Goodman v. Sioux Steel Co.

• Decision Date: 22 May 1991
• Docket Number: No. 17091,17091
• Citation: 475 N.W.2d 563
• Parties: Kevin A. GOODMAN, Plaintiff and Appellant, v. SIOUX STEEL COMPANY, Defendant and Appellee. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 563

475 N.W.2d 563

Kevin A. GOODMAN, Plaintiff and Appellant, v. SIOUX STEEL COMPANY, Defendant and Appellee.

No. 17091.

Supreme Court of South Dakota.

Considered on Briefs May 22, 1991.

Decided Sept. 11, 1991.

Harlan A. Schmidt, Spearfish, for plaintiff and appellant.

Gary P. Thimsen, Woods, Fuller, Schultz and Smith, Sioux Falls, for defendant and appellee.

WUEST, Justice.

On September 14, 1987, Kevin A. Goodman (Goodman) was seriously injured while working at Sioux Steel Company (Sioux Steel) in Sioux Falls, South Dakota. Goodman was an employee of Manpower, Inc. (Manpower), a labor service company, and had been assigned to temporary duty at Sioux Steel. Goodman received workers' compensation benefits through Manpower's Insurer.

Goodman also brought a common law negligence action against Sioux Steel for his injuries. Sioux Steel responded by arguing that Goodman's claim was barred by SDCL 62-3-2, the workers' compensation exclusivity provision. The trial court directed a verdict in favor of Sioux Steel. Goodman appeals to this court and we decide:

Whether an employee of a labor service company who is assigned to a temporary employer makes a contract of hire with the temporary employer and thus comes under the exclusivity provision of South Dakota's workers' compensation statute.

This is a case of first impression in South Dakota. The question has been addressed in numerous jurisdictions, with mixed results. The majority position holds a temporary employee, such as Goodman, is an employee of both the labor broker and its customer company, and workers' compensation is the temporary employee's exclusive remedy. See, e.g., McMaster v. Amoco Foam Products Co., 735 F.Supp. 941 (D.S.D.1990) (applying South Dakota law); Pettaway v. Mobile Paint Mfg. Co., Inc., 467 So.2d 228 (Ala.1985); Santa Cruz Poultry, Inc. v. Superior Court, 194 Cal.App.3d 575, 239 Cal.Rptr. 578 (1987); Fox v. Contract Beverage Packers, Inc., 398 N.E.2d 709 (Ind.App.1980); Whitehead v. Safway Steel Products, Inc., 304 Md. 67, 497 A.2d 803 (1985); Danek v. Meldrum Mfg. and Engineering Co., Inc., 312 Minn. 404, 252 N.W.2d 255 (1977); Freeman v. Krause Milling Co., 43 Wis.2d 392, 168 N.W.2d 599 (1969). Typically, these courts have held an employer/employee relationship is implied as a matter of law, premised upon the control the customer company exercises over the temporary employee.

However, several jurisdictions hold it is a question for the trier of fact whether a temporary employee is under a contract of hire with a labor broker's customer company. See, e.g., M.J. Daly Co. v. Varney, 695 S.W.2d 400 (Ky.1985); Pato v. Sweeney Steel Service Corp., 499 N.Y.S.2d 286, 117 A.D.2d 984 (1986); Novenson v. Spokane Culvert & Fabricating Co., 91 Wash.2d 550, 588 P.2d 1174 (1979). Typically, the jury question is whether the temporary employee consented to an employment relationship with the customer company.

In his treatise on workers' compensation, Professor Larson proposes a test which has been acknowledged in both majority and minority position jurisdictions:

When a general employer lends an employee to a special employer, the special employer becomes liable for workmen's compensation only if

(a) the employee has made a contract of hire, express or implied, with the special employer;

(b) the work being done is essentially that of the special employer; and

(c) the special employer has the right to control the details of the work.

When all three of the above conditions are satisfied in relation to both employers, both employers are liable for workmen's compensation.

Employment may also be "dual," in the sense that, while the employee is under contract of hire with two different employers, his activities on behalf of each employer are separate and can be identified with one employer or the other. When this separate identification can clearly be made, the particular employer whose work was being done at the time of injury will be held exclusively liable.

1C. Larson, Workmen's Compensation Law Sec. 48.00 (1990). ^* Professor Larson stresses, "[t]here can be no compensation liability in the absence of a contract of hire between the employee and the borrowing employer." Id. Sec. 48.11. "This must necessarily be so, since the employee loses certain rights along with those he gains when he strikes up a new employment relationship. Most important of all, he loses the right to sue the special employer at common law for negligence[.]" Id. Sec. 48.12.

SDCL 62-1-3 defines "employee" for purposes of workers' compensation:

[E]very person, including a minor, in the services of another under any contract of employment, express or implied[.]

The Larson test is thus consistent with SDCL 62-1-3 in identifying a contract of employment, express or implied, as essential to workers' compensation coverage. See Scissons v. City of Rapid City, 251 N.W.2d 681 (S.D.1977); Schumacher v. Schumacher, 67 S.D. 46, 288 N.W. 796 (1939); Bergstresser v. City of Willow Lake, 63 S.D. 386, 259 N.W. 276 (1935).

While the Larson test focuses on liability for workers' compensation, it is nonetheless useful because liability for common law negligence (which is at issue here) is inversely related to liability for workers' compensation under South Dakota's Workers' Compensation statute. SDCL 62-3-2, the workers' compensation exclusivity provision, provides in pertinent part:

The rights and remedies herein granted to an employee subject to this title, on account of personal injury ... arising out of and in the course of employment, shall exclude all other rights and remedies of such employee, ... on account of such injury ... against his employer ..., except rights and remedies arising from intentional tort.

As a general rule, we construe workers' compensation statutes liberally to provide coverage, even when a worker would rather avoid it. Jensen v. Sport Bowl, Inc., 469 N.W.2d 370, 371 (S.D.1991); South Dakota Med. Service v. Minnesota Mut. Fire & Cas. Co., 303 N.W.2d 358, 361 (S.D.1981). And although the existence of an employer/employee relationship is normally a question of fact, where clear, the relationship may be determined by the court. Steen v. Potts, 75 S.D. 184, 189, 61 N.W.2d 825, 828 (1953).

Under these circumstances and for purposes of workers' compensation, we find an implied employment contract between Goodman and Sioux Steel as a matter of law. The purpose of Goodman's association with Manpower was to secure temporary employment with other businesses, such as Sioux Steel. Goodman performed the work of Sioux Steel under its direction and control. Although Sioux Steel could not discharge Goodman from his employment with Manpower, Sioux Steel could refuse to accept Goodman's assignment to the company or could relieve Goodman of his duties once assigned. From Sioux Steel's perspective then, it maintained the right to hire and fire Goodman. Such an analysis is consonant with the majority of jurisdictions which have addressed this issue.

The implied contract of employment between Goodman and Sioux Steel precludes Goodman from pressing his common law negligence action. SDCL 62-3-2. Under our holding, a directed verdict for Sioux Steel was appropriate. We affirm.

MILLER, C.J., and AMUNDSON, J., concur.

SABERS, J., concurs specially.

HENDERSON, J., dissents.

SABERS, Justice (concurring specially).

I concur in all respects.

I write specially to point out that the dissent appears to overlook the fact that Goodman is in fact being provided worker's compensation coverage. What difference does it really make that it is being provided by his first employer, Manpower, rather than his second employer, Sioux Steel? Goodman cannot show that he is entitled to bring a common law negligence action against Sioux Steel. This is a solid decision and a just result. One can't help but consider the whereabouts of the "solitary cry(er) of dissent" when Black Hills wood cutter Flores was determined by this court to have no workmen's compensation insurance whatsoever. See Egemo v. Flores, 470 N.W.2d 817 (S.D.1991).

HENDERSON, Justice (dissenting).

In every argument, one or more premisses and a conclusion are asserted. It is fundamental, in establishing sound law or a decision, that an argument must be first recognized. My brothers fail to recognize appellant's argument.

Salient facts of this case are not revealed to the reader in the majority decision. Hence, deduction of legal propriety of this decision is not possible. Ultimate facts are set forth only and they are quite conclusory; they are set forth in four sentences, at the conclusion of this opinion, in the penultimate paragraph.

Whether our argument concerns public affairs or some other subject we must know some, if not all, of the facts about the subject on which we are to speak and argue. Otherwise, we can have no materials out of which to construct arguments.

ARISTOTLE, Rhetoric

So I wish to furnish some (and perhaps not "all") of the construction materials.

1. A jury heard the appellant's case; the trial judge did not permit the jury to decide the case.

2. Upon a motion for directed verdict, the trial judge must determine if there is any substantial evidence to sustain the action. Sabag v. Continental, 374 N.W.2d 349, 355 (S.D.1985). In assessing this substantial evidence test, the trial judge must accept the evidence in the most favorable light for the non-movant (Goodman). All legitimate inferences of fact must be indulged in Goodman's favor. Id.

3. Goodman's right hand was crushed between the unguarded (apparently) machine owned by Sioux Steel.

4. In a prior ruling, before the directed verdict, the trial judge had ruled: "there exists a genuine issue of material fact as to whether or not there existed an implied contract of employment between the plaintiff and defendant, which issue is properly triable by a jury." Thus, trial judge reversed himself in these proceedings.

5. During the trial, Goodman...