Subcontracting Concepts, Inc. v. Commissioner of the Division of Unemployment Assistance

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13-P-269 Appeals Court

SUBCONTRACTING CONCEPTS, INC. vs. COMMISSIONER OF THE DIVISION
OF UNEMPLOYMENT ASSISTANCE & another. 1

No. 13-P-269.

Middlesex. October 8, 2013. - November 12, 2014.

Present: Rubin, Milkey, & Agnes, JJ.

Employment Security, Employment relationship, Burden of proof.

Civil action commenced in the Ayer Division of the District
Court Department on August 23, 2011.

The case was heard by Michael J. Brooks, J.

Jack K. Merrill for the plaintiff.
Suleyken D. Walker, Assistant Attorney General, for
Commissioner of Unemployment Assistance.

AGNES, J. This case concerns the liability of the

plaintiff, Subcontracting Concepts, Inc. (SCI), a New York

corporation, for contributions to the Massachusetts unemployment

compensation fund (fund) pursuant to G. L. c. 151A, §§ 13 & 14.

The Division of Unemployment Assistance (DUA) determined that

1
Kenneth Flynn.
2

the defendant Kenneth Flynn was an "employee," who performed

"employment" services for SCI, who was his "employer." SCI

contends that Flynn was an independent contractor (and not an

employee) under a statutory exemption set forth in G. L.

c. 151A, § 2. For the reasons that follow, we conclude that the

board of review (board) of the DUA ruled correctly that Flynn

was an employee who performed services for SCI, and thus we

affirm the judgment of the District Court which reached the same

result.

1. Procedural background. 2 This appeal arose out of a

claim for unemployment compensation filed by Flynn in September,

2009. Flynn worked from April 4, 2009, to August 12, 2009, when

he was terminated. Flynn named Ace Expediters of Alabama, Inc.

(Ace), as his employer. Flynn did not work for anyone else

during this period. 3

2
The DUA concedes that two of the review examiner's
findings are clearly erroneous. Those facts are not relied upon
in reaching this decision. The rest of the review examiner's
findings are supported by substantial evidence in the record.
3
Thereafter, the DUA determined that Flynn was an employee
and that SCI was his employer. Thus, the DUA concluded that SCI
was required to pay into the fund. See G. L. c. 151A, §§ 13 &
14. On or about November 12, 2009, SCI appealed this
determination and requested a hearing. A review examiner
appointed by DUA conducted a hearing on April 5, 2011. On May
12, 2011, the examiner issued a written decision determining
that an employer-employee relationship existed between SCI and
Flynn and that SCI was liable for payments to the fund. On or
about July 13, 2011, SCI petitioned the board for review of the
examiner’s decision. The board issued its decision on July 25,
3

2. Factual background. The examiner made the following

findings of fact which are amply supported by the evidence

presented at the hearing. On March 21, 2009, Flynn entered into

a written contract with SCI to provide services to "SCI and its

customers." 4

The examiner found that SCI "is engaged in providing

drivers and vehicles to client courier services to perform their

necessary delivery work. They also provide a payroll service,

paying the drivers, who are always hired as independent

contractors." Flynn did not sign a contract with SCI’s courier

client for whom he made the deliveries, in this case Ace.

Flynn’s agreement with SCI states that "no employer/employee

relationship is created under this agreement or otherwise." No

taxes were deducted from Flynn's pay and he received no benefits

from SCI. Flynn was paid a set daily fee of $139.00 for his

services. He could not negotiate his own fees with the client,

Ace, and was required to follow the delivery schedule set by the

2011, and affirmed the examiner’s determination. SCI filed a
complaint for judicial review in the Ayer District Court on
August 23, 2011. The judge ruled that the board "had a
reasonable basis and was not arbitrary and capricious."
Judgment entered for the defendants.

Because both the District Court and the board summarily
affirmed the written decision by the examiner, that decision is
what we review in this case. See Eady's Case, 72 Mass. App. Ct.
724, 725-726 (2008).
4
The contract was received as an exhibit at the hearing and
is part of the record on appeal.
4

client. Flynn was required to wear a shirt with the Ace logo on

it when he performed services for the client.

Under the contract, Flynn agreed to make his vehicle

available to SCI and to use his vehicle in connection with the

services Flynn furnished to SCI and Ace. Flynn’s agreement with

SCI also obligated him "not to have any 'non-essential'

personnel on board his or her vehicle while the vehicle is on

the premises of any SCI courier client or while

[o]wner/[o]perator's vehicle contained any freight packages or

envelopes." Flynn also was required to report any accidents to

SCI, and SCI agreed to provide insurance benefits to their

independent contractors such as Flynn.

3. Discussion. a. Standard of review. We review the

decision of the board according to the standards set forth in

G. L. c. 30A, § 14(7). G. L. c. 151A, § 42. The validity of an

agency decision depends on whether it is supported by

substantial evidence. Coverall N. America, Inc. v. Commissioner

of the Div. of Unemployment Assistance, 447 Mass. 852, 857

(2006) (Coverall). 5

5
We respect "the experience, technical competence, and
specialized knowledge of the agency, as well as . . . the
discretionary authority conferred upon it." Athol Daily News v.
Board of Review of the Div. of Employment & Training, 439 Mass.
171, 174 (2003). The board’s decision will be affirmed unless
it is "unsupported by substantial evidence or is arbitrary or
capricious, an abuse of discretion, or not in accordance with
law." Commissioner of the Div. of Unemployment Assistance v.
5

b. SCI was obligated to contribute to the Unemployment

Compensation Fund. i. SCI was an "employing unit." An

"employing unit" is defined as "any individual or type of

organization . . . who or which has or . . . had one or more

individuals performing services for him or it within this

[C]ommonwealth." G. L. c. 151A, § 1(j). The statute also

defines "employment" as any "service . . . performed for wages

or under any contract, oral or written, express or implied, by

an employee for his employer . . . ." G. L. c. 151A, § 1(k).

See Work-A-Day of Fitchburg, Inc. v. Commissioner of the Dept.

of Employment & Training, 412 Mass. 578, 581 n. 3 (1992).

SCI contends that the board erred in making the threshold

determination that it was an "employing unit" subject to the

requirements of the unemployment compensation statute because

Flynn never performed services for it. SCI’s contention that it

was not an "employing unit" is belied by the plain terms of the

contract and the findings made by the examiner. The contract

states that Flynn was to provide services to "SCI and its

customers." Flynn, in fact, provided services for SCI by

delivering goods for SCI's clients, such as Ace, which hired SCI

to supply it with delivery drivers.

Town Taxi of Cape Cod, Inc., 68 Mass. App. Ct. 426, 428-429
(2007).
6

ii. SCI did not meet its burden to demonstrate that Flynn

was an independent contractor. An employer’s liability to

contribute to the fund depends on whether there is an employment

relationship between the employing unit and the person who

performs services for it. An "[e]mployee" is defined by G. L.

c. 151A, § 1 (h), as "any individual employed by any employer

subject to this chapter and in employment subject thereto." The

statute creates a rebuttable presumption that an individual

performing services to an employing unit is an employee. SCI

argues that Flynn and those similarly situated were not

employees, but instead should be regarded as independent

contractors.

"The term 'employment' under the [statute] is inclusive,

and the [statute] is of broad reach." Boston Bicycle Couriers,

Inc. v. Deputy Director of the Div. of Employment and Training,

56 Mass. App. Ct. 473, 476 (2002) (Boston Bicycle Couriers).

Under the statute, the burden rests on SCI, as an "employing

unit" to overcome the statutory presumption and to establish

that Flynn, the individual who performed services for it, falls

within the statutory exemption. Whether the presumption is

overcome is governed by what has come to be known as the

tripartite "ABC" test. Under this test, SCI must prove that

Flynn performed services (a) "free from control or direction" of

the employing enterprise; (b) "outside of the usual course of
7

business," or "outside of all the places of business, of the

enterprise;" and (c) as part of "an independently established

trade, occupation, profession, or business" of the worker.

G. L. c. 151A, § 2. In order to meet its burden of proof, SCI

must demonstrate that each one of the three statutory criteria

is applicable to the services performed by Flynn. Otherwise,

the services in question will be deemed "employment" within the

meaning of G. L. c. 151A and SCI is liable to contribute to the

fund. If SCI meets its burden of proof, and demonstrates that

the services do not constitute employment, Flynn and others

similarly situated will be regarded as independent contractors

and not "employees" within the meaning of G. L. c. 151A.

See Coverall, supra at 856-857. The board was warranted in

concluding that SCI did not meet its burden of proof with

respect to part (a) of the tripartite test because it failed to

demonstrate that the services at issue are performed "free from

control or direction" of the employing enterprise. G. L.

c. 151A, § 2(a).

In Athol Daily News v. Board of Review of the Div. of

Employment and Training, 439 Mass. 171, 175 (2003) (Athol Daily

News), the Supreme Judicial Court explained that, in assessing

whether the employing unit has met its burden of proof on part

(a) of the tripartite test, there are two critical questions:

did the person performing services (1) have the right to control
8

the details of how the services were performed; 6 and (2) have the

freedom from supervision "not only as to the result to be

accomplished but also as to the means and methods that are to be

utilized in the performance of the work." Id. at 177, quoting

from Maniscalco v. Director of the Div. of Employment Sec., 327

Mass. 211, 212 (1951).

Under the contract at issue, SCI required Flynn to submit

to the control or direction of Ace, SCI's client. Flynn had a

contractual obligation to SCI to perform his work through

whatever means or methods Ace required. SCI required that Flynn

check with Ace prior to working for any other carrier, follow

Ace's delivery routes and wear a t-shirt bearing the Ace logo,

and ensure that anyone working with Flynn met SCI's

requirements. SCI controlled how Flynn maintained the vehicle

he used for deliveries and who he allowed in his vehicle while

servicing SCI's customers. While Flynn had some choice as to

the manner in which he performed his deliveries, SCI had

authority to exercise a substantial degree of control over

numerous details of the performance. See Driscoll v. Worcester

Telegram & Gazette, 72 Mass. App. Ct. 709, 715-716 (2008). SCI

6
However, "the test is not so narrow as to require that a
worker be entirely free from direction and control from outside
forces." Athol Daily News, supra at 176-178 (quotation
omitted).
9

did not meet its burden of showing that Flynn was free from

control, direction, and supervision of the employing enterprise.

SCI also failed to meet its burden with respect to part (c)

of the tripartite test. That burden is not met "unless it can

be demonstrated that the services at issue are performed . . .

as part of an independently established trade, occupation,

profession, or business of the worker." Athol Daily News, supra

at 175. The critical question here is "whether the service in

question could be viewed as an independent trade or business

because the worker is capable of performing the service to

anyone wishing to avail themselves of the services or,

conversely, whether the nature of the business compels the

worker to depend on a single employer for the continuation of

the services." Id. at 181. "[T]he question whether an employer

has satisfied the statutory requirements of the third prong of

[the independent contractor test] must be based upon a

comprehensive analysis of the totality of relevant facts and

circumstances of the working relationship. No one factor is

outcome-determinative." Boston Bicycle Couriers, supra at 484.

Thus, the fact that Flynn signed an agreement that identified

him as an independent contractor is not determinative. 7 See id.

7
The observation we made in Boston Bicycle Couriers is
instructive: "the Legislature, presumably aware of the
possibility of artful contract drafting, included language in
§ 2 that requires the employer to prove the absence of control
10

at 480 (key consideration is "whether the worker is wearing the

hat of an employee of the employing company, or is wearing the

hat of his own independent enterprise"). Essentially, part (c)

requires the employing unit to demonstrate that the worker is

performing services as "an entrepreneur." Ibid.

In this case, Flynn, like the bicycle carriers in Boston

Bicycle Couriers, supra, depended on a single employer for the

continuation of the services he performed while not wearing the

hat of his own independent enterprise. Flynn worked five days a

week for Ace between 9 P.M. and 6 A.M., with little time to

engage in any independent enterprise. Flynn worked for no one

else during the period he was employed by SCI. Flynn was

required to obtain approval prior to performing work for any

other clients, thus placing limits on his ability to work for

anyone wishing to avail themselves of his services.

See Coverall, supra at 859 ("[T]he claimant was compelled to

rely heavily on Coverall"). Compare Athol Daily News, supra at

181-182 (carriers were free to deliver newspapers for multiple

and direction over the worker 'both under his contract for the
performance of service and in fact' [emphasis original]. This
statutory language directs [the Department of Employment and
Training] and a reviewing court to look beyond the four corners
of the agreement to the actual working relationship [footnote
omitted]. So viewed, boilerplate language replete with
designations and labels incorporated into form contracts by the
employing unit may not be used as a subterfuge to avoid
liability to the unemployment compensation fund when the
agreement lacks any real foundation in the facts of the actual
working relationship." Id. at 484.
11

publishers, including competitors of the defendant publisher,

and the record in that case indicates that some carriers

exercised that option); Commissioner of the Div. of Unemployment

Assistance v. Town Taxi of Cape Cod, Inc., 68 Mass. App. Ct.

426, 432 (2007) (court noted that the drivers could operate

their own taxi service or drive for another service at the same

time they operated leased taxi cabs).

4. Conclusion. For the foregoing reasons, we conclude

that the review examiner's determination that the claimant was

not an independent contractor within the meaning of G. L.

c. 151A, § 2, but instead an employee who was controlled by SCI

is neither arbitrary nor capricious, and is supported by

substantial evidence. Accordingly, we affirm the judge's

decision.

Judgment affirmed.