Nolan v. Unempl. Ins. Appeals Bd. CA1/4 ( 2014 )

Filed 5/8/14 Nolan v. Unempl. Ins. Appeals Bd. CA1/4
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
MARY NOLAN,
Appellant,
v.
UNEMPLOYMENT INSURANCE A137299
APPEALS BOARD et al.,
(Alameda County
Respondents; Super. Ct. No. RG12619816)
TAMMY MERCADO et al.,
Real Parties in Interest.
I.
INTRODUCTION
An administrative law judge (ALJ) determined that real parties in interest, a
paralegal and a legal secretary, were employees of appellant, the attorney for whom they
worked, rather than independent contractors, and that they were therefore entitled to
unemployment benefits following the termination of their employment. Respondent
Unemployment Insurance Appeals Board (the Board) affirmed the ALJ’s decision, and
the superior court denied appellant’s petition for a writ of administrative mandamus
overturning the Board’s ruling.
Appellant contends (1) the ALJ denied appellant a fair and impartial hearing;
(2) the ALJ’s findings are not supported by the evidence; (3) the superior court’s findings
are not supported by the evidence; and (4) the superior court did not issue an adequate
1
statement of decision. We reject these contentions, and affirm the superior court’s denial
of appellant’s writ petition.
II.
FACTUAL AND PROCEDURAL BACKGROUND
From 2002 or 2003 until early 2010, with some interruptions, real party in interest
Tammy Mercado performed paralegal services for appellant Mary Nolan in support of
Nolan’s solo family law practice. Real party in interest Melissa Yago performed
administrative and secretarial services for Nolan’s law practice from 2003 or 2004 to
March 2010, also with at least one interruption.1 Nolan treated Mercado and Yago
(collectively, Claimants) as independent contractors rather than employees, and therefore
did not report their wages to the Employment Development Department (EDD).
The parties dispute the facts regarding why (and in Mercado’s case, when)
Claimants stopped working for Nolan, but it is undisputed that Claimants did not work
for Nolan after March 1, 2010. On May 17, 2010, Claimants each applied for
unemployment benefits. Upon receiving Claimants’ applications, EDD commenced an
investigation to determine the nature of their work relationship with Nolan.
EDD determined that both Claimants were Nolan’s employees, and were therefore
eligible for unemployment benefits. Nolan appealed EDD’s determinations to the Board,
which designated an administrative law judge (ALJ) to conduct an evidentiary hearing.
The ALJ held a single evidentiary hearing with regard to both Claimants, over portions of
three separate days.
After the hearing, the ALJ issued two separate decisions, one for Mercado and one
for Yago, finding in both cases that Claimants were Nolan’s employees rather than
independent contractors. Nolan appealed the ALJ’s decisions to the Board, which
affirmed both decisions. Nolan then filed a petition for a writ of administrative mandate
1
The specifics of Mercado’s and Yago’s work relationships with Nolan are the
crux of the dispute in this case. We defer further discussion of them until after our
explication of the governing law and the standards of review applicable to the issues
Nolan raises on appeal.
2
in the Alameda County Superior Court. That court rejected Nolan’s challenges to the
decisions of the ALJ and the Board, and denied Nolan’s writ petition. This timely appeal
ensued.2
III.
DISCUSSION
A. Challenge to Factual Findings by ALJ and Superior Court
1. Substantive Law: Employees versus Independent Contractors
By now, the case law regarding the distinction between employees and
independent contractors is well settled, and we do not understand Nolan to be arguing
otherwise in her brief on appeal. Nonetheless, we review the relevant law briefly, as
background to our discussion of its application to the facts of the present case.
Employees, but not independent contractors, are entitled to unemployment
benefits if their employment is terminated and they otherwise qualify.3 (Unemp. Ins.
Code, § 656; see also id. at §§ 1251 et seq.)4 Whether a person is an employee or an
independent contractor is a question of law if the evidence is undisputed; otherwise, it is a
factual issue. (S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48
Cal. 3d 341, 349-355 (Borello); Gonzalez v. Workers’ Comp. Appeals Bd. (1996) 46
Cal. App. 4th 1584, 1592 (Gonzalez).) The label placed by the parties on their relationship
is not dispositive of whether a person is an employee or independent contractor. (See
Gonzales, at p. 1594.)
2
Claimants did not file a respondents’ brief on appeal, but the Board submitted a
brief in support of the trial court’s denial of Nolan’s writ petition.
3
Nolan contends that Claimants were independent contractors, but has never
asserted that there is any other basis for disqualifying them from receiving unemployment
benefits in connection with the termination of the services they rendered to her law
practice. Accordingly, we have no occasion to enumerate or discuss any of the other
eligibility requirements for unemployment benefits.
4
All further undesignated statutory references are to the Unemployment
Insurance Code unless otherwise noted.
3
For unemployment compensation purposes, the term “employee” includes “[a]ny
individual who, under the usual common law rules applicable in determining the
employer-employee relationship, has the status of an employee.” (§ 621, subd. (b).) By
expressly incorporating “the usual common law rules” into the statutory definition, the
Legislature delegated to the courts the task of elaborating and applying the tests for
determining whether a person in a particular work relationship is an employee or an
independent contractor.
In the seminal case of Tieberg v. Unemployment Ins. App. Bd. (1970) 2 Cal. 3d
943, the Supreme Court clarified that under the statutory scheme, “[t]he principal test of
an employment relationship is whether the person to whom service is rendered has the
right to control the manner and means of accomplishing the result desired. [Citation.] If
control may be exercised only as to the result of the work and not the means by which it
is accomplished, an independent contractor relationship is established. [Citation.]” (Id.
at pp. 946-947.) “ ‘If the employer has the authority to exercise complete control,
whether or not that right is exercised with respect to all details, an employer-employee
relationship exists.’ ” (Id. at p. 949.)
The Supreme Court went on to hold in Tieberg, supra, 2 Cal. 3d 943, that while the
right to control test is “clearly the most significant test of the employment relationship,”
it is “not the only element in determining whether an employment relationship has been
created. [Citation.]” (Id. at p. 950.) “ ‘Strong evidence in support of an employment
relationship is the right to discharge at will, without cause. [Citations.] Other factors to
be taken into consideration are (a) whether or not the one performing services is engaged
in a distinct occupation or business; (b) the kind of occupation, with reference to whether,
in the locality, the work is usually done under the direction of the principal or by a
specialist without supervision; (c) the skill required in the particular occupation;
(d) whether the principal or the workman supplies the instrumentalities, tools, and the
place of work for the person doing the work; (e) the length of time for which the services
are to be performed; (f) the method of payment, whether by the time or by the job;
(g) whether or not the work is a part of the regular business of the principal; and
4
(h) whether or not the parties believe they are creating the relationship of employer-
employee. [Citation.]’ ” (Id. at p. 949.) We will refer to the individual factors listed by
the court as the Tieberg factors.
Since the decision in Tieberg, supra, 2 Cal. 3d 943, California courts have
repeatedly reaffirmed that whether an individual is an employee or an independent
contractor for unemployment purposes is to be determined by applying the right to
control test, not standing alone, but as supplemented by the other Tieberg factors. One of
the more recent cases so holding is Air Couriers Internat. v. Employment Development
Dept. (2007) 150 Cal. App. 4th 923 (Air Couriers). In Air Couriers, the court rejected the
contention that delivery drivers for a package service were independent contractors rather
than employees. In so doing, the court held that the proper legal standard against which
to evaluate the evidence continues to be the test set forth in Tieberg and its progeny,
including Borello, supra, 48 Cal. 3d 341, which applied the same test in the workers’
compensation context. (Air Couriers, at pp. 932-937; accord, Messenger Courier Assn.
of Americas v. California Unemployment Ins. Appeals Bd. (2009) 175 Cal. App. 4th 1074,
1089-1092, 1095-1096 (Messenger Courier) [rejecting employer’s challenge to holding
in Air Couriers].)
2. Standard of Review
Decisions of the Board implicate fundamental vested rights, and are therefore
subject to the independent judgment test when reviewed by a superior court pursuant to a
petition for writ of mandate. (Interstate Brands v. Unemployment Ins. Appeals Bd.
(1980) 26 Cal. 3d 770, 780 (Interstate Brands) [employer’s right to be free from
erroneous charges to its unemployment insurance reserve account is fundamental vested
right; employer is therefore entitled to independent judicial review of Board decision
affecting that right].) “By reason of the importance of rights generally affected by
administrative adjudications [that are] subject to the independent judgment test of review,
California fixes responsibility for factual determination at the trial court rather than the
administrative agency tier of the pyramid as a matter of public policy. [Citations.]”
(Guymon v. Board of Accountancy (1976) 55 Cal. App. 3d 1010, 1015.) “ ‘In reviewing a
5
decision of the [Unemployment Insurance Appeals] Board, the superior court exercises
its independent judgment on the evidentiary record of the administrative proceedings and
inquires whether the findings of the administrative agency are supported by the weight of
the evidence.’ [Citations.]” (Sanchez v. Unemployment Ins. Appeals Bd. (1984) 36
Cal. 3d 575, 585 (Sanchez); accord, Evans v. Unemployment Ins. Appeals Bd. (1985) 39
Cal. 3d 398, 407 (Evans).)
Exercising its independent judgment requires the superior court to reweigh the
evidence and examine the credibility of witnesses. (See Barber v. Long Beach Civil
Service Com. (1996) 45 Cal. App. 4th 652, 658.) However, as the Supreme Court
explained in Fukuda v. City of Angels (1999) 20 Cal. 4th 805, 812, the independent
judgment test “ ‘does not mean that the preliminary work performed by the
administrative board in sifting the evidence and in making its findings is wasted effort.’ ”
Rather, the court must “begin its review with a presumption of the correctness of
administrative findings, and then, after affording the respect due to these findings,
exercise independent judgment in making its own findings. [Citations.]” (Id. at p. 819.)
Moreover, when an administrative decision is supported by undisputed facts, if those
facts are subject to conflicting inferences, the superior court exercising independent
judgment may draw its own inferences from the evidence in the record, and if the
inferences so drawn are supported by substantial evidence, they are binding on the
reviewing court. (Interstate Brands, supra, 26 Cal.3d at p. 774, fn. 2.)
Once the superior court has ruled on the writ petition, the right to independent
judicial review on questions of fact has been fulfilled. Thus, our task as an appellate
court is limited to reviewing the superior court’s judgment to determine whether its
factual findings are supported by substantial, credible, and competent evidence, and
whether a different result was compelled as a matter of law. (Sanchez, supra, 36 Cal.3d
at p. 585; accord, Evans, supra, 39 Cal.3d at p. 407; Bilyeu v. Unemployment Ins.
Appeals Bd. (1982) 130 Cal. App. 3d 657, 667.) In applying the substantial evidence
standard of review, we “ ‘must consider the entire record . . . and may not isolate only the
evidence which supports the board’s findings [citation] and thus disregard relevant
6
evidence in the record. [Citation.]’ ” (Steve P. Rados, Inc. v. California Occupational
Saf. & Health Appeals Bd. (1979) 89 Cal. App. 3d 590, 595.) Nonetheless, in considering
the totality of the evidence, we resolve all conflicts favorably to the prevailing party, and
draw all reasonable inferences in support of the judgment. (Lacy v. California
Unemployment Ins. Appeals Bd. (1971) 17 Cal. App. 3d 1128, 1134.) In that connection,
we stress that the testimony of a single witness is sufficient to satisfy the substantial
evidence requirement, even if that witness is a party to the proceeding. (In re Marriage
of Mix (1975) 14 Cal. 3d 604, 614; Sabbah v. Sabbah (2007) 151 Cal. App. 4th 818, 823.)
We also note that the burden is on the principal to establish that persons rendering
services were independent contractors rather than employees. (Messenger Courier,
supra, 175 Cal.App.4th at p. 1086.)
Here, the administrative record documents the existence of a number of factual
disputes relevant to whether Claimants, in rendering services to Nolan, did so as
independent contractors or as employees. The superior court, upon independent review,
found no error in the ALJ’s findings as to these issues. Under the applicable standard of
review, therefore, our task on this appeal is to determine whether there is substantial
evidence to support the superior court’s determination that the ALJ’s findings were
supported by the record. We must sustain the superior court’s finding if it is supported
by substantial evidence, even where the evidence could also have justified contrary
findings. (Yield Dynamics, Inc. v. TEA Systems Corp. (2007) 154 Cal. App. 4th 547, 557
(Yield Dynamics).) Moreover, “even if error is demonstrated it will rarely warrant
reversal unless it appears ‘reasonably probable that a result more favorable to the
appealing party would have been reached in the absence of the error.’ [Citations.] This
means the appellant must show not only that error occurred but that it is likely to have
affected the outcome.” (Ibid.)
3. Sufficiency of Evidence: Credibility
The ALJ expressly found Mercado to have been a more credible witness than
Nolan. The Board independently reviewed the record, and found no material errors in the
ALJ’s factual findings, including as to credibility. The superior court, after its
7
independent review of the record, found that “[C]laimants’ testimony appears more
credible than [Nolan’s] testimony.” On appeal, Nolan contends that these credibility
findings are not supported by the record.
As an example of the reasons why it agreed with the ALJ and the Board that
Claimants were more credible than Nolan, the superior court cited the parties’ testimony
regarding agreements Nolan and Claimants signed that characterized Claimants as
independent contractors. All of the parties testified that the agreement was signed in
2009, although it was dated in 2006. Their testimony as to the reason for the agreements
differed sharply, however. Nolan testified that she prepared the agreements for
Claimants because of their insistence on remaining self-employed. Claimants both
testified, however, that they did not ask to be treated as independent contractors; rather,
Nolan insisted they sign the agreements because she needed them in connection with an
Internal Revenue Service (IRS) tax audit. The superior court found Claimants’
explanation more plausible. This assessment is supported by substantial evidence, in that
Claimants’ rationale better explains why the agreements were backdated to 2006.
Moreover, Nolan admitted that in connection with the signing of the independent
contractor agreements, she told Mercado that the IRS audit was “looking at outside
compensation.”
Nolan argues that it was error for the superior court to rely on the backdating of
the agreement in assessing her credibility. In support of that contention, Nolan relies on a
declaration by a tax expert who analyzed Claimants’ personal tax returns for the years at
issue and determined that they made more money, net of taxes, as independent
contractors than they would have as employees. This evidence was excluded by the ALJ
as irrelevant, and Nolan argues this was error.
The expert’s analysis lends some additional credence to Nolan’s testimony that
she treated Claimants as independent contractors because they requested that she do so.
This was not the only respect, however, in which the ALJ found Nolan’s testimony less
credible than that of Claimants, and the superior court relied on the independent
8
contractor agreement issue only as an example of the reasons it agreed with the ALJ on
that point.
Indeed, other parts of the record provide evidence to support the superior court’s
decision on credibility. For example, Nolan testified that during 2007, 2008, and 2009,
Mercado worked for her only about 60 percent of a forty-hour week, and did not work for
her at all for sporadic periods of several weeks at a time. Nolan also estimated that
Mercado only worked for her during half of the months between 2002 and the beginning
of 2010. Yet the IRS form 1099 that Nolan prepared for Mercado in 2008 reflected a
total payment of $86,962.85, and the one for 2009 reflected a total payment of $98,648.
Nolan admitted that these amounts were well above the average annual salary of
$65,000 for paralegals in the geographic area. Nolan explained that she paid Mercado
generously because Nolan was able to bill her law practice’s clients for about 20 hours
per week of Mercado’s time. Nonetheless, given the amount of Mercado’s compensation
during 2008 and 2009, we cannot fault the ALJ or the superior court for doubting Nolan’s
testimony that Mercado worked only 60 percent of a standard work week during those
years, and did not work for her at all during some weeks. Moreover, Nolan’s testimony
about Mercado’s work hours was controverted by independent witnesses familiar with
Nolan’s law practice, including Mercado’s predecessor and her replacement during her
absence in 2006, who corroborated Mercado’s testimony that she was expected to be in
Nolan’s office and available to answer her telephone during regular business hours.5
Nolan also testified, in response to a question from the ALJ, that Mercado was not
paid until she finished doing a project. The ALJ followed up by asking Nolan why, in
that case, Mercado was paid the same amount every week that she worked. Even from
the written transcript, it is evident that Nolan had difficulty explaining this disparity
between her testimony and the documentary evidence regarding how Mercado was paid.
5
Nolan testified that the business hours of her law office were 9:00 a.m. to
5:00 p.m. Monday through Thursday, and 9:00 a.m. to 1:00 p.m. on Friday.
9
The ALJ was entitled to draw an adverse inference regarding Nolan’s credibility from
this aspect of her testimony.
Similarly, in the context of her contention that Mercado and Yago were treated as
independent contractors at their own insistence, Nolan testified that Yago was well
educated, was going to college, and had her own personal business. Yago testified,
however, that she had no law office or secretarial experience before she began working
for Nolan, and that her educational attainments consisted of a high school diploma and
some college-level classes taken online, which she did not complete. Yago also denied
ever having had her own business, or working for others, during the periods she
performed services for Nolan. In light of this testimony by Yago, the ALJ and the
superior court were entitled to question the credibility of Nolan’s assertion that she
treated Yago as an independent contractor at Yago’s request.
In addition, as discussed post, Mercado’s and Yago’s version of the facts
concerning specific aspects of their working relationship with Nolan was corroborated by
other witnesses who worked for Nolan, or who were clients of hers. For example, Joseph
Ochoa, who worked for Nolan immediately before Mercado and performed similar
services, testified that it was Nolan’s decision to treat him as an independent contractor
and not to withhold taxes from his paychecks, and that he was not given a choice in the
matter.
For all of the foregoing reasons, our review of the record confirms that it includes
substantial evidence, above and beyond the backdating of the independent contractor
agreements, supporting the trial court’s conclusion that Claimants’ testimony was more
credible than Nolan’s.6 For the same reasons, even if the ALJ and the trial court erred in
excluding from evidence Nolan’s expert’s declaration about the economic benefits to
6
Nolan argues that Claimants included the agreements in the documents they
submitted to the ALJ before the hearing in order to prejudice the ALJ against Nolan, due
to Nolan’s having backdated the agreements. Even if we were to accept this argument,
we still would not reverse the superior court’s credibility finding, because it is supported
by other evidence apart from the backdating of the agreements.
10
Mercado and Yago of independent contractor status—an issue we need not and do not
reach—the trial court’s credibility finding is still supported by substantial evidence.
4. Sufficiency of Evidence: Mercado
With respect to Mercado, Nolan challenges the sufficiency of the evidence to
support the ALJ’s findings regarding the overall right to control test, as well as a number
of the individual Tieberg factors.
a. Right to Control Test
As our Supreme Court held in Tieberg, and reaffirmed in Borello, “ ‘[t]he
principal test of an employment relationship is whether the person to whom service is
rendered has the right to control the manner and means of accomplishing the result
desired. . . .’ [Citations.]” (Borello, supra, 48 Cal.3d at p. 350, citing Tieberg, supra,
2 Cal.3d at p. 946.) In evaluating whether this test is satisfied in the circumstances of this
case, we emphasize that the issue is the right to control, not the actual exercise of that
right. “If the employer has the authority to exercise complete control, whether or not that
right is exercised with respect to all details, an employer-employee relationship exists.”
(Empire Star Mines Co. v. Cal. Emp. Com. (1946) 28 Cal. 2d 33, 43, italics added,
disapproved on another point in People v. Sims (1982) 32 Cal. 3d 468, 479-480, fn. 8; see
also 3 Witkin, Summary of Cal. Law (10th ed. 2005) Agency and Employment, § 24,
p. 64.)
In other words, “ ‘[i]t does not follow that because there is a certain amount of
freedom inherent in the nature of the work one is called upon to do that one becomes an
independent contractor rather than an employee. [Citation.]’ [Citation.]” (Briggs v.
Lawrence (1991) 230 Cal. App. 3d 605, 618 [salaried public defender engaged in
representing client is public employee within meaning of California Tort Claims Act];
JKH Enterprises, Inc. v. Department of Industrial Relations (2006) 142 Cal. App. 4th
1046, 1064-1065 [upholding agency finding that drivers were employees for purposes of
entitlement to workers’ compensation where employer retained “all necessary control”
over operation, despite company’s and drivers’ perception of relationship as one of
independent contracting].) For example, where a newspaper publisher “retained
11
ownership of the newspapers until delivered, did not charge carriers for lost or misplaced
papers, collected subscription fees directly from the subscribers, and received complaints
about the manner in which deliveries were made,” the newspaper carriers who made
deliveries for the publisher were employees rather than independent contractors.
(Gonzalez, supra, 46 Cal.App.4th at pp. 1593-1594.)
In arguing that she did not have the right to control Mercado’s work, Nolan
stresses evidence that Mercado enjoyed considerable autonomy in performing her work.
Nolan admitted at the hearing, however, that Mercado could not prepare pleadings or
issue legal opinions to clients on her own. Nolan reviewed all of the court filings,
discovery requests, and letters that Mercado drafted for Nolan’s signature, and signed
them only if they were acceptable to her. As Nolan expressly acknowledges in her
opening brief, “[i]t is axiomatic that an attorney is responsible for all work products done
for their clients.” Thus, Nolan was responsible, as a matter of law, for the legal
sufficiency and correctness of all documents emanating from her practice, even if they
were prepared by Mercado. (See also Bus. & Prof. Code, § 6452 [attorney who uses
services of paralegal is liable for any harm caused by paralegal’s negligence, misconduct,
or violation of statutes governing paralegals].)
For all of the foregoing reasons, even if Mercado did not in fact require close
supervision on a day-to-day basis, due to her high level of skill as a family law paralegal,
it remains beyond dispute that Nolan retained the right to direct and control Mercado’s
work. Accordingly, there is substantial evidence to support the findings (express or
implied) of the ALJ and the superior court that the right to control test was satisfied with
respect to Nolan’s work relationship with Mercado.
b. Tieberg Factors
In considering Nolan’s arguments with respect to the sufficiency of the evidence
regarding the various Tieberg factors, we note that no individual Tieberg factor is
dispositive. (See Borello, supra, 48 Cal.3d at p. 351 [individual factors cannot be applied
mechanically as separate tests; factors are intertwined, and weight depends on particular
combinations].) Thus, in order to persuade us that the ultimate finding that Mercado was
12
an employee is not supported by substantial evidence, Nolan bears the burden of
demonstrating that the findings are incorrect as to a sufficient number of the Tieberg
factors to shift the balance of the overall analysis.
Nolan does not dispute that at least most of the work Mercado did for her was an
integral part of the regular business of Nolan’s law practice. Nolan also admitted in her
testimony before the ALJ that starting in late 2006 or early 2007, Mercado received a set
weekly amount of base compensation, plus expense reimbursements and occasional
bonuses, and was not paid “by the job.” Mercado also received some paid time off,
although Nolan disclaimed having any policy regarding paid vacation.7 In addition, it is
not disputed that Mercado performed services for Nolan from no later than 2003 until no
earlier than January 2010, with some interruptions, the longest of which was when
Mercado left Nolan’s office to work at a real estate firm from February to August of
2006. Thus, the conclusions that Mercado performed services integral to Nolan’s
business, was paid standard weekly compensation, and worked for Mercado during an
extended period of time, are supported by substantial evidence. These are all hallmarks
of employee status under Tieberg. (See Borello, supra, 48 Cal.3d at p. 351, citing
Tieberg, supra, 2 Cal.3d at p. 949 [Tieberg factors include “the length of time for which
the services are to be performed; [] the method of payment, whether by the time or by the
job; and [] whether or not the work is a part of the regular business of the principal”].)
With respect to hours and location of work, Nolan testified that Mercado was free
to work at home, did not have any specific work hours, and was able to set her own
schedule. However, Mercado testified that she was generally expected to be available in
Nolan’s office during the hours it was open. Christensen and Ochoa both corroborated
this, stating that while they worked for Nolan, they were expected to be in her law office
during business hours.
7
Dawn Christensen, who took over Mercado’s duties during the period in 2006
when Mercado was not working for Nolan, also testified that she was given paid vacation
time.
13
Another of the Tieberg factors is whether the person rendering services provides
his or her own tools and equipment, or is furnished them by the principal. In this regard,
Nolan testified that Mercado brought her own laptop to Nolan’s office on a daily basis.
Mercado testified, however, that with the sole exception of an online multiple listing
service program, she used Nolan’s computers and software to perform her work. She
also testified she used Nolan’s account to do online legal research, and did not maintain
an account of her own. Ochoa testified that while he worked for Nolan, he was provided
with a desk, a computer, and software with which to perform his work.
Nolan seeks to bolster her claim that Mercado was an independent contractor
through her own testimony that Mercado operated her own independent real estate and
paralegal businesses while working in Nolan’s office. As to the real estate sales work,
Mercado acknowledged that she was working for Nolan at the time she obtained her real
estate license. Mercado’s 2006 tax documents showed that she earned $3,208 that year
working for a private investigator, and also had income from working for a mortgage
broker. However, 2006 was the year during which Mercado left her job in Nolan’s office
for several months. Moreover, Mercado did not have a broker’s license, and was only
entitled to work on real estate matters under the supervision of a broker. Thus, Mercado’s
receipt of income from sources other than Nolan during 2006 does not refute Mercado’s
testimony that she did not operate her own real estate business during the periods when
she was working for Nolan.
Moreover, Mercado testified that she only handled a few real estate transactions
during the time she worked for Nolan—including one for Nolan personally, and two for
Mercado’s own investments. Although Mercado acknowledged making occasional use
of her real estate skills while working for Nolan, this was to assist Nolan in valuing
clients’ real property, rather than to operate a separate real estate business.
As to independent paralegal work, Mercado also acknowledged that while
working for Nolan, she did assist about eight to ten unrepresented individuals in
preparing paperwork for marital dissolutions, although she referred these people to Nolan
14
if it appeared they needed legal advice. Mercado testified, however, that she did not start
her own independent paralegal business until after she stopped working for Nolan.
In determining whether substantial evidence supports the superior court’s
conclusion that Mercado was an employee, we defer to that court’s finding that
Mercado’s testimony was more credible than Nolan’s. The undisputed facts listed above,
coupled with Mercado’s versions of the disputed facts, are sufficient in and of themselves
to constitute substantial evidence that Mercado was an employee rather than an
independent contractor under the Tieberg factors. Accordingly, even though Nolan
disputes some facts with regard to other Tieberg factors, including when, why, and how
Mercado’s services to Nolan were terminated, we are persuaded that the superior court’s
ultimate finding of fact rests on substantial evidentiary support.
5. Sufficiency of Evidence: Yago
Yago testified that Nolan told her how to draft letters she wrote for Nolan’s
signature, and reviewed and edited her drafts. Nolan acknowledged that she assigned
projects to Yago, and was ultimately responsible for the accuracy and correctness of
Yago’s work for her office. Based on this evidence, as well as our discussion ante of the
application of the Tieberg right to control test to the facts of this case, we find substantial
evidence in the record supporting the superior court’s finding that Yago was Nolan’s
employee under the right to control test.
With respect to the Tieberg factor regarding the worker’s services being an
integral part of the principal’s business, Nolan does not cite any evidence in the record
that contradicts the ALJ’s findings, based on Yago’s testimony, that Yago provided
administrative services integral to the operation of Nolan’s law practice, such as opening
and routing the mail, answering the telephone, procuring office supplies, picking up
voicemail messages and relaying them to Nolan, photocopying, paying bills, making
bookkeeping entries, and serving legal documents. The fact that Yago may occasionally
have run personal errands for Nolan, in addition to her regular work in Nolan’s office,
does not affect our conclusion that her services as a whole were an integral part of
Nolan’s law practice.
15
Nolan contends that Yago was self-employed, and did not work exclusively for
Nolan during the time she provided services to Nolan’s law practice. There was no
evidence in the record that Yago had her own business. Nolan relies on evidence that
Yago had cosmetics, other personal items, and a massage table delivered to her at
Nolan’s office. However, Nolan’s briefs on appeal cite no evidence that Yago actually
used those items to operate a business, or earned any income from such a business.
Indeed, Nolan has not drawn to the attention of this court any evidence in the record that
conflicts with Yago’s testimony that she never had her own business or worked for others
while working for Nolan; that the cosmetics and other products were delivered to Yago at
Nolan’s office because Yago was not home during the day to receive packages; and that
the smaller items were for Yago’s personal use, and the massage table was for a friend.
Nolan cites no authority that a worker’s receipt of personal packages at the principal’s
office address somehow transmogrifies an employee into an independent contractor, and
there is nothing in the Tieberg factors that would support such a conclusion.
There is substantial evidence in the record justifying the finding that the Tieberg
factors regarding work hours, location, and basis for payment favor treating Yago as an
employee. It is undisputed that Yago was paid at an hourly rate. Her weekly income was
based on invoices she submitted, which showed she worked between 36 and 42 hours per
week. Yago testified she was required to be at Nolan’s office during business hours to
answer the phone, that she needed permission to take a day off, and that she received
vacation pay. Nolan contended that Yago was free to set her own schedule and to work
from home, and did not need permission to be out of the office. However, Christensen,
who replaced Mercado during the time she was not working for Nolan in 2006,
corroborated Yago’s testimony that Yago was expected to be in the office during
business hours.
As Nolan points out, there are conflicts in the evidence about the circumstances of
Yago’s signing the independent contractor agreement, and about what prompted the
termination of her services to Nolan. However, all of the Tieberg factors discussed
above, including the right to control test, support the superior court’s ultimate finding of
16
fact that Yago was an employee and not an independent contractor. Accordingly, even if
we were to find insufficient evidence to support the ALJ’s factual findings about the
signing of the agreement and Yago’s termination, this would not undermine our
conclusion that the superior court’s finding as to the ultimate fact is supported by
substantial evidence.
B. Challenge to Fairness of Administrative Hearing
1. Standard of Review and Applicable Law
Nolan challenged the fairness of the ALJ’s conduct of the administrative hearing
both in her appeals to the Board and in her writ petition to the superior court. Both the
board and the superior court rejected Nolan’s claims. On appeal, we do not give
deference to these rulings; rather, we review the administrative record de novo to
determine whether it supports Nolan’s claim of procedural unfairness, which raises an
issue of law.8 (TWC Storage, LLC v. State Water Resources Control Bd. (2010) 185
Cal. App. 4th 291, 296; Clark v. City of Hermosa Beach (1996) 48 Cal. App. 4th 1152,
1169-1170; Rosenblit v. Superior Court (1991) 231 Cal. App. 3d 1434, 1442.)
In reviewing Nolan’s claims of bias, however, we bear in mind that erroneous
rulings on evidentiary issues, and even erroneous factual findings, do not, in and of
themselves, establish bias on the part of the ALJ. (Andrews v. Agricultural Labor
Relations Bd. (1981) 28 Cal. 3d 781, 795-796.) Similarly, the ALJ’s opinions as to the
relative credibility of the witnesses, based on her observations of their demeanor while
testifying, are also insufficient, standing alone, to demonstrate bias. (People v. Guerra
(2006) 37 Cal. 4th 1067, 1111-1112, disapproved in part on other grounds by People v.
Rundle (2008) 43 Cal. 4th 76, 151.) With those principles in mind, we proceed to
consider the specific conduct by the ALJ on which Nolan predicates her claim of bias and
denial of a fair hearing.
8
Because we review de novo, as a matter of law, the superior court’s
determination that the ALJ conducted a fair hearing, we need not consider Nolan’s
argument that the superior court’s statement of decision on that issue is inadequate.
(Davenport v. Unemployment Ins. Appeals Bd. (1994) 24 Cal. App. 4th 1695, 1700.)
17
2. Review of Documents Prior to Hearing
One of Nolan’s grounds for contending that she did not receive a fair hearing is
that the ALJ reviewed Claimants’ documents ex parte prior to the hearing. The factual
background relevant to this contention is as follows. The administrative hearing on
Nolan’s appeal of EDD’s determinations as to both Claimants began on May 26, 2011.
The notices sent to all parties’ counsel before the hearing indicated that “[a]ll parties
[should] send any additional documents by [a specified date] to the Office of Appeals
. . . .” The notices also stated that parties appearing at the hearing in person should “bring
all documents and witnesses necessary to support your case.”
Before the hearing, Claimants each submitted a package of documents to the ALJ
in support of their claims. As Nolan acknowledges, the ALJ forwarded copies of these
documents to Nolan’s counsel in advance of the hearing. This procedure complied with
the regulations governing ALJ hearings in EDD matters, which provide that although ex
parte communication between a party and the ALJ is generally improper, “[a] document
filed or submitted to the administrative law judge is permissible if it is added to the case
file, so that all parties have a reasonable opportunity to review it.” (Cal. Code Regs.,
tit. 22, § 5059, subd. (c); see also Gov. Code, § 11430.50 [if presiding officer at
administrative hearing receives ex parte communication from party, communication shall
be made part of the record, parties shall be notified, and parties requesting to do so shall
be given opportunity to comment].)
At the hearing, the ALJ began by identifying Claimants’ documents for the record,
with exhibit numbers she had previously assigned to them, and indicated that she had
“looked at most of these ahead of time.” Nolan and her counsel raised no objection at the
time, but she now complains that the ALJ’s review of Claimants’ documents in advance
of the hearing is evidence of bias, because those documents included newspaper articles
containing negative statements about Nolan. Nolan fails to mention in her briefs,
18
however, that the ALJ sustained Nolan’s objection to the admission of those newspaper
articles into evidence, and excluded them from the record.9
In any event, as to all of the documents Claimants submitted, Nolan’s counsel had
the opportunity to review and comment on them both before and during the hearing. We
perceive no due process problem or evidence of bias from the mere fact that—as
permitted by the regulations, provided the other party receives notice—the ALJ received
and reviewed them in advance.
Nolan also does not mention in her briefs on appeal that in addition to her
successful objection to the introduction of the newspaper articles, she prevailed on a
threshold procedural issue near the beginning of the hearing. Specifically, Mercado
raised an issue about the timeliness of Nolan’s appeal of EDD’s determination of
eligibility as to her. Before taking testimony regarding the substantive issues in the case,
the ALJ heard the testimony and argument of Nolan’s counsel on the timeliness issue,
and then ruled that Nolan’s appeal was timely. These two rulings in Nolan’s favor, made
early in the hearing, vitiate her contention that “[t]he ALJ’s prejudgment and advocacy
were demonstrated early in the hearing.”
3. Exclusion of Evidence
Nolan also contends that the ALJ improperly excluded evidence that should have
been admitted. Nolan asserts, without any citation to supporting authority, that “[i]n an
administrative hearing the only basis for excluding evidence is relevance.” That is not
the law. “An administrative law judge has discretion to exclude evidence if its probative
value is substantially outweighed by the probability that its admission will necessitate
undue consumption of time, or to prevent injustice, undue burden, or prejudice.” (Cal.
Code Regs., tit. 22, § 5062, subd. (f).) Accordingly, we proceed to consider the specific
9
Nolan contends in her brief that the ALJ later changed this ruling and admitted
the newspaper articles, which were grouped into exhibit 13, into evidence. In the portion
of the record Nolan cites for this proposition, the ALJ stated (mistakenly) that she had not
yet ruled on the admissibility of exhibit 13, but she did not admit exhibit 13 into
evidence. To the contrary, exhibit 13 is included in the administrative record under the
heading of documents that were “rejected,” that is, excluded from evidence.
19
items of evidence that Nolan claims were improperly excluded, in light of the basis on
which Nolan sought to introduce them.
Nolan offered Yago’s tax returns in evidence, and attempted to elicit Mercado’s
testimony regarding whether she filed her tax returns as self-employed in 2006. Nolan
offered this evidence to show that while working for Nolan, Claimants represented
themselves as self-employed on their tax returns. The ALJ declined to receive
Claimants’ tax returns in evidence for that purpose. Nolan contends this was error.
Claimants did not dispute that during the time they rendered services to Nolan,
their compensation was reported to the IRS on form 1099, and they filed tax returns
showing they were self-employed. Thus, it was not necessary to introduce Claimants’ tax
returns to establish that fact.10 The disputed issue was why Claimants filed their tax
returns as self-employed persons—that is, whether it was their own choice to be treated
as independent contractors, or a decision that Nolan made. As to this issue, the excluded
evidence had no probative value. Moreover, Nolan does not demonstrate in her briefs
how the exclusion of this evidence prejudiced her case, given that it was probative only
of facts that were not disputed. (See Cal. Const., art. 6, § 13 [judgments not to be set
aside based on improper rejection of evidence unless error resulted in miscarriage of
justice]; Tudor Ranches, Inc. v. State Comp. Ins. Fund (1998) 65 Cal. App. 4th 1422,
1431-1432 [where evidence is improperly excluded, error is not reversible unless it is
reasonably probable appellant would have obtained more favorable result in absence of
error].)
Nolan complains that the ALJ offered no rationale for her exclusion from evidence
of an analysis of Yago’s invoices to Nolan, compared with office calendar entries, to
show when Yago worked for Nolan. Her brief does not explain, however, what this
evidence was offered to prove, why it should have been admitted, or how its exclusion
10
The ALJ made it clear she would accept Claimants’ IRS 1099 forms to the
extent they were offered to show that while working for Nolan, Claimants also received
income from other sources. She declined to receive Claimants’ tax returns in their
entirety, however, due to privacy concerns.
20
prejudiced her case. Accordingly, we decline to consider this issue. (City of Santa Maria
v. Adam (2012) 211 Cal. App. 4th 266, 286-287.)
Next, Nolan complains that the ALJ excluded various documents pertaining to
Mercado’s activities in the real estate business. Again, this evidence related to an
undisputed issue. Mercado never disputed that she obtained her real estate license during
the period she worked for Nolan before February 2006; that she worked in the real estate
industry while not working for Nolan between February and August 200611; and that she
participated in a few real estate transactions after she started working for Nolan again in
the fall of 2006. The disputed issues were whether Mercado conducted her own real
estate business while working for Nolan, and if so, whether this justified Nolan’s
treatment of her as an independent contractor.
The ALJ ruled that even if Mercado did do some real estate work in addition to
performing services for Nolan, this did not, in and of itself, establish that Mercado was
acting as an independent contractor when she performed services for Nolan. Nolan’s
opening brief appears to argue that this ruling was incorrect as a matter of law. Nolan
cites no authority for that proposition, however. On the contrary, the case law makes
clear that a worker’s participation in outside employment does not necessarily
demonstrate that the worker is an independent contractor. (See Gonzalez, supra, 46
Cal.App.4th at p. 1592 [fact that newspaper carrier delivered other newspapers in
addition to those published by putative employer did not preclude finding that worker
was employee].) Accordingly, we see no error in the ALJ’s ruling that Mercado’s real
estate activities did not preclude a finding that Mercado was Nolan’s employee.
Although her briefs are not a model of clarity, it appears Nolan may be arguing
that Mercado’s conduct of a high volume of real estate business would have been
probative on the question whether Mercado was acting in the capacity of a self-employed
independent contractor when she rendered services to Nolan. However, the evidence
11
The ALJ admitted into evidence Mercado’s 2006 tax return, which documented
her receipt of income from her real estate activities during 2006.
21
about Mercado’s real estate work that the ALJ excluded did not have any bearing on the
volume of real estate work that Mercado did during the periods she worked for Nolan.
Thus, Nolan cannot show that the exclusion of that evidence was prejudicial.
Finally, to the extent that Nolan contends the ALJ’s exclusion of evidence offered
by her is evidence of bias on the part of the ALJ, we note that the ALJ admitted several
exhibits offered by Nolan even though Claimants’ counsel objected to them.
Accordingly, we discern no pattern of bias against Nolan in the ALJ’s evidentiary
rulings.
4. Interference in Questioning of Witnesses
Nolan complains in general terms that the ALJ interfered with her counsel’s
questioning of witnesses. The applicable regulations, however, provide that “[a]n
administrative law judge may question any party or witness and may introduce exhibits,”
and that “[t]he taking of evidence in a hearing shall be controlled by the administrative
law judge in a manner best suited to ascertain the facts and safeguard the rights of the
parties.” (Cal. Code Regs., tit. 22, § 5062, subds. (l), (m).) Thus, it was proper for the
ALJ to pose questions to witnesses. Moreover, the ALJ did not interrupt only Nolan’s
counsel; she also frequently interrupted and asked questions during witness examinations
by counsel for Claimants, as well as by the EDD representative. Accordingly, the ALJ’s
questioning of witnesses, in and of itself, did not reflect bias against any party.
In addition to interruptions by the ALJ during the examination of witnesses by
Nolan’s counsel, Nolan cites various specific instances of assertedly biased questioning
by the ALJ. It would unduly prolong this opinion to describe each of these incidents,
which Nolan’s counsel did not object to contemporaneously. Suffice it to say that we
have reviewed all the portions of the record identified in Nolan’s opening brief on appeal,
and are satisfied that the ALJ’s questions and comments, including those that interrupted
Nolan’s counsel, were prompted by the ALJ’s legitimate interest in clarifying the
testimony or in asking follow-up questions, or by Nolan’s counsel’s pursuit of repetitive
or irrelevant lines of questioning. None of these incidents reflect any indication of bias or
prejudice on the part of the ALJ. Accordingly, we find nothing in the record to indicate
22
that the ALJ’s conduct of the hearing reflected anything other than the ALJ’s efforts to
elicit relevant testimony in a coherent manner, and to deter witnesses or counsel from
expending undue amounts of time on matters not material to the issues.
C. Challenge to Sufficiency of Statement of Decision
Nolan requested that the superior court issue a statement of decision regarding its
denial of her writ petition. The superior court issued a statement of decision finding that
Nolan “failed to show that the [ALJ’s and Board’s] finding that an employer-employee
relationship existed between the parties is contrary to the law or the weight of the
evidence.” After summarizing the applicable law as set forth in Tieberg, supra, 2 Cal. 3d
943, the court went on to find that “there is ample evidence in the record to support the
conclusion that an employer-employee relationship existed based on [Nolan’s] right to
control the manner and means of [C]laimants’ work as well as [the] secondary factors”
enumerated in Tieberg.
Nolan contends on appeal that this statement of decision was inadequate.
Specifically, Nolan contends that the superior court “made no factual findings on how
Claimants were controlled, on weight given to the Borello [sic] factors,[12] on weight
given to evidence both rejected at the hearing and offered subsequently to hearing, on
whether Claimants had their own businesses and whether claimants were terminated.”13
“[I]t is settled that the trial court need not, in a statement [of] decision, ‘address all
the legal and factual issues raised by the parties.’ [Citation.] It ‘is required only to set
out ultimate findings rather than evidentiary ones.’ [Citation.] ‘ “[U]ltimate fact[ ]” ’ is a
slippery term, but in general it refers to a core fact, such as an element of a claim or
12
As discussed ante, the law regarding the distinction between employees and
independent contractors, as set forth in Tieberg, supra, 2 Cal. 3d 943, was reiterated by
the California Supreme Court in Borello, supra, 48 Cal.3d at pp. 349-355.
13
Nolan also contends that the superior court’s findings regarding the fairness of
the administrative hearing were incomplete. As noted ante, our de novo review of that
issue moots any issue as to the adequacy of the superior court’s decision in that regard.
In addition, Nolan repeats under this heading her argument that the superior court’s
finding on the credibility of Claimants’ testimony is not supported by substantial
evidence. That issue was also discussed ante.
23
defense, without which the claim or defense must fail. [Citation.]’ It is distinguished
conceptually from ‘evidentiary facts’ and ‘conclusions of law.’ [Citation.]” (Yield
Dynamics, supra, 154 Cal.App.4th at p. 559.)
Moreover, a “trial court is not required to respond point by point to issues posed in
a request for a statement of decision. ‘The court’s statement of decision is sufficient if it
fairly discloses the court’s determination as to the ultimate facts and material issues in the
case.’ [Citations.]” (In re Marriage of Burkle (2006) 139 Cal. App. 4th 712, 736, fn. 15,
quoting Golden Eagle Ins. Co. v. Foremost Ins. Co. (1993) 20 Cal. App. 4th 1372, 1380;
see also Bauer v. Bauer (1996) 46 Cal. App. 4th 1106, 1118 [trial court “is not required to
make an express finding of fact on every factual matter controverted at trial, where the
statement of decision sufficiently disposes of all the basic issues in the case”]; In re
Marriage of Garrity & Bishton (1986) 181 Cal. App. 3d 675, 686-687, superseded by
statute on another point as stated in In re Marriage of Weaver (1990) 224 Cal. App. 3d
478, 484-485 [trial court’s statement of decision is required only to state ultimate rather
than evidentiary facts].) All that is required in a statement of decision “ ‘is an
explanation of the factual and legal basis for the court’s decision as to the principal
controverted issues at trial which are specified in the party’s request for statement of
decision.’ ” (R. E. Folcka Construction, Inc. v. Medallion Home Loan Co. (1987) 191
Cal. App. 3d 50, 54.) Concomitantly, a party’s request for statement of decision should be
limited to non-argumentative specifications of the principal controverted factual issues in
the case, and a trial court’s failure to respond to requests that do not meet these criteria
does not render its statement of decision insufficient. (See Yield Dynamics, supra, 154
Cal.App.4th at pp. 558-560.)
The only ultimate issue of fact presented by this case is whether Claimants worked
for Nolan as her employees or as independent contractors. The superior court made an
express finding on that issue. This finding satisfied the court’s obligations with respect to
the requirements for a statement of decision. Its failure to specify its factual findings on
each of the Tieberg factors, and to explain what weight it gave each factor, is not grounds
for reversal.
24
IV.
DISPOSITION
The judgment is affirmed. The Board shall recover its costs on appeal.
_________________________
RUVOLO, P. J.
We concur:
_________________________
REARDON, J.
_________________________
RIVERA, J.
25