Department of Employment Security v. Charlie's Barber Shop

Marbury, J., delivered the opinion of the Court. The appeal here is from a decision and order of the Circuit Court for Worcester County, dated June 11, 1962, reversing an order of the Board of Appeals of the Department of Employment Security for the State of Maryland, dated December 6, 1961. The decision of the Board held that the appellee, Charlie’s Barber Shop, Charles E. Beacht, proprietor, was an employer within the meaning of the Unemployment Insurance Law of Maryland and that contributions were payable, as provided by that law, on the earnings of persons “renting” chairs in the barber shop owned and operated by Mr. Beacht for the period of time from and including the third calendar quarter of 1959 to the present. The decision of the court would have the effect of removing unemployment insurance coverage from barbers rendering services in the shop.

Appellee, a master barber, has owned and operated a barbershop in Ocean City, Maryland, since May 17, 1957. From that date and through the second calendar quarter of 1959, he had filed employment reports and contribution returns with the appellant showing the names and earnings of the barbers who were employed in the shop, under the provisions of the Unem ⁴⁷³ ployment Insurance Law, Code (1957), Article 95A, and the unemployment insurance tax was paid on those wages at the proper rate and in the correct amount. Appellee’s business is seasonal. During the winter months he was able to operate the shop alone.

Plowever, in the summer, he hired extra barbers to accommodate the increased business. He has four chairs in his shop. During the 1957 and 1958 summer seasons, appellee paid his barbers on a commission basis, but experienced difficulty with his summer employees. On occasions they would not report for work or would leave early.

This laxity on their part was costly to appellee, since he was renting the building, and when a chair was not in use, he derived no income from it. Prior to the 1959 summer season, appellee, after consultation with his accountant and his attorney, decided on an arrangement whereby he would lease the chairs by means of a written agreement, in order to bind the barbers more tightly. Under the terms of the rental lease, each barber was to pay appellee a stipulated weekly amount for the use of the chair plus $5 per week for tonics and linens. Each barber was to pay the amount until the expiration of the lease even though he might have vacated the chair for any reason.

Each lessee had access to the use of the chair during normal working hours, but was under no duty to report for work. Each lessee was free to set his own prices and was to keep any money paid him for services rendered plus all tips, with no accounting to the appellee-lessor. It appears, however, that uniform prices were charged. The lease also provided that each barber was to render service to customers “in harmony with all other barbers.” Each lessee had his own key to the shop, his own name posted behind his chair, his own price list posted, and each one had his individual business cards.

Each lessee paid his own federal income tax and self-employed Social Security tax. Each barber furnished his own tools of the trade. The telephone directory listed only “Charlie’s Barber Shop” with no mention of the individual barbers. During the period in question, two other master barbers, in addition to the appellee, and one apprentice, were working in the shop.

When appellee filed his 1959 third quarter return, he listed ⁴⁷⁴ no employees and requested no further return forms to be mailed to him for filing until further notice, and since that time has filed no quarterly returns. The basic question in this case is substantially this: Are the barbers who work in the shop operated by appellee rendering services outside the purview of the specific provisions of the Maryland Unemployment Insurance Law relating to the definition of employment as set out in Code (1957), Article 95A, §§ 20 (g) (6) (A) (B) and (C) ? Section 20 (g) (1) defines “employment” as “* * * service, including service in interstate commerce, performed for remuneration or under any contract of hire, written or oral, express or implied.” Section 20 (g) (6) provides that: “Services performed by an individual for wages or under any contract of hire shall be deemed to be employment subject to this article, irrespective of whether the common-law relationship of master and servant exists, unless and until it is shown to the satisfaction of the Executive Director that (A) Such individual has been and will continue to be free from control or direction over the performance of such services, both under his contract of service and in fact; and (B) 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; and (C) Such individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service in question.” Questions of coverage under