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Families, Inc. v. Director, Department of Workforce Services Employer Contribution Unit

Court of Appeals of Arkansas, Division II

October 19, 2016



          Branch, Thompson, Warmath & Dale, P.A., by: Robert F. Thompson III, for appellant.

          Phyllis A. Edwards, for appellee.

          BART F. VIRDEN, Judge

         Appellant Families, Inc. ("Families") 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 some of its workers. On appeal, Families argues that the Board erred by not applying the recently amended version of Arkansas Code Annotated section 11-10-210. Families also asserts that the Board's decision is not supported by substantial evidence. We affirm.

         I. Facts

         On February 11, 2015, the Arkansas Department of Workforce Services ("Department") issued an unemployment-tax determination letter of liability to Families concluding that Families' workers were its employees for purposes of unemployment-insurance taxes. On March 2, 2015, Families filed a letter disputing the Department findings and requested a hearing for a redetermination of coverage by the Department director ("Director") pursuant to Arkansas Code Annotated section 11-10-308 (Supp. 2013). In April 2015, the statute concerning the criteria used to classify workers as either independent contractors or as employees was amended. Pursuant to the amendment, in order for an employer to show that its workers are independent contractors, Arkansas Code Annotated 11-10-210(e) now requires that the employer prove the first prong of the three-prong test and only one of the other two prongs. Prior to the amendment, the statute required that the employer satisfy all three prongs of the test.

         The hearing was held on June 11, 2015. At the hearing several Families workers testified about the services they performed for Families and about the work they engaged in outside of Families. Each of these four witnesses testified that he or she provided mental-healthcare-related services for Families and that they also worked as professionals in the mental healthcare field outside of Families. One witness, Anne Lehman, testified that she was employed as a school counselor at McRae Elementary School and that she maintained a private practice in addition to her work with Families. Stephanie Marlowe testified that she was employed as a mental-health therapist with Families and that she maintained a private practice. Keith Merriweather testified that he worked for the Veterans Administration as a veterans services representative, and that he was a contract case manager for Families. These workers testified that Families assigned clients to them but that they were allowed to control the size of their caseloads.

         Mark Thurman, the CEO for Families testified that the "Rehabilitative Services for Persons with Mental Illness" ("RSPMI") manual set forth the same regulations for both employees and contract workers and that, for purposes of the RSPMI, there was no distinction between the two classifications of workers. Thurman testified that the RSPMI set forth rules for accreditation, record keeping, performance evaluations, staff competence and training, and location of services. Thurman testified that, pursuant to the "Professional Services Agreement, " Families workers must get approval of any outside work they take on.

         After the hearing, the Director issued a decision affirming the tax audit letter on liability and found that Families used both traditional employees and contract workers to deliver the outpatient services it provided and that it issued the client assignments to both types of workers; thus, Families was responsible for the payment of unemployment-insurance taxes for the services performed by its mental-health professionals and paraprofessionals classified as employees, and their earnings constituted wages subject to unemployment taxes. Families then appealed to the Board, which affirmed and adopted the Director's decision in an opinion filed on August 13, 2015. Families has now timely appealed the Board's decision to this court.

         II. Points On Appeal

         A. Retroactive Application of Arkansas Code Annotated Section 11-10-210

         The first point on appeal asserted by Families is whether the amended version of Arkansas Code Annotated section 11-10-210 should have been applied retroactively. Families argues that the amended statute should have been applied because the change made by the legislature was procedural rather than substantive; thus, the amendment did not create any new rights or obligations. Furthermore, Families argues that the changes relate to the fiscal affairs of government and the collection of taxes; therefore, retroactive application of a statute is permissible. We disagree, and we affirm.

         The first principle of retroactivity of legislation is that retroactivity is a matter of legislative intent. Coots v. Bandera, 2016 Ark.App. 388, at 2-3, ___ S.W.3d ___. The general rule is that all legislation is presumed to apply prospectively unless the legislature expressly declares, or necessarily implies by the language used, an intent to give a statute retroactive effect. Id. The rule of strict construction does not apply to remedial statutes that do not disturb vested rights, or create new obligations, but only supply a new or more appropriate remedy to enforce an existing right or obligation. Bean v. Office of Child Support Enf't, 340 Ark. 286, 297, 9 S.W.3d 520, 526 (2000). Procedural legislation is more often given retroactive application. Id. The cardinal principle for construing remedial legislation is for the courts to give appropriate regard to the spirit which promoted its enactment, the mischief sought to be abolished, and the remedy proposed. Ark. Dep't of Human Servs. v. Walters, 315 Ark. 204, 866 S.W.2d 823 (1993). In addition, we have approved retroactive application of civil statutes, especially those concerning the fiscal ...

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