Finch v. Schneider Specialized Carriers

• Decision Date: 15 July 2005
• Docket Number: No. 03-1012.,03-1012.
• Citation: 700 N.W.2d 328
• Parties: Gary W. FINCH, Appellee, v. SCHNEIDER SPECIALIZED CARRIERS, INC. and Travelers Property Casualty, Appellants.
• Court: Iowa Supreme Court

700 N.W.2d 328

Gary W. FINCH, Appellee, v. SCHNEIDER SPECIALIZED CARRIERS, INC. and Travelers Property Casualty, Appellants.

No. 03-1012.

Supreme Court of Iowa.

July 15, 2005.

John E. Swanson and Aaron T. Oliver of Hansen, McClintock & Riley, Des Moines, for appellants.

Randy V. Hefner of Hefner & Bergkamp, P.C., Adel, for appellee.

PER CURIAM.

Gary Finch was denied workers' compensation benefits by the industrial commissioner on the ground he was not an employee. Finch successfully challenged that ruling on judicial review in district court. The court of appeals reversed, and we granted further review. We now vacate the decision of the court of appeals, reverse the judgment of the district court, and remand.

I. Facts and Prior Proceedings.

Finch, a truck driver, began hauling cargo for Schneider Specialized Carriers, Inc. in 1992 under a written agreement. He continued to work primarily with Schneider under similar agreements until January 2000, when he suffered a neck injury while attempting to detach a Schneider trailer from his tractor.

Finch filed a workers' compensation claim against Schneider and its insurance carrier, Travelers Property Casualty (collectively Schneider). Schneider did not dispute the events that caused the injury or that Finch suffered an injury that affected his ability to work. The primary issue was whether Finch was an employee or an independent contractor, for workers' compensation purposes.

The deputy workers' compensation commissioner who originally heard the case ruled that Finch was an employee. The deputy made numerous factual findings, which tended to show that Schneider had the right to exercise significant control over the manner in which Finch conducted the details of his work. Based on this control, the deputy concluded Finch was an employee entitled to benefits. Schneider appealed to the industrial commissioner who reversed, concluding the facts established that Finch was an independent contractor—not an employee. Accordingly, the commissioner ruled that Schneider had no workers' compensation liability.

Finch sought judicial review. The district court found that Schneider had failed to prove at least one of the six statutory factors listed in Iowa Code section 85.61(13)(c) (1999) to establish Finch's status as an independent contractor.¹ The statute required Schneider to show that the six statutory factors under that section "are substantially present" in order to establish an independent-contractor status; however, subparagraph (5) is the only factor seriously at issue in this case. That section required Schneider to prove that Finch substantially "determine[d] the details and means of performing the services, in conformance with the regulatory requirements, operating procedures of the carrier, and specifications of the shipper." Iowa Code § 85.61(13)(c)(5). The district court concluded that, because Schneider failed to establish this factor, Finch would be considered an employee.

Schneider appealed, and the court of appeals reversed, reinstating the commissioner's decision denying benefits. According to the court of appeals, there was substantial evidence in the record to support the commissioner's factual findings. See Iowa Code § 17A.19(10)(f) (2001). The court of appeals, at Finch's urging, remanded the case for the commissioner to explain a possible inconsistency between his ruling in this case and two prior cases decided by the commissioner. See Iowa Code § 17A.19(10)(h).

II. Review of the Commissioner's Decision.

A. Standard of review. Review of agency action is limited to correction of errors at law. Iowa R.App. P. 6.4; IBP, Inc. v. Harpole, 621 N.W.2d 410, 414 (Iowa 2001). In reviewing a district court's decision on judicial review, we apply the standards of Iowa Code chapter 17A to determine whether our conclusions are the same as those of that court. Grundmeyer v. Weyerhaeuser Co., 649 N.W.2d 744, 748 (Iowa 2002).

The interpretation of workers' compensation statutes and related case law has not been clearly vested by a provision of law in the discretion of the agency. Accordingly, this court is free to substitute its judgment de novo for the agency's interpretation of law. See P.D.S.I. v. Peterson, 685 N.W.2d 627, 633 (Iowa 2004) (citing Iowa Code § 17A.19(10)(c), (11)(b)); see also Mycogen Seeds v. Sands, 686 N.W.2d 457, 464 (Iowa 2004). However, the agency's factual determinations are clearly vested by a provision of law in the discretion of the agency. See Iowa Code § 85.21; accord Mycogen Seeds, 686 N.W.2d at 465; P.D.S.I., 685 N.W.2d at 633. Thus, a court is bound by them if they are supported by "substantial evidence in the record before the court when that record is viewed as a whole." Iowa Code § 17A.19(10)(f); accord P.D.S.I., 685 N.W.2d at 633.

Finally, the application of the law to the factual determinations in workers' compensation cases is "vested by a provision of law in the discretion of the agency." [Iowa Code] § 17A.19(10)(f); see also Mycogen, 686 N.W.2d at 464. We can therefore only reverse the agency's application of the law to the facts if we determine such an application was "irrational, illogical, or wholly unjustifiable." Iowa Code § 17A.19(10)(m); see also Mycogen, 686 N.W.2d at 464.

P.D.S.I., 685 N.W.2d at 633.

B. Substantial evidence review. The wording of section 85.61(13)(c) suggests that the burden of establishing an independent-contractor status is on the trucking company. Schneider does not appear to challenge that principle, although, of course, the claimant ordinarily has the burden of establishing a prima facie right to receive workers' compensation benefits. The industrial commissioner, after discussing the evidence presented to the deputy, concluded that Finch established a prima facie case that he was an employee. However, the commissioner found that Schneider proved that Finch was an independent contractor within the definition provided in section 85.61(13)(c). The commissioner based that finding largely on the basis of the agreement signed by Schneider and Finch entitled "Independent Contractor Operating Agreement" (ICOA).

The commissioner noted:

The ICOA agreement required [Finch] to pay all operating expenses of the tractor, including tolls, ferries, fuel, oil, taxes, traffic and weight fines (unless the trailer was preloaded), maintenance and repairs on the tractor, insurance on the tractor and any of [Finch's] employees, and any wages of drivers furnished by [Finch].

The commissioner concluded:

Schneider proved . . . by a preponderance of the evidence that [Finch] was an independent contractor within the definition provided in Iowa Code section 85.61(13)(c). Under the evidence presented in this case the only way that [Finch] could be held to be an employee is to totally ignore section 85.61(13)(c). The purpose of that statutory provision was to provide objective standards under which an evaluation of employment status could be made.

Because the commissioner is charged with weighing the evidence, we liberally and broadly construe the findings to uphold his decision. Caterpillar Tractor Co. v. Shook, 313 N.W.2d 503, 505-06 (Iowa 1981). The court of appeals followed this rule and affirmed the commissioner's ruling. We agree with the court of appeals' resolution on this issue.

C. Consistency with prior agency precedents. We granted further review primarily to discuss the court of appeals' order for remand based on Iowa Code section 17A.19(10)(h). Section 17A.19(10)(h) provides that a court

shall reverse, modify, or grant other appropriate relief from agency action . . . [if the action]:

h. . . . is inconsistent with the agency's prior practice or precedents, unless the agency has justified that inconsistency by stating credible reasons sufficient to indicate a fair and rational basis for the inconsistency.

We have not previously construed paragraph (h) of section 17A.19(10), which was adopted in 1998. Neither party challenges the constitutionality of this provision, so we proceed to address its applicability to this case. See Schiavo v. Schiavo, 404 F.3d 1270, 1273-75 (11th Cir.2005) (Birch, J., specially concurring) (stating statutory provision setting a particular standard of review for the courts violates separation-of-powers doctrine).

The reporter-draftsman for the 1998 amendments has written that paragraph (h) provides a specific example "of agency action that any reviewing court should overturn as unreasonable, arbitrary, capricious, or an abuse of discretion." Arthur Earl Bonfield, Amendments to Iowa Administrative Procedure Act, Report on Selected Provisions 69 (1998). The author suggests that this language does not really change the law,

but it should result in somewhat more structured, informed, and systematic review by the courts under the unreasonable, arbitrary, capricious, and abuse of discretion standards, and clearer arguments by and instructions to litigants with respect to the arguments that may be made with respect to such matters.

Id. We agree paragraph (h) does not change the law and was intended to amplify review under the unreasonable, arbitrary, capricious, and abuse-of-discretion standards.

In a case applying the standards of judicial review set out in chapter 17A prior to the 1998 amendments, this court observed that "an agency's failure to conform to its prior decisions[,] or furnish sufficient reasoning from which to distinguish them, may give rise to a reversal under [chapter 17A]." Anthon-Oto Cmty. Sch. Dist. v. PERB, 404 N.W.2d 140, 143 (Iowa 1987). In Anthon-Oto a PERB decision defining a collective-bargaining unit was challenged as "unreasonable, arbitrary and capricious," and the consistency of the agency's decision with its prior decisions was deemed pertinent to this challenge. Id. at 143. It is important to note that the agency's decision was rendered...