Baindurashvili v. Helpful Hands Transportation, Inc., No. A11-60, Unpub. (Minn. Ct. App. 11/21/2011) (A case recently won by Sherayzen Law Office)

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This is a copy of the Minnesota Court of Appeals unpublished opinion in the case recently won by Mr. Eugene Sherayzen, the owner of Sherayzen Law Office, on November 21, 2011.

 

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2010).

STATE OF MINNESOTA
IN COURT OF APPEALS
A11-60

Avtandil Baindurashvili,
Respondent,

Vyacheslav Kirkov,
Respondent,

vs.

Helpful Hands Transportation, Inc.,
Relator,

Department of Employment and Economic Development,
Respondent.

Filed November 21, 2011
Reversed and remanded
Kalitowski, Judge

Department of Employment and Economic Development
File Nos. 25886858-3, 26006922-4

Avtandil Baindurashvili, Crystal, Minnesota (pro se respondent)

Vyacheslav Kirkov, Burnsville, Minnesota (pro se respondent)

Eugene A. Sherayzen, Minneapolis, Minnesota (for relator)

Lee B. Nelson, Amy R. Lawler, Department of Employment and Economic Development, St. Paul, Minnesota (for respondent Department of Employment and Economic Development)

Considered and decided by Stoneburner, Presiding Judge; Kalitowski, Judge; and
Peterson, Judge.

U N P U B L I S H E D   O P I N I O N

KALITOWSKI, Judge

In this certiorari appeal, relator transportation company challenges the determination by an unemployment-law judge (ULJ) that respondents, drivers who transported patients for relator, were employees rather than independent contractors and accordingly were eligible for benefits under the unemployment-benefits laws.  Relator argues:  (1) the ULJ’s findings do not support a determination that respondents were employees; (2) the ULJ erred by failing to follow the structural framework set forth in Minn. R. 3315.0555 (2009); and (3) the ULJ’s decision was arbitrary and capricious.  Because the ULJ made findings that are inconsistent with a determination of employee status and failed to follow the analytic structure of Minn. R. 3315.0555, we reverse and remand.

D E C I S I O N

Respondents Avtandil Baindurashvili and Vyacheslav Kirkov worked as drivers for  relator Helpful Hands Transportation, Inc. (Helpful Hands) from 2003 and 2007, respectively, until June 2010.  Helpful Hands contracts with insurance companies to provide nonemergency medical transportation and hires drivers to transport patients. Prior to 2009, Helpful Hands classified drivers as employees.  In April 2009, Helpful Hands began to treat drivers as independent contractors.

Baindurashvili and Kirkov applied for unemployment benefits after their separations from Helpful Hands.  Respondent Department of Employment and Economic Development (DEED) conducted an audit and determined that the drivers were employees for purposes of unemployment-benefits law.  Helpful Hands appealed the determinations and the matters were consolidated for a telephone hearing before the ULJ. The ULJ determined that Baindurashvili and Kirkov were employees of Helpful Hands.

Employers must contribute to the unemployment trust fund based on wages paid to employees.  See Minn. Stat. § 268.035, subd. 25 (2010).  But payments to independent contractors do not constitute wages under Minnesota unemployment law.  Nicollet Hotel
Co. v. Christgau, 230 Minn. 67, 68, 40 N.W.2d 622, 622-23 (1950).

Whether an individual is an employee or an independent contractor is a mixed question of law and fact.  Nelson v. Levy, 796 N.W.2d 336, 339 (Minn. App. 2011).  This court reviews a ULJ’s factual findings in the light most favorable to the decision and will not disturb them if sustained by substantial evidence.   Skarhus v. Davanni’s Inc., 721 N.W.2d 340, 344 (Minn. App. 2006).   Questions of law are reviewed de novo.  Ywswf v. Teleplan Wireless Servs., Inc., 726 N.W.2d 525, 529 (Minn. App. 2007).

Five factors are used to determine whether a worker is an employee or an independent contractor:  “(1) The right to control the means and manner of performance; (2) the mode of payment; (3) the furnishing of material or tools; (4) the control of the premises where the work is done; and (5) the right of the employer to discharge.”  Guhlke v. Roberts Truck Lines, 268 Minn. 141, 143, 128 N.W.2d 324, 326 (1964) (codified at Minn. R. 3315.0555, subp. 1).  Of these five factors, the two most important are “the right or the lack of the right to control the means and manner of performance,” and the right or the lack of the right “to discharge the worker without incurring liability.”  Minn. R. 3315.0555, subp. 1.   Subpart 3 sets forth  criteria to be considered when evaluating whether the right to control the means and manner of performance exists.  Minn. R. 3315.0555, subp. 3.  Subpart 2  provides additional factors that may be considered if analysis of the five essential factors is inconclusive.  Minn. R. 3315.0555, subp. 2.

Helpful Hands argues that the ULJ’s findings of fact as to the issue of control are contradictory and  inconsistent with his  ultimate conclusion  that the drivers are employees.  We agree.  The ULJ found,

A  driver, usually the driver in the most convenient location who is available, is contacted the day the service is needed and asked if he is able and willing to accept the assignment. If the driver declines, another driver is contacted. . . . [Helpful Hands] does not dictate how a driver does his job or what  route is driven and it does not require drivers to work specific hours.

The ULJ concluded, “ultimately there is little if any control to be had over how the actual transport is conducted.”  These findings suggest that Helpful Hands did not retain the right to control the drivers’ means and manner of performance and tend to support
independent-contractor status.

The ULJ did make other findings of fact that weigh in favor of employee status. But if the ULJ determined that other factors in the  Minn. R. 3315.0555 analysis outweighed these findings on the issue of control, explanation was necessary.  Because the ULJ failed to set forth  such  analysis, we are unable to review  the decision to determine whether it is supported by substantial evidence.   See Minn. Stat. § 268.105, subd. 7(d) (2010) (providing that this court may reverse or modify the decision of a ULJ if a party has been prejudiced by findings, inferences, conclusions or decisions that are unsupported by substantial evidence in view of the entire record as submitted).

We do not suggest that all factual findings relating to the factors in Minn. R. 3315.0555 must support the final determination of worker status.  Indeed, the various factors may  tend to support either determination and may be inconsistent with one another.  See St. Croix Sensory, Inc. v. Dep’t of Emp’t & Econ. Dev., 785 N.W.2d 796, 800-04 (Minn. App. 2010) (finding that some factors indicated control and an employment relationship, while others indicated a lack of control and an independentcontractor relationship, and holding that on the totality of the circumstances the workers were independent contractors).   But there must be a logical link between the findings on the important factor of the right to control the means and manner of performance and the ultimate conclusion.

Helpful Hands next argues that the ULJ failed to follow the analytic framework set forth in Minn. R. 3315.0555.  We agree.  The ULJ determined that analysis of two of the essential factors—the right to control the means and manner of performance and the right to discharge without incurring liability—was inconclusive but did not make a finding as to whether analysis of all five essential factors was inconclusive before addressing the additional factors.  See Minn. R. 3315.0555, subp. 1 (providing that if the five essential factors of subpart 1 are inconclusive, the additional factors of subpart 2 should be considered).  The ULJ also considered certain subpart 3 criteria as stand-alone factors and thus did not properly weigh them in his analysis of control of the means and manner of performance.  See id. at subp. 3 (setting forth “criteria for determining if the employer has control over the method of performing or executing services”).

Finally, Helpful Hands contends that the ULJ’s decision is arbitrary and capricious because the ULJ relied on a factor—the importance of the worker to the company—that is not included in Minn. R. 3315.0555.  We disagree.  An agency ruling is arbitrary and capricious if the agency relied on factors not intended by the legislature.   Citizens Advocating Responsible Dev. v. Kandiyohi Cnty. Bd. of Comm’rs, 713 N.W.2d 817, 832 (Minn. 2006).  The ULJ’s discussion of the importance of the drivers to Helpful Hands’s business informed the ULJ’s analysis of whether the workers’ activity was performed in the course of the employer’s business.  Minn. R. 3315.0555, subp. 2H includes whether services are performed in the course of the employer’s business as an additional factor in the worker-status analysis, and provides,  “services  which  are a part or process of the employer’s trade or business are generally performed by individuals in employment. . . . Process refers to those services which directly carry out the fundamental purposes for which the organization, trade, or business exists . . . .”  The ULJ’s consideration of the importance of the drivers to the company did not depart from the rule and was  not arbitrary and capricious.

In conclusion, we reverse and remand for findings of fact and conclusions of law consistent with this opinion in such proceedings as the ULJ deems appropriate.

Reversed and remanded.

Eugene Sherayzen, Esq. Wins a Minnesota Court of Appeals Case

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On November 21, 2011, the Minnesota Court of Appeals ruled in favor of Helpful Hands Transportation, Inc. (HHT) – the client of Sherayzen Law Office – and reversed the unemployment law judge’s (ULJ) determination that HHT’s workers should be classified as employees. Judge Kalitowski wrote the opinion.  Two respondents were listed as “pro se”, but the opinion of the ULJ was defended by Minnesota Attorney General’s Office on behalf of the Department of Employment and Economic Security (DEED). Mr. Eugene Sherayzen represented our client throughout the case.

At the center of the issue was whether the ULJ erred in its determination that HHT’s workers were employees.  Mr. Sherayzen’s chief arguments were: (1) the ULJ’s factual findings are inconsistent with his legal conclusion, and (2) the ULJ failed to follow the analytical framework of Minnesota Rule 3315.0555.   The Court of Appeals agreed with both arguments and reversed the decision.

A copy of the court opinion will be posted on our website later.

Contact Sherayzen Law Office For Appellate Litigation

If you have a case that you wish to appeal to the Minnesota Office of Administrative Appeals, Minnesota Court of Appeals or Minnesota Supreme Court, contact Sherayzen Law Office.  Our experienced appellate tax firm will assist you in filing the case, constructing efficacious legal arguments, drafting compelling legal briefs,  and zealously representing your interests in applicable courts.

Limited Liability Limited Partnerships

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A Limited Liability Limited Partnership (LLLP) is a relatively recent modification of a traditional limited partnership, and about half of the states in the U.S. have adopted statutes for their formation. In this article, I will highlight some of the most prominent features of the LLLPs.

As I already mentioned above, LLLPs are a modification of limited partnerships. By definition, limited partnerships consist of one or more general partners, and one or more limited partners. In a standard limited partnership, the general partners have joint and several liability for the debts and obligations of the limited partnership, whereas limited partners will not have such liability for these debts and obligations beyond any amount of their capital contributions.

In contrast, in an LLLP, general partners will also have limited liability for the debts and obligations of the limited partnership that arise during the time that the LLLP form is elected. Thus, general partners in an LLLP may have significantly less liability, and are not likely to be personally liable for the debts and obligations of the partnership; rather, the liability of a general partner is limited to the amount of his capital contribution.

Despite the differences in the liability, LLLPs are usually managed in a manner similar to the LPs – in an LLLP, general partners usually manage the partnership, while limited partners only have a financial interest. Similarly, tax-wise, an LLLP election has no effect on the pass-through taxation aspects of a partnership.

As noted above, only about half the states allow for an LLLP form; therefore, you need to check your local statutes to see if you have an option to make such an election. In practice, LLLPs are often formed by converting existing limited partnerships into such a form (in order to take advantage of the benefits of an LLLP).

Contact Sherayzen Law Office NOW For Legal and Tax Help With Partnerships

Forming partnerships, LLPs, LLLPs, and other similar business entities involve complex issues, and often legal issues arise that necessitate experienced planning beyond merely the formation of an entity. This article only attempts to provide a general background information that should not be relied upon in making the determination of your specific situation. Please contact Sherayzen Law Office for legal help with this issue. Our experienced business firm will guide you through the complex web of rules concerning business partnerships and their various forms (general, LPs, LLLPs, et cetera).

Limited Liability Partnerships (LLPs)

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The term limited liability partnership (“LLP”) is often used in public discourse- often erroneously. What exactly is an LLP, and what are its features compared to a traditional, general partnership? This article will attempt to answer that question and provide you with some basic understanding of LLPs.

Please note that this article is intended to only cover the general aspects of LLPs- the majority of states currently allow for the LLP form, and state laws vary widely, so applicable state laws for specifics relating to your particular situation will need to be consulted.

Advantages of an LLP

In general, an LLP is a type of partnership in which some or all partners may have limited liability, meaning that partners are not liable for damages resulting from negligence, fraud, malpractice or similar misconduct committed by another partner. This is an essential difference between LLPs and general (unlimited) partnerships. This feature thus provides an important advantage that the corporate form provides for shareholders.

It should be noted, partners in an LLP are still personally liable for any negligence, fraud, malpractice or similar misconduct that they themselves commit.

Another advantage of an LLP is that LLP profits are distributed among the partners for taxation purposes under pass-through rules, and thus are not subject to double-taxation.

Finally, an advantage of LLPs compared to LLCs is that in states that impose franchise taxes on operations, LLPs will not have to pay such taxes, whereas LLCs may have to, depending upon state law.

Remember, whether an LLP is an advantageous form of business for you will depend on your particular circumstances. What appears to be an advantage in one situation may actually become a disadvantage in another. Therefore, you need to consult with a business and tax attorney before deciding whether an LLP is the most convenient form for your particular business.

Certain Aspects of LLPs

LLPs are often utilized by service providers, such as physicians, attorneys, architects, accountants and similar professionals. Articles of LLP must be filed with the Secretary of State of applicable states that allow for LLP formation.

When an LLP is formed, states either require the firm’s name to include the term “limited liability partnership” or “registered limited liability partnership”, or applicable abbreviations, in order to properly inform the public as to its business form.

Some Aspects of Various LLP Statutes

As noted above, statutes differ widely, and should be examined for your particular situation.

Despite the general LLP limited liability rule, certain states may scale back this feature to some degree. For example, in some states, LLP partners may still be jointly and severally liable for matters relating to contractual liability of the LLP.

In general, some states provide for transformation of an unlimited partnership into an LLP. A number of states also allow for only majority- and not unanimous consent- of partners of a general partnerships to become an LLP.

Contact Sherayzen Law Office NOW for Legal and Tax Help For Your Business

The formation of partnerships, limited liability partnerships and other business and tax matters can involve complex issues and knowledge of applicable state and Federal laws, and this article only attempts to provide a very general background information that should not be relied upon in making the determination of your specific situation. Rather, you should contact Sherayzen Law Office for legal help with this issue. Our experienced business and tax firm will guide you through the complex web of rules concerning partnership, LLP, LLC, corporate formation and taxation matters.

Business Lawyers Minneapolis: Preparing for Initial Consultation II

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In previous article, I discussed what type of information you should bring to your Minneapolis business attorney. In this essay, I shift the focus toward the second part of the preparation which is about what type of questions you need to ask your business lawyer.

Usually, the questions that you want your Minneapolis business lawyer to answer should, at the very least, cover the following four areas:

1.    Cost and Billing

The most common and important issue is the cost of the case as well as the manner in which you will be billed.  Unless this is a flat-fee case, you should not expect your business attorney to give you a precise amount of money you will need to spend on your case.  Usually, a Minneapolis business lawyer will give you an estimate, which, in the end, may or may not correspond to the actual cost of the case.

In terms of the manner of billing, you are likely to billed per hour in most business litigation and large business transaction matters. Small contracts and certain common-place business services are often subject to a flat fee with an additional hourly fee charged in case of further modifications as requested by a client.

2.     Time

The next area you should discuss with your Minneapolis business attorney is how long the case will need to be conducted.   The estimates here are likely to vary significantly.   While it is often fairly easy to predict when an employment contract will be finished, it is much harder to estimate an amount of time a business litigation case may take (especially if an extensive motion practice is anticipated).

3.    Participation

Ask your Minneapolis business lawyer about who will handle your case – i.e. whether the attorney will handle it personally or turn it over to his associates.  When you are dealing with a large law firm, you run the risk that the attorney with whom you are having the initial consultation will not be the one handling your case, especially if you are a small business or an individual.  Due to common division of labor in large law firms, it is very likely that the case will be turned over to inexperienced associates whose work will be only reviewed by the attorney who conducted the initial consultation.

If, however, you are hiring a small firm or a solo practitioner, you are very likely to avoid this problem and your case will be handled from the beginning through the end by your experienced business lawyer who is probably an owner of the law firm and personally responsible for the case.

4.     Percentage of Practice

The last question is how much time per month, on the average, your Minneapolis business attorney devotes to his business practice.  At a minimum, your business lawyer should devote about 25% of his practice to business law.

Conclusion

While these four questions do not represent a complete list of questions you should ask your business attorney, they are likely to provide that minimum background necessary for the review of a retainer agreement with your Minneapolis business lawyer.

Sherayzen Law Office can help you with your business issues, whether you want to establish a new business, create a legal structure for an existing one, draft an employment contract or an Independent Contractor Agreement, engage in complex business planning, litigate a business dispute, and so on.

Contact Sherayzen Law Office to discuss your business case with an experienced business attorney!