Central Management Co. v. Industrial Com'n of Arizona

• Decision Date: 24 October 1989
• Docket Number: CA-IC,No. 1,1
• Citation: 162 Ariz. 187,781 P.2d 1374
• Parties: CENTRAL MANAGEMENT COMPANY, Petitioner Employer, Travelers Insurance Company, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Dolores Leonard, Respondent Employee, Florenda Smith, Respondent Employer, No Insurance Section, Respondent Carrier. 88-153.
• Court: Arizona Court of Appeals

Page 1374

781 P.2d 1374

162 Ariz. 187

CENTRAL MANAGEMENT COMPANY, Petitioner Employer Travelers Insurance Company, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent Dolores Leonard, Respondent Employee Florenda Smith, Respondent Employer No Insurance Section, Respondent Carrier.

No. 1 CA-IC 88-153.

Court of Appeals of Arizona, Division 1, Department D.

Oct. 24, 1989.

JoAnn C. Gaffaney, Phoenix, for petitioner Employer and petitioner Carrier.

Catherine A. Fuller, Chief Counsel by Laura L. McGrory, Asst. Chief Counsel, The Indus. Com'n of Arizona, Phoenix, for respondent and respondent Carrier.

Jerome, Gibson & Stewart, P.C. by James L. Stevenson, Phoenix, for respondent Employee.

GRANT, Chief Judge.

This is a special action review of an Industrial Commission award for a compensable claim. We must decide whether the administrative law judge erred by finding that the respondent employee (claimant) was an employee of the petitioner employer, Central Management Company (CMC) and not of respondent employer, Florenda Smith (Smith). CMC seeks review, asserting that Smith was either the sole or dual employer of the claimant. Because we find the administrative law judge's award reasonably supported by the evidence, we affirm.

The claimant was injured on September 6, 1987, while standing outside of a taxi cab. The claimant filed a workers' compensation claim listing both Smith and CMC as employers. The claim was denied for benefits by both the insurance carrier for CMC and the No Insurance Section for Smith. The claimant timely requested a hearing. The claimant and CMC's General Manager testified at the only hearing.

Lamonte H. Jackson, CMC's General Manager, testified regarding the company's operations. He explained that CMC is the owner and parent company of Courier Cab, Shamrock Taxi, Discount Taxi, and Carefree Courier. CMC runs a dispatch operation for the cabs and owns the radio system in each cab. CMC has two different types of drivers: owner/operators and lease-to-purchase drivers. An owner/operator owns his own vehicle and contracts with CMC to provide cab services. A lease-to-purchase driver enters into a written agreement with CMC to lease a cab, makes payments toward its purchase price, and enters into a vehicle maintenance agreement intended to keep the vehicle in a safe condition.

Before being allowed to drive for CMC, a prospective driver fills out a CMC employment application, provides a motor vehicle department report, and pays various fees based on the cab division for which he is going to drive. All drivers must have a Chauffeur's License. CMC also employs a full-time trainer and requires all prospective drivers to successfully complete a one-day training program. The trainer uses CMC's policies and procedures manual, which addresses a variety of topics including safety, dispatching, cordiality with customers, cab stand locations, and breakdowns. The training program includes classroom time followed by a written test and a road test, although this claimant did not take a road test. Applicants are graded on a point system. An applicant who fails is required to repeat the program.

Once employed, a driver is allowed to pick up fares anywhere in the city with the exception of the Princess Resort and Gainey Ranch. Drivers are dispatched from cab stands established by CMC throughout the city. CMC can "redline", i.e., withhold radio calls, from drivers who refuse calls without good reason, are guilty of reckless driving, or use profanity on the radio. Drivers repeatedly redlined are subject to disciplinary action and termination by CMC. Drivers are also required by CMC to be neatly groomed, although no specific uniform is required.

Lease-to-purchase drivers are allowed to use their cabs for personal matters. They are also allowed to sublease their cabs to other CMC-approved drivers, but these drivers are subject to the same hiring procedures CMC employs for its lease-to-purchase drivers. Drivers are also allowed to solicit their own business by using the mobile phones in their cabs and are allowed to set their own hours and vacations. The company provides no fringe benefits and has never asked drivers for proof of workers' compensation insurance.

CMC has a sales department which solicits business from hotels and other private companies. It enters into agreements to provide cab service on a voucher system. Drivers pick up fares which are paid for by voucher and then turn in the vouchers to CMC for credit on their lease payment. CMC also has a garage facility which provides maintenance on its lease-to-purchase cabs. In addition, if an accident occurs, CMC sends out an independent investigator and a road supervisor. The cabs are clearly marked as "Courier" cabs, as are customer receipts.

The claimant testified that she became employed by CMC in March, 1987. She filled out an employment application, provided a motor vehicle department report, and successfully completed the one-day training program. She was hired by CMC's General Manager Jackson and began driving for lease-to-purchase driver Duke McFarland. After several months, CMC negotiated and approved her transfer to Smith, another lease-to-purchase driver.

The claimant testified that she paid Smith $52 a day for the use of the cab and drove the cab at night, approximately twelve hours per shift. The claimant kept everything she made over and above the $52 payment and was responsible for paying her own taxes. The claimant gave Smith any vouchers that she received as part of the $52 payment. After her shift, she returned the cab clean and full of gas to Smith's home. Smith drove the cab during the day.

When the claimant began driving for Smith, she received an additional four hours of training. Smith also held driver meetings once a month, at which she circulated policy changes and memoranda from CMC. She required all drivers to initial a copy of memoranda from CMC to prove that they had received them. Smith did not allow eating, drinking or smoking in her cab, and had fired a driver who had dented one of her cabs. The claimant testified that she was not allowed to hire anyone to drive for her, and she was not allowed to drive for any other company while employed by CMC.

The claimant testified that she and Smith followed CMC's written dress code and wore black and white. If she had any difficulties with the cab, she notified both CMC's dispatcher and Smith. CMC provided routine maintenance on the cab, which Smith obtained during the day shift. CMC carried liability insurance on the cabs but did not carry medical insurance on the drivers. CMC set the maximum cab fares which a driver could charge. Finally, the claimant testified that after the accident, she was released to drive by CMC's General Manager.

On August 25, 1988, the administrative law judge entered an award for a compensable claim. She found that the claimant was an employee of CMC. On administrative review, the administrative law judge supplemented and affirmed the award, adding that the claimant was not an employee of Smith and that "CMC had substantial authority and right to control both applicant and defendant Smith." CMC brought this special action.

STANDARD OF REVIEW

Before proceeding to a substantive review of the issues, we reaffirm the standard of review in this case as enunciated in Hunt Bldg. Corp. v. Industrial Comm'n, 148 Ariz. 102, 713 P.2d 303 (1986):

This court and the court of appeals must consider all evidence in the light most favorable to sustaining the Commission's award.... We have stated that '[a]wards of the Industrial Commission will be sustained if they are reasonably supported by the evidence and appellate courts will not weight [sic] evidence but consider it in a light most favorable to sustaining the awards.'

Id. at 106, 713 P.2d at 307 (citations omitted). However, we also recognize that an appellate court may make an independent determination of whether a claimant is an independent contractor as a conclusion of law based on the totality of facts and circumstances. Anton v. Industrial Comm'n, 141 Ariz. 566, 688 P.2d 192 (App.1984).

DEFINITION OF AN EMPLOYEE

The distinction between an employee and an independent contractor usually rests on the extent of control the employer may exercise over the details of the work. As Professor Larson explains:

The traditional test of the employer-employee relation is the right of the employer to control the details of the work. It is the ultimate right of control, under the agreement with the employee, not the overt exercise of that right, which is decisive. If the right of control of details 1C A. Larson, Workmen's Compensation Law § 44.10 at 8-40 (1986).

[162 Ariz. 190] goes no further than is necessary to ensure a satisfactory end result, it does not establish employment.

The Arizona Workers' Compensation statute tracks this traditional test. It provides in relevant part:

B. When an employer procures work to be done for him by a contractor over whose work he retains supervision or control, and such work is a part or process in the trade or business of the employer, then such contractors and the persons employed by him and his subcontractor and persons employed by the sub-contractor, are, within the meaning of this section, employees of the original employer.

C. A person engaged in work for another, and who while so engaged is independent of the employer in the execution of the work and not subject to the rule or control of the person for whom the work is done, but is engaged only in the performance of a definite job or piece of work, and is subordinate to the employer only in effecting a result in accordance with the employer's design, is an independent contractor, and an employer within the meaning of this section.

A.R.S. § 23-902. Thus, under this definition, a worker who is regularly employed in the business of an employer is an "employee" for the purposes of workers' compensation unless the...