Commissioners of State Ins. Fund v. Kaplan

• Decision Date: 02 March 1977
• Citation: 392 N.Y.S.2d 971,89 Misc.2d 610
• Parties: COMMISSIONERS OF the STATE INSURANCE FUND, Plaintiffs, v. Alan R. KAPLAN, d/b/a Capital Cleaning Contractors, Defendant.
• Court: New York City Court

Page 971

392 N.Y.S.2d 971

89 Misc.2d 610

COMMISSIONERS OF the STATE INSURANCE FUND, Plaintiffs, v. Alan R. KAPLAN, d/b/a Capital Cleaning Contractors, Defendant.

Civil Court of the City of New York, New York County.

March 2, 1977.

Peter M. Pryor, New York City, for plaintiffs; Kenneth R. Berman, New York City, of counsel.

Nydick & Ross, Melville, for defendant.

FELICE K. SHEA, Judge.

In this action brought by the Commissioners of the State Insurance Fund (Fund) for premiums under a policy of Workmen's Compensation insurance, the legal issue presented is what standard the Court should apply in determining whether defendant 'employed' maintenance men in the conduct of his cleaning business or whether defendant 'sold' maintenance work to 'buyers' who operated independently. Since premiums under the policy were based on earnings of the insured's employees during the policy period, premiums are owed by defendant only if his so-called buyers are found by the Court to have been employees.

The Fund contends that this Court may not weigh the evidence to decide whether defendant's maintenance men were employees. According to plaintiffs, an employment relationship must be found unless, upon the record at trial, it can be said as a matter of law that the maintenance men were Not employees. The authorities cited in support of this novel theory, which would wrest the fact-finding function from this Court, are all cases of appellate review of decisions of the Workmen's Compensation Board. It is well established that determinations of fact by administrative bodies will not be disturbed by the courts, even when the evidence is conflicting, so long as the findings are supported by substantial evidence. 1 N.Y.Jur., Administrative Law § 185; 66 N.Y.Jur., Workmen's Compensation § 695; Palermo v. Samuel Gallucci & Sons, 5 N.Y.2d 529, 186 N.Y.S.2d 255, 158 N.E.2d 834; Morales v. World Mar Corp., 37 A.D.2d 885, 325 N.Y.S.2d 325; Abel v. McKaig-Hatch, Inc., 36 A.D.2d 783, 319 N.Y.S.2d 120. The test for judicial review of decisions by the Workmen's Compensation Board cannot be applied, however, to this action, tried without a jury, where no administrative body has acted and where the Court took extensive testimony, examined documents admitted into evidence, and had a full opportunity to evaluate the credibility of witnesses.

The Fund claims support for its argument, with respect to the circumscribed function of this Court, in the case of Commissioners of State Insurance Fund v. Rivington Farm Dairy, Inc., 16 A.D.2d 58, 225 N.Y.S.2d 486, decided by the First Department in 1962. The Rivington Farm case is one of the few reported compensation cases in which the underlying dispute as to the existence of an employer-employee relationship came to the court via an action for insurance premiums, ¹ in contrast to the large number of cases which reach the courts by way of judicial review of action taken by the Workmen's Compensation Board on claims for insurance benfits. The Rivington Farm court reversed the trial court, found a master-servant relationship on the basis of the record below, and went on to say (p. 60, 225 N.Y.S.2d pp. 487--488):

'An additional consideration may be pointed out, though we need not rest our decision on it. We are required to determine the meaning of the terms 'employer' and 'employee' as used in a special type of insurance policy. The policy shifts the burden of paying a possible compensation award from the insured to the Fund; it is for the assumption of that burden that premiums are asked and paid. Accordingly, if there is a reasonable risk that the Workmen's Compensation Board would hold persons to be employees rather than independent contractors, it is fair to infer that the parties intended premiums to be paid in respect of such persons. . . .'

A careful reading of the Rivington Farm dictum leads this Court to conclude that nothing said therein is inconsistent with the exercise of the trial court's usual fact-finding function. The test to be applied is similar to that which the administrative agency would apply were a claim to be brought by an alleged employee of defendant. See Helfrick v. Dahlstrom Metallic Door Co., 256 N.Y. 199, 204, 176 N.E. 141, 142, Aff'd, 284 U.S. 594, 52 S.Ct. 202, 76 L.Ed. 511. The Appellate Division, in using the words 'reasonable risk' did not mean, as plaintiffs would have us believe, that this Court must find premiums owing if Any risk exists that the Board might hold the insurer liable, or if any substantial evidence adduced at trial would support a finding of employment. It is the Court's duty to weigh the evidence, fully and fairly, to determine the facts upon a preponderance of the credible evidence, and to apply the law. ²

The facts herein are largely undisputed. Defendant solicited maintenance service accounts from customers which he then 'sold' to unskilled 'buyers' together with cleaning equipment. Defendant furnished a short training period, after which the 'buyers' operated without supervision. The contracts of sale provided for a down payment and periodic payments over six to eight months, during which time defendant guaranteed the 'buyer' another account or a Pro rata return of his investment if the account was lost for any reason other than unsatisfactory performance. During the period within which the 'buyer' was paying defendant in installments, defendant billed the customer for the work done, deducted the installment payment due him, and forwarded the balance to his 'buyer'. It is upon these payments, during the period July 1, 1969 to September 29, 1972, that plaintiffs calculate premiums claimed to be owed in the sum of $3,231.85. If the Court finds that defendant's 'buyers' were in fact 'employees,' then plaintiffs must prevail.

While the Workmen's Compensation Law defines 'employer', ³ 'employee' ⁴ and 'employment' ⁵ in general terms, more enlightenment is to be found in the case law. The traditional test of 'right to control', which determined the master-servant relationship for vicarious tort liability, has been applied by the courts to define the employment relationship in compensation cases. 65 N.Y.Jur., Workmen's Compensation § 161. The list of indicia of control is long, ⁶ and precedents may be found on both sides in a variety of borderline cases where, as here, the relationship has some of the earmarks of employment and some of the earmarks of independence. ⁷

Upon the traditional control test, the courts have superimposed an awareness that the term 'employee', when used in social and labor legislation, must be interpreted in light of the remedial purposes of the law. See, e.g., Flo v. General Elec. Co., 7 N.Y.2d 96, 100, 195 N.Y.S.2d 652, 656, 163 N.E.2d 876, 879; Paly v. Lane Brush Co., 6 A.D.2d 50, 53, 174 N.Y.S.2d 205, 208. According to the leading treatise in the field, '(T)he overall development of compensation law shows that the (employee) concept has been broadened and altered . . . to fit the peculiar needs and purposes of compensation law . . . (An) appropriate . . . subject for compensation protection . . . is (one who is) taking a regular and continuous part in the . . . (business); his work is hazardous; his rate of pay is such that he and his family cannot be expected to bear the cost of industrial accident; and his place in the industrial process is not such that he could distribute the risk of injury through channels of his own.' 1A Larson, The Law of Workmen's Compensation, §§ 43.41, 43.42 (1973).

The New York courts have expanded the definition of 'employee' by giving varying degrees of weight to the conventional indicia of employment, and by applying, in addition, a newer test based on the nature of the work. Biktjorn v. Worley Homes, Inc., 12 A.D.2d 540, 206 N.Y.S.2d 744; Play v. Lane Brush Co., 6 A.D.2d 50, 174 N.Y.S.2d 205; See Gordon v. New York Life Ins. Co., 300 N.Y. 652, 90 N.E.2d 898, Rev'g 275 App.Div. 135, 89 N.Y.S.2d 83.

' In compensation cases, the principal factors to be considered in determining relationship are right to control, method of payment, furnishing of equipment, right to discharge and the so-called relative nature of the work test.' Grigoli v. Nito, 11 A.D.2d 581, 200 N.Y.S.2d 511. The employment relation may be grounded upon proof of any one factor. Worth v. C. T. Hubbell Lumber Corp., 29 A.D.2d 1025, 289 N.Y.S.2d 519; Grigoli v. Noto, supra. On the other...