Hunt Bldg. Corp. v. Industrial Com'n of Arizona, 18294-PR

• Decision Date: 15 January 1986
• Docket Number: No. 18294-PR,18294-PR
• Parties: HUNT BUILDING CORPORATION, Petitioner Employer, State Compensation Fund, Petitioner Carrier, v. INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Jesus Villaescusa, Respondent Employee, R.L. McGuckin dba R.L. McGuckin & Company, Respondent Employer, Jesse's Concrete, Inc., Respondent Employer.
• Court: Arizona Supreme Court

Page 303

713 P.2d 303

148 Ariz. 102

HUNT BUILDING CORPORATION, Petitioner Employer, State Compensation Fund, Petitioner Carrier, v. INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Jesus Villaescusa, Respondent Employee, R.L. McGuckin dba R.L. McGuckin & Company, Respondent Employer, Jesse's Concrete, Inc., Respondent Employer.

No. 18294-PR.

Supreme Court of Arizona,

In Banc.

Jan. 15, 1986.

Reconsideration Denied Feb. 25, 1986.

Robert K. Park, Chief Counsel, State Compensation Fund by James Crane, Phoenix, for petitioners.

Dennis P. Kavanaugh, Chief Counsel, The Indus. Com'n, Phoenix, for respondent.

Tretschok, McNamara & Clymer by Patrick R. McNamara, Tucson, for respondents Villaescusa and Jesse's Concrete.

CAMERON, Justice.

This is a petition for review of an opinion and decision of the court of appeals setting aside an award made to Jesus Villaescusa (claimant) by the Industrial Commission of Arizona. Hunt Building Corporation v. Industrial Commission, 148 Ariz. 96, 713 P.2d 297 (Ariz.App.1985). We have jurisdiction pursuant to art. 6, § 5(3) of the Arizona Constitution, A.R.S. § 12-120.24 and Rule 23, Ariz.R.Civ.App.Proc., 17A A.R.S.

The issues presented on review are:

1. Is the "right to control" test to determine when someone is an employee the same under both A.R.S. § 23-902(B) and (C)?

2. Did the court of appeals err in finding that there was insufficient evidence in the record to support the commission's finding that claimant was a statutory employee within A.R.S. § 23-902(B)?

The facts follow. On 8 October 1981, Hunt Building Corporation (Hunt) entered into a contract with the Quechan Housing Authority, of the Quechan Indian tribe in California, to construct 94 housing units on the Fort Yuma Indian Reservation. Construction of Indian housing is a considerable amount of Hunt's business, in fact, the corporation has an entire division on Indian housing. The contract with the Quechan Housing Authority provided that Hunt "shall supervise the work, and have a competent superintendent on the work at all times", and further provided that Hunt "shall be fully responsible for the acts and omissions of persons directly employed by him."

In accordance with its usual practice, Hunt subcontracted virtually all the actual work on the contract. Among these subcontracts was one to R.L. McGuckin for earthwork and paving, plus one to Frontier Concrete for curb and gutter work. Under these contracts, the subcontractors, McGuckin and Frontier, were to provide workers' compensation insurance.

When it appeared that Frontier Concrete would not be able to meet the project's construction schedule, Hunt's general superintendent on the job sought a substitute subcontractor. McGuckin suggested the claimant and contacted him on Hunt's behalf. Claimant, who had worked on an Indian housing project with Hunt once before as president of Jesse's Concrete Inc., met with McGuckin and Hunt's superintendent, Bob Landoll, and agreed to perform the curb and gutter work for a specified amount per lineal foot. Frontier Concrete was then released from its contract. However, the Quechan Housing Authority required approval of all subcontractors and Hunt did not want to delay the work for the amount of time necessary to get such approval. Therefore, at Hunt's suggestion no written subcontract was entered into with claimant. Instead, to circumvent the approval requirement, the curb and gutter work was added to McGuckin's contract.

Claimant, whose company Jesse's Concrete Inc. was in a state of limbo, negotiated the agreement with Hunt and McGuckin on his own personal behalf. He inspected the work and discussed the plans with Hunt's superintendent. Claimant supplied his own curbing machine and brought several men with him to begin the project, which was expected to take less than two weeks.

As claimant was about to begin work, he was told by Hunt's superintendent that he had the wrong "shoe" on his curbing machine. This mistake was corrected before work began. Later that same day and before any curbing was actually installed, claimant's leg became caught in an auger of his curbing machine and was severely injured. The leg was eventually amputated above the knee.

A claim for workers' compensation benefits was filed by the claimant alleging Hunt and McGuckin as his employers. This claim was denied by the State Compensation Fund and a hearing thereon was requested by claimant.

A second claim was filed alleging the McGuckin Co. as his employer. The State Compensation Fund also denied this claim. Subsequently, the commission entered a finding that McGuckin had no workers' compensation insurance and that the claim was non-compensable. This finding was protested.

Claimant filed a third claim alleging Jesse's Concrete, Inc. as his employer. This claim was also denied and the claimant requested a hearing.

A consolidated hearing on the three claims was held to decide the issue of whether claimant was an independent contractor or an employee of either Hunt, McGuckin or Jesse's Concrete, Inc. at the time of the injury. The Administrative Law Judge found that the claimant was a statutory employee of Hunt under A.R.S. § 23-902(B) but not of McGuckin or Jesse's Concrete, Inc. The claimant was thereby awarded benefits from Hunt and the State Compensation Fund. This decision was affirmed on administrative review.

The court of appeals, applying the same "right to control" test as the Administrative Law Judge did, set aside the award. The court stated that based on the factual findings of the Administrative Law Judge and the undisputed facts in the record, the claimant was clearly an independent contractor and the Administrative Law Judge had erred in concluding he was a statutory employee of Hunt. Claimant then petitioned this court for review which was granted.

DOES THE RIGHT TO CONTROL TEST APPLY?

A.R.S. § 23-902 defines "Employers Subject" to the Workers' Compensation Act. Subsection A defines the statutory employer, that is the employer subject to the provision of the act. Subsection C defines the independent contractor whose employees are not employees of the original employer. Subsection C reads:

C. A person engaged in work for another, and who while so engaged is independent of the employer in the execution of the work and not subject to the rule or control of the person for whom the work is done, but is engaged only in the performance of a definite job or piece of work, and is subordinate to the employer only in effecting a result in accordance with the employer's design, is an independent contractor, and an employer within the meaning of this section.

Subsection B is an in-between classification, defining those who, though they may appear to be independent contractors, are by statute employees of the original employer. It reads:

B. When an employer procures work to be done for him by a contractor over whose work he retains supervision or control, and such work is a part or process in the trade or business of the employer, then such contractors and the persons employed by him, and his sub-contractor and persons employed by the sub-contractor, are, within the meaning of this section, employees of the original employer.

A.R.S. § 23-902. Under Subsection B, an employer can be required to pay workers' compensation benefits to remote employees, in other words, the employees of another, if he is deemed their "statutory employer". Young v. Environmental Air Products, 136 Ariz. 158, 160 n. 1, 665 P.2d 40, 42 n. 1 (1983). The statutory employer law allows conceded non-employees workers' compensation coverage if the conditions of A.R.S. § 23-902(B) are met. Young v. Environmental Air Products, 136 Ariz. at 161, 665 P.2d at 43. Those conditions are: (1) the employer procuring work to be done for him by a contractor must retain supervision or control of the work and (2) the work is a part or process in the trade or business of the employer. Id.; A.R.S. § 23-902(B).

In determining whether the first condition of supervision or control was met, both the Administrative Law Judge and the court of appeals applied the traditional "right to control" test. Hunt Building Corporation v. Industrial Commission, 713 P.2d at 299-300. This test is generally used under A.R.S. § 23-902(C) to distinguish between employee and independent contractor. The test provides that the right to control or supervise the methods of obtaining a specific result is determinative of whether someone is an employee or independent contractor. Home Insurance Co. v. Industrial Commission, 123 Ariz. 348, 350, 599 P.2d 801, 803 (1979). In analyzing whether such a right to control exists, courts look to the totality of the facts of each case, in light of several indicia of control. Id. These indicia, none of which by itself is conclusive, include:

the duration of the employment; the method of payment; who furnishes necessary equipment; the right to hire and fire; who bears responsibility for workmens' compensation insurance; the extent to which the employer may exercise control over the details of the work, and whether the work was performed in the usual and regular course of the employer's business.

Id. (citations omitted).

The question we must decide is whether the "right to control" test applies to Subsection B as it does to Subsection C. Claimant contends, and the dissent in the court of appeals agreed, that when the legislature amended A.R.S. § 23-902 in 1945 and divided it into sections (A), (B) and (C), it intended in Subsection B cases for a lesser standard of control--that of supervising or controlling the end result of the work. Hunt Building Corporation v. Industrial Commission supra, 713 P.2d at 302. This court, however, has continued to apply the traditional right to control test, even after the revision of A.R.S. § 23-902. See Blasdell v. Industrial Commission, 65 Ariz. 373, 181 P.2d 620 (1947). In construing Subsection B, Arizona caselaw has applied the right to...