MNH Truck Leasing Co., L.L.C. v. Dir., Ohio Dept. of Job & Family Servs.

[Cite as MNH Truck Leasing Co., L.L.C. v. Dir., Ohio Dept. of Job & Family Servs., 2017-Ohio-442.]

IN THE COURT OF APPEALS OF OHIO

TENTH APPELLATE DISTRICT

MNH Truck Leasing Company, LLC, :

Appellant-Appellant, : No. 16AP-301

(C.P.C. No. 14CV-10701)

v. : No. 16AP-302

(C.P.C. No. 14CV-10698)

Director, Ohio Department of : No. 16AP-303

Job & Family Services, (C.P.C. No. 14CV-10699)

:

Appellee-Appellee. (REGULAR CALENDAR)

:

D E C I S I O N

Rendered on February 7, 2017

On brief: Mark R. McBride, for appellant. Argued: Mark

R. McBride.

On brief: Michael DeWine, Attorney General, and Patria V.

Hoskins, for appellee. Argued: Patria V. Hoskins.

APPEALS from the Franklin County Court of Common Pleas

SADLER, J.

{¶ 1} In this consolidated appeal, appellant, MNH Truck Leasing Company, LLC,

appeals from the judgment entry of the Franklin County Court of Common Pleas

upholding three administrative decisions of the Unemployment Compensation Review

Commission ("UCRC") regarding appellant's liability and contribution rate determination

under Ohio unemployment compensation laws. For the following reasons, we affirm.

I. FACTS AND PROCEDURAL HISTORY

{¶ 2} Appellant is a limited liability company primarily in the business of freight

brokerage and trucking services. A claim for unemployment benefits filed by one of

appellant's former workers prompted the Ohio Department of Job and Family Services

Nos. 16AP-301, 16AP-302, and 16AP-303 2

("ODJFS") to audit appellant's status under Ohio unemployment compensation law and

classification of its workers. ODJFS notified appellant that it met the definition of an

employer for purposes of Ohio unemployment compensation law, and in August 2013,

issued two employer's liability and contribution rate determinations assessing appellant

maximum penalty tax rates for 2012 and 2013 as a result of appellant's failure to timely

submit required quarterly wage information. In September 2013, the director of ODJFS

issued reconsidered decisions affirming the determination that appellant was a liable

employer and affirming both the 2012 and 2013 liability and contribution determinations.

In October 2013, ODJFS released the final audit report reviewing the period of 2009

through 2011. According to the audit, appellant became a liable employer as of January 1,

2009, misclassified 41 workers as independent consultants, and underreported wages by

nearly $2.5 million. The audit report notes that appellant "had no comment concerning

people being considered employees or wages paid by the employer." (Oct. 1, 2013 Audit

Report at 9.)

{¶ 3} On October 23, 2013, appellant appealed the director's reconsidered

decisions to the UCRC, and a telephone hearing on the matter was held on September 9,

2014. During the hearing, the attorney representing ODJFS was sworn in to testify.

ODJFS' attorney identified exhibits submitted for admission on behalf of ODJFS "with the

support of * * * affidavit[s]." (Sept. 9, 2014 Hearing Tr. at 7.) The exhibits identified

included the unemployment tax notification contribution rate determinations, the

application for reconsideration, the director's reconsidered decisions, quarterly report

histories, the audit report, notes prepared by the auditor, business documents prepared

by appellant used in support of the auditor's report, an ODJFS compliance examiner

questionnaire interviewing appellant, and an ODJFS compliance examiner questionnaire

with appellant's former worker. The two affidavits submitted by ODJFS, one from the

chief of the contributions section and one from the assistant chief of the compliance

section of ODJFS' Office of Unemployment Compensation, averred that the exhibits

submitted at the hearing were true and accurate copies of the originals produced or

obtained in connection with appellant's investigation, audit, and appeals.

{¶ 4} When asked whether she would offer additional testimony based on her

conversations with the auditor and the compliance examiner, ODJFS' attorney replied:

Nos. 16AP-301, 16AP-302, and 16AP-303 3

Yes although not necessarily in regards to the information

they provided me at least up until now I think that

everything's been covered fairly well in the documents. I did

want to give some additional information on those three

[redeterminations by ODJFS].

(Sept. 9, 2014 Hearing Tr. at 16.) After describing the basis for ODJFS' reconsiderations,

ODJFS' attorney declined to offer additional testimony. Appellant lodged a general

objection to the attorney for ODJFS offering testimony and characterized such testimony

as inappropriate, hearsay, and not the best evidence. ODJFS' attorney responded that

hearsay is admissible in administrative proceedings, that ODJFS' staffers were

unavailable due to retirement and maternity leave, that the affidavits supported the

testimony, and that appellant could have subpoenaed either one. The hearing officer

overruled the objection, noting that he would determine the weight to give the evidence

submitted.

{¶ 5} Thereafter, the single member of appellant, John Petrlich, testified. Petrlich

agreed that some of the workers at issue were employees. However, Petrlich generally

argued that the audit was inaccurate and that some of the workers were actually

independent contractors who were not obligated to drive for appellant, had their own

federal ID number, and drove trucks owned by other people. Appellant did not provide

documentation or other evidence supporting these contentions.

{¶ 6} The UCRC affirmed the director's reconsidered decisions in three separate

decisions mailed September 17, 2014. Regarding the two director's reconsidered

decisions addressing the penalty rates imposed for 2012 and 2013, the UCRC found that

because appellant "did not provide the wage information in the specified timeframes to

receive a calculated rate, even despite the fact that the employer now acknowledges that at

least some individuals performed services for the employer in covered employment from

2011 to the present," appellant was correctly assigned the penalty rate pursuant to R.C.

4141.25 and 4141.26. (UCRC Decision on 2012 Rate at 5; UCRC Decision on 2013 Rate at

5.)

{¶ 7} Regarding the director's reconsidered decision addressing individuals who

provided services to appellant covered in employment, UCRC concluded that, pursuant to

R.C. 4141.01(B)(1) and Ohio Adm.Code 4141-3-05 and viewing the totality of the

Nos. 16AP-301, 16AP-302, and 16AP-303 4

circumstances, appellant exercised direction and control over the truck drivers, office

workers, sales staff, and an individual who provided financial services. The UCRC notes

that Petrlich acknowledged that the office workers should have been classified as

employees. As to the truck drivers, the UCRC cited a variety of factors showing discretion

and control by appellant, including that none of the individuals owned the trucks that

they operated, appellant paid for liability insurance for all drivers, appellant reimbursed

expenses of the drivers, and appellant took disciplinary actions against a driver. The

UCRC further notes:

[Appellant's] primary concern in this case seems to be that the

auditor, Ms. Earl, did not perform her job in an appropriate

manner. In other words, [appellant's] concerns seem to be

more procedural in nature. [Appellant] has produced very

little evidence regarding the substantive nature of Ms. Earl's

findings, and [appellant] has not produced evidence to

establish that Ms. Earl's primary findings regarding the

covered employment issues in this case were incorrect.

(UCRC Decision on Covered Employees at 7.)

{¶ 8} Appellant appealed the decisions of the UCRC to the Franklin County Court

of Common Pleas, and on appellee's motion, the cases were consolidated. Appellant

based its appeal of the UCRC's decision on three grounds: the decisions were not

supported by reliable, probative, or substantive evidence; the evidence proffered during

the hearing should not have been admitted in the form in which it was presented; and the

decisions were not in accordance with due process. The trial court upheld the decisions of

the UCRC. In doing so, the trial court states that "[a]ppellant's brief in this matter * * *

does not argue that the ODJFS or [UCRC's] findings of fact are actually wrong. Instead,

[a]ppellant attacks the [UCRC] decisions on essentially procedural and due process

grounds." (Mar. 22, 2016 Trial Court Decision to Affirm and Final Judgment at 3-4.) In

resolving the appeal, the trial court found that appellant presented nothing to dispute the

factual findings made by the ODJFS or the UCRC, that appellant's due process rights were

not violated by the admission of hearsay evidence or by the contacting of appellant

directly during the audit, and that after an independent review of the record, the UCRC's

decisions are in fact supported by reliable, probative, and substantial evidence. Appellant

filed a timely appeal to this court.

Nos. 16AP-301, 16AP-302, and 16AP-303 5

II. ASSIGNMENTS OF ERROR

{¶ 9} Appellant presents two assignments of error for our review:

[1.] The trial court committed reversible error by permitting

testimony from an advocate representing the Ohio

Department of Job and Family Services to be used as

evidence, which formed the basis for the Department's

adverse determination against Appellant.

[2.] The trial court committed reversible error by erroneously

indicating that MNH failed to dispute the Director's factual

findings.

III. STANDARD OF REVIEW

{¶ 10} This court recently set forth the applicable standard of review as follows:

The standard of review for appeals from decisions of the

UCRC is found in R.C. 4141.26(D)(2), which states that a

common pleas court may affirm UCRC's decision where it is

"supported by reliable, probative, and substantial evidence

and is in accordance with law." A court of appeals' review of

an administrative agency's ruling "is more limited than that of

a common pleas court. This court does not weigh the

evidence." Kate Corp. v. Ohio State Unemp. Comp. Rev.

Comm., 10th Dist. No. 03AP-315, 2003-Ohio-5668, ¶ 7, citing

Childs v. Oil & Gas Comm., 10th Dist. No. 99AP-626, 2000

Ohio App. LEXIS 1242 (Mar. 28, 2000), citing Lorain City

Bd. of Edn. v. State Emp. Relations Bd., 40 Ohio St.3d 257,

533 N.E.2d 264 (1988). "Although appellate courts are not

permitted to make factual findings or weigh the credibility of

the witnesses, the court does have a duty to determine

whether the board's decision is supported by the evidence in

the record." Pennex Aluminum Co., LLC v. Ohio Dept. of Job

& Family Servs., 10th Dist. No. 14AP-446, 2014-Ohio-5308,

¶ 10, citing Tzangas, Plakas & Mannos v. Ohio Bur. of Emp.

Servs., 73 Ohio St.3d 694, 696, 1995 Ohio 206, 653 N.E.2d

1207 (1995).

Thus, a court of appeals determines only if the common pleas

court abused its discretion. Tzangas at 696-97. * * *

However, where a R.C. 4141.26(D)(2) appeal raises legal

issues, our review is de novo. Slats & Nails Pallets, Inc. v.

Ohio Dept. of Job & Family Servs., 10th Dist. No. 14AP-690,

2015-Ohio-1238, ¶ 8, citing Hayward v. Summa Health

Nos. 16AP-301, 16AP-302, and 16AP-303 6

Sys./Akron City Hosp., 139 Ohio St.3d 238, 2014-Ohio-1913,

¶ 23, 11 N.E.3d 243.

Senco Brands, Inc. v. Ohio Dept. of Job & Family Servs., 10th Dist. No. 15AP-796, 2016-

Ohio-4769, ¶ 11-13.

IV. DISCUSSION

A. First Assignment of Error

{¶ 11} Under the first assignment of error, appellant contends that the trial court

abused its discretion by permitting an attorney for ODJFS to testify at the administrative

hearing regarding the attorney's conversation with the person who conducted appellant's

audit in this matter and by basing its decision on such testimony. Although it is not

entirely clear, appellant's argument seems to incorporate both rules of evidence and due

process protections as a means to eliminate evidence relied on by the UCRC to support its

decision. For the following reasons, we disagree with appellant.

{¶ 12} "Although administrative appeals to government agencies are required to

comport with fundamental aspects of due process, they are not judicial proceedings."

Rudd v. Ohio Dept. of Job & Family Servs., 2d Dist. No. 2015-CA-9, 2015-Ohio-3796,

¶ 13. As a general rule, administrative agencies are not bound by the strict rules of

evidence applied in court. H.K. Trading Ctr., Inc. v. Liquor Control Comm., 10th Dist.

No. 09AP-293, 2010-Ohio-913, ¶ 41. For example, "[s]tatements or evidence that would

be excluded as hearsay elsewhere are admissible in an administrative proceeding where

they are not inherently unreliable and are sufficient to constitute substantial, reliable, and

probative evidence." Harr v. Jackson Twp., 10th Dist. No. 10AP-1060, 2012-Ohio-2030,

¶ 24, fn. 1, discretionary appeal not allowed, 132 Ohio St.3d 1533, 2012-Ohio-4381. See

also Rudd at ¶ 14. Furthermore, to comport with due process in an administrative

hearing, the state agency must afford "notice and hearing, that is, an opportunity to be

heard." Korn v. State Medical Bd., 61 Ohio App.3d 677, 684 (10th Dist.1988), citing Luff

v. State, 117 Ohio St. 102 (1927).

{¶ 13} Here, the testimony offered by the attorney for ODJFS is essentially a

description of the exhibits offered for submission and an explanation of the director's

reconsidered decisions. Such testimony was supported by affidavits establishing the

Nos. 16AP-301, 16AP-302, and 16AP-303 7

accuracy of the exhibits, and the attorney declined to testify further based on her

conversations with the auditor and compliance examiner.

{¶ 14} Considering the limited scope of this testimony and its reliability based on

the affidavits, the trial court did not err by finding that UCRC properly admitted what

appellant characterizes as hearsay evidence. Furthermore, on an independent review of

appellant's related due process concerns, we do not find that the UCRC's decision to allow

the specific testimony in this case deprived appellant of an opportunity to be heard such

that his due process rights were violated. Considering all the above, we find that on the

facts of this case, the trial court did not abuse its discretion in permitting the issue here as

evidence.

{¶ 15} Moreover, contrary to appellant's assignment of error, we find no indication

that the testimony of ODJFS' attorney was dispositive to the UCRC decision. As described

above, the testimony of ODJFS' attorney is essentially a duplication of the exhibits and

affidavits. Even if the testimony of the attorney is removed from consideration here, the

exhibits, affidavits, and Petrlich's own testimony support the decision of the UCRC. As

such, appellant's argument does not constitute reversible error in this case.

{¶ 16} Accordingly, for all the above reasons, appellant's first assignment of error

is overruled.

B. Second Assignment of Error

{¶ 17} Under the second assignment of error, appellant contends that the trial

court committed reversible error by indicating that appellant failed to dispute the

director's findings.

{¶ 18} Appellant takes issue with the trial court's assertions that "[a]ppellant's brief

in this matter * * * does not argue that the ODJFS or [UCRC's] findings of fact are actually

wrong" and "[appellant] has presented nothing that disputes the factual finding made by

the ODJFS or the [UCRC]." (Trial Court Decision to Affirm and Final Judgment at 3, 6.)

Appellant argues in its memorandum in support of its appeal that it did make two

objections to the findings of fact, including the auditor's "characterization of [appellant's]

misclassifying its workers," and "[appellant's] appeals, which challenged both the issue of

worker classification and its subsequent penalty rates." (Brief of Appellant at 9.)

Nos. 16AP-301, 16AP-302, and 16AP-303 8

{¶ 19} However, even if appellant's assertion is true that the trial court erroneously

indicated that appellant failed to dispute the director's findings, the trial court ultimately

did review this issue. The trial court states: "Furthermore, the Court has done an

independent review of the record in this matter and finds that the [UCRC's] three

decisions are in fact supported by reliable, probative, and substantial evidence." (Trial

Court Decision to Affirm and Final Judgment at 6.) Therefore, appellant's argument,

even if correct, does not constitute reversible error here, and, as a result, the assignment

of error lacks merit.

{¶ 20} Accordingly, appellant's second assignment of error is overruled.

V. CONCLUSION

{¶ 21} Having overruled appellant's two assignments of error, we affirm the

judgment of the Franklin County Court of Common Pleas.

Judgment affirmed.

BROWN and BRUNNER, JJ., concur.

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