Hartford Underwriters Ins. Co. v. State, Dept. of Human Resources

• Decision Date: 19 October 2001
• Docket Number: No. 86,268.,86,268.
• Parties: HARTFORD UNDERWRITERS INSURANCE COMPANY, Petitioner-Appellee, v. STATE OF KANSAS, DEPARTMENT OF HUMAN RESOURCES, Respondent-Appellant, and RICK MEIER, Respondent-Appellee.
• Court: Kansas Supreme Court

272 Kan. 265

32 P.3d 1146

HARTFORD UNDERWRITERS INSURANCE COMPANY, Petitioner-Appellee, v. STATE OF KANSAS, DEPARTMENT OF HUMAN RESOURCES, Respondent-Appellant, and RICK MEIER, Respondent-Appellee.

No. 86,268.

Supreme Court of Kansas.

Opinion filed October 19, 2001.

Don Doesken, of Kansas Department of Human Resources, argued the cause and was on the brief for appellant.

Thomas R. Hill, of Hill, Beam-Ward & Kruse, L.L.C., of Overland Park, argued the cause, and Mark Beam-Ward, of the same firm, was with him on the on the brief for appellee, Hartford Underwriter Insurance Company.

The opinion of the court was delivered by

LOCKETT, J.:

The Kansas Department of Human Resources (KDHR) appeals the district court's reversal of the Secretary of KDHR's (Secretary) finding that the personal care attendants of an injured worker receiving workers compensation benefits for an injury are employees of the injured worker; therefore, the worker is responsible for unemployment insurance taxes. The Secretary claims that (1) the injured worker is an employer subject to the Kansas Employment Security Law, K.S.A. 44-701 et seq., (2) the district court erroneously considered disputed facts not included in the agency record, and (3) the district court erred in finding that injured worker's former employee, who accepted employment as an independent contractor, is estopped from claiming unemployment compensation benefits.

This action arose out of a claim submitted to the Secretary for unemployment compensation by one of Rick Meier's former personal care attendants, who identified Meier as her former employer. Meier, a quadriplegic confined to a wheelchair, contested the claim, asserting that the personal care attendant had been an independent contractor paid by his insurance carrier, Hartford Underwriters Insurance Company (Hartford). The KDHR field officer found that Meier was the employer and the claimant's earnings were subject to Kansas unemployment insurance requirements.

Meier appealed the KDHR field determination, claiming that Hartford was responsible for payment of compensation to his attendants; therefore, he was not an "employer." A KDHR hearing officer heard the matter on February 16, 2000.

The hearing officer noted that Meier's injury rendered him a quadriplegic primarily confined to a wheelchair. Meier has some use of both arms but no fine motor coordination of the hands. Meier needs assistance getting in and out of bed, dressing, preparing and eating meals, and traveling by vehicle. Meier requires catheterization to relieve his bladder and a nurse to evacuate his bowels.

The hearing officer further found that based upon the recommendation of Meier's treating physician, the workers compensation administrative law judge had ordered that Meier's employer and its insurance carrier provide Meier with nursing services. The parties stipulated that payment for nursing services, including potential tax liability under the Employment Security Law, is the responsibility of the workers compensation employer and its insurance company.

The hearing officer noted that with the approval of the workers compensation administrative law judge, Meier retained individuals to provide attendant care. As a condition of employment, the attendant signs a statement prepared by Meier acknowledging that he or she is an independent contractor. Meier directs the manner the workers perform services for him. He prepares a job description and duties list stating his expectations. Meier prefers to hire individuals with some healthcare experience and who do not require a great deal of training.

Once a worker was retained by Meier, no substitutes are allowed to render the services. The duration of the employment varies. Meier schedules when the attendants are to arrive and depart. Some attendants work full time, others work part time. Most services are performed in Meier's home. The work to be performed was determined by Meier. Meier provides a van and other equipment which attendants use to transport him to appointments or errands.

None of the workers hired own a business providing attendant care to the public. The workers have no discretion as to the manner the services are provided to Meier. The workers were free to have jobs separate from their work for Meier. Few did. Both the worker and Meier could terminate the work relationship at will.

Hartford dictates the amount Meier is permitted to pay the attendants and the number of hours the attendants can work. Hartford pays for the advertising to locate attendant care workers.

Based on these facts, the hearing officer concluded that the former personal attendant worker had been Meier's employee. The Secretary of KDHR affirmed the hearing officer on April 13, 2000.

Meier appealed to the Barton County District Court. The district court first determined that Meier was not the employer of his personal care attendant and the attendant was an independent contractor. The district court reversed the Secretary's order, further finding that the worker was estopped from pursuing a claim of unemployment insurance because the worker had accepted employment as an independent contractor. The Secretary appealed to the Court of Appeals. The case was transferred to this court pursuant to K.S.A. 20-3018(c). Briefs have been filed by the Secretary and Hartford.

Standard of Review

The question of whether Meier is an employer under the Kansas Employment Security Law involves review of an agency's interpretation of statutes.

"The interpretation of a statute by an administrative agency charged with the responsibility of enforcing a statute is entitled to judicial deference and is called the doctrine of operative construction. Deference to an agency's interpretation is particularly appropriate when the agency is one of special competence and experience. Although an appellate court gives deference to the agency's interpretation of a statute, the final construction of a statute lies with the appellate court, and the agency's interpretation, while persuasive, is not binding on the court. Interpretation of a statute is a question of law over which an appellate court's review is unlimited. [Citation omitted.]" In re Appeal of United Teleservices, Inc., 267 Kan. 570, 572, 983 P.2d 250 (1999).

District Court Decision

In reversing the Secretary's finding that Meier was an employer subject to unemployment compensation taxes, the district court reasoned:

"Mr. Meier finds [the] recent decision by the Kansas Department of Human Resources in direct conflict with his prior contact with the State when he attempted to utilize the local employment security office to help him find people to work for him several years ago. The manager of the local employment security office told him since the people who care for him were not employees, he was not entitled to use the services of the local employment security office for purposes of locating care attendants.

"Mr. Meier has no options in having health care workers come in and perform daily services for him. His injuries were not voluntarily incurred by Mr. Meier. The services provided are a statutory requirement ordered by the workers' compensation court, and as a practical matter he has to have someone help him in his daily routine.

"Hartford establishes the rate of pay to the nursing attendants, not Mr. Meier. Hartford determines the number of hours the attendants are allowed to work, not Mr. Meier. Hartford does have the authority to choose the medical providers, and/or health care attendants, but in this case they have allowed Mr. Meier to pick and choose who he believes should work with him since he is the one who has to deal with them on a daily basis. If Mr. Meier were to be termed a regular businessman, or employer of other employees he would have the right to terminate his business if he chose to do so. In this case he has no right to choose to terminate his business and/or employees because he is always going to need to have an employee as a result of an involuntary accident that occurred to him. This Court cannot believe it was the intent or it should be the interpretation of the statutes of the State of Kansas to conclude Mr. Meier is in fact an employer under these particular facts and circumstances. He has absolutely no choice in the matter as to whether he should have attendants to help him in his daily activities. The Court would admit Mr. Meier does exercise the control over the people once they come to his home to help him with his daily activities. However, the issue for determination on whether he is an employer or the workers are independent contractors goes back before the worker/attendant actually comes to his home. He has no choice in the matter as to whether they are going to be there. He does not determine their pay, or how much time they will work. They are nothing more than health care providers mandatorily required to be there because of a workers' compensation statute or because of a contract for hire situation. These health care services are provided by Hartford to Mr. Meier."

We note that evidence that Meier was denied the services of the local employment security office was not introduced during the administrative hearings.

Analysis

The Kansas Employment Security Law requires the compulsory setting aside of unemployment reserves to be used for the benefit of persons who become unemployed. The systematic accumulation of funds for this purpose is accomplished by taxing employers and placing the money into the state employment security fund. The Kansas Employment Security Law defines employment in several ways, two of which are relevant to this case. First K.S.A. 44-703(i)(1)(B) provides that "employment" means, in part, service performed by any individual who, under the usual common-law rules applicable in determining the employer-employee relationship, has the status of an employee. Second, K.S.A. 44-703(i)(3)(D) provides:

"Services performed

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