Two state agencies are facing each other in court in a dispute over how a temporary agency should be taxed in Iowa.
It is somewhat unusual for two state agencies to settle their disputes in court as taxpayers end up footing the legal bills for both sides of the case, as well as paying for all court proceedings.
In this case, Iowa Workforce Development has filed a petition in Polk County Circuit Court challenging a decision issued by the Iowa Department of Inspections and Appeals late last year.
That decision involved Gillmann Services, a staffing company in Virginia that primarily provides workers to companies in the construction industry.
When Gillmann began operating in Iowa last summer, Iowa Workforce Development categorized the business as a construction firm, which has its own special tax rate. Gillmann appealed the decision, arguing that it was not a construction company and that every other state in which it operates recognizes that fact.
While Gillmann admitted he provides workers primarily for the construction trade, he claimed he would also provide workers for other types of businesses.
In November, the case went before Administrative Law Judge Joseph Ferrentino in the DIA’s Division of Administrative Hearings. He ruled in favor of the company and said that Gillmann should be categorized and taxed as a non-construction employer.
Doing so, Ferrentino decided, would avoid the “absurd” result of turning a temp agency “into a construction business” — and recategorizing all other temp agencies in Iowa as the businesses they primarily serve.
Iowa Workforce Development requested a rehearing on the matter, but the request was denied. Now the workforce agency is asking a district court judge to review the DIA’s decision.
The workforce agency argues that decisions about how to categorize employers are within its discretion and that the DIA’s decision in the Gillmann case is not supported by the evidence.
The standard for seeking judicial review in such cases requires that Iowa Workforce Development first show that the DIA’s decision was not merely questionable, but that the process used to reach the decision was based on an “unreasonable interpretation, illogical or wholly unjustifiable of a provision of the law.”
DIA has yet to file a response to the workforce agency’s petition.
