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COURT OF APPEALS DECISION DATED AND RELEASED November 7, 1996 |
NOTICE |
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A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No.
96-0714
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT IV
TMI, INC.
Plaintiff-Respondent,
v.
LABOR AND INDUSTRY REVIEW COMMISSION,
Defendant-Appellant
DEPARTMENT OF INDUSTRY,
LABOR AND
HUMAN RELATIONS,
Defendants.
APPEAL from an order of
the circuit court for Wood County:
JAMES MASON, Judge. Reversed.
Before Dykman, P.J.,
Vergeront and Roggensack, JJ.
ROGGENSACK,
J. The Labor and Industry Review Commission (LIRC) appeals from an
order reversing LIRC's determination that TMI, Inc. owes unemployment
compensation contributions for exotic dancers who entertained customers in a
tavern owned by TMI. LIRC held that the
dancers were employees within the meaning of § 108.02(12), Stats.
The circuit court reversed.
Because LIRC's conclusions, that the dancers performed services for TMI
for pay and that they were not free from TMI's control or direction are reasonable,
we affirm LIRC. Accordingly, we reverse
the order of the circuit court. In
light of our determination, we do not decide whether the dancers performed
their services in an independently established trade, business or profession in
which they were customarily engaged.
BACKGROUND
TMI operated a tavern
called The Body Shop, which featured exotic dancers. The dancers initiated contact with TMI, seeking bookings, usually
for a week at a time. Three dancers
performed each night. Although the
tavern kept no employment records, it estimated that the dancers earned as much
or more in tips (approximately $50/night) as in wages ($30-$50/night). Some of the dancers worked for tips
alone. Dancers did not report their
tips to TMI, which withheld nothing from their earnings.
The dancers provided
their own music, costumes, and routines.
They also determined the length and order of their sets among
themselves. The tavern provided a
stage, lighting and sound equipment, and a dance license. Under a written contract implemented in
1992, the dancers were prohibited from soliciting for prostitution, using or
selling illegal substances, or engaging in acts which might affect TMI's
reputation. Certain state statutes and
city ordinances also limited the dancers' conduct. Violations could lead to the revocation of TMI's liquor and dance
licenses.
In 1992, the Department
of Industry, Labor and Human Relations[1]
(DILHR) found TMI had failed to pay unemployment compensation taxes for the
dancers in 1990, 1991, and the first quarter of 1992. It assessed TMI for the unpaid contributions and interest. TMI appealed DILHR's decision. On July 30, 1993, after an evidentiary
hearing, the appeal tribunal affirmed DILHR's determination. It concluded that the dancers performed
services for TMI for pay and that they were not free from TMI's control or
direction because TMI had the right, even if not always exercised, to control
various aspects of the dancers' work.
For example, the dancers were expected to begin shows within one of hour
of opening; TMI policed its dancers to be sure their conduct did not jeopardize
TMI's licenses; and TMI would not rehire a dancer who was unpopular with the
customers or did not show up for work for two nights. It also found there was no credible evidence to support the
conclusion that the dancers' services were performed in an independently
established trade, business, or profession in which they were customarily
engaged. TMI appealed that decision to
LIRC.
On February 28,
1994, LIRC adopted all of the appeal tribunal's factual findings. LIRC held that the dancers' services were
not performed free from TMI's control or direction. It did not address whether the services were performed in an
independently established trade, business or profession. TMI appealed to the circuit court. On January 19, 1996, the Wood County
Circuit Court reversed LIRC and concluded LIRC's determination that the dancers
were subject to the control or direction of TMI, was not supported by credible,
substantial or probative evidence and that TMI had met its burden of proof
sufficient to establish that the dancers were excepted from coverage by
§ 108.02(12)(b), Stats. LIRC appealed.
DISCUSSION
Scope
of Review.
We review LIRC's
decision rather than that of the circuit court. Stafford Trucking, Inc. v. DILHR, 102 Wis.2d 256,
260, 306 N.W.2d 79, 82 (Ct. App. 1981).
Whether an exotic dancer is an "employee" within the meaning
of § 108.02(12)(a), Stats.,
or is exempt under § 108.02(12)(b), is a mixed question of fact and law,
which requires the application of a statutory standard to findings of
fact. See Larson v. LIRC,
184 Wis.2d 378, 386, 516 N.W.2d 456, 459 (Ct. App. 1994). LIRC's factual findings must be upheld on
review if there is credible and substantial evidence in the record upon which
reasonable persons could rely to make the same findings. Section 102.23(6), Stats.; Princess House, Inc. v. DILHR, 111
Wis.2d 46, 54-55, 330 N.W.2d 169, 173-74 (1983) (concluding that the statutory
requirement of § 102.23(6)[2]
that "credible and substantial evidence" is necessary to support an
agency's factual findings merely codified existing case law). Once the facts are established, however, the
determination of whether those facts fulfill the statutory standard is a legal
conclusion. Keeler v. LIRC,
154 Wis.2d 626, 632, 453 N.W.2d 902, 904 (Ct. App. 1990). Therefore, we will review LIRC's
determination that the dancers performed services for TMI over which TMI
exercised control or direction, as a conclusion of law.
A court is not bound by
an agency's conclusions of law. West
Bend Educ. Ass'n v. WERC, 121 Wis.2d 1, 11, 357 N.W.2d 534, 539
(1984). However, it may defer to those
determinations. The supreme court has
recently clarified both when to defer to an agency's legal conclusions, and how
much deference the courts should give. See
UFE, Inc. v. LIRC, 201 Wis.2d 274, 548 N.W.2d 57 (1996).
An agency's
interpretation or application of a statute may be accorded great weight
deference, due weight deference or de novo review. Id. at 284, 548 N.W.2d at
61. We will accord great weight
deference only when all four of the following requirements are met:
(1) the
agency was charged by the legislature with the duty of administering the
statute; (2) ¼ the
interpretation of the agency is one of long‑standing; (3) ¼ the
agency employed its expertise or specialized knowledge in forming the
interpretation; and (4) ¼ the
agency's interpretation will provide uniformity and consistency in the
application of the statute.
Id., citing
Harnischfeger Corp. v. LIRC, 196 Wis.2d 650, 660, 539 N.W.2d 98,
102 (1995). We will accord due weight
deference when "the agency has some experience in an area, but has not
developed the expertise which necessarily places it in a better position to
make judgments regarding the interpretation of the statute than a
court." Id. at 286,
548 N.W.2d at 62. The deference allowed
an administrative agency under due weight is accorded largely because the
legislature has charged the agency with the enforcement of the statute in
question. Id. This court will not overturn a reasonable
agency decision that furthers the purpose of the statute unless we determine
that there is a more reasonable interpretation under the applicable facts than
that made by the agency. Id. We will employ de novo review
when the legal conclusion made by the agency is one of first impression, or
when the agency's position on the statute has been so inconsistent as to
provide no real guidance. Id.
(citations omitted).
We conclude that great
weight deference cannot be accorded to LIRC's application of the facts to the
statutory standard set forth in § 108.02(12)(b), Stats., because LIRC has not satisfied all four criteria for
great weight deference required by the supreme court in UFE. For example, there is no long standing
agency determination of when an exotic dancer is an employee for purposes of
unemployment compensation. LIRC's
appendix cites only three such decisions, none of which resulted in a published
appellate decision. That is not a
sufficient historical record to support applying great weight deference to
LIRC's conclusion of law. UFE
at 285, 548 N.W.2d at 62. We also do
not apply a de novo review to the agency's legal conclusion because
DILHR has been charged by the legislature with administering the statute in
question and its interpretation in this case is not one of first
impression. Therefore, we conclude that
because the agency has some experience in interpreting § 108.02(12)(b)
with regard to exotic dancers, we will accord LIRC's conclusion of law due
weight deference.
Liability for
Unemployment Compensation Contributions.
Determining
whether persons are employees for unemployment compensation purposes requires a
two-step analysis. See Keeler,
154 Wis.2d at 631, 453 N.W.2d at 904.
First, DILHR has the burden of showing that the individuals performed
services for an employing unit for pay.
If that is proved, the individuals are presumed to be employees for
purposes of unemployment compensation and the burden shifts to the employer to
show that the persons should be exempt under the provisions of
§ 108.02(12)(b), Stats. That is, the employer must prove both
(1) that the individuals were, and will continue to be, free from its
control or direction in regard to the performance of the individuals' services,
under their contracts and in fact, and (2) that the individuals performed their
services in an independently established trade, business or profession, in
which they were customarily employed. Id.
The control or direction
test is not one of degree; it is sufficient to show that the employer had the
right to control its employees, whether that right was exercised or not. Stafford Trucking, 102 Wis.2d
at 263, 306 N.W.2d at 83. In Princess House, the supreme court
decided that a manufacturer of household products did not control or direct the
services provided by its independent dealers.
The dealers signed ten year contracts which could be terminated only for
deceptive sales practices or for violations of state or federal laws. They set their own hours and could use any
type of marketing method they preferred.
They set their own resale prices.
The only evidence of control of the dealers was the dealers' compliance
with certain laws, for which compliance was in their own self-interests. The court did not consider the dealers'
conformance with their own self-interests sufficient evidence of an employer's
right to control. Princess House,
111 Wis.2d at 67-68, 330 N.W.2d at 180.
In contrast, in Lifedata
Medical Services v. LIRC, 192 Wis.2d 663, 531 N.W.2d 451 (Ct. App.
1995), we applied a deferential standard of review to LIRC's conclusion that
for purposes of unemployment compensation, networks of nurses, emergency
medical technicians and paramedics were employees of a company that contracted
with the insurance industry to provide qualified examiners for applicants. While Lifedata did not directly supervise
the physical examinations, it did assert a right to check them periodically for
quality control. Lifedata also required
the examiners to follow a manual which explained how to conduct physical
examinations; it prohibited the disclosure of test results and required the
examiners to either retain copies of the exams for six months or send them to
Lifedata. Id. at 668, 531
N.W.2d at 453.
In the case at hand,
TMI's exotic dancers were expected to comply with state and local
ordinances. However, unlike the dealers
in Princess House, TMI held licenses which depended upon the
compliance of its dancers. Moreover,
some dancers signed a contract which prohibited soliciting for prostitution,
using or selling illegal substances or engaging in acts which would harm TMI's
reputation. TMI exerted no artistic
control over the dancers' performances.
But, like the employer in Lifedata, TMI exerted some
quality control over its dancers, by refusing to rehire them if they failed to
show up for two nights, or if they were unpopular with its customers. And, it had the right to control any aspect
of their performances that violated the statutes and ordinances upon which
TMI's liquor and dance licenses depended.
All of the facts which
LIRC found are supported by credible and substantial evidence. Therefore, we may not set them aside.
Section 102.23(6), Stats. LIRC also determined that, given the facts
found, TMI had failed to prove that the dancers were free from its control or
direction over the performance of their services both under contract and in
fact.
If LIRC's legal
conclusion is reasonable, applying due weight deference to it, we must sustain
it unless there is a more reasonable interpretation available. UFE at 287, 548 N.W.2d at
62. LIRC was persuaded by the facts it
found, as set forth above, that TMI had the right to control or direct the
dancers. We conclude those facts form a
reasonable basis for the conclusion LIRC reached. Therefore, the question before us is whether the conclusion that
TMI lacked control is more reasonable than LIRC's conclusion that it had
control. If not, we must defer to
LIRC's determination.[3] Id.
In determining whether
one conclusion is more reasonable than another, we consider the policy behind
the statute being applied. Moorman
Mfg. Co. v. Industrial Comm., 241 Wis. 200, 203, 5 N.W. 743, 744
(1942). We note that the Unemployment
Compensation Act is remedial in nature, and thus should be "liberally
construed to effect unemployment compensation coverage for workers who are
economically dependent upon others in respect to their wage-earning
status." Princess House,
111 Wis.2d at 62, 330 N.W.2d at 177.
Its purpose is to relieve some of the burden of unemployment from
workers and to provide compensation for as broad a base of workers as is
practicable. Moorman Mfg. Co.,
241 Wis. at 204-05, 5 N.W.2d at 745.
LIRC's conclusion
furthers the purpose of the statute, since it requires TMI to bear part of the
burden which dancers who are not able to maintain continuous employment will
endure. The circuit court's conclusion
does not further the purpose underlying § 108.02(12), Stats.
Therefore, we hold that concluding that the dancers were, and will
continue to be, free from TMI's control or direction is not more reasonable
than LIRC's legal conclusion and we affirm LIRC.
By the court.—Order
reversed.
Not recommended for
publication in the official reports.