 ~?
D.         Alonzo and Pappillion have not demonstrated that they                                 ave personal          J'        \' \
           knowledge of the relevant facts.                                                                            fl"ei?J               d
                                                                                                                                         v
           The statements by Alonzo and Pappillion fail to establis                  at the facts related to the             ~a-~

providers' work are within Alonzo's and Pappillion'                      ersonal knowledge. A witnesses'                &t       ~~o(
status cannot establish personal knowled .                     2
                                                                   Neither Alonzo nor Pappillion have                    (   J\) ."~1'1
                                                                                                                                 \,.,•
established that they have any perso                knowledge of the provider's working condition. 13                   ~?                   -of
                                                                                                                             \~' (/jt
           The TWC objects to s           ements made by Alonzo and Pappillion on the ground that                           ovj e.-~~~
the testimony is not b ed on personal knowledge. Testimony is not competent summary-                                     ~0                  y
                                                                                                                              Y"vJV
                       nee unless evidence shows that it is based on the witness's personal                                  G

11
     Duncan Dev., Inc. v. Haney, 634 S.W.2d 811, 812-13 (Tex. 1982)
                                                                                                                  @
12
     Spradlin v. State, 100 S.W.3d 372,381, (Tex.App.-Houston [1st Dist.] 2002, no pet.).
13
     Tex. R. Civ. P. 166a.
14
  Tex. R. Civ. P. 166a(f); Tex. R. Evid. 602; Kerlin v. Arias, 274 S.W.3d 666,668 (Tex. 2008); Ryland Grp., Inc. v.
Hood, 924 S.W.2d 120, 122 (Tex. 1996); Garner v. Long, 106 S.W.3d 260,267 (Tex. App.-Fort Worth 2003, no
pet.); Geiselman v. Cramer Fin. Grp., Inc., 965 S.W.2d 532, 537 (Tex. App.-Houston [14th Dist.] 1997, no writ).

                                                                                                                              1509
                                           DC               BK15252 PG1277

II.        OBJECTIONS TO DECLARATION OF MICHAEL SEALE

           Exhibit A to Plaintiffs response to the TWC's motion for summary judgment is an

affidavit of Plaintiffs counsel, Michael Seale. It does not present competent summary

judgment evidence for the following reasons.

A.         The Court should strike the Seale affidavit because a party's attorney cannot
           act as a witness regarding disputed factual matters.

            The TWC objects to the Seale affidavit on the grounds that the testimony of

Plaintiffs attorney is not proper summary-judgment evidence. A person who is an

attorney for one of the parties cannot act as a witness about disputed factual matters. 64 In

paragraph 3 of Seale's declaration, he makes statements regarding an Internal Revenue

Service audit of Plaintiff. In paragraph 4 of the Seale declaration, he makes statements

regarding a Department of Labor investigation of Plaintiff.

            Based on those paragraphs, Plaintiff argues that there is a fact issue as to whether
the TWC properly classified the providers as Plaintiffs employees. Because Seale's

statements are not competent summary-judgment evidence, the Court should strike them.

ORDER:L
sustained

B.
                           ~Xicroverruled a.~              -1-o   861 S.W.2d 869, 870 (Tex. 1993).

                                                                                                       1510
                                          DC               BK15252 PG1278

probative value in this case. To be admissible, evidence must be relevant. 65 Because the

evidence is not competent summary-judgment evidence, the Court should strike it.

ORDER:             /
Sustained- - -                       Overruled- - -

C.         The Seale affidavit contains hearsay.

           The TWC objects to paragraphs 3 and 4 of the Seale affidavit on the grounds that
they contain hearsay. Those paragraphs contain detailed summaries of audits by the IRS

and DOL that are not supported by admissible evidence. Hearsay statements are not

competent summary-judgment evidence. 66

           Because hearsay statements are not competent summary-judgment evidence, the

::::~uld/strike
             the:rp.

Sustained                            Overruled- - -
D.         Exhibit A(l) to the Seale affidavit is not properly authenticated.

           The TWC objects to Exhibit A(l) to the Seale affidavit on the ground that it has not

been properly authenticated. Seale's affidavit does not contain the proper predicate for
65
     Tex. R. Evid. 402; see E.!. duPont de Nemours & Co. v. Robinson, 923 S.W.2d 549, 556 (Tex. 1995).
66
  Kerlin v. Arias, 274 S.W.3d 666, 668 (Tex. 2008) (affidavits); Southland Corp. v. Lewis, 940 S.W.2d 83, 85 (Tex.
1997) (same); Fid & Cas. Co. v. Burts Bros., 744 S.W.2d 219, 224 (Tex. App.-Houston [1st Dist.] 1987, writ
denied) (same).

                                                                                                                     1511
                                         DC                BK15252 PG1279

admissibility and the evidence was filed without an affidavit verifying its authenticity.

Evidence that is not properly authenticated is not competent summary-judgment

evidence. 67 Because the evidence is not competent summary-judgment evidence, the Court

should strike it.

ORDER:
Sustained- - -

III.    OBJECTIONS TO EXHffiiT E

        Plaintiff attached 20 declarations as Exhibit E to its response to the TWC's motion

for summary judgment. The declarations are identical in every respect, save for

handwritten portions at the beginning and end of the declarations. The TWC objects to

paragraphs in those declarations as follows

A.      The declarations contain legal conclusions.

        The TWC objects to this paragraph on the grounds that it is a legal conclusion.

Witnesses must state facts and cannot merely recite legal conclusions. 68 The TWC

objects to the following paragraphs on that basis

67
   Blanche v. First Nationwide Mortg. Corp., 74 S.W.3d 444,451-52 (Tex. App.-Dallas 2002, no pet.); Banowsky
v. State Farm Mut. Auto. Ins. Co., 876 S.W.2d 509, 513 (Tex. App.-Amarillo 1994, no writ); see, e.g., Seidner v.
Citibank (S.D.) NA., 201 S.W.3d 332, 334-35 (Tex. App.-Houston [14th Dist.] 2006, pet. denied) (business-record
affidavit must meet requirements ofTex. R. Evid. 902(10)); Cottrell v. Carrillon Assocs., Ltd., 646 S.W.2d 491, 494
(Tex. App.-Houston [1st Dist.] 1982, writ refd n.r.e.) (affidavit did not lay proper predicate required by Business
Records Act).
68
  Brownlee v. Brownlee, 665 S.W.2d Ill, 112 (Tex. 1984). 801 Nolana, Inc. v. RTC Mortg. Trust, 944 S.W.2d 751,
754 (Tex.App-Corpus Christi, 1997, writ denied.). McDuffv. Chambers, 895 S.W.2d 492, 500 (Tex. App.-Waco
1995, writ denied).

                                                                                                                      1512
                             DC           BK15252 PG1280

         5.       I am a self-employed business person and an
                  independent contractor.

ORDER:_/
Sustained               Overruled.___

         7.       I am not an employee of Health Force.

ORDER:

                        Overruled- - -
         10.      Under the terms of the Independent Contractor
                  Agreement I signed with Health Force, if either party
                  seeks to terminate the contract, it must provide

~:::~_/vane:::~:                   notice or be liable for damages.
         11.      My contractual relationship with Health Force
                  recognizes that I may perform independent contractor
                  services for more than one company at a time and I am
                  not prevented from doing so.

ORDER:        /

Sustained_£             Overruled._ __

                                                                          1513
                             DC            BK15252 PG1281

            18.   Health Force does not have the right to control the
                  details of or the manner in which I perform my services.
                  Health Force cannot delegate control over the details of
                  or the manner in which I perform my services.

ORDER:

Sustained   /
            21.
                         Overruled- - -

                  Health Force does not require me to personally perform
                  my services. I can hire additional or substitute persons
                  to perform services for Health Force's clients or assist
                  me in providing the services.

::~n:dL Overruled___
            22.   Health Force reports payments made to me on a federal
                  tax Form I 099-MISC. Because I am not an employee,
                  Health Force does not deduct Social Security, Medicare
                  or withhold any taxes from the payments made to me. I
                  am responsible for paying my all taxes. I am responsible
                  for providing my own liability, auto and health
                  insurance. I am not able to submit a claim for
                  unemployment benefits against Health Force because I
                  am not employed by Health Force.

ORDER:
                         Overruled- - -

                                            /0
                                                                             1514
                                         DC                BK15252 PG1282

                 23.      I am not eligible for employee benefits provided by
                          Health Force to its employees, such as bonuses, paid
                          vacation, or sick pay.

ORDER:

Sustained   _L_                              , ~     \
                       ..e..J(fOverruled_____!__[ nc- :           'f \1:> \c. IJ   f(l" « H ~    CJ 0
                                                                                                        lz\\J_-          cHl
                                                                                                                            t
                                                                                                                                      J
                 25.      Health Force reported no wages for me because I am not                        ()() }-      a.£.-hJfl,\J)'
                          an employee and did not earn wages.                                            {"G Cc ', Vc::...        J, / «
ORDER:L                                                                                                              b   t_ )'\      'fz:,   I

Sustained                          Overruled- - -

B.      The Declarations contain factual conclusions.

        The TWC objects to statements made in the Exhibit E declarations on the ground

that they contain factual conclusions. A factual conclusion without supporting facts is not

competent summary-judgment evidence. 69 Because these statements are not competent

summary-judgment evidence, the Court should strike them.
                 6.       I work for myself and consider Health Force to be my
                          agent and marketing tool because Health Force brings
                          me work opportunities without any effort on my part.
ORDER:L
Sustained                          Overruled" - - -

69
  See Ryland Grp., Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996) (affidavits); Hovorka v. Cmty. Health Sys., Inc.,
262 S.W.3d 503,511 (Tex. App.--El Paso 2008, no pet.) (deposition testimony); see, e.g., Haynes v. City of
Beaumont, 35 S.W.3d 166, 178 (Tex. App.-Texarkana 2000, no pet.) (affidavit that plaintiff was fired because of
unacceptable behavior was factual conclusion and incompetent as summary-judgment evidence); Rizkallah v.
Conner, 952 S.W.2d 580,587-88 (Tex. App.-Houston [1st Dist.] 1997, no writ) (affidavit that defendant caused
problem with plaintiff's car by steam cleaning engine was factual conclusion and incompetent as summary-
judgment evidence).

                                                    II
                                                                                                                                  1515
                                            DC            BK15252 PG1283

            8        I am responsible for my own profits and losses.
ORDER:             (' I\          II ,                            l{     I
                  .r     '"'t...    :f (IV'l">: ~   ~ """c:. , (\. '>        c..'
                                                                          ~ \-r s. 0 • .               I
Sustained                               Overruled   v/ ; ~ fl"~ .. Y\ ... h-/~Ac_ )'lit"> ~orN.- C{,t, J,
                                                       b c. md uc.J- +-o C(f-l..-c..c....~- i: nc.o ~ flo+
            10.        I did not agree to a set t~e period for providing my              :pro~~' J-
                       services to Health Force's clients.                                     ~.
ORDER:

Sustained- - -                          Overruled   /                                        0£j
            11.        I am allowed to perform services as an independent
                       contractor for companies that are not clients of Health
                       Force. I am not required to perform services for clients

ORDER:        +o
            a.~
      I /i~J~!'t\J~.rt rOverruled
                                                    L
                       of Heath Force on a full-time basis.

Sustaine~                     L                            a~ h.<- f'"v- \ ~ t:
            e6'"f\-\l ctc:.   't1   r
            14.        Health Force does not set or require that I work a
                       particular schedule for performing my services.
ORDER:

Sustained- - -                          Overruled   _L
            17.        Health Force does not supervise my performances of
                       services.           /
ORDER:
Sustained- - -                          Overruled___JL_

                                                    IZ--
                                                                                                     1516
                                 DC            BK15252 PG1284

                18.   Health Force does not have the right to control the
                      details of or the manner in which I perform my services.
                      Health Force cannot delegate control over the details of
                      or the manner in which I perform my services.
ORDER:

Sustained   I                Overruled- - -

                21.   Health Force does not require me to personally perform
                      my services. I can hire additional or substitute persons
                      to perform services for Health Force's clients or assist
                      me in providing the services.
ORDER:

Sustained   I                Overruled   I

                                                                                 1517
                                                    DC            BK15240 PG794

                                                                                          Filed in The D!st;ict Court
                                                                                           of Travis County, Texas

                                                                                                AUG 2 6 2015        0-
                                              CAUSE NO. D-1-GN-09-001957                At__}_///{               ~(I
                                                                                         Veiva L. Price, District Clerk
      TOCHRIL, INC.,                                                          IN THE DISTRICT COURT

           Plaintiff,

      v.                                                                          53rct JUDICIAL DISTRICT

      TEXAS WORKFORCE
      COMMISSION,
                                                                                  TRAVIS COUNTY, TEXAS
                  Defendants.

                   ORDER GRANTING TEXAS WORKFORCE COMMISSION'S
                          MOTION FOR SUMMARY JUDGMENT

               On August 20, 2015, the Court considered the Texas Workforce Commission's
    (TWC) Motion for Summary Judgment. After considering the summary judgment

    evidence, arguments presented, the pleadings, the response, the reply, the affidavits, the

    objections and other evidence on file, the Court GRANTS the TWC's motion for summary

    judgment.

               IT IS THEREFORE, ORDERED, ADJUDGED AND DECREED that the
    TWC's Motion for Summary Judgment is GRANTED; that Plaintifftakes nothing on any

     claim against the TWC; and that Plaintiff's case is dismissed, in its entirety, with prejudice.

    All costs shall be borne by the party incurring same. This is a final judgment disposing of

     all claims and all parties. All other relief not herein granted is denie

     SIGNED this day,              A., z~ , vn                    ...:;;.-~;;:,1~~=---J'-+-_ ____,r---
                                                           2_o_Is_.

111111111111111111111111111111111111111111111111111 \Ill
004186315
                                                                                                                          1518
§ 815.134. Employment Status: Employee or Independent..., 40 TX ADC § 815.134

     KeyCite Yellow Flag - Negative Treatment
Proposed Regulation

  Texas Administrative Code
    Title 40. Social Services and Assistance
      Part 20. Texas Workforce Commission
         Chapter 815. Unemployment Insurance
           Subchapter C. Tax Provisions

                                                        40 TAC § 815.134
                                                Tex. Admin. Code tit. 40, § 815.134

                            § 815.134. Employment Status: Employee or Independent Contractor

                                                           Currentness

Subject to specific inclusions and exceptions to employment enumerated in Chapter 201 of the Act, the Commission shall use
the guidelines referenced in § 821.5 of this title as the official guidelines for use in determining employment status.

Credits
Source: The provisions of this § 815.134 adopted to be effective February 19, 2007, 32 TexReg 628.

Current through 40 Tex.Reg. No. 9012, dated December 11, 2015, as effective on or before December 18, 2015

40 TAC § 815.134, 40 TX ADC § 815.134

 End of Document                                                     © 2015 Thomson Reuters. No claim to original U.S. Government Works.

                 © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                  1
§ 821.5. Employment Status: Employee or Independent Contractor, 40 TX ADC § 821.5

     KeyCite Yellow Flag - Negative Treatment
Proposed Regulation

  Texas Administrative Code
    Title 40. Social Services and Assistance
      Part 20. Texas Workforce Commission
         Chapter 821. Texas Payday Rules
           Subchapter A. General Provisions

                                                        40 TAC § 821.5
                                                Tex. Admin. Code tit. 40, § 821.5

                              § 821.5. Employment Status: Employee or Independent Contractor

                                                          Currentness

The Commission adopts the following form, Form C-8, as its official guideline for use in determining employment status.

                 © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                      1
§ 821.5. Employment Status: Employee or Independent Contractor, 40 TX ADC § 821.5

Credits
Source: The provisions of this § 821.5 adopted to be effective June 1, 1998, 23 TexReg 5732; amended to be effective March
13, 2007, 32 TexReg 1328.

Current through 40 Tex.Reg. No. 9012, dated December 11, 2015, as effective on or before December 18, 2015

40 TAC § 821.5, 40 TX ADC § 821.5

End of Document                                                 © 2015 Thomson Reuters. No claim to original U.S. Government Works.

              © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                2
Rule 166a. Summary Judgment, TX R RCP Rule 166a

  Vernon's Texas Rules Annotated
    Texas Rules of Civil Procedure
      Part II. Rules of Practice in District and County Courts
        Section 8. Pre-Trial Procedure (Refs & Annos)

                                           TX Rules of Civil Procedure, Rule 166a

                                               Rule 166a. Summary Judgment

                                                          Currentness

(a) For Claimant. A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory judgment
may, at any time after the adverse party has appeared or answered, move with or without supporting affidavits for a summary
judgment in his favor upon all or any part thereof. A summary judgment, interlocutory in character, may be rendered on the
issue of liability alone although there is a genuine issue as to amount of damages.

(b) For Defending Party. A party against whom a claim, counterclaim, or cross-claim is asserted or a declaratory judgment
is sought may, at any time, move with or without supporting affidavits for a summary judgment in his favor as to all or any
part thereof.

(c) Motion and Proceedings Thereon. The motion for summary judgment shall state the specific grounds therefor. Except
on leave of court, with notice to opposing counsel, the motion and any supporting affidavits shall be filed and served at least
twenty-one days before the time specified for hearing. Except on leave of court, the adverse party, not later than seven days
prior to the day of hearing may file and serve opposing affidavits or other written response. No oral testimony shall be received
at the hearing. The judgment sought shall be rendered forthwith if (i) the deposition transcripts, interrogatory answers, and other
discovery responses referenced or set forth in the motion or response, and (ii) the pleadings, admissions, affidavits, stipulations
of the parties, and authenticated or certified public records, if any, on file at the time of the hearing, or filed thereafter and
before judgment with permission of the court, show that, except as to the amount of damages, there is no genuine issue as to any
material fact and the moving party is entitled to judgment as a matter of law on the issues expressly set out in the motion or in an
answer or any other response. Issues not expressly presented to the trial court by written motion, answer or other response shall
not be considered on appeal as grounds for reversal. A summary judgment may be based on uncontroverted testimonial evidence
of an interested witness, or of an expert witness as to subject matter concerning which the trier of fact must be guided solely by
the opinion testimony of experts, if the evidence is clear, positive and direct, otherwise credible and free from contradictions
and inconsistencies, and could have been readily controverted.

(d) Appendices, References and Other Use of Discovery Not Otherwise on File. Discovery products not on file with the
clerk may be used as summary judgment evidence if copies of the material, appendices containing the evidence, or a notice
containing specific references to the discovery or specific references to other instruments, are filed and served on all parties
together with a statement of intent to use the specified discovery as summary judgment proofs: (i) at least twenty-one days
before the hearing if such proofs are to be used to support the summary judgment; or (ii) at least seven days before the hearing
if such proofs are to be used to oppose the summary judgment.

(e) Case not Fully Adjudicated on Motion. If summary judgment is not rendered upon the whole case or for all the relief
asked and a trial is necessary, the judge may at the hearing examine the pleadings and the evidence on file, interrogate counsel,

                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              1
Rule 166a. Summary Judgment, TX R RCP Rule 166a

ascertain what material fact issues exist and make an order specifying the facts that are established as a matter of law, and
directing such further proceedings in the action as are just.

(f) Form of Affidavits; Further Testimony. Supporting and opposing affidavits shall be made on personal knowledge, shall
set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the
matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto
or served therewith. The court may permit affidavits to be supplemented or opposed by depositions or by further affidavits.
Defects in the form of affidavits or attachments will not be grounds for reversal unless specifically pointed out by objection by
an opposing party with opportunity, but refusal, to amend.

(g) When Affidavits Are Unavailable. Should it appear from the affidavits of a party opposing the motion that he cannot for
reasons stated present by affidavit facts essential to justify his opposition, the court may refuse the application for judgment
or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make
such other order as is just.

(h) Affidavits Made in Bad Faith. Should it appear to the satisfaction of the court at any time that any of the affidavits
presented pursuant to this rule are presented in bad faith or solely for the purpose of delay, the court shall forthwith order the
party employing them to pay to the other party the amount of the reasonable expenses which the filing of the affidavits caused
him to incur, including reasonable attorney's fees, and any offending party or attorney may be adjudged guilty of contempt.

(i) No-Evidence Motion. After adequate time for discovery, a party without presenting summary judgment evidence may move
for summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which
an adverse party would have the burden of proof at trial. The motion must state the elements as to which there is no evidence. The
court must grant the motion unless the respondent produces summary judgment evidence raising a genuine issue of material fact.

Credits
Oct. 12, 1949, eff. March 1, 1950. Amended by orders of Oct. 1, 1951, eff. March 1, 1952; July 20, 1966, eff. Jan. 1, 1967; July
21, 1970, eff. Jan. 1, 1971; July 11, 1977, eff. Jan. 1, 1978; June 10, 1980, eff. Jan. 1, 1981; Dec. 5, 1983, eff. April 1, 1984;
July 15, 1987, eff. Jan. 1, 1988; April 24, 1990, eff. Sept. 1, 1990; Aug. 15, 1997, eff. Sept. 1, 1997.

Notes of Decisions (8188)

Vernon's Ann. Texas Rules Civ. Proc., Rule 166a, TX R RCP Rule 166a
Rules of Civil Procedure, Rules of Evidence, and Rules of Appellate Procedure are current with amendments received through
September 1, 2015. Bar Rules, Rules of Disciplinary Procedure, Code of Judicial Conduct, and Rules of Judicial Administration
are current with amendments received through September 1, 2015. Other state court rules and selected county rules are current
with rules verified through June 1, 2015.

End of Document                                                       © 2015 Thomson Reuters. No claim to original U.S. Government Works.

                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                    2
Rule 1006. Summaries to Prove Content, TX R EVID Rule 1006

  Vernon's Texas Rules Annotated
    Texas Rules of Evidence (Refs & Annos)
      Article X. Contents of Writings, Recordings, and Photographs (Refs & Annos)

                                            TX Rules of Evidence, Rule 1006

                                        Rule 1006. Summaries to Prove Content

                                                        Currentness

The proponent may use a summary, chart, or calculation to prove the content of voluminous writings, recordings, or photographs
that cannot be conveniently examined in court. The proponent must make the originals or duplicates available for examination
or copying, or both, by other parties at a reasonable time and place. And the court may order the proponent to produce them
in court.

Credits
Eff. March 1, 1998. Amended by orders of Supreme Court March 10, 2015 and Court of Criminal Appeals March 12, 2015,
eff. April 1, 2015.

Notes of Decisions (16)

Rules of Evid., Rule 1006, TX R EVID Rule 1006
Rules of Civil Procedure, Rules of Evidence, and Rules of Appellate Procedure are current with amendments received through
September 1, 2015. Bar Rules, Rules of Disciplinary Procedure, Code of Judicial Conduct, and Rules of Judicial Administration
are current with amendments received through September 1, 2015. Other state court rules and selected county rules are current
with rules verified through June 1, 2015.

End of Document                                                   © 2015 Thomson Reuters. No claim to original U.S. Government Works.

               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                 1
§ 639.3 Definitions., 20 C.F.R. § 639.3

  Code of Federal Regulations
    Title 20. Employees' Benefits
      Chapter V. Employment and Training Administration, Department of Labor
         Part 639. Worker Adjustment and Retraining Notification (Refs & Annos)

                                                      20 C.F.R. § 639.3

                                                    § 639.3 Definitions.

                                                        Currentness

(a) Employer.

    (1) The term “employer” means any business enterprise that employs—

    (i) 100 or more employees, excluding part-time employees; or

    (ii) 100 or more employees, including part-time employees, who in the aggregate work at least 4,000 hours per week,
    exclusive of hours of overtime.

    Workers on temporary layoff or on leave who have a reasonable expectation of recall are counted as employees. An
    employee has a “reasonable expectation of recall” when he/she understands, through notification or through industry
    practice, that his/her employment with the employer has been temporarily interrupted and that he/she will be recalled to
    the same or to a similar job. The term “employer” includes non-profit organizations of the requisite size. Regular Federal,
    State, local and federally recognized Indian tribal governments are not covered. However, the term “employer” includes
    public and quasi-public entities which engage in business (i.e., take part in a commercial or industrial enterprise, supply a
    service or good on a mercantile basis, or provide independent management of public assets, raising revenue and making
    desired investments), and which are separately organized from the regular government, which have their own governing
    bodies and which have independent authority to manage their personnel and assets.

    (2) Under existing legal rules, independent contractors and subsidiaries which are wholly or partially owned by a parent
    company are treated as separate employers or as a part of the parent or contracting company depending upon the degree
    of their independence from the parent. Some of the factors to be considered in making this determination are (i) common
    ownership, (ii) common directors and/or officers, (iii) de facto exercise of control, (iv) unity of personnel policies
    emanating from a common source, and (v) the dependency of operations.

    (3) Workers, other than part-time workers, who are exempt from notice under section 4 of WARN are nonetheless counted
    as employees for purposes of determining coverage as an employer.

    (4) An employer may have one or more sites of employment under common ownership or control. An example would be
    a major auto maker which has dozens of automobile plants throughout the country. Each plant would be considered a site
    of employment, but there is only one “employer”, the auto maker.

                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                           1
§ 639.3 Definitions., 20 C.F.R. § 639.3

(b) Plant closing. The term “plant closing” means the permanent or temporary shutdown of a “single site of employment”,
or one or more “facilities or operating units” within a single site of employment, if the shutdown results in an “employment
loss” during any 30–day period at the single site of employment for 50 or more employees, excluding any part-time employees.
An employment action that results in the effective cessation of production or the work performed by a unit, even if a few
employees remain, is a shutdown. A “temporary shutdown” triggers the notice requirement only if there are a sufficient number
of terminations, layoffs exceeding 6 months, or reductions in hours of work as specified under the definition of “employment
loss.”

(c) Mass layoff.

     (1) The term “mass layoff” means a reduction in force which first, is not the result of a plant closing, and second, results
     in an employment loss at the single site of employment during any 30–day period for:

     (i) At least 33 percent of the active employees, excluding part-time employees, and

     (ii) At least 50 employees, excluding part-time employees.

     Where 500 or more employees (excluding part-time employees) are affected, the 33% requirement does not apply, and
     notice is required if the other criteria are met. Plant closings involve employment loss which results from the shutdown
     of one or more distinct units within a single site or the entire site. A mass layoff involves employment loss, regardless of
     whether one or more units are shut down at the site.

     (2) Workers, other than part-time workers, who are exempt from notice under section 4 of WARN are nonetheless counted
     as employees for purposes of determining coverage as a plant closing or mass layoff. For example, if an employer closes a
     temporary project on which 10 permanent and 40 temporary workers are employed, a covered plant closing has occurred
     although only 10 workers are entitled to notice.

(d) Representative. The term “representative” means an exclusive representative of employees within the meaning of section
9(a) or 8(f) of the National Labor Relations Act or section 2 of the Railway Labor Act.

(e) Affected employees. The term “affected employees” means employees who may reasonably be expected to experience an
employment loss as a consequence of a proposed plant closing or mass layoff by their employer. This includes individually
identifiable employees who will likely lose their jobs because of bumping rights or other factors, to the extent that such
individual workers reasonably can be identified at the time notice is required to be given. The term “affected employees”
includes managerial and supervisory employees, but does not include business partners. Consultant or contract employees who
have a separate employment relationship with another employer and are paid by that other employer, or who are self-employed,
are not “affected employees” of the business to which they are assigned. In addition, for purposes of determining whether
coverage thresholds are met, either incumbent workers in jobs being eliminated or, if known 60 days in advance, the actual
employees who suffer an employment loss may be counted.

(f) Employment loss.

               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            2
§ 639.3 Definitions., 20 C.F.R. § 639.3

     (1) The term “employment loss” means (i) an employment termination, other than a discharge for cause, voluntary
     departure, or retirement, (ii) a layoff exceeding 6 months, or (iii) a reduction in hours of work of individual employees of
     more than 50% during each month of any 6–month period.

     (2) Where a termination or a layoff (see paragraphs (f)(1)(i) and (ii) of this section) is involved, an employment loss does
     not occur when an employee is reassigned or transferred to employer-sponsored programs, such as retraining or job search
     activities, as long as the reassignment does not constitute a constructive discharge or other involuntary termination.

     (3) An employee is not considered to have experienced an employment loss if the closing or layoff is the result of the
     relocation or consolidation of part or all of the employer's business and, prior to the closing or layoff—

     (i) The employer offers to transfer the employee to a different site of employment within a reasonable commuting distance
     with no more than a 6–month break in employment, or

     (ii) The employer offers to transfer the employee to any other site of employment regardless of distance with no more
     than a 6–month break in employment, and the employee accepts within 30 days of the offer or of the closing or layoff,
     whichever is later.

     (4) A “relocation or consolidation” of part or all of an employer's business, for purposes of paragraph § 639.3(h)(4), means
     that some definable business, whether customer orders, product lines, or operations, is transferred to a different site of
     employment and that transfer results in a plant closing or mass layoff.

(g) Unit of local government. The term “unit of local government” means any general purpose political subdivision of a State,
which has the power to levy taxes and spend funds and which also has general corporate and police powers. When a covered
employment site is located in more than one unit of local government, the employer must give notice to the unit to which it
determines it directly paid the highest taxes for the year preceding the year for which the determination is made. All local taxes
directly paid to the local government should be aggregated for this purpose.

(h) Part-time employee. The term “part-time” employee means an employee who is employed for an average of fewer than 20
hours per week or who has been employed for fewer than 6 of the 12 months preceding the date on which notice is required,
including workers who work full-time. This term may include workers who would traditionally be understood as “seasonal”
employees. The period to be used for calculating whether a worker has worked “an average of fewer than 20 hours per week”
is the shorter of the actual time the worker has been employed or the most recent 90 days.

(i) Single site of employment.

     (1) A single site of employment can refer to either a single location or a group of contiguous locations. Groups of structures
     which form a campus or industrial park, or separate facilities across the street from one another, may be considered a
     single site of employment.

               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              3
§ 639.3 Definitions., 20 C.F.R. § 639.3

     (2) There may be several single sites of employment within a single building, such as an office building, if separate
     employers conduct activities within such a building. For example, an office building housing 50 different businesses will
     contain 50 single sites of employment. The offices of each employer will be its single site of employment.

     (3) Separate buildings or areas which are not directly connected or in immediate proximity may be considered a single
     site of employment if they are in reasonable geographic proximity, used for the same purpose, and share the same staff
     and equipment. An example is an employer who manages a number of warehouses in an area but who regularly shifts or
     rotates the same employees from one building to another.

     (4) Non-contiguous sites in the same geographic area which do not share the same staff or operational purpose should not
     be considered a single site. For example, assembly plants which are located on opposite sides of a town and which are
     managed by a single employer are separate sites if they employ different workers.

     (5) Contiguous buildings owned by the same employer which have separate management, produce different products, and
     have separate workforces are considered separate single sites of employment.

     (6) For workers whose primary duties require travel from point to point, who are outstationed, or whose primary duties
     involve work outside any of the employer's regular employment sites (e.g., railroad workers, bus drivers, salespersons),
     the single site of employment to which they are assigned as their home base, from which their work is assigned, or to
     which they report will be the single site in which they are covered for WARN purposes.

     (7) Foreign sites of employment are not covered under WARN. U.S. workers at such sites are counted to determine whether
     an employer is covered as an employer under § 639.3(a).

     (8) The term “single site of employment” may also apply to truly unusual organizational situations where the above criteria
     do not reasonably apply. The application of this definition with the intent to evade the purpose of the Act to provide notice
     is not acceptable.

(j) Facility or operating unit. The term “facility” refers to a building or buildings. The term “operating unit” refers to an
organizationally or operationally distinct product, operation, or specific work function within or across facilities at the single
site.

(k) State dislocated worker unit. The term “State dislocated worker unit” means a unit designated or created in each State by
the Governor under title III of the Job Training Partnership Act, as amended by EDWAA.

(l) State. For the purpose of WARN, the term “State” includes the 50 States, the District of Columbia, the Commonwealth of
Puerto Rico, and the U.S. Virgin Islands.

SOURCE: 54 FR 16064, April 20, 1989, unless otherwise noted.

AUTHORITY: 29 U.S.C. 2107(a).

               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             4
§ 639.3 Definitions., 20 C.F.R. § 639.3

Notes of Decisions (226)

Current through December 24, 2015; 80 FR 80290.

End of Document                                          © 2015 Thomson Reuters. No claim to original U.S. Government Works.

               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                        5
                                        20 Common Law Factors
                                    Rev. Rul. 87-41, 1987-1 CB 296

ISSUE                                                 predecessor or affiliated corporation of the
                                                      Client) at any time preceding the time at which
In the situations described below, are the
                                                      the Individual begins performing services for the
individuals employees under the common law
                                                      Client. Also, the Individual has not been an
rules for purposes of the Federal Insurance
                                                      employee of or performed services for or on
Contributions Act (FICA), the Federal
                                                      behalf of the Firm at any time preceding the time
Unemployment Tax Act (FUTA), and the
                                                      at which the Individual begins performing
Collection of Income Tax at Source on Wages
                                                      services for the Client. The Individual's contract
(chapters 21, 23, and 24 respectively, subtitle C,
                                                      with the Firm states that the Individual is an
Internal Revenue Code)? These situations
                                                      independent contractor with respect to services
illustrate the application of section 530(d) of the
                                                      performed on behalf of the Firm for the Client.
Revenue Act of 1978, 1978-3 (Vol. 1) C.B. 119
(the 1978 Act), which was added by section            The Individual and the other programmers
1706(a) of the Tax Reform Act of 1986, 1986- 3        perform the services under the Firm's contract
(Vol. 1) C.B. 698 (the 1986 Act) (generally           with the Client. During the time the Individual is
effective for services performed and                  performing services for the Client, even though
remuneration paid after December 31, 1986).           the Individual retains the right to perform
                                                      services for other persons, substantially all of the
FACTS
                                                      Individual's working time is devoted to
In each factual situation, an individual worker       performing services for the Client. A significant
(Individual), pursuant to an arrangement              portion of the services are performed on the
between one person (Firm) and another person          Client's premises. The Individual reports to the
(Client), provides services for the Client as an      Firm by accounting for time worked and
engineer, designer, drafter, computer                 describing the progress of the work. The Firm
programmer, systems analyst, or other similarly       pays the Individual and regularly charges the
skilled worker engaged in a similar line of work.     Client for the services performed by the
Situation 1                                           Individual. The Firm generally does not pay
                                                      individuals who perform services for the Client
The Firm is engaged in the business of providing      unless the Firm provided such individuals to the
temporary technical services to its clients. The      Client.
Firm maintains a roster of workers who are
available to provide technical services to            The work of the Individual and other
prospective clients. The Firm does not train the      programmers is regularly reviewed by the Firm.
workers but determines the services that the          The review is based primarily on reports by the
workers are qualified to perform based on             Client about the performance of these workers.
information submitted by the workers.                 Under the contract between the Individual and
                                                      the Firm, the Firm may terminate its relationship
The Firm has entered into a contract with the         with the Individual if the review shows that he
Client. The contract states that the Firm is to       or she is failing to perform the services
provide the Client with workers to perform            contracted for by the Client. Also, the Firm will
computer programming services meeting                 replace the Individual with another worker if the
specified qualifications for a particular project.    Individual's services are unacceptable to the
The Individual, a computer programmer, enters         Client. In such a case, however, the Individual
into a contract with the Firm to perform services     will nevertheless receive his or her hourly pay
as a computer programmer for the Client's             for the work completed.
project, which is expected to last less than one
year. The Individual is one of several                Finally, under the contract between the
programmers provided by the Firm to the Client.       Individual and the Firm, the Individual is
The Individual has not been an employee of or         prohibited from performing services directly for
performed services for the Client (or any             the Client and, under the contract between the
Firm and the Client, the Client is prohibited         payment made by the Client to the Individual
from receiving services from the Individual for a     reduces the amount of the fee that the Client is
period of three months following the termination      otherwise required to pay the Firm. The
of services by the Individual for the Client on       Individual is performing services that can be
behalf of the Firm.                                   accomplished without the Individual's receiving
                                                      direction or control as to hours, place of work,
Situation 2
                                                      sequence, or details of work.
The Firm is a technical services firm that
                                                      Situation 3
supplies clients with technical personnel. The
Client requires the services of a systems analyst     The Firm, a company engaged in furnishing
to complete a project and contacts the Firm to        client firms with technical personnel, is
obtain such an analyst. The Firm maintains a          contacted by the Client, who is in need of the
roster of analysts and refers such an analyst, the    services of a drafter for a particular project,
Individual, to the Client. The Individual is not      which is expected to last less than one year. The
restricted by the Client or the Firm from             Firm recruits the Individual to perform the
providing services to the general public while        drafting services for the Client. The Individual
performing services for the Client and in fact        performs substantially all of the services for the
does perform substantial services for other           Client at the office of the Client, using materials
persons during the period the Individual is           and equipment of the Client. The services are
working for the Client. Neither the Firm nor the      performed under the supervision of employees
Client has priority on the services of the            of the Client. The Individual reports to the Client
Individual. The Individual does not report,           on a regular basis. The Individual is paid by the
directly or indirectly, to the Firm after the         Firm based on the number of hours the
beginning of the assignment to the Client             Individual has worked for the Client, as reported
concerning (1) hours worked by the Individual,        to the Firm by the Client or as reported by the
(2) progress on the job, or (3) expenses incurred     Individual and confirmed by the Client. The
by the Individual in performing services for the      Firm has no obligation to pay the Individual if
Client. No reports (including reports of time         the Firm does not receive payment for the
worked or progress on the job) made by the            Individual's services from the Client. For
Individual to the Client are provided by the          recruiting the Individual for the Client, the Firm
Client to the Firm.                                   receives a flat fee that is fixed prior to the
                                                      Individual's commencement of services for the
If the Individual ceases providing services for
                                                      Client and is unrelated to the number of hours
the Client prior to completion of the project or if
                                                      and quality of work performed by the Individual.
the Individual's work product is otherwise
                                                      However, the Firm does receive a reasonable fee
unsatisfactory, the Client may seek damages
                                                      for performing the payroll function. The Firm
from the Individual. However, in such
                                                      may not direct the work of the Individual and
circumstances, the Client may not seek damages
                                                      has no responsibility for the work performed by
from the Firm, and the Firm is not required to
                                                      the Individual. The Firm may not terminate the
replace the Individual. The Firm may not
                                                      services of the Individual. The Client may
terminate the services of the Individual while he
                                                      terminate the services of the Individual without
or she is performing services for the Client and
                                                      liability to either the Individual or the Firm. The
may not otherwise affect the relationship
                                                      Individual is permitted to work for another firm
between the Client and the Individual. Neither
                                                      while performing services for the Client, but
the Individual nor the Client is prohibited for
                                                      does in fact work for the Client on a
any period after termination of the Individual's
                                                      substantially full-time basis.
services on this job from contracting directly
with the other. For referring the Individual to the   LAW AND ANALYSIS
Client, the Firm receives a flat fee that is fixed
                                                      This ruling provides guidance concerning the
prior to the Individual's commencement of
                                                      factors that are used to determine whether an
services for the Client and is unrelated to the
                                                      employment relationship exists between the
number of hours and quality of work performed
                                                      Individual and the Firm for federal employment
by the Individual. The Individual is not paid by
                                                      tax purposes and applies those factors to the
the Firm either directly or indirectly. No
                                                      given factual situations to determine whether the
Individual is an employee of the Firm for such       other than that of employer and employee is
purposes. The ruling does not reach any              immaterial. Thus, if such a relationship exists, it
conclusions concerning whether an employment         is of no consequence that the employee is
relationship for federal employment tax              designated as a partner, coadventurer, agent,
purposes exists between the Individual and the       independent contractor, or the like.
Client in any of the factual situations.
                                                     As an aid to determining whether an individual
Analysis of the preceding three fact situations      is an employee under the common law rules,
requires an examination of the common law            twenty factors or elements have been identified
rules for determining whether the Individual is      as indicating whether sufficient control is
an employee with respect to either the Firm or       present to establish an employer- employee
the Client, a determination of whether the Firm      relationship. The twenty factors have been
or the Client qualifies for employment tax relief    developed based on an examination of cases and
under section 530(a) of the 1978 Act, and a          rulings considering whether an individual is an
determination of whether any such relief is          employee. The degree of importance of each
denied the Firm under section 530(d) of the          factor varies depending on the occupation and
1978 Act (added by section 1706 of the 1986          the factual context in which the services are
Act).                                                performed. The twenty factors are designed only
                                                     as guides for determining whether an individual
An individual is an employee for federal
                                                     is an employee; special scrutiny is required in
employment tax purposes if the individual has
                                                     applying the twenty factors to assure that
the status of an employee under the usual
                                                     formalistic aspects of an arrangement designed
common law rules applicable in determining the
                                                     to achieve a particular status do not obscure the
employer-employee relationship. Guides for
                                                     substance of the arrangement (that is, whether
determining that status are found in the
                                                     the person or persons for whom the services are
following three substantially similar sections of
                                                     performed exercise sufficient control over the
the Employment Tax Regulations: sections
                                                     individual for the individual to be classified as
31.3121(d)-1(c); 31.3306(i)- 1; and 31.3401(c)-
                                                     an employee). The twenty factors are described
1.
                                                     below:
These sections provide that generally the
                                                     1. Instructions. A worker who is required to
relationship of employer and employee exists
                                                     comply with other persons' instructions about
when the person or persons for whom the
                                                     when, where, and how he or she is to work is
services are performed have the right to control
                                                     ordinarily an employee. This control factor is
and direct the individual who performs the
                                                     present if the person or persons for whom the
services, not only as to the result to be
                                                     services are performed have the right to require
accomplished by the work but also as to the
                                                     compliance with instructions. See, for example,
details and means by which that result is
                                                     Rev. Rul. 68-598, 1968-2 C.B. 464, and Rev.
accomplished. That is, an employee is subject to
                                                     Rul. 66- 381, 1966-2 C.B. 449.
the will and control of the employer not only as
to what shall be done but as to how it shall be      2. Training. Training a worker by requiring an
done. In this connection, it is not necessary that   experienced employee to work with the worker,
the employer actually direct or control the          by corresponding with the worker, by requiring
manner in which the services are performed; it is    the worker to attend meetings, or by using other
sufficient if the employer has the right to do so.   methods, indicates that the person or persons for
                                                     whom the services are performed want the
Conversely, these sections provide, in part, that
                                                     services performed in a particular method or
individuals (such as physicians, lawyers,
                                                     manner. See Rev. Rul. 70-630, 1970-2 C.B. 229.
dentists, contractors, and subcontractors) who
follow an independent trade, business, or            3. Integration. Integration of the worker's
profession, in which they offer their services to    services into the business operations generally
the public, generally are not employees.             shows that the worker is subject to direction and
                                                     control. When the success or continuation of a
Finally, if the relationship of employer and
                                                     business depends to an appreciable degree upon
employee exists, the designation or description
                                                     the performance of certain services, the workers
of the relationship by the parties as anything
                                                     who perform those services must necessarily be
subject to a certain amount of control by the       off the premises of the person or persons
owner of the business. See United States v. Silk,   receiving the services, such as at the office of
331 U.S. 704 (1947), 1947-2 C.B. 167.               the worker, indicates some freedom from
                                                    control. However, this fact by itself does not
4. Services Rendered Personally. If the services
                                                    mean that the worker is not an employee. The
must be rendered personally, presumably the
                                                    importance of this factor depends on the nature
person or persons for whom the services are
                                                    of the service involved and the extent to which
performed are interested in the methods used to
                                                    an employer generally would require that
accomplish the work as well as in the results.
                                                    employees perform such services on the
See Rev. Rul. 55-695, 1955-2 C.B. 410.
                                                    employer's premises. Control over the place of
5. Hiring, Supervising, and Paying Assistants. If   work is indicated when the person or persons for
the person or persons for whom the services are     whom the services are performed have the right
performed hire, supervise, and pay assistants,      to compel the worker to travel a designated
that factor generally shows control over the        route, to canvass a territory within a certain
workers on the job. However, if one worker          time, or to work at specific places as required.
hires, supervises, and pays the other assistants    See Rev. Rul. 56-694.
pursuant to a contract under which the worker
                                                    10. Order or Sequence Set. If a worker must
agrees to provide materials and labor and under
                                                    perform services in the order or sequence set by
which the worker is responsible only for the
                                                    the person or persons for whom the services are
attainment of a result, this factor indicates an
                                                    performed, that factor shows that the worker is
independent contractor status. Compare Rev.
                                                    not free to follow the worker's own pattern of
Rul. 63-115, 1963-1 C.B. 178, with Rev. Rul.
                                                    work but must follow the established routines
55-593, 1955-2 C.B. 610.
                                                    and schedules of the person or persons for whom
6. Continuing Relationship. A continuing            the services are performed. Often, because of the
relationship between the worker and the person      nature of an occupation, the person or persons
or persons for whom the services are performed      for whom the services are performed do not set
indicates that an employer-employee                 the order of the services or set the order
relationship exists. A continuing relationship      infrequently. It is sufficient to show control,
may exist where work is performed at frequently     however, if such person or persons retain the
recurring although irregular intervals. See         right to do so. See Rev. Rul. 56-694.
United States v. Silk.
                                                    11. Oral or Written Reports. A requirement that
7. Set Hours of Work. The establishment of set      the worker submit regular or written reports to
hours of work by the person or persons for          the person or persons for whom the services are
whom the services are performed is a factor         performed indicates a degree of control. See
indicating control. See Rev. Rul. 73-591, 1973-2    Rev. Rul. 70-309, 1970-1 C.B. 199, and Rev.
C.B. 337.                                           Rul. 68- 248, 1968-1 C.B. 431.
8. Full Time Required. If the worker must           12. Payment by Hour, Week, Month. Payment by
devote substantially full time to the business of   the hour, week, or month generally points to an
the person or persons for whom the services are     employer-employee relationship, provided that
performed, such person or persons have control      this method of payment is not just a convenient
over the amount of time the worker spends           way of paying a lump sum agreed upon as the
working and impliedly restrict the worker from      cost of a job. Payment made by the job or on a
doing other gainful work. An independent            straight commission generally indicates that the
contractor, on the other hand, is free to work      worker is an independent contractor. See Rev.
when and for whom he or she chooses. See Rev.       Rul. 74-389, 1974-2 C.B. 330.
Rul. 56- 694, 1956-2 C.B. 694.
                                                    13. Payment of Business and/or Traveling
9. Doing Work on Employer's Premises. If the        Expenses. If the person or persons for whom the
work is performed on the premises of the person     services are performed ordinarily pay the
or persons for whom the services are performed,     worker's business and/or traveling expenses, the
that factor suggests control over the worker,       worker is ordinarily an employee. An employer,
especially if the work could be done elsewhere.     to be able to control expenses, generally retains
Rev. Rul. 56-660, 1956-2 C.B. 693. Work done        the right to regulate and direct the worker's
business activities. See Rev. Rul. 55-144, 1955-       18. Making Service Available to General Public.
1 C.B. 483.                                            The fact that a worker makes his or her services
                                                       available to the general public on a regular and
14. Furnishing of Tools and Materials. The fact
                                                       consistent basis indicates an independent
that the person or persons for whom the services
                                                       contractor relationship. See Rev. Rul. 56-660.
are performed furnish significant tools,
materials, and other equipment tends to show the       19. Right to Discharge. The right to discharge a
existence of an employer- employee                     worker is a factor indicating that the worker is
relationship. See Rev. Rul. 71-524, 1971-2 C.B.        an employee and the person possessing the right
346.                                                   is an employer. An employer exercises control
                                                       through the threat of dismissal, which causes the
15. Significant Investment. If the worker invests
                                                       worker to obey the employer's instructions. An
in facilities that are used by the worker in
                                                       independent contractor, on the other hand,
performing services and are not typically
                                                       cannot be fired so long as the independent
maintained by employees (such as the
                                                       contractor produces a result that meets the
maintenance of an office rented at fair value
                                                       contract specifications. Rev. Rul. 75-41, 1975-1
from an unrelated party), that factor tends to
                                                       C.B. 323.
indicate that the worker is an independent
contractor. On the other hand, lack of investment      20. Right to Terminate. If the worker has the
in facilities indicates dependence on the person       right to end his or her relationship with the
or persons for whom the services are performed         person for whom the services are performed at
for such facilities and, accordingly, the existence    any time he or she wishes without incurring
of an employer-employee relationship. See Rev.         liability, that factor indicates an employer-
Rul. 71-524. Special scrutiny is required with         employee relationship. See Rev. Rul. 70-309.
respect to certain types of facilities, such as
                                                       Rev. Rul. 75-41 considers the employment tax
home offices.
                                                       status of individuals performing services for a
16. Realization of Profit or Loss. A worker who        physician's professional service corporation. The
can realize a profit or suffer a loss as a result of   corporation is in the business of providing a
the worker's services (in addition to the profit or    variety of services to professional people and
loss ordinarily realized by employees) is              firms (subscribers), including the services of
generally an independent contractor, but the           secretaries, nurses, dental hygienists, and other
worker who cannot is an employee. See Rev.             similarly trained personnel. The individuals who
Rul. 70-309. For example, if the worker is             are to perform the services are recruited by the
subject to a real risk of economic loss due to         corporation, paid by the corporation, assigned to
significant investments or a bona fide liability       jobs, and provided with employee benefits by
for expenses, such as salary payments to               the corporation. Individuals who enter into
unrelated employees, that factor indicates that        contracts with the corporation agree they will
the worker is an independent contractor. The           not contract directly with any subscriber to
risk that a worker will not receive payment for        which they are assigned for at least three months
his or her services, however, is common to both        after cessation of their contracts with the
independent contractors and employees and thus         corporation. The corporation assigns the
does not constitute a sufficient economic risk to      individual to the subscriber to work on the
support treatment as an independent contractor.        subscriber's premises with the subscriber's
                                                       equipment. Subscribers have the right to require
17. Working for More Than One Firm at a Time.
                                                       that an individual furnished by the corporation
If a worker performs more than de minimis
                                                       cease providing services to them, and they have
services for a multiple of unrelated persons or
                                                       the further right to have such individual replaced
firms at the same time, that factor generally
                                                       by the corporation within a reasonable period of
indicates that the worker is an independent
                                                       time, but the subscribers have no right to affect
contractor. See Rev. Rul. 70-572, 1970-2 C.B.
                                                       the contract between the individual and the
221. However, a worker who performs services
                                                       corporation. The corporation retains the right to
for more than one person may be an employee of
                                                       discharge the individuals at any time. Rev. Rul.
each of the persons, especially where such
                                                       75-41 concludes that the individuals are
persons are part of the same service
arrangement.
employees of the corporation for federal             The determination of whether any individual
employment tax purposes.                             who is treated as an employee holds a position
                                                     substantially similar to the position held by an
Rev. Rul. 70-309 considers the employment tax
                                                     individual whom the taxpayer would otherwise
status of certain individuals who perform
                                                     be permitted to treat as other than an employee
services as oil well pumpers for a corporation
                                                     for employment tax purposes under section
under contracts that characterize such
                                                     530(a) of the 1978 Act requires an examination
individuals as independent contractors. Even
                                                     of all the facts and circumstances, including
though the pumpers perform their services away
                                                     particularly the activities and functions
from the headquarters of the corporation and are
                                                     performed by the individuals. Differences in the
not given day-to-day directions and instructions,
                                                     positions held by the respective individuals that
the ruling concludes that the pumpers are
                                                     result from the taxpayer's treatment of one
employees of the corporation because the
                                                     individual as an employee and the other
pumpers perform their services pursuant to an
                                                     individual as other than an employee (for
arrangement that gives the corporation the right
                                                     example, that the former individual is a
to exercise whatever control is necessary to
                                                     participant in the taxpayer's qualified pension
assure proper performance of the services; the
                                                     plan or health plan and the latter individual is
pumpers' services are both necessary and
                                                     not a participant in either) are to be disregarded
incident to the business conducted by the
                                                     in determining whether the individuals hold
corporation; and the pumpers are not engaged in
                                                     substantially similar positions.
an independent enterprise in which they assume
the usual business risks, but rather work in the     Section 1706(a) of the 1986 Act added to section
course of the corporation's trade or business. See   530 of the 1978 Act a new subsection (d), which
also Rev. Rul. 70-630, 1970-2 C.B. 229, which        provides an exception with respect to the
considers the employment tax status of               treatment of certain workers. Section 530(d)
salesclerks furnished by an employee service         provides that section 530 shall not apply in the
company to a retail store to perform temporary       case of an individual who, pursuant to an
services for the store.                              arrangement between the taxpayer and another
                                                     person, provides services for such other person
Section 530(a) of the 1978 Act, as amended by
                                                     as an engineer, designer, drafter, computer
section 269(c) of the Tax Equity and Fiscal
                                                     programmer, systems analyst, or other similarly
Responsibility Act of 1982, 1982-2 C.B. 462,
                                                     skilled worker engaged in a similar line of work.
536, provides, for purposes of the employment
                                                     Section 530(d) of the 1978 Act does not affect
taxes under subtitle C of the Code, that if a
                                                     the determination of whether such workers are
taxpayer did not treat an individual as an
                                                     employees under the common law rules. Rather,
employee for any period, then the individual
                                                     it merely eliminates the employment tax relief
shall be deemed not to be an employee, unless
                                                     under section 530(a) of the 1978 Act that would
the taxpayer had no reasonable basis for not
                                                     otherwise be available to a taxpayer with respect
treating the individual as an employee. For any
                                                     to those workers who are determined to be
period after December 31, 1978, this relief
                                                     employees of the taxpayer under the usual
applies only if both of the following consistency
                                                     common law rules. Section 530(d) applies to
rules are satisfied: (1) all federal tax returns
                                                     remuneration paid and services rendered after
(including information returns) required to be
                                                     December 31, 1986.
filed by the taxpayer with respect to the
individual for the period are filed on a basis       The Conference Report on the 1986 Act
consistent with the taxpayer's treatment of the      discusses the effect of section 530(d) as follows:
individual as not being an employee (“reporting
                                                     The Senate amendment applies whether the
consistency rule”), and (2) the taxpayer (and any
                                                     services of [technical service workers] are
predecessor) has not treated any individual
                                                     provided by the firm to only one client during
holding a substantially similar position as an
                                                     the year or to more than one client, and whether
employee for purposes of the employment taxes
                                                     or not such individuals have been designated or
for periods beginning after December 31, 1977
                                                     treated by the technical services firm as
(“substantive consistency rule”).
                                                     independent contractors, sole proprietors,
                                                     partners, or employees of a personal service
corporation controlled by such individual. The        The analysis would not differ if the facts of
effect of the provision cannot be avoided by          Situation 1 were changed to state that the
claims that such technical service personnel are      Individual provided the technical services
employees of personal service corporations            through a personal service corporation owned by
controlled by such personnel. For example, an         the Individual.
engineer retained by a technical services firm to
                                                      In Situation 2, the Firm does not retain any right
provide services to a manufacturer cannot avoid
                                                      to control the performance of the services by the
the effect of this provision by organizing a
                                                      Individual and, thus, no employment
corporation that he or she controls and then
                                                      relationship exists between the Individual and
claiming to provide services as an employee of
                                                      the Firm.
that corporation.
                                                      In Situation 3, the Firm does not control the
. . . [T]he provision does not apply with respect
                                                      performance of the services of the Individual,
to individuals who are classified, under the
                                                      and the Firm has no right to affect the
generally applicable common law standards, as
                                                      relationship between the Client and the
employees of a business that is a client of the
                                                      Individual. Consequently, no employment
technical services firm.
                                                      relationship exists between the Firm and the
2 H.R. Rep. No. 99-841 (Conf. Rep.), 99th             Individual.
Cong., 2d Sess. II-834 to 835 (1986).
                                                      HOLDINGS
Under the facts of Situation 1, the legal
                                                      Situation 1. The Individual is an employee of the
relationship is between the Firm and the
                                                      Firm under the common law rules. Relief under
Individual, and the Firm retains the right of
                                                      section 530 of the 1978 Act is not available to
control to insure that the services are performed
                                                      the Firm because of the provisions of section
in a satisfactory fashion. The fact that the Client
                                                      530(d).
may also exercise some degree of control over
the Individual does not indicate that the             Situation 2. The Individual is not an employee of
individual is not an employee. Therefore, in          the Firm under the common law rules.
Situation 1, the Individual is an employee of the     Situation 3. The Individual is not an employee of
Firm under the common law rules. The facts in         the Firm under the common law rules.
Situation 1 involve an arrangement among the
Individual, Firm, and Client, and the services        Because of the application of section 530(b) of
provided by the Individual are technical              the 1978 Act, no inference should be drawn with
services. Accordingly, the Firm is denied section     respect to whether the Individual in Situations 2
530 relief under section 530(d) of the 1978 Act       and 3 is an employee of the Client for federal
(as added by section 1706 of the 1986 Act), and       employment tax purposes.
no relief is available with respect to any
employment tax liability incurred in Situation 1.