                     COURT OF APPEALS OF VIRGINIA


Present: Judges Benton, Willis and Annunziata
Argued at Richmond, Virginia


BROTHERS CONSTRUCTION COMPANY, INC.
                                               OPINION BY
v.   Record No. 0255-97-2              JUDGE JAMES W. BENTON, JR.
                                            JANUARY 13, 1998
VIRGINIA EMPLOYMENT COMMISSION


         FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
                    Randall G. Johnson, Judge
          Daniel M. Press (Chung & Press, P.C., on
          briefs), for appellant.

          John B. Purcell, Jr., Assistant Attorney
          General (James S. Gilmore, III, Attorney
          General; Lisa J. Rowley, Assistant Attorney
          General, on brief), for appellee.



     Brothers Construction Company, Inc. contends the circuit

court judge erred in upholding the Virginia Employment

Commission's ruling that Brothers was not exempt from the payment

of unemployment insurance taxes on the remunerations paid to its

siding installers.    See Code § 60.2-212(C).   We affirm the

judgment because the evidence supports the commission's findings

of facts and conclusions of law that (1) services were performed

by individuals for remuneration, (2) the installers were not free

from Brothers' direction and control, (3) the services were not

performed outside all of Brothers' places of business, and (4)

the installers were not engaged in independently established

trades, occupations, professions or businesses.
                                I.

     Following a random audit for unemployment insurance tax

compliance, the commission issued to Brothers, which was then

named Brothers Siding Company, Inc., a letter containing findings

of fact and a determination that individuals who installed siding

for Brothers performed services for Brothers that constitute

employment as defined in Code § 60.2-212.    Brothers requested a

hearing pursuant to Code § 60.2-500.
     Testimony at the hearing proved that Brothers, which had

then changed its name from Brothers Siding Company, Inc., to

Brothers Construction Company, Inc., is in the business of

installing siding, gutters, and downspouts on residential and

other buildings.   Charlie Hwang, the president of Brothers,

testified that after Brothers obtained contracts to install

siding on buildings, Brothers hired installers to work at job

sites located throughout Virginia, Maryland, and Washington, D.C.

The testimony established that during a five year period,

Brothers issued two hundred federal tax forms No. 1099 to

installers who performed work for Brothers.

     Hwang orally negotiated with the installers, most of whom

did not speak English very well, to pay them at a set rate per

square foot of installed siding.     Each of the installers that he

hired signed a "self-employment contract" with Brothers that

reads as follows:
          I understand that I am an independent
          contractor, and that I am responsible for all
          tax withholdings, FICA and self-employment



                               - 2 -
          taxes due. I have specific control over the
          order and sequence of work performed, time of
          completion, and the hours worked. I am paid
          by job production or by completed job, but
          not by my time. Due to these factors, I
          realize that I have the opportunity for
          [entrepreneurial] Profit (and Loss). I also
          understand that I will receive a form 1099
          from BROTHERS SIDING CO. so that I may file
          the proper Self-Employment forms due at the
          end of the year. I understand also that I am
          responsible for filing a quarterly estimate
          of federal taxes to cover Self-Employment
          Income reported to me by BROTHERS SIDING CO.


     Brothers required the installers to obtain all of their

materials from Brothers' warehouse and to provide their own tools

and transportation to the job sites.    Even though Brothers

supplied all the siding materials for the installers, Hwang

testified that Brothers only employed a few "service work"

employees who fixed damaged siding.    Otherwise, none of Brothers'

employees installed siding; they only installed gutters and

downspouts.
     Brothers set deadlines for completion of the work.     If any

of the work was defective, Brothers required the installers to

return to the site and make the requisite repairs.    The

installers were paid each week on Saturday based upon the square

feet of material installed that week.   Many of the installers

hired work crews.   Hwang testified that Brothers did not

supervise the installers or the hiring of the work crews.

     The evidence proved that Brothers reported, as employees for

unemployment tax purposes, all its corporate executives,

officers, warehouse help, and administrative staff.   However,


                               - 3 -
Brothers issued to the siding installers federal tax forms No.

1099 showing "non-employee compensation" paid.    A random audit by

the commission's tax auditor disclosed that approximately two

hundred tax forms No. 1099 were issued to these siding installers

between 1989 and 1991.   Upon investigation, the auditor found

that most of the identification numbers on those tax forms were

individual Social Security numbers.    The auditor eliminated from

his investigation any of the two hundred names of installers that

he discovered were business names.     The auditor also found that

only three of fifty installers he randomly selected to check had

business licenses in three of the counties in Northern Virginia

where Brothers performed siding installation contracts.    Based on

this information, the auditor opined that the installers were not

independent contractors and issued to Brothers a Notice of Tax

Liability Determination.
     Following the presentation of the evidence at the hearing,

the commission made extensive findings and concluded that "the

services performed by all installers and their assistants . . .

constituted services in employment so as to subject [Brothers] to

the liability for paying unemployment insurance taxes on the

remuneration paid for such services."    The commission ordered

Brothers to file amended payroll tax reports to cover the

remuneration in question.   Brothers filed for review of that

decision in the Circuit Court of the City of Richmond.     See Code

§ 60.2-500(B)(1).   The circuit court judge affirmed the



                               - 4 -
commission's decision.




                         - 5 -
                                 II.

     The taxation provision of the Act provides that "[i]n any

judicial proceedings . . . , the Commission's findings of facts,

if supported by the evidence and in the absence of fraud, shall

be conclusive, and the jurisdiction of the court shall be

confined to questions of law."    Code § 60.2-500(B)(1).   For

unemployment compensation purposes, "[s]ervices performed by an

individual for remuneration shall be deemed to be employment."

Code § 60.2-212(C).   The parties agree that the commission has

the initial burden of proving that services were performed by

individuals for remuneration.     See Virginia Employment Comm'n v.

Thomas Regional Directory, Inc., 13 Va. App. 610, 612, 414 S.E.2d

412, 414 (1992).

     In our review of the law, we are guided by the following

principles:
          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 Commission v. A.I.M. Corp., 225 Va. 338,

345-46, 302 S.E.2d 534, 539 (1983) (citations omitted).    In

addition, we must consider the evidence in the light most


                                 - 6 -
favorable to the findings of the commission, and we will not

disturb the commission's findings unless the evidence, as a

matter of law, is insufficient to support those findings.

Virginia Employment Comm'n v. Peninsula Emergency Physicians,

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

                  Services Performed by Individuals

     Brothers contends the commission failed to meet its burden

of proof because the evidence did not establish that services

were performed by individuals.    Brothers argues that even if the

installers were sole proprietorships, they did not fit within the

definition of "individual" contained in Code § 60.2-212(C)

because most of the installers hired assistants.      The commission

found that Brothers was liable for unemployment taxes for the

installers and the "individuals assisting the installers."     The

record supports this finding of fact.

     The evidence proved that all but three of the two hundred

installers used Social Security numbers that were issued to

individuals.    The auditor eliminated any installers from the list

that were business entities or that had business licenses.     The

evidence provides no rational basis to support a finding that the

remaining names on the list were anything other than individuals

as that term is commonly used.    Therefore, the commission met its

burden of proving that services were performed by individuals for

remuneration.   The evidence proved that individual installers and

their assistants performed work for Brothers and that Brothers



                                 - 7 -
paid them for these services.




                                - 8 -
                            Exemptions

     After the commission met its burden of proof, the burden

then shifted to Brothers to prove by a preponderance of the

evidence that it qualified for an exemption under Code

§ 60.2-212(C).   See Thomas Regional Directory, 13 Va. App. at

612, 414 S.E.2d at 414. Code §    60.2-212(C) provides 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 service is either outside the usual
          course of the business for which such service
          is performed, or such service is performed
          outside of all the places of business of the
          enterprise for which such service is
          performed; or such individual, in the
          performance of such service, is engaged in an
          independently established trade, occupation,
          profession or business.


     "[I]f the putative employer fails to demonstrate that it is

within the terms of both subsection (C)(1) and one of the three

exceptions under subsection (C)(2), it fails to meet its burden

of proof and an 'employment' relationship exists."    Thomas

Regional Directory, 13 Va. App. at 612, 414 S.E.2d at 414.

Furthermore, the Supreme Court has ruled that these exemptions

"should be strictly construed against the alleged employer."

A.I.M. Corp., 225 Va. at 346, 302 S.E.2d at 539.




                               - 9 -
                        Control and Direction

     Brothers points to the "self-employment contract" signed by

all of its installers as evidence of Brothers' lack of control

and direction over the installers.       However, "the existence of

the master-servant relationship under the Unemployment Act 'does

not depend upon how the parties designate each other in their

contract.'   Rather, the individual's status in relation to the

alleged employer is to be determined from all the facts and

circumstances adduced by the evidence, including the provisions

of any written agreement."    A.I.M. Corp., 225 Va. at 347, 302

S.E.2d at 539 (citations omitted).       See Thomas Regional

Directory, 13 Va. App. at 614-15, 414 S.E.2d at 415-16.

     "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).      "The potential power

of control, not the actual exercise of control, is the important

element."    A.I.M. Corp., 225 Va. at 347, 302 S.E.2d at 539-40.
See Hann v. Times-Dispatch Publ'g Co., 166 Va. 102, 106, 184 S.E.

183, 184-85 (1936).   This right of control includes not only the

power to specify the result to be accomplished but also includes

the power over the "performance of such services, both under his

contract of services and in fact."       Code § 60.2-203(C)(1).   "If

the party for whom the work is to be done has the power to direct

the means and methods by which the other does the work, an

employer-employee relationship exists."       A.I.M. Corp., 225 Va. at




                                - 10 -
347, 302 S.E.2d at 540.   "Among the tests used to determine if

the right to control exists are:   whether instructions have to be

obeyed, and whether either of the parties possesses the right to

terminate services at will without incurring liability to the

other."   Id.   Another "'means of ascertaining whether or not this

right to control exists is the determination of whether or not,

if instructions were given, they would have to be obeyed.'"

Hann, 166 Va. at 107, 184 S.E. at 185 (citation omitted).
     The evidence and the reasonable inferences to be drawn from

the evidence proved that Brothers had the right to instruct the

installers as to the work that was to be done and the manner in

which that work would be performed.     While the installers

provided their own tools and transportation, Brothers provided

all of the materials for completion of the job.    The installers

were not free to choose their own materials or purchase materials

from other sources.   Furthermore, the work had to be performed to

Brothers' standards, specifications, and satisfaction.    Although

the installers were not under constant supervision, Brothers

conducted periodic inspections.    If, upon inspection, Brothers

discovered that the work was defective, Brothers required the

installers to return to the job site to correct the mistakes

according to Brothers' specifications.    If the installers' work

was particularly unsatisfactory, the installers would not be

hired for another job.    Brothers also retained the right to

terminate the installers from a project at will.    Thus, we cannot



                               - 11 -
say the commission erred as a matter of law in finding that

Brothers exercised control over the installers.

     Although the commission's finding that Brothers exercised

control over the installers is dispositive of the case, see Code

§ 60.2-212(C), we briefly discuss the additional requirements

needed to prove an exemption under Code § 60.2-212(C)(2) because

the commission addressed them.    The exemptions of Code

§ 60.2-212(C)(2) require proof that service performed by an

individual for remuneration "is either outside the usual course

of the business for which such service is performed, or such

service is performed outside of all the places of business of the

enterprise for which such service is performed; or such

individual, in the performance of such service, is engaged in an

independently established trade, occupation, profession or

business."    The commission found that Brothers failed to prove

those exemptions.
                      Outside Place of Business
     Brothers concedes that it does not meet the first exception

contained in subsection (C)(2):    "[s]uch service is . . . outside

the usual course of the business for which such service is

performed."    However, Brothers argues that it operates only from

its headquarters in Lorton, Virginia, and that the installers'

services were performed throughout Maryland, Virginia, and

Washington, D.C. on sites that were not its places of business.

However, "places of business" are not confined to the




                               - 12 -
headquarters or office premises of the employer but embrace all

of the sites in the territory in which the alleged employees

worked.     See Life & Casualty Ins. Co. v. Unemployment

Compensation Comm'n, 178 Va. 46, 56, 16 S.E.2d 357, 361 (1941).

The installers "operated in precisely the same place or places

where [Brothers] would have operated if [it] had undertaken the

work [it]self."     Unemployment Compensation Comm'n v. Collins, 182

Va. 426, 436-37, 29 S.E.2d 388, 393 (1944).    In each instance,

the installers worked to install siding on buildings that

Brothers had agreed by contract to service.    Thus, Brothers did

not meet its burden of proving that the services provided by the

installers were performed outside of all Brothers' places of

business.
                 Independently Established Businesses

     "[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 and Casualty, 178

Va. at 55-56, 16 S.E.2d at 361.
          "It will be observed that in order to escape
          the provisions of the statute the requirement
          is not that the alleged employee be engaged
          in an 'independent business.' He must be
          engaged in one that is 'independently
          established.' An 'established' business is
          one that is permanent, fixed, stable, or
          lasting."


Peninsula Emergency Physicians, 4 Va. App. at 630, 359 S.E.2d at

557 (quoting Collins, 182 Va. at 437, 29 S.E.2d at 393).



                                - 13 -
     The evidence failed to prove that the installers either had

a proprietary interest or were engaged in independently

established businesses that were permanent, stable and lasting.

Although the installers had their own tools, the evidence proved

that Brothers supplied all the materials to perform the work.

Brothers presented no evidence that the installers had business

cards, business licenses, business phones, or business locations

to support a claim of a lasting, independently established

business.   See Thomas Regional Directory, 13 Va. App. at 616, 414

S.E.2d at 416.   No evidence proved that the installers received

income from any party other than Brothers.   See id. at 615, 414

S.E.2d at 416.   "[T]he 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.

     For these reasons, we hold that the evidence was sufficient

to support the commission's finding that the services performed

by the installers and their crews constituted employment so as to

subject Brothers to unemployment insurance tax liability.    For

these reasons, we affirm the judgment upholding the commission's

decision.
                                                          Affirmed.




                              - 14 -
