                   COURT OF APPEALS OF VIRGINIA


Present: Judge Annunziata, Senior Judges Cole and Baker *
Argued at Richmond, Virginia


YARD BIRD, INC., T/A TZERS
                                               OPINION BY
v.   Record No. 2237-97-2                 JUDGE MARVIN F. COLE
                                             AUGUST 18, 1998
VIRGINIA EMPLOYMENT COMMISSION


         FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
                    Theodore J. Markow, Judge
          A. Robinson Winn (Outland, Gray, O'Keefe &
          Hubbard, on brief), for appellant.

          William A. Diamond, Assistant Attorney
          General (Mark L. Earley, Attorney General, on
          brief), for appellee.



     Yard Bird, Inc., t/a Tzers ("Yard Bird"), appeals the

circuit court's order denying its petition for judicial review

and affirming the Virginia Employment Commission's ("VEC" or

"Commission") ruling that Jackie Pulliam and other exotic dancers

who perform for Yard Bird, are employees, not independent

contractors.   On cross-appeal, the VEC asserts that the circuit

court erred when it found that Pulliam and the other dancers were

free from Yard Bird's control.   For the reasons that follow, we

affirm in part and reverse in part.

                                 I.

     On July 5, 1995, Jackie Pulliam, who formerly performed as

     *
      Judge Baker participated in the hearing and decision of
this case prior to the effective date of his retirement on July
31, 1998 and thereafter by his designation as senior judge
pursuant to Code § 17-116.01.
an exotic dancer for Yard Bird, filed for unemployment benefits

and listed Yard Bird as one of her former employers.    While

processing Pulliam's claim, the VEC discovered that Yard Bird had

not been paying unemployment taxes on Pulliam or any of its other

dancers.   Following an investigation, a VEC tax representative

issued a letter opinion finding that the dancers were Yard Bird's

employees.    Yard Bird appealed this determination to the

Commission.   A VEC special examiner conducted a hearing on the

matter and issued a decision affirming the earlier letter

opinion.
     The Commission found that Yard Bird operates a restaurant,

bar, and lounge in Chesapeake, Virginia, where it engages

approximately fourteen exotic dancers each day.   Dancers were

generally engaged by verbal agreement until September 1995, when

Yard Bird began employing an "Independent Contractor Agreement."

Prior to that, Yard Bird had, at least on occasion, utilized

written employment applications.   Yard Bird offered into evidence

an employment application completed by Pulliam in July 1994,

attached to which was a form indicating that Yard Bird considered

the applicant-dancer to be an independent contractor.

     Dancers are paid five dollars per twenty-minute set and work

three sets per shift.   Most of the dancers' income is derived

from tips from patrons.   Yard Bird prepares a schedule of

available sets, and dancers call in to schedule their own

performances on a first-come, first-served basis.   Dancers are




                                - 2 -
not required to work a minimum number of hours each week and are

not penalized for turning down work.    The average dancer works

fours hours per week for Yard Bird and is engaged there for

approximately eight to ten weeks.   Some dancers, however, will

have as short a tenure as one week, and others will only work

around the Christmas season in order to earn additional money for

the holidays.

     Dancers are not told by Yard Bird how to perform on stage

but are required to comply with Virginia Alcoholic Beverage

Control ("ABC") laws and regulations applicable to Yard Bird's

licensing status.   Yard Bird has authority to order a dancer from

the stage during a set if the dancer violates an ABC regulation.

On the advice of ABC, Yard Bird also requests that dancers not

leave the building between sets, and the Commission found that

Yard Bird "attempts to enforce such a rule."   Yard Bird is a

"pasties and t-bar" club, and dancers provide their own

performance outfits.
     Yard Bird owner Shirley Stephenson testified that dancers

will frequently work at other clubs in the Tidewater area.

Dancers generally have their own "business" cards listing their

dance schedules.    Yard Bird offered into evidence three such

business cards and also submitted as evidence an application for

business license for the City of Virginia Beach that had been

completed by dancer Janet Taylor.   Yard Bird began "requiring"

its dancers to secure local business licenses in approximately




                                - 3 -
1995.       Nevertheless, Stephenson testified that she does not

enforce this requirement and uses dancers who do not have

business licenses.      The only evidence presented concerning

details of the dancers' business activities outside of Yard Bird

was an affidavit from one woman stating that she was "currently

employed by more than one establishment in the Greater Tidewater

area."

        Dancers are told when they audition that Yard Bird does not

withhold taxes from their earnings and that as soon as the

dancers earn $600, they are issued 1099s.      The dancers are also

required to fill out a form W-9 Request for Taxpayer

Identification Number and Certification form.      This latter

requirement is imposed by the Internal Revenue Service in

connection with Yard Bird's use of 1099s.      In a 1995 opinion

letter solicited by Yard Bird, an IRS group manager advised Yard

Bird that the IRS considered certain Yard Bird workers to be

employees, not independent contractors. 1     The group manager

explained, however, as follows:
          Section 530 of the Tax Reform Act of 1978
          provides a safe haven for taxpayers who can
          show (1) judicial precedent, (2) prior audit
          by the IRS, or (3) industry practice. Since
          you meet the requirements of Section 530, we
          will not change the way you report the
          earnings of the below mentioned worker[s].

        1
      Although the letter is silent on the jobs performed by the
workers, Yard Bird presents the letter as an opinion on the
employment status of its dancers. The VEC does not challenge
this assertion, and we will assume that the letter does indeed
refer to Yard Bird's dancers.



                                   - 4 -
The dancers generally use their residential addresses for these

tax forms and their business licenses.

     The special examiner ruled that Pulliam and the other

dancers were employees, not independent contractors.   The special

examiner held that Yard Bird had not met its burden of proving it

did not exert control over the dancers and had not proved the

dancers were engaged in independently established businesses.

The Commission further rejected Yard Bird's argument that the

"safe haven" granted Yard Bird by the IRS was binding on the VEC,

or at least should be dispositively persuasive.
     Yard Bird filed a timely petition for judicial review with

the circuit court.   The circuit court disagreed with the

Commission on the issue of control, but it concurred that the

dancers were not engaged in independent businesses.    The circuit

court also rejected Yard Bird's "safe haven" argument.

                                II.

     "Initially, we note that in any judicial proceedings `the

findings of the commission as to the facts, if supported by

evidence and in the absence of fraud, shall be conclusive, and

the jurisdiction of the court shall be confined to questions of

law.'"   Israel v. Virginia Employment Comm'n, 7 Va. App. 169,

172, 372 S.E.2d 207, 209 (1988) (citation omitted).    In accord

with our usual standard of review, we "consider the evidence in

the light most favorable to the finding by the Commission."

Virginia Employment Comm'n v. Peninsula Emergency Physicians,




                               - 5 -
Inc., 4 Va. App. 621, 626, 359 S.E.2d 552, 554 (1987).

     Our review of questions of law on the definition of

"employment" is guided by the following:
          The meaning of "employment" in the
          unemployment compensation context is
          controlled by statute. . . . The Act is to
          be liberally construed to effect its
          beneficent purpose and in borderline cases
          "employment" should be found to exist.
          Exemptions in the Act should be strictly
          construed against the alleged employer, the
          rule requiring liberal construction in favor
          of the taxpayer not being applicable. As
          defined in the Act, the term "employment"
          should be accorded a broader and more
          inclusive meaning than in the common-law
          context of master and servant.

Virginia Employment Comm'n v. A.I.M. Corp., 225 Va. 338, 345-46,

302 S.E.2d 534, 539 (1983) (citations omitted).   Employment, in

the context of unemployment compensation and taxation, is defined

by Code § 60.2-212(C) as follows:
          Services performed by an individual for
          remuneration shall be deemed to be employment
          subject to this title unless:

          1. Such individual has been and will continue
          to be free from control or direction over the
          performance of such services, both under his
          contract of service and in fact; and

          2. Such . . . individual, in the performance
          of such service, is engaged in an
          independently established trade, occupation,
          profession or business.


     The VEC has the initial burden of proving that the services

are performed by individuals for remuneration; 2 however, once the
     2
      Yard Bird concedes that the dancers perform services for
remuneration.




                              - 6 -
VEC has met its burden, the burden shifts to the putative

employer to prove, by a preponderance of the evidence, that it

qualifies for an exemption under Code § 60.2-212(C).    See

Virginia Employment Comm'n v. Thomas Regional Directory, Inc., 13

Va. App. 610, 612, 414 S.E.2d 412, 414 (1992).   If the employer

does not meet its burden of proof, then an employment

relationship will be found to exist.   See id.   Further, "the

failure to produce evidence on a factor is held against the party

having the burden of proof, not against the party that does not

have the burden of proof."   Id. at 616, 414 S.E.2d at 416.

                               III.

     "The power of control is the most significant indicium of

the employment relationship . . . ."   Richmond Newspapers, Inc.

v. Gill, 224 Va. 92, 98, 294 S.E.2d 840, 843 (1982).    We look not

only to actual control but also the potential control an alleged

employer can exert over the putative employee.    See Thomas

Regional Directory, 13 Va. App. at 614, 414 S.E.2d at 416.

"[T]he individual's status in relation to the alleged employer is

to be determined from all the facts and circumstances adduced by

the evidence, including[, but not limited to,] the provisions of

any written agreement."   A.I.M. Corp., 225 Va. at 347, 302 S.E.2d

at 539.

     The power of control includes not only the power to specify

the result to be accomplished but also to control the manner in

which the service is performed.   See id. at 347, 302 S.E.2d at




                               - 7 -
540.    In determining "whether a right to control exists, a court

must determine whether instructions have to be obeyed by an

individual and whether either party has the right to terminate

services at will without incurring liability to the other party."

 Thomas Regional Directory, 13 Va. App. at 614, 414 S.E.2d at

416.    "[I]f the alleged employer [has] the power to discharge the

alleged employee from its service because of disobedience, then

the alleged employer [has] the right to control and the service

is 'employment' under the statute."      Virginia Employment Comm'n

v. Porter-Blaine Corp., 27 Va. App. 153, 164, 497 S.E.2d 889, 895

(1998).

        Yard Bird attempts to enforce its rule that dancers not

leave the premises between sets.    While the dancers are

responsible for providing their own costumes, the fact that Yard

Bird is a "pasties and t-bar" establishment, as a practical

matter, places significant limits on the dancers' discretion in

choosing a costume.    The dancers may choose the times they work

but only in conformity with the schedule established by Yard

Bird.     See Cy Investment, Inc. v. National Council on

Compensation Ins., 876 P.2d 805, 807 (Or. App. 1994) (factors

indicating control include defining the length of a dancer's

shift).    Finally, Yard Bird requires dancers to comply with ABC

laws and regulations that govern Yard Bird's licensing status.

        Yard Bird also failed to prove it could not terminate the

services of any of the dancers at will.     The "Independent




                                 - 8 -
Contractor Agreement" was silent on this matter, and Stephenson

conceded she could not envision a situation where she would sue a

dancer for leaving Yard Bird.   The agreement sets no limits on

how long the dancers will perform for Yard Bird and guarantees

them no minimum amount of service.      Stephenson also indicated she

could order a dancer from the stage, mid-performance, if she felt

the dancer had committed an act of lewdness or disorderly

conduct.   While dancers are paid a flat rate for dancing, they

are paid for a set of fixed duration.     For all intents and

purposes, therefore, this payment constitutes a guaranteed hourly

rate of pay.   Cf. Elizabeth River Tunnel District v. Beecher, 202

Va. 452, 459, 117 S.E.2d 685, 691 (1961) (the existence of an

agreement providing for the performance of a job at a fixed price

is indicative of independent contractor status).

     The evidence proved that, in several significant aspects,

Yard Bird exercised actual or potential control over the dancers.

Accordingly, based on the totality of the circumstances,

including the "Independent Contractor Agreement," we hold that

Yard Bird failed to meet its burden of proving that Pulliam and

the other dancers were free from its control.

                                IV.

     Even were we to hold that the dancers were free from Yard

Bird's control, Yard Bird still had the burden of proving that

the dancers were engaged in independently established businesses

in order to be exempt from paying unemployment taxes on them.



                                - 9 -
See Code § 60.2-212(C)(2).

     "[I]t is elemental that one engaged in an independent

enterprise, business or profession has a proprietary interest

therein to the extent that he can operate it without hindrance

from any individual or force whatsoever."    Life & Casualty Ins.

Co. v. Unemployment Compensation Comm'n, 178 Va. 46, 55-56, 16

S.E.2d 357, 361 (1941).   Furthermore, the alleged employer has

the burden of proving that the putative employee's business is

independently established.   See Thomas Regional Directory, 13 Va.

App. at 615, 414 S.E.2d at 416.   "An [independently]

'established' business is one that is permanent, fixed, stable,

or lasting."   Unemployment Compensation Comm'n v. Collins, 182

Va. 426, 437, 29 S.E.2d 388, 393 (1944).

     Yard Bird failed to present sufficient evidence proving that

any of the dancers were engaged in "permanent, fixed, stable, or

lasting" business enterprises.    Some dancers will dance at Yard

Bird for only a week; others will dance only during the holiday

season to earn additional money for Christmas.   The average

dancer stays at Yard Bird for eight to ten weeks.   Little

evidence was presented as to how long dancers continue in the

"business" of exotic dancing after leaving Yard Bird.   The

evidence suggests that the exotic dancing "enterprises" of Yard

Bird's dancers are temporary and short-lived.

     Yard Bird presented only one business license and three

"business" cards in support of its position that the dancers are



                              - 10 -
independent contractors.   Yard Bird's owner conceded that,

although the "Independent Contractor Agreement" indicates the

dancers must have business licenses, not all of the dancers have

licenses and this "requirement" is not enforced.   While business

licenses and business cards are both indicia of independently

established businesses, the fact that an individual has a

business license and a business card is not dispositive.    This

conclusion is especially true where the worker obtains the

business license only at the request of the putative employer.
     The evidence that the dancers perform at other clubs does

not conclusively prove they are engaged in independently

established businesses.    The other clubs might treat the dancers

as employees.    Yard Bird presented a single affidavit from one

dancer to corroborate Stephenson's testimony regarding the

dancers' activities outside of Yard Bird.   Moreover, the

affidavit suggested the dancer was not an independent contractor

because she indicated she was "employed" by more than one

establishment.   The fact that a person may work several part-time

jobs, even in the same industry, does not necessarily make him or

her an independent contractor.

     Finally, the fact that Yard Bird issues 1099s to its dancers

is largely immaterial under the circumstances.   Yard Bird's own

evidence proved that the IRS allows the dancers to be considered

as independent contractors merely because of a special exemption

in the tax code.   The IRS specifically found that it considered




                               - 11 -
the dancers to be employees.

       Accordingly, Yard Bird's evidence falls short of proving

that the dancers were engaged in independently established

businesses.

                                 V.

       "[T]he fact that an exemption [from employment] may exist

under federal law is not determinative of whether an exemption

exists under the Virginia [Unemployment Compensation] Act."

Peninsula Emergency Physicians, 4 Va. App. at 627, 359 S.E.2d at

555.   We are governed by the definition of "employment" contained

in Code § 60.2-212.   Accordingly, we reject the contention that

we are, or should be, bound by the "safe haven" granted to Yard

Bird by the IRS.

                                 VI.

       For the reasons stated above, we hold that Pulliam and the

other dancers were under the control and direction of Yard Bird,

that they were not engaged in independently established

businesses, and that the VEC correctly determined they were

employees.    Accordingly, we reverse the circuit court's judgment

that the dancers were free from Yard Bird's control, but we

affirm its ruling that the dancers were employees.   The matter is

remanded for further proceedings consistent with this opinion.
                                             Affirmed in part,
                                             reversed in part,
                                             and remanded.




                               - 12 -
