Court Opinion

ID: 5137997
Source: CourtListenerOpinion
Date Created: 2021-12-21 14:49:09.064066+00
Date Added: 2024-06-11T08:24:05.564911
License: Public Domain

2015 UT App 61
_________________________________________________________

              THE UTAH COURT OF APPEALS

                     EVOLOCITY, INC.,
                        Petitioner,
                             v.
             DEPARTMENT OF WORKFORCE SERVICES
                  AND DEABRA C. COLBERT,
                       Respondents.

                            Opinion
                       No. 20130587-CA
                      Filed March 19, 2015

                Original Proceeding in this Court

          Vincent C. Rampton, Attorney for Petitioner

          Kathleen Bounous, Attorney for Respondent
              Department of Workforce Services

         David J. Holdsworth, Attorney for Respondent
                       Deabra C. Colbert

  JUDGE MICHELE M. CHRISTIANSEN authored this Opinion, in
which SENIOR JUDGES RUSSELL W. BENCH and JUDITH M. BILLINGS
                        concurred.1

CHRISTIANSEN, Judge:

¶1     Evolocity, Inc. challenges the Department of Workforce
Services’ determination that Deabra C. Colbert was an employee of
Evolocity rather than an independent contractor. We decline to
disturb the Department’s decision.

1. The Honorable Russell W. Bench and the Honorable Judith M.
Billings, Senior Judges, sat by special assignment as authorized by
law. See generally Utah R. Jud. Admin. 11-201(6).
           Evolocity v. Department of Workforce Services

                         BACKGROUND

¶2     Evolocity provides website design and marketing services
for healthcare providers.2 Evolocity operates largely through a
system of what it terms independent contractors, who perform the
company’s programming and website-marketing work. Colbert
was approached by her neighbor—Evolocity’s owner—who offered
her a position as a “go between” or intermediary between
Evolocity’s clients and its website designers and website-marketing
workers. Colbert was a teacher at the time and had no previous
experience working with website services.

¶3      When Colbert began working for Evolocity, she signed a
contract indicating that she was an independent contractor. She
received training from Evolocity on the operation of its “Steel
Jaws” software, which Evolocity’s workers were required to use to
communicate with and track the work performed for Evolocity’s
clients. After her training, Colbert worked from her own home
office. Colbert used her own computer, but Evolocity provided
access to the Steel Jaws software and other software Colbert
needed. Colbert received payment from Evolocity in the form of a
biweekly retainer, which was akin to a set salary. Colbert’s
payments from Evolocity did not vary based on the quantity or
quality of work she performed unless she was penalized by
Evolocity for poor work performance.

¶4     During the time she worked for Evolocity, Colbert never
formed a business, though she did keep records of her business
expenses for tax purposes. Colbert worked full-time for Evolocity
and did not perform website marketing or other similar services for
other clients during this time.

¶5    After a number of years, Colbert’s working relationship with
Evolocity came to an end. Colbert filed for unemployment benefits

2. In reviewing an agency’s adjudicative decision, we view the facts
in the light most favorable to the agency’s findings. See Swift
Transp. v. Labor Comm’n, 2014 UT App 104, ¶ 2 n.1, 326 P.3d 678.

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            Evolocity v. Department of Workforce Services

with the Department. Evolocity challenged Colbert’s entitlement to
unemployment benefits, arguing that Colbert was an independent
contractor, not an employee. An administrative law judge
determined that, notwithstanding the form of Colbert’s
employment contract, she was Evolocity’s employee. Evolocity
appealed that decision to the Department’s appeals board, which
affirmed the administrative law judge’s decision. Evolocity now
seeks judicial review of the Department’s final decision.

            ISSUES AND STANDARDS OF REVIEW

¶6      Evolocity first argues that the Department’s determination
that Colbert was not an independent contractor is unsupported by
the evidence in the record. The determination whether a claimant
is an independent contractor involves a fact-sensitive inquiry into
the unique facts of a particular employment relationship. See BMS
Ltd. 1999, Inc. v. Department of Workforce Servs., 2014 UT App 111,
¶ 13, 327 P.3d 578. Because this inquiry “will differ in every case
due to the individuality of fact patterns and the vagaries of various
vocations,” we grant deference to the Department in its weighing
of the relevant factors to arrive at its ultimate decision. Id. And we
will disturb that decision only if it is clearly erroneous or falls
outside the scope of the afforded deference. See Carbon County v.
Workforce Appeals Bd., 2013 UT 41, ¶¶ 22–23, 308 P.3d 477; see also In
re adoption of Baby B., 2012 UT 35, ¶ 46, 308 P.3d 382 (explaining that
a “fact-like” mixed finding is “entitled to deference and would be
properly affirmed on appeal if not clearly erroneous”). “To
establish clear error, the challenging party must show that a
finding is not supported by legally sufficient evidence even when
the evidence is viewed in a light most favorable to the finding.”
State v. Cater, 2014 UT App 207, ¶ 10, 336 P.3d 32. We do not
reweigh the evidence or substitute our decision for that of the
Department but instead will uphold its determinations if they are
supported by the record evidence. Cf. Migliaccio v. Labor Comm’n,
2013 UT App 51, ¶ 7, 298 P.3d 676.

¶7    In addressing this issue, we review the Department’s
subsidiary legal conclusions for correctness and its underlying

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           Evolocity v. Department of Workforce Services

factual findings for the support of substantial evidence. Drake v.
Industrial Comm'n, 939 P.2d 177, 181 (Utah 1997); see Murray v. Labor
Comm’n, 2013 UT 38, ¶¶ 19, 21, 308 P.3d 461.

¶8      Evolocity also argues that the Department’s interpretation
of the regulations governing an independent-contractor
determination rendered those regulations unconstitutionally vague
and thereby violated Evolocity’s right to due process.
“Constitutional issues, including questions regarding due process,
are questions of law . . . .” Summerhaze Co. v. Federal Deposit Ins.
Corp., 2014 UT 28, ¶ 8, 332 P.3d 908 (citation and internal quotation
marks omitted). We therefore decide Evolocity’s constitutional
challenge as a matter of law. Id.3

                            ANALYSIS

I. The Department’s Determination Is Supported by the Evidence
                   and Entitled to Deference.

¶9      Evolocity first argues that the Department’s determination
that Colbert was an employee, rather than an independent
contractor, is not supported by the record evidence. Under Utah’s
Employment Security Act, “[f]ormer employees are generally
eligible for unemployment benefits while independent contractors
are not.” BMS Ltd. 1999, Inc. v. Department of Workforce Servs., 2014
UT App 111, ¶ 6, 327 P.3d 578. For purposes of establishing
entitlement to unemployment benefits, “Utah law presumes that a
paid or contracted worker is an employee unless the putative
employer can demonstrate that the worker (1) is independently
established in work of the same nature and (2) has been free from
control or direction over the means of performing the work.” Id.
(citing Utah Code Ann. § 35A-4-204(3) (LexisNexis 2011) and Utah
Admin. Code R994-204-303). “Special scrutiny of the facts is

3. Evolocity raised its constitutional claim before the Department,
but the Department did not rule on it. We therefore address this
argument for the first time on appeal.

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           Evolocity v. Department of Workforce Services

required to assure that the form of a service relationship does not
obscure its substance . . . .” Utah Admin. Code R994-204-303. If an
employer fails to demonstrate either independent establishment or
freedom from control, the worker is considered an employee and
may be entitled to unemployment benefits. Utah Code Ann. § 35A-
4-204(3). We first address the Department’s determination that
Colbert was not independently established in work of the same
nature as she performed for Evolocity.

¶10 “An independent contractor is a worker who is customarily
engaged in an independently established trade, occupation,
profession, or business of the same nature as the services
performed.” Utah Admin. Code R994-204-301(1). “[A]n
independently established trade, occupation, profession, or
business is created and exists apart from a relationship with a
particular employer and does not depend on a relationship with
any one employer for its continued existence.” Id. R994-204-
303(1)(a). In evaluating whether a claimant is independently
established, the Utah Administrative Code sets forth seven factors
to be used by the Department as “aids in the analysis of the facts of
each case.” Id. R994-204-303.4 However, the regulations also
recognize that “[t]he degree of importance of each factor varies
depending on” the nature of the work performed and that “some
factors do not apply to certain services and . . . should not be
considered.” Id.

¶11 Here, the Department determined that two of the
factors—whether the claimant had a separate place of business and

4. In short, those factors direct the department to consider whether
the claimant has a separate place of business, has “a substantial
investment” in the tools required to perform the services, regularly
performs services of the same nature for other customers, can
realize a profit or risks a loss from the independent business
activity, advertises in an effort to generate business, has obtained
required or customary licenses, and maintains records or
documents for business-tax purposes. Utah Admin. Code R994-204-
303(1)(b).

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           Evolocity v. Department of Workforce Services

maintained records for business-tax purposes—were established by
the evidence. And the Department determined that a third
factor—whether the claimant had obtained required or customary
business licenses—was not applicable under these circumstances.
Evolocity has not challenged these determinations, and we
therefore consider Evolocity’s challenges to the remaining four
factors.5

A.     Tools and Equipment

¶12 Evolocity first argues that the Department erroneously
determined that Colbert did not provide her own tools and
equipment.6 This factor asks whether the claimant “has a
substantial investment in the tools, equipment, or facilities
customarily required to perform the services.” Utah Admin. Code
R994-204-303(1)(b)(ii). Evolocity notes that “for the most part, Ms.
Colbert used her own computer, used her own telephone service,
used her own internet service, and used her own other related
equipment.” Evolocity concedes, however, that it had furnished
some equipment and software to Colbert, most notably access to
the company’s Steel Jaws software, which Colbert was required to
use to communicate with Evolocity’s clients and track the work she

5. Evolocity does argue that the Department improperly weighed
Colbert’s use of a home office in considering whether Colbert was
subject to Evolocity’s “control and direction” under rule R994-204-
303(2) of the Utah Administrative Code. However, because we do
not reach the question of whether Colbert was subject to
Evolocity’s control and direction, we do not address this claim.

6. Evolocity incorrectly identifies this factor as one of those the
Department found in Evolocity’s favor. However, the
Department’s final order states that the tools and equipment factor
“does not support a finding the Claimant was independently
established.” Nevertheless, because Evolocity has set forth the
evidence and reasoning it believes demonstrate that Colbert
provided her own tools and equipment, we address this argument
as a challenge to the Department’s determination.

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           Evolocity v. Department of Workforce Services

had performed each day. The Department determined that
Colbert’s purchase of a computer, telephone service, and internet
service did not constitute a “substantial investment” in the tools
required to do her work, because those purchases were “typical
household expenses,” the costs of which were “quite low.” The
Department found, moreover, that these purchases did not
constitute all of the tools Colbert needed for her job and that the
balance of those tools—a headset, the Steel Jaws software, and
other business software—were provided to her by Evolocity.

¶13 Evolocity has not demonstrated that the Department’s
determination on this point lacks evidentiary support when the
evidence is viewed in a light most favorable to the Department’s
determination. Evolocity does not address the Department’s
determination that Colbert’s purchase of a computer and
telecommunications services are merely “household expenses.”
And Evolocity has not explained how the Department’s
determination is clearly erroneous in light of the evidence that
Evolocity supplied the software necessary for Colbert to perform
her work. Accordingly, we conclude that Evolocity has failed to
demonstrate error in the Department’s determination on this point.

B.    Other Clients

¶14 Evolocity next argues that the Department erred in
determining that Colbert did not perform work for clients other
than Evolocity. This factor asks whether the claimant “regularly
performs services of the same nature for other customers or clients
and is not required to work exclusively for one employer.” Utah
Admin. Code R994-204-303(1)(b)(iii). Evolocity first observes that
Colbert worked part-time for the United States Census Bureau for
three months. However, Evolocity has directed us to no record
evidence that Colbert’s work for the census bureau was “of the
same nature” as the work she performed for Evolocity. Id.
Accordingly, the fact that Colbert worked part-time for the census
bureau does not undermine the Department’s determination.

¶15 Evolocity also asserts that Colbert was free to work for other
clients and argues that requiring an employer to demonstrate that

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            Evolocity v. Department of Workforce Services

a claimant has actually worked for other clients is “an unreasonable
requirement” that is “clearly outside the law.” However, the plain
language of the regulation asks not whether a claimant is free to
perform work for other clients but whether the claimant “regularly
performs” work for other clients. Id. Thus, the Department’s
determination is neither contrary to law nor contrary to the record
evidence, and Evolocity has not demonstrated error on this point.

C.     Advertising

¶16 Evolocity also argues that the Department erred in
determining that Colbert did not advertise her services to generate
business. This factor is satisfied if the claimant “advertises services”
by any method “clearly demonstrating an effort to generate
business.” Utah Admin. Code R994-204-303(1)(b)(v). Evolocity
asserts that Colbert advertised through interpersonal “networking”
by speaking to friends and neighbors about her work and inviting
several of them to work for Evolocity. However, evidence that she
solicited others to work for Evolocity does not demonstrate “an
effort to generate business” of her own. Id. Evolocity has identified
no evidence that Colbert advertised in any medium in an effort to
generate business for herself.

¶17 Evolocity faults the Department for focusing on whether
Colbert actually advertised rather than whether she could have
advertised her services. However, again, the plain language of the
rule dictates precisely the inquiry undertaken by the Department:
whether the claimant “advertises services,” not whether the
claimant is free to advertise her services. Id. Thus, we see no error
in the Department’s determination on this factor.

D.     Profit or Loss

¶18 Last, Evolocity challenges the Department’s determination
that Colbert could not realize a profit or loss through her work for
Evolocity. To prevail on this factor, an employer must demonstrate
that the claimant “can realize a profit or risks a loss from expenses
and debts incurred through an independently established business
activity.” Utah Admin. Code R994-204-303(1)(b)(iv). Evolocity

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            Evolocity v. Department of Workforce Services

argues that the Department inappropriately considered whether
Colbert was “invested” in Evolocity.

¶19 In making this argument, Evolocity attacks the analysis
conducted by the administrative law judge in this matter, not the
analysis conducted by the Department’s appeals board. However,
our review is limited to the final, operative order of the
Department as rendered by its appeals board.7 See Utah Code Ann.
§ 63G-4-403 (LexisNexis 2011). The appeals board did not consider
whether Colbert was invested in Evolocity but instead determined
that Colbert’s “expenses incurred to provide services for
[Evolocity] . . . were not substantial enough to feasibly exceed [her]
set salary.” Not only has Evolocity failed to articulate a challenge
to the appeals board’s determination, but the appeals board’s
reasoning is consistent with this court’s decision in Petro-Hunt, LLC
v. Department of Workforce Services, 2008 UT App 391, 197 P.3d 107.
In Petro-Hunt, this court concluded that a claimant could not realize
a profit or loss where her overhead was limited and “all the money
she received was pure profit with no accompanying risk of loss.”
Id. ¶ 28. Colbert was paid a set salary every two weeks. She could
not increase the amount she was paid by performing more work,
and she was not exposed to any risk of loss through incurring debts
or expenses in performing her work. Thus, we are not convinced
that the Department erred in determining that Colbert could not
realize a profit or loss through her work for Evolocity.

¶20 In sum, Evolocity has failed to demonstrate error in the
Department’s determinations on the factors relevant to a decision
whether Colbert was independently established in work similar to
that she performed for Evolocity. The ultimate inquiry for the
Department was whether, in light of these factors, Evolocity had

7. Evolocity asserts that, because the appeals board adopted the
administrative law judge’s findings, this court must review those
findings rather than those of the appeals board. However, the
appeals board conducted its own analysis of each relevant factor.
Accordingly, it is the reasoning of the appeals board that controls,
and Evolocity must demonstrate error in that reasoning to prevail.

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            Evolocity v. Department of Workforce Services

proved that Colbert was “regularly engaged” in a business
“established independently of the alleged employer”—that is, one
that Colbert “created and [that] exists apart from a relationship
with [Evolocity] and does not depend on a relationship with
[Evolocity] for its continued existence.” See Utah Admin. Code
R994-204-303(1)(a).

¶21 As the Department found, Colbert was a teacher before she
was approached by Evolocity to perform work for them and had
never before worked in website marketing. Evolocity did not “call
upon persons who were already in that trade or business as one
would when in need of a barber, physician, or plumber.” New Sleep,
Inc. v. Department of Emp’t Sec., 703 P.2d 289, 291 (Utah 1985).
Evolocity trained Colbert to perform the work using software
Evolocity provided. During her tenure with Evolocity, Colbert
never performed website-marketing work for other clients. As
Evolocity itself declares in discussing whether Colbert worked
exclusively for Evolocity, “Ms. Colbert chose not to establish a
separate business entity, despite having been shown how to do so
on multiple occasions.” (Emphasis omitted.)

¶22 Given the balance of the relevant factors and the record
evidence, we cannot conclude that the Department clearly erred in
determining that Colbert was not engaged in an independently
established business. See In re adoption of Baby B., 2012 UT 35, ¶ 46,
308 P.3d 382. Because Evolocity has not demonstrated that Colbert
was independently established, we need not consider whether she
was subject to Evolocity’s direction and control. See Utah Code
Ann. § 35A-4-204(3) (LexisNexis 2011); BMS Ltd. 1999, Inc. v.
Department of Workforce Servs., 2014 UT App 111, ¶ 6, 327 P.3d 578.

 II. The Department’s Decision Does Not Render the Governing
             Regulations Unconstitutionally Vague.

¶23 Finally, Evolocity argues that the Department’s decision
“applied governing legal standards in a vague, subjective, and
unpredictable manner, in violation of void for vagueness
restrictions imposed by the due process clause.” “The
void-for-vagueness doctrine requires that a statute or ordinance

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           Evolocity v. Department of Workforce Services

define an ‘offense with sufficient definiteness that ordinary people
can understand what conduct is prohibited and in a manner that
does not encourage arbitrary and discriminatory enforcement.’”
Greenwood v. City of North Salt Lake, 817 P.2d 816, 819 (Utah 1991)
(quoting Kolender v. Lawson, 461 U.S. 352, 357 (1983)).8 Evolocity
takes issue principally with a statement made by the administrative
law judge summarizing the standard applied to an independent-
contractor determination:

       A status determination requires an assessment or
       evaluation of the total employment situation. It is not
       simply a matter of adding up the number of factors
       indicating employment status and those that indicate
       independent contractor status. The entire
       employment relationship is reviewed, considering
       the factors, to discover whether the Claimant was
       more like an employee or more like an independent
       contractor.

Evolocity asserts that this “impressionistic approach” improperly
treats the statutory and regulatory standards as “simply ‘points to
ponder’ when an administrative law judge is faced with the
question whether, in his/her personal estimation, a given claimant
looks more like a contractor or more like an employee.” Evolocity
accordingly argues that this approach renders the governing law
unconstitutionally vague.

¶24 We first conclude that the administrative law judge’s
explanation of the governing standard is consistent with the law.

8. We note that it is not entirely clear whether the void-for-
vagueness doctrine applies to a statutory unemployment-insurance
program such as the Employment Security Act. Generally, the
doctrine is applied to penal statutes or legislative enactments that
impose civil fines. See Kolender v. Lawson, 461 U.S. 352, 357 (1983);
Giaccio v. Pennsylvania, 382 U.S. 399, 402 (1966). However, because
Evolocity has not demonstrated that the regulations are
impermissibly vague, we need not decide whether the doctrine is
applicable here.

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            Evolocity v. Department of Workforce Services

The Employment Security Act provides that independent-
contractor status must be proven “to the satisfaction of the
[Unemployment Insurance Division]” of the Department. Utah
Code Ann. § 35A-4-204(3) (LexisNexis 2011). The act’s
implementing regulations provide the procedure to be followed by
the Department in making such a determination, setting forth the
factors discussed above but cautioning that they are only “aids in
the analysis of the facts of each case.” Utah Admin. Code R994-204-
303. Most importantly, the regulations give the Department
discretion to consider the “degree of importance of each factor” in
a particular case and whether a given factor may apply at all. Id.
Accordingly, the administrative law judge correctly observed that
the Department is empowered to evaluate “the total employment
situation,” including the relevant factors, “to discover whether the
Claimant was more like an employee or more like an independent
contractor.”9

¶25 Evolocity’s concern is therefore properly with the statutory
scheme and the implementing regulations, not with the
Department’s decision. However, Evolocity has not identified the
statute or regulation it believes fails to “define an offense with
sufficient definiteness that ordinary people can understand what
conduct is prohibited.” Greenwood, 817 P.2d at 819 (citation and
internal quotation marks omitted). And while Evolocity’s argument
could be read as a challenge to the Department’s statutory

9. In its reply brief, Evolocity relies on this court’s decision in
Tasters Ltd. v. Department of Employment Security for the proposition
that the legislature intended the independent-contractor factors to
be a “precise framework to be meticulously followed,” 863 P.2d 12,
27 (Utah Ct. App. 1993), and argues that the Department therefore
lacks the discretion apparently afforded it by the statute and
regulations. “It is well settled that issues raised by an appellant in
the reply brief that were not presented in the opening brief are
considered waived and will not be considered by the appellate
court.” Allen v. Friel, 2008 UT 56, ¶ 8, 194 P.3d 903 (citation and
internal quotation marks omitted). Because Evolocity did not argue
in its opening brief that the Department lacked the discretion or
authority to apply the factors as it did, this argument is waived.

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           Evolocity v. Department of Workforce Services

discretion to evaluate and weigh the factors under rule R994-204-
303 of the Utah Administrative Code, Evolocity has not shown that
the ultimate standard applied by the Department under rule R994-
204-301—whether the claimant is “engaged in an independently
established trade, occupation, profession, or business of the same
nature as the services performed”—is so vague that “ordinary
people” cannot understand what conduct falls within the reach of
the provision. See Utah Admin. Code R994-204-301(1); Greenwood,
817 P.2d at 819. Evolocity has therefore failed to demonstrate that
the law as applied by the Department is unconstitutionally vague.

                         CONCLUSION

¶26 The record evidence supports the Department’s finding that
Colbert was not engaged in an independently established business
and was therefore not an independent contractor. Evolocity has
failed to demonstrate that the Department’s application of the law
rendered it unconstitutionally vague. We therefore decline to
disturb the Department’s determination that Colbert was
Evolocity’s employee.

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