NOVEMBER 13, 2002


[NO. 2001-BR-1 EC]


Appellant Superior Senior Care ("Superior") appeals from a decision of the Arkansas Board of Review finding that Superior is a covered employer subject to the payment of unemployment insurance taxes on the wages of its caregivers. Superior argues that the Board erred in (1) determining that Superior's relationship with its caregivers constituted employment under Ark. Code Ann. § 11-10-210 (Repl. 2002), when Superior does not pay any remuneration to such caregivers, and (2) in determining under the "ABC" test articulated in Ark. Code Ann. § 11-10-210(e) that the caregivers are employees of Superior. We affirm.

According to the evidence presented, Superior is a licensed employment agency under Arkansas law, and it supplies caregivers to individuals who need personal care services in their homes or while in the hospital. Superior advertises that it offers specialized in-home or in-hospital care, and it solicits caretakers through the newspaper or by word-of-mouth. When the caregivers contact Superior, they are required to complete a "Caregiver Information Sheet" that reflects personal data, education, experience, work history, and references. All applicants are required tosign an Independent Contractor Agreement before their name is placed on Superior's caregiver registry. Superior checks their references and completes a background investigation. Superior also interviews its clients to determine their specific needs and preferences, and this information is documented on a "Client Data Sheet." Superior then scrutinizes its registry in order to match the needs and preferences of a client with the skills, experience, and preferences of a potential caregiver.

Joseph Pascual, co-owner of Superior, testified that a potential caregiver and a client meet to discuss the services that are desired by the client. If the caregiver is acceptable to the client, certain documents that are drafted by Superior are executed, including a placement agreement, which memorializes the financial terms. According to Pascual's testimony, the client and the caregiver negotiate the wage to be paid, which is usually from $6 to $10 per hour. Superior receives $2 for every hour worked by the caregiver as its referral fee for the entire duration of the relationship between the client and the caregiver. The client and the caregiver are required to agree not to enter into a private employment arrangement for twelve months from the last date worked by the caretaker.

There are two different forms of relationships that exist between Superior and its caregivers and clients. One form involves caregivers who are paid for their services by the client, whether through an escrow account maintained by Superior, or by the client paying the caregiver directly. In the latter case, the caregiver agrees to remit the referral fee to Superior. When the escrow account is used, the client pays the caregiver's wages to Superior, and Superior pays the caregiver's wages and its fee out of the escrow account.

In the second form of relationship, the client's care is paid with Medicaid funds through the Elder Choices program. This money is paid to Superior by Medicaid, and it is placed into an escrowaccount from which the caretakers are paid. Medicaid also establishes the wages that can be paid to caregivers. Under the Elder Choices program, the Department of Human Services has established certain requirements for the caregivers. For example, the caregivers are required to follow a plan of care established by a nurse, to complete certain forms on the client, to participate in training, to submit to in-home inspections, and to follow a code of ethics. Superior has contracted with another entity, Elder Source, to perform these types of services required by the Elder Choices program. However, Superior is required as a "Provider" of this program to maintain certain client files and records on its premises. If a caregiver does not meet the requirements of the program, Superior is notified that the caregiver can no longer provide services to the client.

Pascual's testimony and the documents executed by the client and caregiver indicate that Superior does not give instructions on the details of the assignment, as the details are negotiated between the client and the caregiver. The caregivers are responsible for their own equipment and transportation. Pascual testified that Superior never fires a caregiver from a client and that a caregiver is not required to accept a referral to a client. However, the evidence indicates that Superior has transmitted a message on at least one occasion from a family member of a client to the caregiver that her services were no longer needed. If a caregiver is ill or otherwise unable to perform an assignment, she or the client can contact Superior for a replacement. Superior withholds no income taxes from the wages of caregivers and pays no unemployment taxes or any other benefits on behalf of the caregivers, and the Independent Contractor Agreement reflects that the caregiver is responsible for paying any federal or state taxes owed.

After several caregivers sought unemployment benefits from Superior, the Arkansas Employment Security Department undertook an investigation to consider if the caregivers qualified as employees of Superior under Ark. Code Ann. § 11-10-210(e). After a hearing, the Department found that thecaregivers qualified as Superior's employees for the purpose of unemployment taxes, and the Board affirmed. Superior appeals from the Board's decision. On appeal, the findings of the Board of Review are affirmed if they are supported by substantial evidence. Barb's 3-D Demo Serv. v. Director, 69 Ark. App. 350, 13 S.W.3d 206 (2000). Substantial evidence is such evidence as a reasonable mind might accept as adequate to support a conclusion. Id. We review the evidence and all reasonable inferences therefrom in the light most favorable to the Board's findings. Id. Even where there is evidence upon which the Board might have reached a different conclusion, appellate review is limited to a determination of whether the Board could reasonably reach its decision upon the evidence before it. Id.

Superior first argues that the Board of Review erred in determining that its relationship with the caregivers constituted employment, as such term is defined in Ark. Code Ann. § 11-10-210, because it does not pay wages to the caregivers. Superior contends that the evidence shows that the client pays the caregiver and not Superior and that section 11-10-210(e) does not permit Superior to be held liable for unemployment taxes imposed on wages that it did not pay. Section 11-10-210(e) provides:

Service performed by an individual for wages shall be deemed to be employment subject to this chapter irrespective of whether the common law relationship of master and servant exists, unless and until it is shown to the satisfaction of the director that:

(1) Such individual has been and will continue to be free from control and direction in connection with the performance of such service, both under his contract for the performance of such service and in fact; and

(2) Such service is performed either outside the usual course of the business for which the service is performed or is performed outside of all the places of business of the enterprise for which the service is performed; and

(3) Such individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.

In Palmer v. Arkansas Employment Security Division, 265 Ark. 571, 580 S.W.2d 683 (1979)(holding that beauty operators who paid appellant a fixed rent for space in her shop were not paid wages by appellant), the court reiterated its holding in McCain v. Crossett Lumber Co., 206 Ark. 51, 174 S.W.2d 114 (1943) (finding that renumeration paid to timber contractors based on amount of lumber delivered to mill is not wages), and stated that paragraphs (1) through (3) of section 11-10-210(e) do not apply except in cases where three precedent conditions are first found to exist: (1) that services were performed; (2) by an individual; (3) for wages. The record reflects that Superior's argument on this point was not raised below. The primary issue as framed by the Board was whether the caretakers were independent contractors or Superior's employees, not whether the caretakers were paid wages such as would constitute "employment" for the purposes of section 11-10-210. Even if this argument could be considered as raised before the Board, it was not ruled upon. Superior admits in its brief that neither the Department nor the Board addressed this issue in their decisions. Where an argument is not raised below or ruled upon, the issue is not preserved for appellate review. Barber v. Director, 67 Ark. App. 20, 992 S.W.2d 159 (1999).

Superior also argues that the Board of Review erred in determining under the "ABC" test set forth in Ark. Code Ann. § 11-10-210(e) that the caregivers are employees of Superior and not employees of a client. In order for an employer to establish the exemption set forth in section 11-10-210(e), it must prove each of the three requirements in subsections (1)-(3). Barb's 3-D Demo Serv., supra. If there is sufficient evidence to support the finding of the Board of Review that any one of the three requirements for establishing the exemption is not met, the case must be affirmed. Id. In this case, the Board found that Superior failed to satisfy all three of the statutory requirements; however, it did not distinguish in its analysis between the regular caregivers and those involved in the Elder Choices Program.

The first requirement is that the individual is free from direction and control in connection with the performance of services, both under the contract and in fact. The contract in this case specifically states that the caregivers should negotiate with the client about such matters as time, place, type of services, working conditions, and the quality of services. There is no evidence that Superior provides any training, instruction, supervision, or control over the manner in which the regular caregivers carry out their services while in the client's home. Superior does require the caregivers to turn in time sheets showing hours worked for a specific client, to sign an Independent Contractor Agreement, and to sign a client agreement, in addition to other documents. The Board found that these documents indicate some degree of control, along with the provisions that the caregivers will not accept private employment from any of Superior's clients for twelve months from the last date worked or accept conflicting referrals. In addition, two caregivers who had been placed by Superior stated that Superior "hired" them and went over the details of the assignment, such as what hours they were to work and what they would be paid, before the caregivers ever met the client. It is not specified whether either of these caregivers were involved in the Elder Choices program.

There is even more evidence of control with regard to the caregivers involved in the Elder Choices program. The requirements imposed by the State in connection with this program, such as training, assessment, and monitoring, evidence significant control over the caregiver's performance of services. Although Superior argues that it contracts with Elder Source to perform these tasks for it, the program requires the "Provider," which is Superior, to assume ultimate responsibility for ensuring compliance with the requirements. Also, Superior would have the responsibility of firing a caregiver who did not meet the qualifications required by the Elder Choices program, which is an indication of control. Thus, the Board's finding that Superior did not prove this factor is supportedby substantial evidence.

In order to establish entitlement to the exemption set forth in section 11-10-210(e), an employer must prove each of the three requirements in subsections (1)-(3). Barb's 3-D Demo Serv., supra. Because we agree with the Board that Superior does not satisfy this first statutory element regarding the control and direction exercised by Superior in connection with the performance of the caregivers' services, it is unnecessary for us to address the remaining statutory requirements. Id.


Neal and Vaught, JJ., agree.