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Spar Marketing Services, Inc. v. State

Intermediate Court of Appeals of Hawaii

February 22, 2019

SPAR MARKETING SERVICES, INC., Appellant-Appellee,
v.
STATE OF HAWAI'I, DEPARTMENT OF LABOR AND INDUSTRIAL RELATIONS, EMPLOYMENT SECURITY APPEALS REFEREES' OFFICE, Appellee-Appellant, and THAD J. INOKUCHI, Appellee-Appellee

          APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CIVIL NO. 12-1-2084)

          Li-Ann Yamashiro, Deputy Attorney General, for Appellee-Appellant.

          John S. Mackey, for Appellant-Appellee.

          FUJISE, PRESIDING JUDGE, REIFURTH AND HIRAOKA, JJ.

          OPINION

          HIRAOKA, J.

         Appellant State of Hawai'i Director of Labor and Industrial Relations (Director)[1] appeals from the April 29, 2013 Order Reversing Employment Security Appeals Referees' Office Decision 1101663 (Order) and the Final Judgment (Judgment) in favor of Appellee Spar Marketing Services, Inc. (Spar) entered by the Circuit Court of the First Circuit (Circuit Court)[2] on May 7, 2013. The Director contends that the Circuit Court erred when it reversed the State of Hawai'i Department of Labor and Industrial Relations (DLIR) Employment Security Appeals Office Decision 1101663 (the Agency Decision) that held Spar liable for unemployment insurance contributions. We agree that the Circuit Court erred by re-weighing the evidence presented to the DLIR hearings officer. We reverse the Order and the Judgment and affirm the Agency Decision for the reasons set forth below.[3]

         I. Procedural History

         Spar and Thad Inokuchi (Inokuchi) were parties to an Independent Merchandiser Agreement (Agreement). The Agreement states in bold type that "[i]t does NOT create any employer/employee relationship" (capitalization and underscoring in original). Inokuchi accepted the Agreement on October 21, 2010. Inokuchi performed services (restocking and maintaining DVD rental kiosks) for three of Spar's clients at various Safeway and Office Depot stores in Honolulu pursuant to written instructions he received from Spar. Inokuchi was paid by Spar and received an IRS Form 1099-MISC from Spar.

         On January 6, 2011, Inokuchi filed a claim for unemployment benefits under the Hawaii Employment Security Law (HRS Chapter 383) with DLIR. On April 26, 2011, DLIR's Employer Services Section determined that Inokuchi was engaged in covered employment and issued a notice of assessment for $29.38 to Spar, representing Spar's unemployment insurance contributions pursuant to HRS Chapter 383, Part III.

         By letter dated May 4, 2011, Spar contested DLIR's determination and requested a hearing. An administrative hearing was conducted on January 24, 2012. The hearings officer admitted fourteen exhibits into evidence without objection by any party. The hearings officer heard testimony from Heidi Savage, Director of Human Resources for Spar Marketing Force, [4] a DLIR Unemployment Insurance Division auditor named Jason Hara, and Inokuchi. On May 21, 2012, DLIR issued the Agency Decision which stated, in relevant part:

The Department's decision is affirmed. The services performed by [Inokuchi] for [Spar] constitute employment pursuant to Haw. Rev. Stat. §§ 383-1, 383-2, 383-6, and 383-10.

Spar's application to reopen the agency proceeding was denied. On August 1, 2012, Spar timely appealed to the Circuit Court pursuant to HRS § 91-14 (2012).[5]

         The Circuit Court heard oral arguments on February 15, 2013. On April 29, 2013, the Circuit Court entered the Order. The Order did not articulate which standard of review the Circuit Court had applied. It contained eleven findings of fact and concluded:

The Court finds that the reliable, probative, and substantial evidence in the record set forth above warrants a reversal of the Appeals Office Decision. Therefore, Employment Security Appeals Referees' Office Decision 1101663 dated May 21, 2012, and the denial of the Application for Reopening of Appeals Officer's Decision, dated July 3, 2012, are reversed.

         The Judgment was entered on May 7, 2013. This appeal followed.

         II. Standard of Review

         "Review of a decision made by the circuit court upon its review of an agency's decision is a secondary appeal. The standard of review is one in which this court must determine whether the circuit court was right or wrong in its decision, applying the standards set forth in HRS § 91-14 (g) [1993] to the agency's decision." Flores v. Bd. of Land & Nat. Res., 143 Hawai'i 114, 120, 424 P.3d 469, 475 (2018) (brackets in original) (citation omitted).

         HRS § 91-14, entitled "Judicial review of contested cases," provides in relevant part:

(g) Upon review of the record the court may affirm the decision of the agency or remand the case with instructions for further proceedings; or it may reverse or modify the decision and order if the substantial rights of the petitioners may have been prejudiced because the administrative findings, conclusions, decisions, or orders are:
(1) In violation of constitutional or statutory provisions; or
(2) In excess of the statutory authority or jurisdiction of the agency; or
(3) Made upon unlawful procedure; or
(4) Affected by other error of ...

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