Fur Breeders v. Department of Workforce Services

2018 UT App 49
THE UTAH COURT OF APPEALS
F UR BREEDERS A GRICULTURAL C OOPERATIVE,
Petitioner,
v.
DEPARTMENT OF WORKFORCE S ERVICES,
Respondent.
Opinion
No. 20161064-CA
Filed March 29, 2018
Original Proceeding in this Court
R. Scott Rawlings, Attorney for Petitioner
Nathan R. White, Attorney for Respondent
JUDGE R YAN M. HARRIS authored this Opinion, in which J UDGES
M ICHELE M. C HRISTIANSEN and JILL M. POHLMAN concurred.
HARRIS, Judge:
¶1 	Fur 	Breeders 	Agricultural 	Cooperative 	(FBAC)
occasionally hires off-duty police officers to provide a security
presence at its facilities, and pays those officers an hourly wage
for their services. The Utah Department of Workforce Services
(DWS) considers these officers to be employees of FBAC, and
has 	charged 	FBAC 	with 	making 	unemployment 	insurance
contributions related 	to 	its payments to 	the 	officers. 	FBAC
disagrees 	with 	that 	determination, 	and 	maintains 	that 	the
officers are not its employees, and that it should not be required
to make unemployment insurance contributions related to its
payments 	to 	the 	officers. 	A 	DWS 	hearing 	officer, 	an
administrative law judge, and the DWS Board of Appeals (the
Board) all determined that the officers were FBAC’s employees.
FBAC seeks judicial review of the Board’s determination.

Fur Breeders Agric. Coop. v. Department of Workforce Services
20161064-CA 	2 	2018 UT App 49
¶2 	Upon review, we conclude that the Board’s analysis was
flawed, in that it improperly framed the relevant question.
Instead 	of 	asking 	whether 	the 	off-duty 	officers 	were
“independent” 	from 	FBAC, 	as 	the 	governing 	statute 	and
regulation require, the Board engaged in an analysis geared
toward ascertaining whether the officers were independent from
anyone. In this opinion, we set aside the Board’s order, provide
instruction as to the proper framing of the question, and direct
the Board to revisit the matter with the proper framework in
mind.
BACKGROUND
¶3 	FBAC is a business that manufactures and distributes
animal feed to farmers who raise animals for their fur. On
occasion, animal rights activist groups have been known to
attempt to damage or destroy property belonging to businesses
like 	FBAC. 	In 	an 	effort 	to 	prevent 	such 	damage, 	FBAC
sometimes 	hires off-duty 	police 	officers to 	provide 	security
services and a “greater police presence” at its facilities. It finds
these officers through the Unified Police Department of Greater
Salt Lake (UPD), a police department that serves many Salt Lake
County cities and communities.
¶4 	UPD has a voluntary “secondary employment program”
through which it allows and coordinates after-hours off-duty
work opportunities for its officers. Any UPD officer who wishes
to engage in police or security services for private entities during
off-duty 	hours 	must 	use 	UPD’s 	secondary 	employment
program; UPD prohibits its officers from engaging in any such
services outside the program. Any UPD officers who wish to
engage in off-duty police work must sign up for the secondary
employment program, and UPD then places those officers with
an individual or entity who wishes to engage their services.

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20161064-CA 	3 	2018 UT App 49
¶5 	On occasion, FBAC contacts UPD and asks to retain the
services 	of 	several 	off-duty 	officers. 	Upon 	receiving 	such
requests, UPD provides FBAC with the names of available
officers, and FBAC engages the officers directly and pays them
an hourly wage. All payments are made directly from FBAC to
the individual officers. The officers remain employees of UPD,
and perform services for FBAC (and others) only in their off-
duty hours. All of the officers who provided services to FBAC in
their 	off-duty 	hours 	during 	the 	relevant 	time 	period 	also
provided similar occasional off-duty services to other companies
during the same time period.
¶6 	FBAC provides no training to the officers. FBAC also does
not provide the officers with any instructions as to how to
perform their services, and does not require the officers to
perform their services in any particular pace or sequence. In
addition, FBAC does not furnish any equipment to the officers;
all equipment used by the officers during their work for FBAC,
including their uniforms, firearms, and police vehicles, was
provided either by UPD or by the officers themselves.
¶7 	In July 2016, a DWS hearing officer determined that the
officers were “employees” of FBAC, such that payments made
by FBAC to the officers were subject to unemployment insurance
contributions. FBAC appealed the hearing officer’s decision to an
administrative law judge, who determined in October 2016 that
the officers were FBAC’s employees. FBAC then appealed to the
Board, which in December 2016 affirmed the administrative law
judge’s determination. FBAC now seeks review in this court.
ISSUE AND STANDARD OF REVIEW
¶8 	While FBAC purports to raise several issues in its appeal,
this case can essentially be narrowed to one dispositive issue:
whether the Board correctly framed the question before deciding
that the officers were FBAC’s employees. We view this question-

Fur Breeders Agric. Coop. v. Department of Workforce Services
20161064-CA 	4 	2018 UT App 49
framing issue as one of statutory and regulatory interpretation,
and therefore one to which we grant no deference to the Board.
When an agency “has erroneously interpreted or applied the
law,” “[t]he appellate court shall grant relief” from the decision
reached by that agency. Utah Code Ann. § 63G-4-403(4)(d)
(LexisNexis 	2016). 	We 	review 	whether 	an 	agency 	properly
interpreted or applied the law for correctness. Petersen v. Utah
Labor Comm’n, 2017 UT 87, ¶ 8.1
ANALYSIS
¶9 	Under 	Utah 	law, 	individuals 	performing 	services 	for
wages 	“under 	any 	contract 	of 	hire” 	are 	considered 	to 	be
employees unless they meet both parts of a two-part test: they
must be both (1) “customarily engaged in an independently
1. DWS argues that we should not review the threshold legal
question for correctness, but should instead apply the same
deference 	to 	the 	Board’s 	framing 	of 	the 	question 	that 	we
typically 	apply 	to 	its 	ultimate 	“determinations.” 	See, 	e.g.,
Evolocity, Inc. v. Department of Workforce Services, 2015 UT App 61,
¶ 6, 347 P.3d 406 (noting that “[w]e do not reweigh the evidence
or substitute our decision for that of [an agency board] but
instead will uphold its determinations if they are supported by
the record evidence”); Tasters Ltd. v. Department of Emp’t Sec., 863
P.2d 12, 19 (Utah Ct. App. 1993) (noting that we defer to the
“intermediate conclusions” and “ultimate determination[s]” of
an agency board if they are not “irrational” or “unreasonable”).
DWS cited no case law supporting that proposition, and we are
aware 	of 	none. 	To 	the 	contrary, 	when 	the 	Board 	bases 	a
determination on its “interpretation of the applicable statutes,”
this “presents a question of law that we review for correctness.”
Carlos v. Department of Workforce Services, 2013 UT App 279, ¶ 5,
316 P.3d 957.

Fur Breeders Agric. Coop. v. Department of Workforce Services
20161064-CA 	5 	2018 UT App 49
established trade, occupation, profession, or business of the same
nature as that involved in the contract of hire for services”; and
(2) “will continue to be free from control or direction over the
means 	of 	performance 	of 	those 	services, 	both 	under 	the
individual’s contract of hire and in fact.” Utah Code Ann. § 35A-
4-204(3) 	(LexisNexis 	2015). 	The 	administrative 	law 	judge
determined that, while FBAC would prevail on the second
element of the test because it had not provided the officers with
any control or direction, FBAC could not make the showing
required under the first element of the statutory test because the
officers’ “main occupation or profession was as a police officer
working for the UPD and it has not been demonstrated [that]
they were customarily engaged in an independently established
business.” 	The 	Board 	affirmed 	the 	determination 	of 	the
administrative law judge, also resting its conclusion on the first
element 	of 	the 	test, 	concluding 	that 	“the 	officers 	are 	not
independently established in their own business.”
¶10 	In interpreting the governing statute, the Board properly
looked to regulatory guidance in the Utah Administrative Code.
See Utah Admin. Code R994-204-303. There, several factors have
been developed to aid in the determination of whether a worker
is an “employee” under the two-part statutory test. Id. R994-204-
303(1)(b). The regulation specifically notes that the question is
governed 	by 	the 	two-part 	statutory 	test, 	id. 	R994-204-303
(“whether the worker is independently established in a like
trade, occupation, profession or business and is free from control
and direction”), and that the “factors listed” in the regulation
“are intended only as aids” in applying the statutory test, id.
¶11 	Importantly for present purposes, with regard to the first
element of the statutory test, the regulation emphasizes that the
“independence” question is to be answered by reference to the
relationship between the worker and the “alleged employer.” See
id. 	R994-204-303(1)(a) 	(stating 	that 	“[a]n 	individual 	will 	be
considered customarily engaged in an independently established

Fur Breeders Agric. Coop. v. Department of Workforce Services
20161064-CA 	6 	2018 UT App 49
trade . . . if the individual is . . . regularly engaged in a trade . . .
of the same nature as the service performed, and the trade . . . is
established 	independently 	of 	the 	alleged 	employer” 	(emphasis
added)); see also Evolocity, Inc. v. Department of Workforce Services,
2015 UT App 61, ¶ 20, 347 P.3d 406 (stating that the “ultimate
inquiry” is whether the worker had a business that “exists apart
from a relationship with [the putative employer] and does not
depend on a relationship with [the putative employer] for its
continued existence”).
¶12 	The 	regulation 	then 	lists 	seven 	factors 	that 	may, 	“if
applicable,” aid in the determination of whether a worker is
“customarily engaged in an independently established trade”:
(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. However, “tools of the trade” used by
certain 	trades 	or 	crafts 	do 	not 	necessarily
demonstrate independence.
(iii) Other Clients. The worker regularly performs
services of the same nature for other customers or
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

Fur Breeders Agric. Coop. v. Department of Workforce Services
20161064-CA 	7 	2018 UT App 49
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.
Utah Admin. Code R994-204-303(1)(b)(i)–(vii). The administrative
law judge and the Board both examined these factors, and
determined 	that 	the 	officers 	were 	not 	“independently
established” and were therefore “employees” of FBAC.
¶13 	In examining these factors, however, the Board appears to
have 	overlooked 	the 	admonition 	of 	the 	regulation 	that 	the
“independence” 	inquiry 	is 	governed 	by 	reference 	to 	the
relationship between the worker and the “alleged employer,”
rather than by reference to any relationship that the worker
might have with any other individual or entity. After all, the
question presented is whether FBAC (and not UPD or some
other 	entity) 	should 	be 	required 	to 	make 	contributions 	to
unemployment insurance related to the payments FBAC made
to the officers for their security services, something FBAC is
obligated to do only if the officers are its “employees.” In
answering this question, it is relevant and important to examine
the relationship between the officers and FBAC. By contrast, the
officers’ relationship with UPD, or with any other entity for
whom they might perform off-duty security services, is of only
minimal or tangential relevance.

Fur Breeders Agric. Coop. v. Department of Workforce Services
20161064-CA 	8 	2018 UT App 49
¶14 	Examination of two of the factors examined by the Board
illustrates 	the 	point. 	One 	factor 	listed 	in 	the 	regulation 	is
captioned “tools and equipment,” and invites the examiner to
inquire 	about 	whether 	“[t]he 	worker 	has 	a 	substantial
investment in the tools, equipment, or facilities customarily
required to perform the services.” Id. R994-204-303(1)(b)(ii). In
our view, and especially given that the basic question to be
answered concerns the officers’ level of independence from
FBAC 	(the 	“alleged 	employer”), 	this 	factor 	should 	be
approached 	by 	examining 	whether 	and 	to 	what 	extent 	the
alleged 	employer 	(here, 	FBAC) 	provided 	the 	tools 	and
equipment that the officers needed in order to perform their
services. As noted, there is no evidence that FBAC provided a
single tool or piece of equipment to the officers. Instead, the
record 	demonstrates 	that 	the 	officers 	brought 	all 	of 	their
equipment with them, including their uniforms, their police
vehicles, and their firearms.
¶15 	Under this factor, the central inquiry is whether, and to
what extent, the alleged employer (FBAC) played a role in
providing the officers with their tools and equipment. If FBAC
did 	not 	provide 	tools 	or 	equipment, 	it 	becomes 	irrelevant
whether 	the 	officers 	obtained 	their 	tools 	through 	personal
payments or through some other third-party source (e.g., from
UPD). Yet in discussing this factor the Board focused entirely on
whether UPD had provided the tools and equipment to the
officers 	as 	opposed 	to 	whether 	the 	officers 	paid 	for 	that
equipment personally. This was erroneous. The Board concluded
that this factor “weighs in favor of employment,” but we cannot
see how that is the case given the absence of evidence that FBAC
provided any of the tools and equipment the officers used.
Where the worker brings his own tools and equipment, and does
not get them from the alleged employer, this factor should weigh
against 	employment, 	regardless 	of 	whether 	the 	worker 	is
fortunate enough to have some third-party benefactor, separate

Fur Breeders Agric. Coop. v. Department of Workforce Services
20161064-CA 	9 	2018 UT App 49
from the alleged employer, who has provided all or part of the
tools and equipment in question.
¶16 	Another 	factor 	listed 	in 	the 	regulation 	is 	captioned
“licenses,” and invites the examiner to inquire whether “[t]he
worker has obtained any required and customary business,
trade, or professional licenses.” Id. R994-204-303(1)(b)(vi). Here,
the Board noted that the officers, as a prerequisite for working
for UPD, had already become “duly trained and certified to be
police officers,” and had received all of the licenses required for
employment as law enforcement officers. However, the Board
determined that because these licenses were required by UPD,
and because the officers were prohibited from operating an
independent 	business 	as 	security 	officers 	outside 	of 	UPD’s
secondary employment program, “[i]t stands to reason that . . .
police certification is not necessary or customary licensure for a
business owner seeking to operate in this market.” Accordingly,
because the officers had not obtained any licenses independently
from UPD, the Board determined that this factor “weigh[ed]
towards employment” by FBAC.
¶17 	As with the “tools and equipment” factor, the Board here
lost sight of the overarching question, which is whether the
officers are “established independently of the alleged employer.”
Id. R994-204-303(1)(a). The officers reported for work at FBAC
already 	possessing 	any 	and 	all 	licensure 	and 	certification
required to perform security services as police officers; there is
certainly 	no 	evidence 	that 	the 	officers 	lacked 	any 	required
licensure or certification. The Board again here seems to have
been unduly distracted by whether the officers obtained any
licenses or certifications independently from UPD, which is
irrelevant to the overarching inquiry.
¶18 	The 	two 	factors 	we 	have 	discussed 	here 	are 	merely
illustrative of how the Board’s improper framing of the question
infected its analysis. We suspect that the manner in which the
Board framed the question affected more than just these two

Fur Breeders Agric. Coop. v. Department of Workforce Services
20161064-CA 	10 	2018 UT App 49
illustrative factors.2 But we do not intend, in this opinion, to
separately analyze and re-weigh all of the factors. That is the
task of the Board, to whose conclusions in that regard we usually
defer, at least where the Board asks the operative question in the
right way.
¶19 	We therefore set aside the Board’s order, and direct the
Board to reconsider the question of whether these officers were
2. We note here the hypothetical scenario we discussed in Needle
Inc. v. Department of Workforce Services, 2016 UT App 85, ¶ 29, 372
P.3d 696. In that case, one of the parties raised the hypothetical
scenario of a full-time college professor hired by a litigant to
provide one-time expert testimony during a lawsuit. Id. ¶ 28.
Considering that situation, we noted that it would be illogical to
consider the professor to be an “employee of the [litigant] that
hired 	him 	to 	be 	an 	expert 	witness,” 	because 	“the 	college
professor was already established in the independent business of
being a professor with the relevant expertise.” Id. ¶ 29. However,
if the logic applied by the Board in this case were applied to this
hypothetical, we would be hard-pressed to avoid the conclusion
that, because the professor employed as an expert witness did
not provide his own equipment (instead having it furnished by
his university), did not independently obtain licenses (instead
having those licenses required by his university as prerequisites
for 	professorship), 	and 	did 	not 	have 	an 	independently
established place of business (instead working at the university),
the professor would qualify as an “employee” of the litigant who
hired him. That conclusion would misapprehend the law, and
would be highly illogical. We see little to distinguish the expert-
witness college professor’s situation from the situation presented
here, in which officers already established in the independent
business of law enforcement, with the equipment, expertise, and
licensure relevant to that position, are hired by a third party to
provide occasional police presence.

Fur Breeders Agric. Coop. v. Department of Workforce Services
20161064-CA 	11 	2018 UT App 49
employees of FBAC, and this time to consider that question in
light of the overarching statutory and regulatory command,
which is whether the officers are established independently of
the alleged employer (here, FBAC), and not whether the officers
are established independently from any other party, including
their usual full-time employer, UPD.