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Colorado Custom Maid, LLC v. Industrial Claim Appeals Office And Division of Unemployment Insurance

Supreme Court of Colorado, En Banc

May 28, 2019

Colorado Custom Maid, LLC, Petitioner
v.
Industrial Claim Appeals Office and Division of Unemployment Insurance. Respondents

          Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 16CA75

          Attorneys for Petitioner: James Abrams, LLC James Abrams Denver, Colorado

          Attorneys for Respondent Industrial Claim Appeals Office: Philip J. Weiser, Attorney General Emmy Langley, Assistant Solicitor General Denver, Colorado

          No appearance on behalf of Division of Unemployment Insurance.

          JUSTICE HART delivered the Opinion of the Court. JUSTICE HOOD does not participate.

          OPINION

          HART, JUSTICE

         ¶1 Colorado Custom Maid (CCM) places house cleaners with clients who need their homes cleaned. In doing so, it has tried to avoid becoming the house cleaners' employer, hoping instead to maintain the relationship as one between a referral service and a group of independent contractors so that it could avoid paying unemployment taxes on the money it paid to those cleaners.

         ¶2 In 2014, the Colorado Department of Labor and Employment Division of Employment and Training (Division) concluded that, despite CCM's efforts to characterize them as independent contractors, CCM's cleaners were in fact employees for whom the company should be paying unemployment taxes. After evaluating the dynamics of the relationship between CCM and its cleaners, we agree. We therefore affirm the court of appeals' decision, which itself affirmed the conclusion of an Industrial Claim Appeals Office Panel (Panel) that the realities of CCM's relationship with its cleaners establish an employment relationship.

         I. Facts and Procedural History

         ¶3 CCM describes itself as a referral service that matches house cleaners with homeowners. The company recruits potential cleaners and, after checking their work and criminal histories, enters into contracts that specify that the cleaners are independent subcontractors. When a homeowner contacts CCM, the company assesses how frequently the home will be cleaned, determines how long each cleaning will take, and sets a price for the cleaning. CCM then assigns one of its contracted cleaners to the home. Each time a home is cleaned, the homeowner writes a check to CCM and CCM in turn gives the cleaner forty-seven percent of what it was paid by the homeowner.

         ¶4 In May 2014, the Division conducted an audit of CCM for the three preceding years to determine whether CCM properly classified its cleaners as independent contractors. The Division concluded that the cleaners should have been classified as employees under the Colorado Employment Security Act (CESA) and required CCM to pay unemployment taxes on the amounts it had paid to the cleaners during those years.

         ¶5 CCM appealed. A hearing officer reversed the Division's decision, concluding that CCM had proven, as required by section 8-70-115(1)(b), C.R.S. (2018), that the cleaners were free from CCM's control and direction and that they customarily engaged in an independent business of providing cleaning services. The Division appealed.

         ¶6 The Panel reversed the hearing officer's decision because it determined that the hearing officer made two significant errors. First, the Panel concluded that the hearing officer failed to make sufficient factual findings to determine whether the cleaners were in fact customarily engaged in independent businesses. Second, the Panel held that the hearing officer failed to consider the totality of the circumstances, or the dynamics of the relationship between CCM and the cleaners, in concluding that the cleaners were customarily engaged in an independent business. See Indus. Claim Appeals Office v. Softrock Geological Servs., Inc., 2014 CO 30, ¶ 2, 325 P.3d 560, 562 (requiring a totality of the circumstances test that evaluates the dynamics of the relationship between the putative employer and employee to determine whether an individual is engaged in an independent trade or business).

         ¶7 On remand, the hearing officer made additional factual findings and again concluded that the cleaners were independent contractors. The Division appealed, and the Panel once again reversed the hearing officer's decision. Although the Panel adopted some of the hearing officer's factual findings, it set several of them aside. The Panel determined that a number of the hearing officer's findings were not supported by the evidentiary record and others were contradicted by factual concessions made by CCM. After conducting its own review of the factual record, the Panel found that the cleaners were employees, not independent contractors, under the totality of the circumstances. CCM appealed the second Panel determination.

         ¶8 The court of appeals agreed with the Panel's conclusions. Colo. Custom Maid, LLCv. Indus. Claim Appeals Office, No. 16CA0075, ¶¶ 1, 8, 18, 38 (Colo.App. March 9, 2017). The court first examined whether the cleaners performed services for the benefit of CCM. Id. at ¶ 8. To this question, the court answered yes. Id. at ¶ 15. The court held that CCM derived a purposeful benefit from the cleaners' work because it maintained an ongoing relationship with the cleaners and the clients. Id. at ¶ 16. Having addressed what it characterized as a "threshold matter," id. at ¶ 10, the court then employed section 8-70-115(1)(b)'s two-prong test to determine whether there was substantial evidence to support the Panel's finding that the cleaners were (1) free from CCM's control and direction in the performance of their cleaning services and (2) engaged in an independent trade or business. Id. at ΒΆΒΆ 22-25. In making this determination, the court of appeals recognized that the Panel set aside a number of the hearing officer's factual findings but concluded that the Panel did not err in doing so because the ...


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