BMS Limited 1999 v. Department of Workforce Services

1. The Honorable Russell W. Bench, Senior Judge, sat by special
assignment as authorized by law. See generally Utah Code Jud.
Admin. R. 11-201(6).
2014 UT App 116
_________________________________________________________
THE UTAH COURT OF APPEALS
BMS LIMITED 1999, INC.,
Petitioner,
v.
DEPARTMENT OF WORKFORCE SERVICES AND ROBERT LOVELOCK,
Respondents.
Memorandum Decision
No. 20130500-CA
Filed May 22, 2014
Original Proceeding in this Court
Rick D. Roskelley and Dustin L. Clark, Attorneys
for Petitioner
Kathleen Bounous, Attorney for Respondent
Department of Workforce Services
SENIOR JUDGE RUSSELL W. BENCH authored this Memorandum
Decision, in which JUDGES STEPHEN L. ROTH and JOHN A. PEARCE
concurred.1
BENCH, Senior Judge:
¶1 BMS Limited 1999, Inc., doing business as RLS of Utah,
(RLS) challenges the decision of the Workforce Appeals Board (the
Board). RLS argues both that the Board erred in applying the
residuum rule to the evidence presented and that the Board
erroneously determined that Robert Lovelock (the Claimant) was
RLS’s employee, as opposed to an independent contractor, for

BMS Limited 1999, Inc. v. Department of Workforce Services
2. “An independent contractor is a worker who is customarily
engaged in an independently established trade, occupation,
profession, or business of the same nature as the services
performed, and the individual providing the services must be free
from the employer’s control and direction while performing
services for the employer.” Utah Admin. Code R994-204-301(1)
(emphasis added). The Board determined that RLS failed to show
that the Claimant met the first requirement for independent
contractor status and therefore declined to address the second
requirement.
20130500-CA 2 2014 UT App 116
purposes of the Utah Employment Security Act. We decline to set
aside the Board’s decision.
I. The Residuum Rule
¶2 RLS first argues that the Board erred by misapplying the
residuum rule to conclude that RLS relied exclusively on
inadmissible hearsay in its attempt to show that the Claimant was
customarily engaged in an independently established business.2
Whether the Board erroneously applied the residuum rule is a
question of law, which we review for correctness. See Prosper, Inc.
v. Department of Workforce Servs., 2007 UT App 281, ¶ 8, 168 P.3d
344.
¶3 The Board correctly recognized that hearsay evidence is
admissible in administrative hearings, see id. ¶ 10, and that findings
of fact “‘must be supported by a residuum of legal evidence
competent in a court of law.’” (Quoting Wagstaff v. Department of
Emp’t Sec., 826 P.2d 1069, 1072 (Utah Ct. App. 1992).) However, the
Board also quoted case law stating that “‘findings of fact cannot be
based exclusively on hearsay evidence.’” (Quoting Wagstaff, 826 P.2d
at 1072.) RLS argues that the Board did not consider that certain
hearsay evidence—including some of the evidence that RLS
presented in this case—is admissible and legally competent,
therefore making it sufficient to satisfy the residuum rule.

BMS Limited 1999, Inc. v. Department of Workforce Services
20130500-CA 3 2014 UT App 116
¶4 RLS is correct that certain hearsay evidence is admissible
and therefore qualifies as evidence competent in a court of law. See
Prosper, 2007 UT App 281, ¶ 11. And we have previously
recognized that some statements in our case law are less than
precise on this point when explaining the residuum rule. See id. As
we have explained, any cases, including the one quoted by the
Board, stating that findings of fact cannot be based exclusively on
hearsay evidence, should more appropriately be understood as
establishing that findings of fact cannot be based exclusively on
inadmissible hearsay evidence. See id.
¶5 Notwithstanding the language the Board quoted, we cannot
say that the Board actually applied the residuum rule too narrowly.
Indeed, we are not convinced that the two pieces of evidence that
RLS argues are admissible hearsay—a business license and an
agency questionnaire—were even considered hearsay by the Board.
The only evidence that the Board specifically identified as hearsay
was the testimony of RLS’s general manager regarding the
Claimant’s business practices. And the Board stated, “Since RLS
offered mainly hearsay evidence in support of its assertion
regarding whether the Claimant was independently established,
[the administrative law judge (the ALJ)] was substantially limited
in the facts he was able to find.” (Emphasis added.) Further, these
“limited” facts found by the ALJ, which facts were adopted by the
Board, show that factual findings were made in reliance on both the
business license and the agency questionnaire. As to the business
license, there is a factual finding that “[t]he Claimant obtained a
business license in 2008 that expired in 2009.” As to the agency
questionnaire, there are multiple findings based on it, including
that “[t]he Claimant kept track of his business expenses in
connection with providing these services” and that “[t]he Claimant
reported to the Department that he considered it was a condition
of employment for him to be an independent contractor in his
relationship with [RLS].” Thus, we see no indication that the Board
erroneously applied the residuum rule by excluding evidence that
RLS argues would have been admissible under certain exceptions
to the hearsay rule.

BMS Limited 1999, Inc. v. Department of Workforce Services
20130500-CA 4 2014 UT App 116
II. Determination of Employee Status
¶6 Considering the limited facts found, the Board determined
that there was not “sufficient evidence to find the Claimant was
customarily engaged in an independently established business,”
which is the first requirement for independent contractor status, see
Utah Admin. Code R994-204-301(1). That is, even considering the
factual findings based on the business license and agency
questionnaire, the Board determined that RLS had not met its
burden to show that the Claimant was an independent contractor.
RLS argues that it did meet its burden. This issue is a mixed
question of fact and law. See Murray v. Labor Comm’n, 2013 UT 38,
¶ 33, 308 P.3d 461 (“[A] mixed question arises when an agency or
lower court must apply a legal standard to a set of facts unique to
a particular case.” (citation and internal quotation marks omitted)).
And because the determination of whether independent contractor
status was established is “fact-like” and not “law-like,” we grant
deference to the Board on this question. See id. ¶ 37 (recognizing
that deference is granted where “the mixed finding is not law-like
because it does not lend itself to consistent resolution by a uniform
body of appellate precedent or is fact-like because the [agency] is
in a superior position to decide it” (citation and internal quotation
marks omitted)).
¶7 The Utah Administrative Code sets forth seven factors to
“determine whether a worker is customarily engaged in an
independently established trade or business.” Utah Admin. Code
R994-204-303(1)(b). These factors are set out by rule as follows:
(i) Separate Place of Business. The worker has a place
of business separate from that of the employer.
(ii) Tools and Equipment. The worker has a
substantial investment in the tools, equipment, or
facilities customarily required to perform the
services. . . .
(iii) Other Clients. The worker regularly performs
services of the same nature for other customers or

BMS Limited 1999, Inc. v. Department of Workforce Services
20130500-CA 5 2014 UT App 116
clients and is not required to work exclusively for
one employer.
(iv) Profit or Loss. The worker can realize a profit or
risks a loss from expenses and debts incurred
through an independently established business
activity.
(v) Advertising. The worker advertises services in
telephone directories, newspapers, magazines, the
Internet, or by other methods clearly demonstrating
an effort to generate business.
(vi) Licenses. The worker has obtained any required
and customary business, trade, or professional
licenses.
(vii) Business Records and Tax Forms. The worker
maintains records or documents that validate
expenses, business asset valuation or income earned
so he or she may file self-employment and other
business tax forms with the Internal Revenue Service
and other agencies.
Id.
¶8 RLS argues that the evidence establishes at least five of these
factors and that “because the balance of factors tip in favor of
independent-contractor status, the Board’s decision should be
reversed.” As an initial matter, RLS is mistaken in describing the
standard the Board must apply in making this determination. The
rule itself explains that the listed factors “are intended only as aids
in the analysis of the facts of each case,” that “[t]he degree of
importance of each factor varies depending on the service and the
factual context in which it is performed,” and that “some factors do
not apply to certain services and, therefore, should not be
considered.” Utah Admin. Code R994-204-303. Thus, the Board
may give differing weights—or no weight at all—to various factors
in determining whether a worker is customarily engaged in an
independently established business.

BMS Limited 1999, Inc. v. Department of Workforce Services
20130500-CA 6 2014 UT App 116
¶9 Next, we disagree that the evidence RLS points to
necessarily establishes all of the factors that it claims are
established. For example, we are not convinced that the factor
considering whether “[t]he worker has a place of business separate
from that of the employer,” id. R994-204-303(1)(b)(i), was
necessarily established by evidence that the Claimant never
performed services at or had an office at RLS’s business offices and
that the Claimant had a business license for one year with his home
address on it. This is especially true where the services were
delivery services, which, by definition, could not be performed at
RLS’s location and would have to be performed elsewhere no
matter the Claimant’s status. Further, there is conflicting evidence
on this issue because the questionnaire states that Claimant did not
have his own place of business and that he “was initially required
by RLS to obtain a business license.”
¶10 Finally, as mentioned above, the factual findings stated that
some factors had been met, namely, that the Claimant had at one
point obtained a business license and that the Claimant kept track
of business expenses. And as to the fact that the Claimant provided
his own equipment and could realize a profit or loss, the ALJ
recognized that evidence on these matters weighed in favor of
independent contractor status: “[C]learly there are some factors
that tend to demonstrate some independence, including the
Claimant using his own vehicle and incurring his own expenses in
providing these services.”
¶11 Notwithstanding these factors, the ALJ and the Board
determined that RLS had not met its burden to show that the
Claimant was engaged in an independently established business.
The Board quoted and relied on the rules providing that “[a]
worker must clearly establish his or her status as an independent
contractor by taking steps that demonstrate independence
indicating an informed business decision has been made,” Utah
Admin. Code R994-204-301(1), and that an independently
established business “is created and exists apart from a relationship
with a particular employer and does not depend on a relationship

BMS Limited 1999, Inc. v. Department of Workforce Services
3. “Special scrutiny of the facts is required to assure that the form
of a service relationship does not obscure its substance . . . .” Utah
Admin. Code R994-204-303.
20130500-CA 7 2014 UT App 116
with any one employer for its continued existence,” id. R994-204-
303(1)(a).
¶12 Other relevant facts that support the Board’s decision
include the following: the services performed were not of the type
to be performed at one location; the initial business license and the
agreement to independent contractor status (which could have
prompted the Claimant’s tracking of business expenses) were
reportedly understood by the Claimant as conditions of
employment; the Claimant reported that the only equipment he
provided was his vehicle, tarps, and straps; RLS would pay a fuel
surcharge when gas prices rose, somewhat limiting the Claimant’s
risk of loss; there was no evidence that the Claimant serviced or
attempted to obtain other customers; and many of the specifics of
the Claimant’s business activities remain unknown. Considering
the rules, the particular facts of this case, and the deference3
granted to the Board on this question, we cannot say that the
Board’s weighing of the factors and ultimate decision should be set
aside.
¶13 We therefore decline to disturb the Board’s decision.