Appeal from the District Court of Natrona County The Honorable David B. Park, Judge.
The opinion of the court was delivered by: Voigt, Chief Justice.
Before VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, JJ.
[¶1] The Wyoming Department of Employment, Unemployment Insurance Commission (Commission) appeals the district court's reversal of the Commission's decision, which decision found that Jolley, Castillo, Drennon, Ltd., d/b/a Sierra Engineering (Sierra) had payroll for services performed by employees subjecting it to unemployment tax under the Wyoming Employment Security Law (WESL), found at Wyo. Stat. Ann. § 27-3-101 (LexisNexis 2009), et. seq. Finding that substantial evidence exists in the record to support the Commission's decision, we will reverse the district court's decision and affirm the Commission's decision.
[¶2] Is there substantial evidence in the record to support the Commission's decision that Sierra had payroll for services performed by employees covered by the WESL during calendar years 2004 through 2006?
[¶3] Sierra is a limited partnership which contracts with clients seeking to design, drill, and complete oil and gas wells in Wyoming and elsewhere. Sierra separately contracts with its consultants to do the work requested by its clients and then links the consultants with its clients to perform the requested services. In August of 2006, the Employer Services section of the Wyoming Department of Employment, Unemployment Tax Division (UI Tax Division) received a Joint Business Registration form from Sierra.*fn1
Based on information provided in the form, the UI Tax Division notified Sierra that it had determined that Sierra had payroll for services performed in Wyoming by employees covered by the WESL and was therefore required to pay unemployment tax.*fn2 Sierra appealed that determination and the Wyoming Department of Employment, Unemployment Insurance Division scheduled a contested case hearing for the matter. The issue to be determined at the hearing was "[w]hether [Sierra] [was] liable to pay quarterly unemployment insurance taxes to the [UI Tax Division] in reference to certain persons performing services for [Sierra]." The resolution of the issue turned on whether the consultants were independent contractors as set forth in Wyo. Stat. Ann. 27-3-104(b) (LexisNexis 2009)*fn3 or whether the consultants were Sierra's employees, which would subject Sierra to the WESL. Following the hearing, the hearing officer issued a decision concluding that Sierra did not carry its burden to prove that the consultants were independent contractors under Wyo. Stat. Ann. § 27-3-104, thus, Sierra was subject to the WESL. Sierra appealed that decision to the Commission.
[¶4] On appeal, the Commission determined that some of Sierra's consultants conducted business with Sierra under separately formed entities while others conducted business as individuals. Consequently, the Commission determined that the case needed to be remanded in order for the hearing officer "to review the actual contracts the employer had with consultants who are individuals." Furthermore, the Commission instructed the hearing officer to "take additional evidence and testimony relative to the subpoenaed contracts and payment records as to whether the services performed under each contract qualify as employment pursuant to the applicable sections of [WESL]." On remand, the hearing officer reviewed the contracts and payroll records relating to Sierra's consultants as instructed by the Commission. It is important to note that the hearing officer determined that an audit of Sierra's employment records had been performed by the UI Tax Division, which will be discussed more below.*fn4 The hearing officer's decision grouped Sierra's consultants that were paid for services by Sierra, between the years 2004 and 2006, into three general categories and then made individual findings of fact and conclusions of liability in respect to each individual consultant. The three categories were: (1) consultants that conducted business as a separate business entity; (2) consultants that conducted business as individuals but the record did not contain a written contract for services with Sierra; (3) consultants that conducted business as individuals and the record contained a written contract for services with Sierra. The hearing officer also made separate findings in respect to numerous other individual consultants. The hearing officer determined that wages paid to consultants in the first category, those that conducted business as a separate business entity, were not subject to the unemployment insurance tax because they are not "individuals" as defined by Wyo. Stat. Ann. § 27-3-104. Regarding the second category of consultants, the hearing officer determined that Sierra failed to meet its burden of proving that they were independent contractors, in part, because none of the consultants had written contracts with Sierra. Moreover, the only evidence supporting Sierra's contention that these consultants were independent contractors was affidavits submitted by the consultants, essentially attesting that they were independent contractors, which the hearing officer deemed to be "not probative, trustworthy, or credible." Finally, in respect to the third category of consultants, the hearing officer determined that they "were not free from direction or control, did not represent themselves to the public as self-employed individuals, and could not substitute another individual to perform their services." Sierra appealed the hearing officer's decision to the Commission.
[¶5] After its review, the Commission concluded as follows:
Contrary to the hearing officer's decision, we find that [the] UI Tax [Division] did not conduct an audit of Sierra's payments to consultants for the calendar years 2004 through 2006. In view of the fact that no audit has been made in this matter, we conclude that it is beyond the scope of this appeal for the Commission to make findings of fact and conclusions relative to specific consultants and the amount of remuneration they received from Sierra as a result of services performed by those consultants in Wyoming beginning January 1, 2004.
The Commission determined inter alia that Sierra did not direct and control every detail of the services performed by consultants, but Sierra did control at least some significant details; Sierra failed to prove by a preponderance of the evidence that all of its consultants represented themselves as independent contractors; and Sierra's consultants could substitute another individual to perform their services with the consent of Sierra and/or Sierra's client. The Commission further found that evidence in the record relating to eight specific consultants "fail[ed] to support Sierra's contention that all of its consultants are independent contractors." Accordingly, the Commission concluded that "Sierra had payroll for services performed in Wyoming by employees covered by [the WESL] during calendar years 2004 through 2006." Sierra appealed the Commission's decision to the district court.
[¶6] On appeal, the district court reversed the Commission's and hearing officer's decisions on the ground that "Sierra presented, at a minimum, a prima facie case. . . . It is at this point that the burden of production shifted to the Division to rebut Sierra's contentions. Bando v. Clure Bros. Furniture, 980 P.2d 323, 330 (Wyo. 1999). ...