Bert Baker, Inc. v. Ryce

• Decision Date: 17 March 1942
• Docket Number: No. 52.,52.
• Parties: BERT BAKER, Inc., v. RYCE et al.
• Court: Michigan Supreme Court

301 Mich. 84

3 N.W.2d 20

BERT BAKER, Inc.,

v.RYCE et al.

No. 52.

Supreme Court of Michigan.

March 17, 1942.

Proceeding under the Unemployment Compensation Law by Bert Baker, Incorporated, to review a finding of the Michigan Unemployment Compensation Commission holding that Robert Ryce, Jr., was an employee of Bert Baker, Incorporated, and entitled to benefits under the act. From a judgment affirming the findings of the Unemployment Compensation Commission, Bert Baker, Incorporated, appeals.

Reversed and remanded.

Appeal from Circuit >>Appeal from Circuit Court, Ingham County; Leland W. Carr, judge.

Before the Entire Bench, except WIEST, J.

Griffin, Emery & Seely, of Detroit (Robert Boyer, of Detroit, of counsel), for plaintiff and appellant.

James T. Nielsen, of Chicago, Ill., Albert E. Van Dusen, of New York City, and Monaghan, Crowley, Clark & Kellogg and George M. Clark, all of Detroit, amicicuriae.

Herbert J. Rushton, Atty. Gen., Edmund E. Shepherd, Sol. Gen., and Florence N. Clement and Daniel J. O'Hara, Asst. Attys. Gen., for defendants-appellees.

CHANDLER, Chief Justice.

This is an appeal from a judgment of the Circuit Court for the County of Ingham, affirming the findings of the appeal board and Referee of the Unemployment Compensation Commission that Robert Ryce, Jr., was an employee of appellant, Bert Baker, Inc., and entitled to benefits under Act No. 1, Pub.Acts 1936 (Ex.Sees.), as amended (Stat.Am.Supp. Sec. 17.501, et seq.), known as the Michigan Unemployment Compensation Act.

The facts are not in dispute. The question presented to us is: Under the facts presented was the claimant an employee of the appellant within the meaning of the unemployment compensation law?

Bert Baker, Inc., a Michigan corporation, is and was engaged in the used car business, doing both retail and wholesale business at Grand River and Livernois Avenues in the City of Detroit. The corporation made an agreement with one Crowley, and latter an identical agreement with his successor, Chapin, who bought Crowley out, under which Crowley, and subsequently Chapin, was to do all of the repair work on automobiles as requested by Bert Baker, Inc. This included the cars of the customers of the corporation and those solely owned by it. Although there was no prohibition in the written contract, Crowley and Chapin did no outside work.

The building in which the repair work was done was located a short city block from the premises of the corporation and was owned by Bert Baker and Victoria Baker, his wife, and was leased to the corporation for a fixed monthly rental. The contracts between the corporation and the direct employers of claimant, Crowley and Chapin, was also in the nature of a lease. The sublessee did not pay any fixed rental, but instead it was provided that certain low base prices would be charged for the paint and bump work on cars sent to the shop by the corporation.

The base price charged by the sublessee was approximately two-thirds of what the work would normally cost elsewhere, the remaining one-third being added to make up the total price paid by appellant's customers, and set up on the books of appellant as rental income from the use of this garage. This rental income fluctuated with the amount of business sent by the corporation to the shop and was supposed to take care of the wcpenses that the corporation had in connection with the building. By the contract, the corporation was to pay for the electricity and water and to provide certain equipment, the balance of the equipment to be furnished by the lessee.

Sometimes the overhead charge which the corporation added in charging the customers, or as testified, on their own cars, which was charged against the value of the car on its books so as to help determine its resale price, would be more than one-third of the listed or agreed price if the job was a small one, because it would otherwise be a losing proposition, but the rental charge approximated one-third of the agreed price. It is also true that the appellant and sublessee had to arrange a price different than the base price when a badly damaged car was sent by appellant to the paint and bump shop as only the average paint and bump job was covered in the written contract. But, in all cases, the corporation recouped the rent for the use of the garage by charging its customers in excess of the price established between it and the sublessee by contract.

At the end of each week the corporation would pay in a lump sum by check to the garage operator for the contract price of the jobs done during the week.

The Unemployment Compensation Appeal Board stated in its decision: ‘It is our understanding that Bert Baker, Inc. had nothing to do with paying the wages of the claimant or the other people who were working for Crowley or Chapin; that Bert Baker, inc., directed the work by telling Crowley and Chapin what it wanted done and Crowley or Chapin in turn carried such instructions to the men working for them; that neither Mr. Crowley nor Mr. Chapin was on the Pay roll of Bert Baker, Inc. and that claimant and the other assistants of Crowley or Chapin were also not carried on the corporation pay roll.’

The applicable statute defining employment is Sec. 42 of Act No. 1, Pub.Acts 1936 (Ex.Sess.), as amended by Pub.Acts 1939, No. 324 (Stat.Ann.Supp. Sec. 17.545), which provides, in part:

‘(6) Services performed by an individual for remuneration shall be deemed to be employment subject to this act unless and until it is shown to the satisfaction of the commission 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.’

Appellant contends that the relationship above set forth does not constitute an employment of Crowley or Chapin, and, therefore, of claimant, within the meaning of the law; further, that the definition created by the statute is but a restatement of the common law concept under which the operators were independent contractors and not in the employ of appellant. Also, if independent contractors are considered as employees under the act, it is contended that the act is in that respect unconstitutional.

Appellant also contends that the unemployment compensation law is unconstitutional for various other reasons. As we are holding that the status here between appellant and claimant was...