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Jack Rabbit Services, LLC v. Director, Department of Workforce Services

Court of Appeals of Arkansas, Division I

September 14, 2016

JACK RABBIT SERVICES, LLC APPELLANT
v.
DIRECTOR, DEPARTMENT OF WORKFORCE SERVICES, EMPLOYER CONTRIBUTIONS UNIT APPELLEE

         APPEAL FROM THE ARKANSAS BOARD OF REVIEW [NO. 2015-BR-4 EC]

          Cross, Gunter, Witherspoon & Galchus, P.C., by: Carolyn B. Witherspoon and Joseph A. Ramsey, for appellant.

          Phyllis Edwards, for appellee.

          WAYMOND M. BROWN, Judge

         Jack Rabbit Services, LLC ("JRS"), appeals from the Arkansas Board of Review's ("Board") decision finding that it is required to pay unemployment-insurance taxes for the services performed by Orlando Mosley and similarly situated individuals. On appeal, JRS argues that the Board's decision is not supported by substantial evidence. We affirm.

         On December 2, 2014, the Arkansas Department of Workforce Services ("Department") issued an unemployment-tax determination letter of liability to JRS, concluding that Orlando Mosley, a roadside-assistance provider under contract with JRS, and all other similarly situated individuals, were employees of JRS for purposes of unemployment-insurance taxes. On December 15, 2014, JRS filed a request for determination of coverage by the Department director ("Director"), and a hearing was held on March 12, 2015.

         Kenneth Jennings, a 515 Unit Supervisor with the Department's Wage Investigation Unit, testified that JRS failed the first two elements of Ark. Code Ann. § 11-10-210(e), [1] the "free from control and direction" element, as well as the "services performed outside the usual course of business" element. Jennings testified that his decision that JRS's place of business included the roadways was premised on his presumption that JRS actually provided dispatch services. He stated that he was unsure if Mosley owned his own business, but that Mosley indicated on the questionnaire that he advertised his services.

         David Hain, JRS's sole managing member, testified that JRS (located in Louisville, Kentucky) finds laborers and entities and then enters into a contractual agreement. He stated that JRS is a broker or labor finder and that it does not provide dispatch services. He said that Mosley did not work a set schedule designated by JRS, and that Mosley and other contractors were able to work when and how they wanted. According to Hain, Mosley was not required to work at all, and Mosley was free to accept or decline any service call or job. He testified that JRS did not supervise Mosley and that the contractors supervised themselves. He stated that Mosley was not instructed on how to perform his job, and that JRS was not involved until Mosley billed JRS for the service call. He testified that Mosley was not required to furnish a time record, and that JRS did not pay based on the amount of time spent on a job, but on the services the workers bill JRS for the completed service or for "gone on arrivals." He stated that JRS pays the independent contractor even if the driver is gone when the contractor shows up. He testified further that

[a]n independent contractor of JRS would receive a service call from a dispatch company, which JRS does not have any direct affiliation. JRS provides the independent contractor's information to a third-party dispatch company that is not affiliated with JRS. The dispatch company then uses the contact information to send out service calls. JRS has no control over the dispatch service. JRS does not pay the dispatch company. JRS does not control what the dispatchers say to an independent contractor.
Mr. Mosley, to my knowledge, did not wear a badge, but he might have worn a reflector vest that stated he was an "independent contractor" or "contracted by." JRS was not representing to the public that Mosley was an employee. If a contractor were representing himself or herself as an employee of JRS, I would ask the contractor to stop. JRS does not secure the location where the worker provides services.

         According to Hain, Mosley had an investment in the services Mosley provided because he had to have a mode of transportation, tools and other equipment, and a cell phone. Hain said that Mosley was not reimbursed for any expenses. Hain also stated that Mosley could suffer a profit or loss while under contract with JRS. Hain testified that Mosley would not have been discharged by advertising his own business or for having his own business. He said that the amount of money a contractor was paid per job was negotiable.

         Hain stated that JRS does not advertise for roadside services, and that it is not in the business of providing roadside-assistance services. He testified that JRS does not have a website, and that no member of the public can just call up JRS and receive roadside assistance. Hain admitted that it was possible for JRS to receive documentation from the third-party dispatch company to confirm information regarding the validity of a service call and whether the contractor actually went on a service run. According to Hain, the dispatch log would reflect occurrences such as originally accepting a service call and then later declining to provide the service. Hain stated that it was the contractor's right to refuse a service call. He also stated that the contractor did not have to obtain a statement from the person receiving the services.

         Hain testified that to his knowledge, JRS had never exercised any control over Mosley. He said that JRS had never provided training to the contractors. He stated that the contract prohibits texting while driving, which is against the law. Hain testified that contractors were required to wear identifying material so that "the person stranded on the side of the road is comfortable when the worker pulls up; it is important that the stranded motorist knows that the individual showing up is supposed to be there." He said that JRS has a contract with Jack Rabbit USA ("JRU") and that under that contract JRS finds labor and provides information regarding the labor to JRU. He stated that he did not have an interest or stake in JRU. He said that his compensation was not based on service calls but on JRS's overall costs and expenses. He stated that JRS's expenses would still get paid if there were no independent contractors accepting service calls. He testified that he does not know who the person receiving roadside assistance actually pays, but that JRS pays the contractors regardless of whether the person needing roadside assistance or his/her insurance company actually paid for the service. When asked about paragraph seventeen[2] of the contract, Hain stated that it had never been enforced and that it was included to, primarily, avoid types of liability.

         The Board found that JRS failed to satisfy all three exemption requirements found in Arkansas Code Annotated section 11-10-210(e). Because JRS was unable to satisfy the requirements, the Board ruled that JRS was liable for unemployment-insurance taxes for the services performed by Orlando Mosley and similarly situated individuals.

         JRS argues that the Board erred in finding that it failed to meet its burden on the three-prong test in section 11-10-210(e). To establish the exemption set forth in section 11-10-210(e), an employer must prove each of the three requirements in subsections (1)-(3).[3]If there is sufficient evidence to support the Board's ...


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