Tuesday, November 20, 2007

Haggard v. Division of Employment Security[1]

Opinion handed down Nov. 20, 2007
Link to Supreme Court Opinion
Where employer challenged the Division of Employment Security in front of the Labor and Industrial Relations Commission, and where the Division of Employment Security was represented by a non-lawyer, the Division of Employment Security was in error but the error did not warrant reversal.

I. Facts and Holding

Mary Jeanette Haggard owns and operates a housecleaning business, “Jenny’s Housecleaning, Inc.”[2] Ms. Haggard disputed that the house cleaners who worked for her business were employees who were paid “wages.” Rather, Ms. Haggard claimed they were independent contractors. The Division of Employment Security (hereinafter “DES”) challenged her on this point, charging Ms. Haggard’s house cleaners were employees and monies paid to them constituted a wage. The Labor and Industrial Relations Commission (hereinafter “LIRC”) heard the dispute and found in favor of DES. The DES was represented by a non-lawyer managerial employee at the LIRC proceedings. The LIRC used a 20-factor test in finding Ms. Haggard’s workers were in fact employees who were paid wages.[3] The Missouri Supreme Court affirmed the LIRC decision.[4]

The more interesting and controversial part of the Haggard decision is Haggard’s argument that the LIRC decision was voided because the DES was improperly represented by a non-attorney in the proceedings. Specifically, Haggard argued that the LIRC lacked jurisdiction to hear the case and as a result the LIRC decision was null and void. The court disagreed and held that, although the DES is required to be represented by legal counsel, its failure to do so is not grounds for reversing the LIRC decision. In so holding, the court relied on the fact that the error Ms. Haggard raised was not properly preserved,[5] but the court also examined and overruled Reed v. Labor and Industrial Relations Commission.[6]

II. Legal Background

This paper will focus on the propriety of the Missouri Supreme Court’s decision to uphold the decision of the LIRC, in light of the misstep of the DES in using a non-lawyer managerial employee to represent it in front of the LIRC.[7] There are two separate but related legal issues that are central to the case: Missouri Supreme Court Rule 5.29 (hereinafter “Rule 5.29”) and the decision in Reed.[8]

The Missouri Supreme Court is the sole regulator of the practice of law in Missouri.[9] The unauthorized practice of law is prohibited to protect the public from the provision of legal services, which require special training and expertise.[10] Rule 5.29(c) carves out an exception for non-lawyers practicing law, providing that in a proceeding before the DES, a corporation, partnership or other business entity authorized by law may be represented by an officer of the entity or a person in the full time employment of the entity in a managerial capacity who shall be afforded the opportunity to participate in the proceeding.” The DES does not fall within the parameters of “a corporation, partnership or other business entity,” and thus is not included within the carve-out.

The promulgation of Rule 5.29(c) was a response to the decision in Reed v. Labor & Indus. Relations Comm’n.[11] In Reed, Marjorie Reed appealed the decision from the LIRC that denied her benefits after being discharged from K-Mart.[12] The basis of Ms. Reed’s appeal was that K-Mart had engaged in the unauthorized practice of law at the hearing in front of the LIRC by using non-legal employees to pursue K-Mart’s interests. The Missouri Supreme Court agreed and held that “a corporation cannot appear in propria persona. A judgment rendered in such a proceeding is void.”[13]

The unauthorized practice of law, in the form of representation of a corporation by a non-attorney, has a presence outside the scope of labor and employment administrative proceedings. In Schenberg v. Bitzmark, Inc.,[14] Bitzmark filed a motion for a new trial with the trial court within the ten day window allowed under Missouri Supreme Court Rule 81.04.[15] However, the motion was not filed by an attorney.[16] The court then recited the general rule that “[t]he normal effect of a representative’s unauthorized practice of law is to dismiss the cause or treat the particular actions taken by the representative as a nullity.”[17] Because Bitzmark’s motion for a new trial was not filed by legal counsel, and because the ten-day window within which an appeal must be filed had passed, the Court of Appeals dismissed Bitzmark’s appeal for lack of jurisdiction.[18]

III. Comment

The decision of the Missouri Supreme Court in Haggard raises the issue of how far the rejection of Reed reaches. On the one hand, the Haggard court rejected Ms. Haggard’s appeal because she failed to preserve and raise the objection to the DES’s participation in the unauthorized practice of law. On the other hand, the Haggard court explicitly overruled Reed to the extent it stood for the proposition that the DES’s non-compliance with Rule 5.29(c) was a jurisdictional issue. The latter interpretation is the interesting one.

The Haggard court rejected the notion from Reed that “a judgment is null and void solely because a party to the decision was represented by a non-lawyer.”[19] Is this rejection of Reed limited to cases involving the DES and LIRC, or does it reach cases like Schenberg, a non-administrative law proceeding, where the court treated the participants’ actions that constituted the unauthorized practice of law as a nullity? In Schenberg, the court held that the filing by a non-attorney was no filing at all. Retrospectively applying the Haggard court’s reasoning to Schenberg, it seems the Haggard court might have approved of the filing by the non-attorney since the opposition party did not object.

By allowing the LIRC decision to stand, notwithstanding the DES’s unauthorized practice of law, the Missouri Supreme Court legitimated the unauthorized practice of law. In Reed, Judge Holstein explained that a corporation must be represented by legal counsel so as to protect the public, the corporation and its shareholders from the incompetence of untrained and unlicensed practitioners.[20] In the same way, the DES, a state agency analogously representing Missouri “shareholders,”[21] should be held to an equally high standard. Representation by non-lawyers not only constitutes the unauthorized practice of law, but it also gives the appearance that untrained and incompetent personnel are enforcing Missouri’s laws in the state’s courts.

- Andrew Crossett

[1] No. SC88577 (Mo. Nov. 20, 2007) (en banc), available at http://www.courts.mo.gov/file.jsp?id=26608.  The West reporter citation is Haggard v. Division of Employment Security, 238 S.W.3d 151 (Mo. 2007) (en banc).
[2] Prior to incorporation, the business operated as “Jenny’s Housecleaning.” The court discussed the “wages” at issue in the case in a pre- and post-incorporation state, but the distinction is not relevant for purposes of this article. Id. at 153 n.1.
[3] The LIRC focused on four significant factors in rejecting Ms. Haggard’s claim that her workers were independent contractors: Ms. Haggard provided the workers instructions and training; she integrated the house cleaners’ services into her business operations; she determined which jobs the house cleaners would perform; and she provided the workers with company t-shirts and cleaning supplies. Id. at 156.
[4] Id. at 157.
[5] Ms. Haggard made no objection at the LIRC hearing to DES’s representation by a non-lawyer.
[6] 789 S.W.2d 19 (Mo. 1990).
[7] The holding that the house cleaners for Jenny’s Housecleaning, Inc. constituted employees and not independent contractors is a relatively uncontroversial decision. The court relied on the 20-factor test outlined in K&D Auto Body, Inc. v. Div. of Employment Sec. 171 S.W.3d 100, 105 (Mo. App. W.D. 2005). Since the workers for Jenny’s Housecleaning, Inc. satisfied several of the factors, the court determined there was substantial evidence to justify the ruling of the LIRC.
[8] 789 S.W.2d 19 (Mo. 1990).
[9] See, e.g., Haggard v. Div. of Employment Sec., 238 S.W.3d 151, 153 (Mo. 2007). See also, Hulse v. Criger, 247 S.W.2d 855, 857 (Mo. 1952) (“One is engaged in the practice of law when he, for valuable consideration appears in a representative capacity as an advocate in proceedings pending or prospective, before any court, commissioner, referee….or commission constituted by law or authorized to settle controversies.” Haggard, 238 S.W.3d.at 154. Further, the representative, in his representative capacity, must perform an act or acts “for the purpose of obtaining or defending the rights of [his] client under the law.”).
[10] Haggard, 238 S.W.3d at 154.
[11] 789 S.W.2d 19 (Mo. 1990).
[12] Id. at 20.
[13] Id. at 21. Although the Reed court did not explicitly articulate the unauthorized practice of law issue to be a jurisdictional issue, this was apparently a reasonable interpretation prior to Haggard. Haggard, 238 S.W.3d at 155 (where the court rejected “any interpretation of Reed that suggest[ed] DES’s failure to comply with Rule 5.29(c) [was] a jurisdictional issue.”)
[14] 178 S.W.3d 543 (Mo. App. E.D. 2005).
[15] Id. at 544.
[16] Id.
[17] Id. Accord Joseph Sansone Co. v. Bay View Golf Course, 97 S.W.3d 571 (Mo. App. E.D. 2003)
[18] Schenberg, 178 S.W.3d.at 543.
[19] Haggard v. Div. of Employment Sec., 238 S.W.3d 151, 155 (Mo. 2007).
[20] Reed v. Labor and Indus. Relations Comm’n, 789 S.W.2d 19, 29 (Mo. 1990) (Holstein, J., concurring). Judge Holstein illustrated this point in Reed by using the facts of that case, where K-Mart was not represented by counsel, and its claims were saved by the benevolence of the lower tribunal’s referee. Id.
[21] That is, the people of the state of Missouri.

Research Sources on Topic:

Catherine J. Barrie, The Missouri Bar’s Role in the Legislative Process, 60 J. of the Mo. Bar 26, 28-29 (2004).

Daniel Jordan, Unauthorized Practice of Law in Administrative Proceedings, 48 J. of the Mo. Bar 539 (1992).