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No. 102,114 IN THE COURT OF APPEALS OF THE STATE OF KANSAS MILANO'S, INC., Appellant, v. KANSAS DEPT. OF LABOR, CONTRIBUTIONS UNIT, Appellee. SYLLABUS BY THE COURT

1. In reviewing a district court's decision that reviewed an administrative agency's action, the appellate court must first determine whether the district court followed the requirements and restrictions placed upon it by the Kansas Judicial Review Act.

2. The district court's review of a final order of the Employment Security Board of Review is governed by K.S.A. 77-601 et seq, and this court reviews the agency's decision in the same manner and with the same statutory standards as the district court.

3. This court may grant relief from a decision of the Employment Security Board of Review if it determines that the Kansas Department of Labor erroneously interpreted or applied the law.

4. The interpretation of a statute is a question of law over which this court has unlimited review. The fundamental rule of statutory interpretation is that a court must give effect to the intent of the legislature as expressed. Thus, when the language of a statute is plain and unambiguous, a court must give effect to that language rather than

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determine what the law should or should not be, speculate as to legislative intent, add something not readily found in the statute, resort to canons of statutory construction, or consult legislative history.

5. An employer questioning the validity of a state agency's decision bears the burden of overcoming the rebuttable presumption of its validity.

6. The Kansas Employment Security Law under K.S.A. 2009 Supp. 44-710, requires employers to set aside unemployment reserves for the benefit of individuals who become unemployed. The set aside is to protect the public good and prevent economic insecurity resulting from involuntary unemployment. The law provides that the Secretary of the Kansas Department of Labor may tax employers and place the money in the Kansas employment security fund.

7. Under the Kansas Employment Security Law, an individual is employed if the services performed by the individual are for wages or under any contract of hire unless and until it is shown to the satisfaction of the Secretary of the Kansas Department of Labor that: (i) Such individual has been and will continue to be free from control or direction over the performance of such services, both under the individual's contract of hire and in fact; and (ii) such service is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed.

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8. The version of the Kansas Judicial Review Act (KJRA) in effect at the time of the agency's decision determines the standard of review on questions of fact. The KJRA allows this court to grant relief if the agency's action is based on a determination of fact, made or implied by the agency, that is not supported by evidence that is substantial when viewed in light of the record as a whole. Substantial competent evidence possesses both relevance and substance and provides a substantial basis of fact from which the issues can be reasonably determined.

9. There is no absolute rule to determine whether an individual is an employee or independent contractor under the Kansas Employment Security Law. The individual's status depends on the particular facts of each case. Although not the only factor, the fundamental question is whether an employer had the right to control the worker's manner and method of performing the service.

10. An issue not briefed by the appellant is deemed waived or abandoned.

Appeal from Shawnee District Court; CHARLES E. ANDREWS, JR., judge. Opinion filed May 14, 2010. Affirmed.

Michael W. Merriam, of Topeka, for appellant.

Darren E. Root and A.J. Kotich, of Kansas Department of Labor, for appellee.

Before MARQUARDT, P.J., BUSER, J., and LARSON, S.J.

MARQUARDT, J.: Milano's, Inc. (Milano's) appeals the district court's order affirming the Kansas Department of Labor's (KDOL) decision that the Club Orleans' 3

entertainers are employees and not independent contractors under the Kansas Employment Security Law (KESL), K.S.A. 44-701 et seq. We affirm.

In July 2002, Milano's acquired a controlling interest in Club Orleans, a gentlemen's club. In 2004, Milano's designated their entertainers as independent contractors.

In response to an unemployment claim submitted by a Milano's entertainer, the Unemployment Tax Contributions Unit of the KDOL began an investigation to determine whether Milano's entertainers are employees or independent contractors. After the investigation, the KDOL auditor determined that the entertainers are employees for unemployment tax purposes.

Milano's requested an administrative hearing with a KDOL hearing officer. After hearing arguments and examining the evidence, the hearing officer determined the entertainers received wages as defined by K.S.A. 2008 Supp. 44-703(o). Because the entertainers received wages, they are employees under K.S.A. 2008 Supp. 44703(i)(3)(D) unless they fall within an exception under K.S.A. 2008 Supp. 44703(i)(3)(D)(i) and (ii).

The hearing officer cited Club Orleans' house rules and concluded "there are sufficient indicia of control, or at least the right to control, that the facts of this matter point to an employer-employee relationship." The hearing officer determined that although the owner of Milano's testified that customers frequented Club Orleans for the "good atmosphere, good lighting and good food," the facts indicate that the "atmosphere largely derives from and is based upon the presence of its semi-nude dancers." The entertainers received wages for services as defined by K.S.A. 2008 Supp. 44703(i)(3)(D), and were not exempt under any exception; therefore, the entertainers are employees under the KESL. The hearing officer ordered Milano's to implement a 4

reporting procedure for the entertainers' tips and to begin paying unemployment insurance.

Milano's filed a petition for judicial review, claiming the hearing officer's order disregarded undisputed facts, and made findings of fact not supported by substantial competent evidence. Milano's also alleged the hearing officer incorrectly interpreted K.S.A. 2008 Supp. 44-703(i)(3)(D).

Quoting K.S.A. 2008 Supp. 44-703(o), the district court agreed with the hearing officer's order that the entertainers' tips constituted wages under the KESL. Additionally, the district court noted that the entertainers were required to complete an application with Milano's before they did any entertaining and to agree to abide by Milano's house rules. Based on this application process, the district court reasoned that a valid contract existed between Milano's and the entertainers. Thus, the burden shifted to Milano's to prove the entertainers were free from its control or direction and the entertainers' performances were outside Milano's usual course of business.

The district court reviewed the statutory exceptions in K.S.A. 2008 Supp. 44703(i)(3)(D)(i) and (ii) and noted several areas in which Milano's maintained the right to control - place to perform, customers, cover charge, tips, schedules, required to accept drinks from customers, shifts, supplies, and fees charged for certain services. Thus, the district court concluded that Milano's retained greater control over when and how the entertainers worked for Club Orleans than did the entertainers. The entertainers were a significant part of the atmosphere at Club Orleans, and their presence during their shift, along with their performances, fell within Milano's usual course of business.

The district court affirmed the KDOL hearing officer's order declaring that the entertainers are Milano's employees. Milano's appeals.

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APPLICATION OF K.S.A. 2008 SUPP. 44-703

In reviewing a district court's decision that reviewed a state agency's action, the appellate court must first determine whether the district court followed the requirements and restrictions placed upon it. Jones v. Kansas State University, 279 Kan. 128, 139, 106 P.3d 10 (2005).

The Kansas Judicial Review Act (KJRA), specifically K.S.A. 77-621, controls the standard of judicial review of an administrative agency's action. The district court's review of a final order of the Employment Security Board of Review is governed by K.S.A. 77-601 et seq., and this court reviews the agency's decision in the same manner and with the same statutory standards as the district court. Siler v. Kansas Employment Security Bd. of Review, 31 Kan. App. 2d 1071, 1073, 77 P.3d 1002 (2003).

Under K.S.A. 77-621(c)(4), this court may grant relief from the KDOL's action if it determines the KDOL erroneously interpreted or applied the law. Resolution of this argument requires interpretation of K.S.A. 2008 Supp. 44-703(i)(1)(B) and K.S.A. 2008 Supp. 44-703(i)(3)(D). The interpretation of a statute is a question of law over which this court has unlimited review. Foster v. Kansas Dept. of Revenue, 281 Kan. 368, 374, 130 P.3d 560 (2006).

This court presumes an administrative agency action is valid. Jones, 279 Kan. at 140. Although an administrative agency's interpretation of a statute is persuasive and entitled to judicial deference, it is not binding on this court. This court will correct the administrative agency's interpretation if it is erroneous as a matter of law. State Dept. of SRS v. Public Employee Relations Board, 249 Kan. 163, 166, 815 P.2d 66 (1991).

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The Kansas Supreme Court recently reiterated the rules of statutory interpretation in In re Tax Exemption Application of Mental Health Assn. of the Heartland, 289 Kan. 1209, 1216, 221 P.3d 580 (2009):
"'The fundamental rule of statutory interpretation is that a court must give effect to the intent of the legislature as expressed. Thus, when the language of a statute is plain and unambiguous, a court must give effect to that language rather than determine what the law should or should not be, speculate as to legislative intent, add something not readily found in the statute, resort to canons of statutory construction, or consult legislative history.' Polson v. Farmers Ins. Co., 288 Kan. 165, Syl.

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