Argued and Submitted January 28, 2014
Office of Administrative Hearings T71262.
Paula A. Barran argued the cause for petitioner-cross respondent. With her on the briefs were Barran Liebman LLP and Edwin A. Harnden.
Karla Ferrall, Senior Assistant Attorney General, argued the cause for respondent-cross-petitioner. With her on the brief were Ellen F. Rosenblum, Attorney General, and Anna M. Joyce, Solicitor General.
Before Sercombe, Presiding Judge, and Hadlock, Judge, and Tookey, Judge.
[265 Or.App. 256] HADLOCK, J.
Petitioner Broadway Cab LLC (Broadway) seeks judicial review of an administrative law judge's (ALJ's) final order affirming a tax assessment issued by the Employment Department. In the challenged order, the ALJ determined that Broadway, a taxicab company, had employed taxicab drivers and that the drivers' compensation was therefore subject to unemployment insurance tax, which Broadway had not paid. On review, Broadway contends that it was not required to pay unemployment insurance tax for two reasons. First, Broadway argues that its drivers did not perform services " for remuneration" during the period at issue (2008 to 2009) and, therefore, the drivers' performance of driving services did not constitute " employment" by Broadway under ORS 657.040. Alternatively, Broadway argues that, even if the drivers did perform services for remuneration, Broadway did not have an employment relationship with the drivers because they were independent contractors under ORS 670.600(2).
The department cross-petitions for review of the same ALJ order, contending that the ALJ erred in (1) concluding that the amount of assessed taxes in the notice was incorrect and (2) failing to provide the department with guidance as to what steps it should take next, as required by ORS 657.683(4).
As explained below, we affirm on Broadway's petition for judicial review. In short, we agree with the ALJ's determination that Broadway is a taxicab company that employed taxicab drivers during the relevant time period, and that it is not--as it contends--merely a " vendor of administrative services" (such as dispatch, billing, and marketing services) to drivers who are independent contractors. However, we agree with the department that the ALJ was required to affirm, modify, or set aside the department's assessment under ORS 657.683(4), and failed to do so. We therefore reverse and remand on the department's cross-petition.
We describe the basic framework of Broadway's contractual relationships with public entities and with its [265 Or.App. 257] drivers here, along with this case's procedural history, and provide more detail as necessary later in this opinion. In doing so, we state the facts consistently with the ALJ's unchallenged factual findings and the uncontroverted evidence in the record. AGAT Transport, Inc. v. Employment Dept., 256 Or.App. 294, 296, 305 P.3d 122 (2013).
A. Broadway's contracts with public entities
Because they are relevant to the issues in this case, we begin our analysis by describing Broadway's relationships with the City of Portland and other public entities. The city granted Broadway a permit to provide taxicab
service within city limits. Broadway's permit required that it provide service 24 hours a day, seven days a week. The permit imposed standards on the service the taxicabs provided, as well as on the visual appearance of the taxicabs. The city set maximum taxicab rates, but drivers were allowed to charge lower rates. The city retained the right to impose civil penalties if Broadway failed to meet its minimum standards of service. In addition to the city-issued taxicab company permit, the city required that each individual driver also obtain a permit. Because taxicab company permits were not issued to individuals, no person could work as a taxicab driver without associating with a taxicab company.
Broadway also had contracts with public agencies, including Tri-County Metropolitan Transportation District of Oregon (TriMet), Portland Public Schools, and Multnomah County. For the purposes of this opinion, we focus primarily on Broadway's contract with TriMet as illustrative of its contracts with other public agencies. Under the Americans with Disabilities Act (ADA), TriMet and other public transit agencies are required to provide comparable service to people who, because of a disability, are unable to use fixed-route transportation. 49 CFR § 37.121. TriMet operated its Lift Demand Response Accessible Cab Transportation Services (LIFT) program as comparable transportation to ADA-qualified customers. TriMet contracted with Broadway to provide ADA-mandated service to TriMet's ADA-qualified customers.
During the search for a taxicab company to provide transportation to its ADA-qualified customers, TriMet [265 Or.App. 258] requested proposals from several companies and rated each company across a variety of areas, including a company's " fleet strength." In its proposal to TriMet, Broadway touted itself as " the oldest and largest taxicab company" with " a fleet of more than 225 cars and 340 drivers." After TriMet awarded the contract to Broadway--and pursuant to that contract--TriMet required Broadway to comply with various requirements relating to driver training and customer service. In complying with those requirements, Broadway arranged for its drivers to be tested for drugs and paid them $8.00 per hour for time that they spent taking those tests. Pursuant to its ADA mandate, TriMet's contract with Broadway also required that Broadway compel its drivers to accept a trip if Broadway could not find a driver to accept the trip voluntarily. TriMet also retained the right to terminate its contract with Broadway if Broadway failed to fulfill its contractual obligations.
B. Broadway's arrangements with its drivers
Broadway required all of its drivers to enter into contracts before allowing them to drive under Broadway's company permit. Broadway drafted those contracts, which all contained the same material provisions, and did not allow drivers to negotiate the terms. Some, but not all, of those contractual terms were a result of Broadway's obligations to the city and public agencies. Broadway required that all drivers sign an agreement under which each driver paid Broadway $160 per week. In exchange for that fee, each driver was included on the company's approved list of drivers, provided with liability insurance, and given access to Broadway's credit- and debit-card processing system. The fee also covered the " billing, accounting, marketing, and advertising services" that Broadway provided for each driver.
Under the contracts with Broadway, drivers also received access to Broadway's dispatch system, although they were not required to use it. In addition to being notified of potential customers through the dispatch system, drivers could accept service requests directly from customers with whom they had formed relationships, wait for customers at Portland International Airport, or hotels, or stop for customers hailing taxis on the street.
[265 Or.App. 259] Broadway required that all new drivers attend Broadway's " Cabbie College," which Broadway described in its proposal to TriMet (as later incorporated into the contract between Broadway and TriMet) as " a rigorous week of classroom-style training." Covered topics included Broadway's policies and procedures, geography and map reading, defensive driving, customer service, vehicle operation, and bookkeeping. Drivers who successfully
completed Cabbie College and passed a background check were invited to contract with Broadway. After contracting with Broadway, each driver's first week was considered " on the job training," which included meetings with Broadway's operations manager and monitoring by several Broadway staff members. Broadway sometimes required established drivers to attend Cabbie College for refresher training based on their performance.
Drivers had three options for obtaining a taxicab to use while driving for Broadway: a driver could use his or her own vehicle, lease a vehicle from Broadway, or use a vehicle owned by another Broadway driver. Drivers who owned their taxicabs operated the vehicles under Broadway's company permit. Those owner-operators were required to have their taxicabs retrofitted to Broadway's standards, which governed both interior equipment, such as seat belts and a dispatch system computer, and exterior appearance, such as having the taxicab painted in company colors with the company's full name and phone number on both sides of the vehicle. Owner-operators were also required to pay for all maintenance on their vehicles. Broadway maintained the right to require owner-operators to park their vehicles in places specified by Broadway when not in use, and to follow Broadway's procedures for taking the taxicabs in and out of service. Broadway charged each owner-operator $420 per week for using his or her own vehicle as a taxicab under Broadway's company permit, but reduced the fee to $320 if the driver agreed to let another Broadway-approved driver share the vehicle, using it when the owner-operator was not working.
As mentioned, drivers could also use vehicles that they leased from Broadway (but not from any other source); the leasing fee was $290 per week. Drivers who leased [265 Or.App. 260] taxicabs from Broadway were required to park the leased vehicles at Broadway's location when they were not in use. Broadway paid for the maintenance and repairs for all leased vehicles, unless damage resulted from a driver's negligence. All drivers paid for their own fuel.
Broadway maintained individual accounts for each driver on its approved list. Through those accounts, Broadway processed all non-cash fares that drivers received from credit and debit cards, charges to accounts maintained by Broadway, and vouchers from public agencies. Although Broadway credited each driver's account for the full amount of each fare, it also deducted its weekly fees from those accounts. Broadway allowed drivers to withdraw money from their accounts only when the accounts had positive balances. Drivers kept any cash fares they received and did not report those amounts to Broadway.
C. Procedural History
In 2010, the department notified Broadway of its assessed taxes for 2008-2009. See ORS 657.505(2) (Oregon employers must pay unemployment insurance taxes into the Unemployment Compensation Trust Fund " on all wages paid for services" ). Broadway contested the assessment and requested a hearing before an ALJ. At the hearing, the ALJ considered three issues: (1) whether the taxicab drivers performed services for remuneration for Broadway under ORS 657.040(1); (2) whether Broadway's drivers satisfied the test for an independent contractor set forth in ORS 670.600(2), and were thus exempt from unemployment insurance tax; and (3) whether the department's tax assessment was correct.
The ALJ determined that the drivers did perform services for remuneration for Broadway and that Broadway had failed to demonstrate that the drivers qualified for the independent contractor exemption. Accordingly, the ALJ concluded, the drivers' performance of services for remuneration constituted taxable employment. The ALJ also concluded that the department's assessment was incorrect, but [265 Or.App. 261] she declined to calculate the correct amount of taxes owed for that period.
Both Broadway and the department seek judicial review of the ALJ's order. In five assignments of error, Broadway asserts that the ALJ erred by concluding that: (1) the drivers performed services for Broadway under ORS 657.030(1); (2) Broadway remunerated the drivers for services under ORS 657.030(1); (3) the drivers were subject to Broadway's direction and control under ORS 670.600(2)(a); (4) the drivers did not operate independently established businesses under ORS 670.600(2)(b) and (3); and (5) the drivers did not obtain the licenses necessary to perform services as taxi drivers under ORS 670.600(2)(d). The department responds that the ALJ's conclusions were correct. The department also cross-petitions for review, arguing that the ALJ erred by concluding that the amount of assessed taxes was incorrect and that the ALJ exceeded her authority by not directing the department's actions following the proceedings under ORS 657.683(4). Broadway responds that the ALJ correctly determined that the amount of assessed taxes was incorrect because the " correct assessment would be none."
We review the ALJ's conclusions for substantial reason and errors of law. See ORS 657.684 (" Judicial review of decisions under ORS 657.683 shall be as provided for review of orders in contested cases in ORS chapter 183 * * *." ); Freeman v. Employment Dept., 195 Or.App. 417, 421, 98 P.3d 402 (2004) (providing that, pursuant to ORS 183.482(8)(a) to (c), the court reviews findings of fact for substantial evidence and legal conclusions for substantial reason and errors of law). Although we defer to the ALJ's factual findings, the " ultimate determination--whether a particular person is an employee or independent contractor--is a question of law." AGAT Transport, Inc., 256 Or.App. at 300-01. For the reasons described below, we conclude that the facts found by the ALJ support her legal conclusions that the drivers performed services for remuneration for Broadway and that Broadway did not adequately show that the drivers qualified for the independent contractor exemption. We therefore affirm on Broadway's petition for judicial review. However, [265 Or.App. 262] because the ALJ did not affirm, modify, or set aside the department's assessment as required by ORS 657.683(4), we reverse and remand on the department's cross-petition.
A. Services for Remuneration
ORS 657.030 describes " employment," in part, as " service for an employer * * * performed for remuneration or under any contract of hire * * *." (Emphasis added.) Both " service" and " remuneration" are " broad term[s] of description, evidencing a legislative intent to give to the [Unemployment Compensation] Act a broad and liberal coverage to the end that the far-reaching effects of unemployment may be alleviated." Employment Dept. v. National Maintenance Contractors, 226 Or.App. 473, 480, 204 P.3d 151, rev den, 346 Or. 363, 213 P.3d 577 (2009) (NMC) (internal quotation marks and citations omitted; brackets in original). Broadway contends ...