Cable Installer Owes $341,000 for Misclassifying Workers as Independent Contractors

Luna Ruth

An underground cable installation company owes about $341,000 in workers compensation premiums because it improperly classified its workers as independent contractors, the Supreme Court of Ohio ruled today.

In a 5-2 decision, the Supreme Court resolved a more than decade-long dispute between Ugicom Enterprises and the Ohio Bureau of Workers’ Compensation. Ugicom has been contesting the results of a 2010 bureau audit, which found the installers should be considered company employees and that Ugicom should pay their workers’ compensation premiums.

In a per curiam opinion, the Court affirmed the Tenth District Court of Appeals decision that the bureau provided “some evidence ” that the workers were Ugicom employees. The opinion noted the bureau is “the exclusive finder of facts in workers’ compensation matters,” and reviewing courts only determine if the bureau’s decision is based on “some evidence in the record .”

Chief Justice Maureen O’Connor and Justices Patrick F. Fischer, Michael P. Donnelly, Melody Stewart, and Jennifer Brunner joined the majority opinion.

In a dissenting opinion, Justice Sharon L. Kennedy wrote the bureau failed to provide any evidence to resolve the key issue in matter, which was whether Ugicom controls the manner or means in which the cable installers do their work. She wrote the bureau presented no evidence that Ugicom controlled the installation work, but merely posted available work on its website and “the installers take it from there.”

Justice R. Patrick DeWine joined Justice Kennedy’s opinion.

Bureau Audits Company’s Practices

In 2009, the bureau audited Ugicom’s practices to ensure it paid the correct amount of workers’ compensation premiums over a five-year period from 2004 to 2009.

Ugicom performs underground cable installations, mainly in residential areas. At the time it was a subcontractor for Time Warner Cable Company (which is now part of Spectrum Communications). Ugicom downloaded work orders from Time Warner in the Greater Cincinnati and Dayton areas. Through its web-based system, Ugicom made installation jobs for Time Warner available to its installers. Installers would log onto Ugicom’s system each morning to obtain job details and log back on in the evening to confirm which jobs the installers completed. Time Warner determined how much it would pay Ugicom for each job. Ugicom executives would set the amount to pay the installers for the work.

Ugicom required the installers to sign one-year independent-contractor agreements and did not pay them any benefits. The contract contained a noncompete clause that forbade the installers from providing similar services to a competitor of Ugicom.

Once installers accepted jobs, they had a two-hour window to complete the work. The installers furnished their own tools, provided their own transportation, and picked up the cable and other cable equipment needed for the jobs from Time Warner. Each installer had to complete a Time Warner-coordinated drug and background check and received an identification badge from Time Warner. On the worksite, the installers were required to wear vests indicating they were contractors for Time Warner, and work vehicles had signs stating “Ugicom Enterprises, Inc. Contractor for Time Warner.”

Company Controlled Work, Bureau Concluded

The bureau’s auditor found the company exercised too much control of the installers work to be designated as independent contractors. The bureau determined the installers should be considered Ugicom employees and billed Ugicom $346,000 for unpaid workers’ compensation premiums.

In 2010, Ugicom unsuccessfully challenged the determination through the bureau’s administrative appeals process. It then sought a writ of mandamus from the Tenth District to order the bureau to vacate its decision. In 2014, the Tenth District ruled the bureau used the wrong legal test to conclude the installers were employees and directed the bureau to review the matter again.

The bureau then applied the “right to control” test established by two Supreme Court of Ohio cases. In 2015, the bureau again decided that the installers were Ugicom employees. Ugicom appealed the decision through the bureau’s administrative process a second time and lost. The unpaid bill was adjusted to about $341,000. Ugicom sought a second writ from the Tenth District in 2017, which was denied in 2021. The company appealed the Tenth District’s decision to the Supreme Court, which was required to consider the case.

Supreme Court Analyzed Control of Work

The opinion explained there is no bright-line rule that determines if a worker is an independent contractor or employee, but rather the bureau considers a set of factors such as whether the work is part of the regular business of the employer; the independent nature of the work; who controls the hours worked; who selects the materials, tools, and personnel used; and the method of payment. For workers’ compensation classification, the Supreme Court has ruled the key determination is “who had the right to control the manner or means of doing the work,” the opinion stated.

The Court noted a number of areas where some evidence leaned toward considering the installers as employees. The Court determined that Ugicom’s business is the installation of underground cable and that the installers did the regular business of the employer. The bureau also provided some evidence that the installers did not operate independently of Ugicom as they had to identify themselves on the worksite as Ugicom contractors working for Time Warner.

The opinion also pointed to the testimony of Ugicom’s president, who said Time Warner would determine how much it would pay for each work assignment and the president would “make up” what he would pay the installer for the job. Typically, an independent contractor in a construction-related job would propose a bid for the cost to do a job rather than just accept what the customer offered, the Court noted. The Court ruled Ugicom’s “take or leave it” pricing did not allow for bidding and was more akin to compensating an employee rather than an independent contractor.

The noncompete clause of the employment agreement also weighed against classifying the installers as independent contractors, the opinion noted. The Court ruled the restriction on the installer’s ability to do work for other cable providers “restricted the installers’ freedom to work, which evinces a measure of Ugicom’s control over the installers.”

While not all of the bureau’s conclusions proved the installers were Ugicom employees, the bureau did not abuse its discretion in reaching its decision, the Court concluded.

Company Mischaracterized, Dissent Stated

In her dissent, Justice Kennedy wrote the bureau mischaracterized the nature of Ugicom’s business and there is no evidence to support the bureau’s findings that the installers were not independent contractors. She explained that if the employer specifies the result of the work, and the worker determines the manner or means of doing the work, then an independent-contractor relationship is created.

Ugicom is not an installer of underground cable, but rather is largely a “labor-management company” in the niche industry of cable installation, the dissent stated. All the requirements for doing the installation work are set by Time Warner, the dissent noted, and Ugicom just posts through its web-based system the jobs Time Warner wants completed. Ugicom does not assign installers to any particular job, the installers choose what jobs to accept, there are no set work hours for doing the jobs, the installers furnish their own tools, and Time Warner provides all cable equipment for the job, the dissent explained.

“The bureau adopted a smell test rather than applying a test requiring review of the actual evidence,” Justice Kennedy wrote. “The bureau started from its conclusion and then attempted to force factors that supported Ugicom’s claims that the installers were independent contractor to instead support its notion that they were not.”  The bureau’s decision was “largely based on the bureau’s nonevidentiary suppositions and generalizations unrelated to the actual facts of this case,” she concluded.

2021-0674. State ex rel. Ugicom Ents., Inc. v. Morrison, Slip Opinion No. 2022-Ohio-1689.

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https://www.courtnewsohio.gov/cases/2022/SCO/0524/210674.asp

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