Drob v. Sek 15, Inc.

• Citation: 965 N.W.2d 683,334 Mich.App. 607
• Decision Date: 19 November 2020
• Docket Number: No. 351198,351198
• Parties: Jennifer DROB, Plaintiff-Appellee, v. SEK 15, INC., d/b/a J.J. Knapps Tavern, Defendant-Appellant.
• Court: Court of Appeal of Michigan (US)

334 Mich.App. 607

965 N.W.2d 683

Jennifer DROB, Plaintiff-Appellee,

v.SEK 15, INC., d/b/a J.J. Knapps Tavern, Defendant-Appellant.

No. 351198

Court of Appeals of Michigan.

Submitted November 9, 2020, at Detroit.

Decided November 19, 2020, 9:00 a.m.

Bone Bourbeau Law, PLLC, Clinton Township (by Brian J. Bourbeau and Jason M. Berger ) for plaintiff.

Secrest Wardle, Troy (by Sidney A. Klingler and Justin A. Grimske ) for defendant.

Before: Gleicher, P.J., and K. F. Kelly and Shapiro, JJ.

Per Curiam.

Jennifer Drob was injured while tending bar at a tavern. The circuit court determined that Drob was not an "employee" but rather an "independent contractor" who could file a premises-liability action against the tavern. Although Drob served under a contract of hire, she held herself out to the public to perform the same services she performed for the tavern, excluding her from the definition of "employee" and the exclusive-remedy provision of the Worker's Disability Compensation Act. We affirm.

I. BACKGROUND

On December 12, 2017, Jennifer Drob injured her ankle on an uneven drain cover while working as a bartender at a J. J. Knapp's Tavern. Her injury required surgery, and she requested that defendant investigate whether she was entitled to workers’ disability compensation (WDC) or could file a claim under the bar's liability insurance policy. However, Drob worked part-time for cash under the table at J. J. Knapp's. Eleanor Knapp, the owner of J. J. Knapp's, advised Drob that she did not qualify for WDC. Knapp promised to look into liability insurance coverage but never followed through. Drob ended her employment and filed suit.

In her premises-liability complaint, Drob described herself as a "business invitee" who was injured while employed by defendant. Drob further alleged that defendant violated the Worker's Disability Compensation Act (the WDCA), MCL 418.101 et seq. , by failing to maintain required WDC insurance for all its employees. She sought recompense for her medical bills, lost wages, and pain and suffering.

Defendant quickly countered with a motion for summary disposition under MCR 2.116(C)(10), contending that Drob was an employee injured on the job whose sole remedy was to file a claim under the WDCA. Specifically, MCL 418.131(1) provides, "The right to the recovery of benefits as provided in this act shall be the employee's exclusive remedy against the employer for a personal injury or occupational disease." "The only exception to this exclusive remedy is an intentional tort," meaning that the "employee is injured as a result of a deliberate act of the employer and the employer specifically intended an injury." Id. Defendant further noted that a WDC claim had been made on Drob's behalf with its insurer under claim number WCC000004863. We note, however, that Eleanor Knapp later denied making such a claim in her deposition. And most of the boxes on the claim form provided to the court were left blank.

Drob contended that summary disposition would be premature as discovery had yet to begin and there remained questions of fact whether she fell within the definition of an "employee" under the WDCA and, if so, whether defendant committed an intentional tort. Discovery was required to consider whether Drob was an employee, whose remedy was limited by the WDCA, or an independent contractor, who could file a tort action. To make this determination, Drob asserted, the court must look to the definition of employee in MCL 418.161(1)(l ) and (n). As stated in Subdivision (l ), an "employee" includes "[e]very person in the service of another, under any contract of hire, express or implied ...." MCL 418.161(1)(n) further defines "employee" as:

Every person performing service in the course of the trade, business, profession, or occupation of an employer at the time of the injury, if the person in relation to this service does not maintain a separate business, does not hold himself or herself out to and render service to the public, and is not an employer subject to this act. On and after January 1, 2013, services are employment if the services are performed by an individual whom the Michigan administrative hearing system determines to be in an employer-employee relationship using the 20-factor test announced by the internal revenue service of the United States department of treasury in revenue ruling 87-41, 1 C.B. 296. An individual for whom an employer is required to withhold federal income tax is prima facie considered to perform service in employment under this act. If a business entity requests the Michigan administrative hearing system to determine whether 1 or more individuals performing service for the entity in this state are in covered employment, the Michigan administrative hearing system shall issue a determination of coverage of service performed by those individuals and any other individuals performing similar services under similar circumstances. [Emphasis added.]

The second sentence of this provision was added by amendment in 2011 PA 266. Drob contended that the statute's reference to "the 20-factor test announced by the internal revenue service" (the 20-factor IRS test) applies only to cases submitted for decision to the Michigan administrative hearing system. Accordingly, the court could rely only on the "three-factor" employment test: whether "the person in relation to this service does not maintain a separate business, does not hold himself or herself out to and render service to the public, and is not an employer subject to this act." The circuit court denied the motion without prejudice, determining that discovery was required before any decision could be made.

During discovery, Drob and Knapp submitted to depositions. Drob described her informal relationship with defendant. Drob had been working part-time at the tavern since 2000. At that time, Drob's friend was the manager and needed additional help. Drob served as a bartender, earning $5.00 an hour cash. Although hired as a bartender, Drob did "whatever was needed to be done at the time." Drob always maintained other full-time employment. She testified that she also advertised her bartending services for other establishments and events by word of mouth. Drob further asserted that when she asked Knapp to file a WDC claim on her behalf, Knapp indicated that Drob was "not an employee."

Knapp asserted that Drob had always been a cash-paid "employee." Knapp described that Drob was subject to the rules applicable to all other employees, such as required training, mandatory employee meetings, and uniform requirements. Drob was subject to discipline and had been given verbal warnings in the past. However, Knapp admitted that she had never asked Drob to fill out a W-2, and Knapp did not pay any employment-related taxes for Drob. Knapp denied telling Drob that she was not an employee and therefore not entitled to WDC. Rather, Knapp insisted that Drob "didn't ask for a Workers’ Comp claim," and so Knapp never filed one.

Following discovery, Drob sought partial summary disposition on the issue of her employment status. Drob contended that "[u]nlike [defendant's] other workers," Drob "was paid under the table, working other jobs, and otherwise acting as an independent contractor." Indeed, Drob contended, Knapp told her "flat out ... that she was not an employee." Drob accused defendant of now trying to shift its liability to avoid the law that defined her as an independent contractor.

Legally, Drob asserted that the court had the power to determine her employee status; such authority was not limited to the Worker's Disability Compensation Agency. Drob then pointed to the definition of "employee" in MCL 418.161(1)(l ) and (n) as including a person working under a contract for hire who "does not maintain a separate business, does not hold himself or herself out to and render service to the public, and is not an employer subject to this act." Drob continued to argue that only the Michigan Administrative Hearing System (MAHS) could consider the 20-factor IRS test referenced in the second sentence of MCL 418.161(1)(n). In this regard, Drob cited Max Trucking, LLC v. Liberty Mut. Ins. Corp. , 802 F.3d 793 (C.A. 6, 2015). And under the three-part test, Drob contended that she was not an employee because she was the only worker at the tavern paid in cash, defendant did not pay employment taxes for her, and she held herself out to the world as a bartender for hire.

Defendant countered with its own motion for summary disposition under MCR 2.116(I)(2). Defendant continued to argue that Drob's claim was barred by the exclusive-remedy provision of the WDCA. In asserting that Drob was an employee for purposes of the WDCA, defendant analyzed both the three-factor test and the 20-factor IRS test. Defendant emphasized that no caselaw supported that a person paid in cash could not be an employee. Defendant also found it irrelevant that Knapp told Drob that she was not an "employee" under the act: "In fact, there is a currently pending workers’ compensation proceeding in this matter...." Defendant disagreed with Drob's contention that she held herself out to the public as available to hire as a bartender. To meet this element of the independent contractor definition, defendant asserted that a person must hold himself or herself out for the same service performed for the purported employer. Here, Drob worked as a bartender, waitress, and cook for J.J. Knapp's and yet only promoted herself as a bartender to others. Rather, Drob was a long-term employee who did side jobs for extra money but did not own a separate bartending company.

Defendant contended that the 20-factor IRS test referenced in the second sentence of MCL 418.161(1)(n) did not supplant the original three-part test; rather, it was an additional test to consider whether a person is an employee or an independent contractor. Defendant then analyzed these factors and argued that nearly all supported that Drob was an employee...