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Concord Enterprises of Knoxville, Inc. v. Commissioner of Tennessee Department of Labor & Workforce Development

Court of Appeals of Tennessee, Nashville

January 20, 2017

CONCORD ENTERPRISES OF KNOXVILLE, INC.
v.
COMMISSIONER OF TENNESSEE DEPARTMENT OF LABOR & WORKFORCE DEVELOPMENT

          November 16, 2016 Session

         Appeal from the Chancery Court for Davidson County No. 14-664-III Ellen H. Lyle, Chancellor

         This appeal arises from a determination by the Tennessee Department of Labor and Workforce Development ("the Department") that Concord Enterprises of Knoxville, Inc. ("Concord"), a pet grooming business, misclassified certain employees as independent contractors from 2006 through 2011 and, therefore, was liable for unpaid unemployment taxes from that period. Following a hearing, the Appeals Tribunal concluded that unemployment taxes were due, a decision affirmed by the Commissioner's Designee. Concord petitioned for judicial review. The Chancery Court for Davidson County ("the Trial Court") affirmed the decision of the Commissioner's Designee and dismissed Concord's petition. Concord appeals to this Court. We find, inter alia, that the pet groomers at issue both performed their service at Concord's place of business and performed pet grooming service that fell squarely within Concord's course of usual business. Evidence both substantial and material supports the agency's determination. We affirm the judgment of the Trial Court.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed; Case Remanded

          Harold C. Wimberly, Knoxville, Tennessee, for the appellant, Concord Enterprises of Knoxville, Inc.

          Herbert H. Slatery, III, Attorney General and Reporter, and, W. Derek Green, Assistant Attorney General, for the appellee, the Tennessee Department of Labor and Workforce Development.

          D. Michael Swiney, C.J., delivered the opinion of the court, in which J. Steven Stafford, P.J., W.S., and Brandon O. Gibson, J., joined.

          OPINION

          D. MICHAEL SWINEY, CHIEF JUDGE

         In 2011, the Department conducted an audit of Concord. In September of 2011, the Department determined that Concord misclassified certain employees as independent contractors from 2006 through 2011 and was liable for unpaid unemployment taxes from that period for these employees. Concord requested a redetermination. In March 2012, the Department affirmed the earlier findings. Various appeals ensued which pertained to whether Concord's appeal was timely.

         Eventually, the matter was heard on the merits by the Appeals Tribunal in May 2013. Susan Porterfield ("Porterfield"), owner of Concord, testified. Porterfield testified in the affirmative that Concord was "in the business of grooming dogs." Concord also trained students to become pet groomers and sold certain pet products like shampoo. The pet groomers at issue determined their prices case-by-case, and Concord paid them 50% commission of what they brought in once a week. Concord provided the pet groomers with necessary supplies. The pet groomers sometimes participated in selling Concord retail items. The pet groomers could work where they wished, but their services provided through Concord all were performed at Concord's place of business on Kingston Pike in Knox County. Customers would call Concord to set up appointments rather than call individual pet groomers, although they could request a particular groomer. The Appeals Tribunal concluded that the pet groomers were covered employees rather than independent contractors, a decision affirmed by the Commissioner's Designee.

         Concord filed a petition for judicial review, which later was decided by the Trial Court in a December 2015 final judgment. The Trial Court found as follows:

This case is a petition for judicial review. It was filed by a business challenging the Respondent's administrative decision that the Petitioner owes back unemployment insurance premiums for the years 2006-2011. Respondent's finding that Petitioner owes the premiums derives from the classification of persons who provided pet grooming services at the Petitioner's business location.
The Respondent concluded in the administrative proceeding that the groomers who worked at the Petitioner's business constituted covered employees pursuant to Tennessee Code Annotated section 50-7-207. The Petitioner contends the groomers are independent contractors for which no premiums are due.
Judicial review was initially filed in Knox County, Tennessee. On January 27, 2014, the case was transferred to Davidson County Chancery Court and assigned to this Court.

         Although the Petitioner asserts it fits the definition of independent contractor under the seven-factor test of Tennessee common law, the Petitioner cited in its brief and acknowledged in oral argument that it must also satisfy a statutory test. Known as the "ABC" test, Tennessee Code Annotated section 50-7-207(e)(1)(A)(B)(C) requires all of the three following factors to be present to establish that the worker is an independent contractor. Failure to establish any one of the three factors classifies the worker as a covered employee for which the business must pay unemployment insurance ...


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