2014 VT 61


863 To Go, Inc. v. Department of
Labor (2013-413)
 
2014 VT 61
 
[Filed 13-Jun-2014]
 
NOTICE:  This opinion is
subject to motions for reargument under V.R.A.P. 40 as well as formal revision
before publication in the Vermont Reports.  Readers are requested to
notify the Reporter of Decisions by email at: JUD.Reporter@state.vt.us or by
mail at: Vermont Supreme Court, 109 State Street, Montpelier, Vermont
05609-0801, of any errors in order that corrections may be made before this
opinion goes to press.
 
 

2014 VT 61

 

No. 2013-413

 

863 To Go, Inc.


Supreme Court


 


 


 


On Appeal from


     v.


Employment Security Board


 


 


 


 


Department of Labor


March Term, 2014


 


 


 


 


Anne
  M. Noonan, Chair


 

Pietro J. Lynn and Alexander G. Lewis of Lynn, Lynn &
Blackman, P.C., Burlington, for
  Plaintiff-Appellant.
 
Dirk Anderson, Montpelier, for Defendant-Appellee.
 
 
PRESENT:  Reiber, C.J.,
Dooley, Skoglund, Robinson and Crawford, JJ.
 
 
¶ 1.            
CRAWFORD, J.   The single issue in this appeal is
whether payments by employer 863 To Go, Inc. to its delivery drivers should be
excluded from the calculation of employer’s contribution to Vermont’s system of
unemployment compensation.  We affirm the decision of the Vermont
Employment Security Board requiring employer to include these payments in the
calculation of its unemployment contribution.  
¶ 2.            
Employer is a Vermont corporation which provides food delivery services
to Burlington-area restaurants that do not employ drivers of their own. 
The company commenced operations in 2005.  Its business model involves
five groups or entities: employer; the restaurants that contract with employer
for marketing and delivery services; Delivery Drivers, Inc. (DDI), an
employment agency located in California; the individual drivers; and the
individual consumers who order food for home delivery.  

¶ 3.            
Consumers call employer, frequently after visiting the company’s
website, which displays the menus of participating restaurants.  They
place an order and arrange payment to employer either by credit card or by cash
to be collected by the delivery driver.  The price includes a delivery
charge that varies by location and distance.   Employer faxes the
order to the restaurant.  It pays the restaurant directly for the meal on
a discounted basis.   
¶ 4.            
In the meantime, the delivery job is placed on a website for approved
drivers.  These drivers are people willing to deliver food to customers in
their own vehicles.  Drivers learn about the employment opportunity
through word of mouth, local advertisements, or a Craigslist advertisement. 
People who respond are directed to DDI.  DDI collects information from
applicants including their driver’s license number and proof of automobile
insurance.  DDI then arranges for each applicant to meet with a
representative from employer.  If the applicant is eligible for
employment, they are given access to employer’s website.  Each driver
decides whether to accept a particular delivery assignment. 
¶ 5.            
At the end of each night, the drivers “cash out” at employer’s office,
meaning that they turn over the cash or credit card slips paid by the
customers.  The amounts collected by drivers include the cost of the meal
and the fixed delivery charge.  They keep any cash tips.  Employer
sends enough money to DDI to pay for its commission and a per-trip payment to the
drivers.  
¶ 6.            
Individual drivers play no role in taking the orders from
customers.  Their responsibility is limited to delivering the food to the
customers.  They are also required to pick up payment from customers who
have not already paid by credit card over the telephone.  They purchase
equipment necessary for delivery such as an insulated food carrier from
employer.  At one time they were required to wear a uniform shirt, but
this policy was dropped in favor of a requirement of clean, neat attire. 
Some drivers place employer advertising decals on their cars, but this is not
mandatory.  
¶ 7.            
Following a field audit, the Unemployment Insurance and Wage Division of
the Vermont Department of Labor assessed an unemployment compensation
contribution against employer for wages paid to 136 individual drivers over
twelve quarterly periods.  Employer petitioned for a hearing.  A
factual hearing was held before an administrative law judge in the Office of
Administrative Hearings at the Department of Labor.  The judge ruled in
favor of the Department.  This decision was upheld by a written decision
of the Vermont Employment Security Board.  Employer appealed directly from
the Board to this Court.  See 21 V.S.A. § 1332.
¶ 8.            
Our review of decisions by the Employment Security Board is highly
deferential.  See Fleece on Earth v. Dep’t of Emp’t
& Training, 2007 VT 29, ¶ 4, 181 Vt. 458, 923 A.2d 594 (“The Board’s
decision is entitled to great weight on appeal.” (quotation
omitted)).  We will uphold the Board’s factual findings unless clearly
erroneous, and its conclusions if reasonably supported by the findings.  Blue v. Dep’t of Labor, 2011 VT 84, ¶ 6, 190 Vt. 228, 27
A.3d 1096.  “We will also generally defer to its interpretations of
the statutes it is charged with administering.”  Id. 
Decisions within the Board’s expertise are presumed to be correct unless there
is a clear showing to the contrary.  Bouchard v.
Dep’t of Emp’t & Training, 174 Vt. 588, 589,
816 A.2d 508, 510 (2002) (mem.).*
¶ 9.            
Under Vermont’s unemployment compensation statute, all persons who
receive wages from an employer are presumed to be engaged in “employment” and are
entitled to unemployment compensation benefits.  21 V.S.A. §§ 1301(5), (6)(B), (12); Fleece on Earth, 2007 VT 29,
¶ 7.  Employers are required to pay for unemployment compensation
insurance for their employees.  21 V.S.A. §§ 1321,
1358.  
¶ 10.         In
this case, employer initially contended that its drivers were self-employed
persons whose services were exempt from the definition of employment under the
so-called “ABC test” set forth in 21 V.S.A. § 1301(6)(B).  Employer
dropped that argument on appeal to the Employment Security Board, and instead
argued that it was not required to make unemployment contributions on behalf of
its drivers because they were “direct sellers” within the meaning of 21 V.S.A.
§ 1301(6)(C)(xxi).  On appeal to this Court, employer limits its
argument to the direct-seller exemption. 
¶ 11.         Section
1301(6)(C)(xxi) exempts from the definition of
employment “[s]ervice[s] performed by a direct seller
if the individual is in compliance with all” of the following factors:
  (I) The individual is engaged in
the trade or business of selling or soliciting the sale of consumer products,
including services or other intangibles, in the home or a location other than
in a permanent retail establishment, including whether the sale or solicitation
of a sale is to any buyer on a buy-sell basis, a deposit-commission basis, or
any similar basis for resale by the buyer or any other person. 
  (II) Substantially all the
remuneration, whether or not received in cash, for the performance of the
services described in subdivision (I) of this subdivision (C)(xxi) is directly
related to sales or other output, including the performance of services, rather
than to the number of hours worked. 
  (III) The services performed by
the individual are performed pursuant to a written contract between the
individual and the person for whom the services are performed, and the contract
provides that the individual will not be treated as an employee for federal and
state tax purposes. 
21 V.S.A. § 1301(6)(C)(xxi).  The provision exempts independent sales
staff located somewhere other than a store who are paid on the basis of sales
concluded rather than hours spent on the job.  Familiar examples include
commission-based sales of products, often door-to-door.    
¶ 12.         In
reviewing the claim that employer’s drivers were direct sellers, the Employment
Security Board ruled that the drivers were not “selling” anything since the
sale occurred prior to the delivery of the products:  
The sale or solicitation of sale has
already occurred by the time the driver even becomes aware that there is work
available for him or her.  The drivers in this case are similarly situated
to drivers employed by courier services, whom we have repeatedly found to be
employees rather than independent contractors.  
¶ 13.         We
agree with the Board that the facts in the record support the determination
that the drivers are not engaged in “selling or soliciting the sale of consumer
products.”  21 V.S.A. § 1301(6)(C)(xxi)(I). 
In a process known to anyone who has ever ordered a pizza, the customer calls
in his or her order.  A bilateral contract based on an exchange of mutual
promises is formed.  The customer promises to pay for the meal either upon
delivery or before.  The price is set, except for any gratuity, as is the
description of the meal.  Employer promises to obtain the food and arrange
for its delivery.  In theory, either party could sue for damages in the
event of a breach.  In practice, a consumer unhappy with the food will make
a different choice next time.  
¶ 14.         The
delivery driver plays no discernible role in creating the contract of
sale.  The record contains no evidence that he or she can vary the terms
of sale, either with respect to price or to product.  The driver’s only
role is to deliver the food and to pick up the purchase price if it has not
already been paid.  He or she has not “sold” anything.  He or she
has, obviously, “delivered” dinner.   
¶ 15.         Employer
directs the Court’s attention to the occasional nature of the drivers’
work.  Drivers accept assignments as they wish and are paid on the basis
of how many deliveries they complete.  Their employment contract describes
them as “self-employed.”  The casual, self-employed nature of the delivery
job is relevant to the second and third criteria set forth in § 1301(6)(C)(xxi).  The Department of Labor concedes for the
purposes of this appeal that these criteria are met.  These
characteristics of the job, however, have no bearing on the threshold question
of whether the drivers are engaged in selling or soliciting sales.  
¶ 16.         The
Vermont exemption for direct sellers is closely modeled after a provision of
the Internal Revenue Code that exempts employers from paying employment taxes
for direct sellers.  Compare 26 U.S.C. § 3508(b)(2)(A)-(C),
with 21 V.S.A. § 1301(6)(C)(xxi).  Employer argues that this case is
similar to Smoky Mountain Secrets, Inc. v. United States, 910 F. Supp.
1316 (E.D. Tenn. 1995), in which a federal court determined that delivery
drivers for a company that marketed gourmet food products qualified as direct
sellers under the federal exemption.   The Smoky Mountain Secrets
decision focused on the participation of the company’s drivers in “closing” the
sales transaction as a basis for finding that they were engaged in “selling”
the product:
  [Plaintiff’s] delivery persons
were an integral part of [plaintiff’s] sales force; their services did not
consist of merely driving to the customer’s home and handing over the package.
 The delivery person had to collect the amount due, which often meant that
he or she had to close the sale. Neither the delivery person nor the
telemarketer would be paid unless the package was accepted and paid for by the
consumer. Thus, the reason [plaintiff’s] own delivery persons were used instead
of common carrier was to obtain the opportunity to close the sale face-to-face
if a delivery was refused. Two of plaintiff’s managers . . . each
of whom had previously worked for [plaintiff] as delivery persons, testified
that the person delivering the packages was often called upon to close sales,
such as when a customer has changed his or her mind, did not know the terms of
the sale, or when an unknowledgeable spouse refused to accept
the package. [They] further testified that delivery persons also made sales on
a “show-me” basis, in which additional packages are shown and sold to customers
and to their neighbors. Consequently, I find that closing the sale was as much
an art as was obtaining the order over the telephone in the first place.
Id. at
1318-19 (footnote omitted). 
¶ 17.         In
this case, although employer’s drivers also picked up money from customers,
there is no evidence that they “closed” the sale when customers changed their
mind or an “unknowledgeable spouse” declined delivery.  There is also no
evidence that they made “additional” sales at the doorstep.  Their
services are almost entirely delivery services with the ability to accept
payment on a cash-on-delivery basis.  
¶ 18.         Given
the record in this case, we agree with the Board that the drivers were not
engaged in “selling or soliciting” within the meaning of the statute. 
Since the “selling” requirement of the exemption was not met, we affirm the
decision of the Employment Security Board that employer is obligated to pay an
unemployment compensation contribution to the Department of Labor with respect
to its delivery drivers. 
Affirmed.
 
 

 


 


FOR THE COURT:


 


 


 


 


 


 


 


 


 


 


 


Associate
  Justice

 





*  Contrary to
employer’s argument, it is not entitled to de novo review.  The Board’s
decision in this case involves interpretation of the statute that the Board is
charged with administering.  This is not a case involving statutory
construction of “provisions not involving any facts or employment-specific
knowledge,” see Windham Cnty. Sheriff’s Dep’t v.
Dep’t of Labor, 2013 VT 88, ¶ 6, ___ Vt. ___, 86 A.3d
410, or the application of judicially created doctrines outside the
expertise of the administrative agency.  In re Tariff
Filing of Cent. Vt. Pub. Serv. Corp., 172 Vt. 14, 19, 769 A.2d
668, 673 (2001).



