Hyslop v. Klein

• Decision Date: 08 August 1978
• Docket Number: Docket No. 77-3689
• Citation: 270 N.W.2d 540,85 Mich.App. 149
• Parties: Howard R. HYSLOP, Plaintiff-Appellant, v. Harold KLEIN, Defendant-Appellee. 85 Mich.App. 149, 270 N.W.2d 540
• Court: Court of Appeal of Michigan — District of US

Page 540

270 N.W.2d 540

Howard R. HYSLOP, Plaintiff-Appellant, v. Harold KLEIN, Defendant-Appellee.

Docket No. 77-3689.

85 Mich.App. 149, 270 N.W.2d 540

Court of Appeals of Michigan.

Aug. 8, 1978.

Released for Publication Oct. 20, 1978.

[85 MICHAPP 151] Joseph C. Cox, Fowlerville, for plaintiff-appellant.

Foster, Swift & Collins by David C. Coey, Lansing, for defendant-appellee.

Before R. B. BURNS, P. J., and WALSH and CLEMENTS, ^* JJ.

[85 MICHAPP 152] WALSH, Judge.

Plaintiff appeals from a decision of the Workmen's Compensation Appeal Board reversing the referee's award of compensation.

Plaintiff's claim derived from an eye injury received on November 16, 1971, while he was helping the defendant repair a broken grain elevator. ¹ The eye was removed on November 13, 1972. Plaintiff filed a petition for specific loss on July 19, 1974, and the referee awarded benefits, limited by the "two-year-back" rule of M.C.L. § 418.381(2); M.S.A. § 17.237(381)(2). The Workmen's Compensation Appeal Board reversed the award and plaintiff appeals, raising two issues for our consideration:

(1) Was the plaintiff an "employee" within the meaning of M.C.L. § 418.161(1)(b); M.S.A. § 17.237(161)(1)(b)?

(2) Did the referee err in applying the two-year back rule of M.C.L. § 418.381(2); M.S.A. § 17.237(381)(2) to limit plaintiff's award?

I

We premise our analysis upon the evidentiary findings of the Workmen's Compensation Appeal Board which are conclusive if supported by competent, material and substantial evidence in the record. Dressler v. Grand Rapids Die Casting Corp., 402 Mich. 243, 262 N.W.2d 629 (1978). Our inquiry is limited to determining whether those evidential facts established the pertinent jural relationship of employer/employee. Askew v. Macomber, 398 Mich. 212, 247 N.W.2d 288 (1976). See Deziel v. Difco Laboratories, Inc., 394 Mich. 466, 232 N.W.2d 146 (1975).

The proper guide for determining whether one is [85 MICHAPP 153] an employee under the Worker's Disability Compensation Act ² is the dissenting opinion of Justice Smith in Powell v. Employment Security Comm., 345 Mich. 455, 75 N.W.2d 874 (1956). Tata v. Muskovitz, 354 Mich. 695, 94 N.W.2d 71 (1959); McKissic v. Bodine, 42 Mich.App. 203, 201 N.W.2d 333 (1972). In Powell, Justice Smith vigorously criticized the "control test" and rejected it in favor of an analysis focusing on the relationship of the worker and his work to the employer's business operation.

"The test employed is one of economic reality. It looks at the task performed, whether or not it is part of a larger common task, ' "a contribution to the accomplishment of a common objective." '* * * (and) at the workmen, to see whether or not their work can be characterized 'as a part of the integrated unit of production' * * * and whether 'the work done, in its essence, follows the usual path of an employee.' " Powell v. Employment Security Comm., supra, 394 Mich. at 478-479, 75 N.W.2d at 886. (Citations omitted.)

The purpose of the "economic reality test" is to more closely conform the definition of "employee" to the objective of the Worker's Disability Compensation Act, Powell, Supra, which is to allocate the human costs of production to the consumer of the product. Whetro v. Awkerman, 383 Mich. 235, 174 N.W.2d 783 (1970). It serves that function by focusing our analysis on two basic queries: (1) Is the work performed a regular part of the normal operations of the business, and (2) Is the worker's method of operation sufficiently distinct from the employer's business as to constitute a separate enterprise? A number of cases have promulgated several factors to be considered in determining [85 MICHAPP 154] employee status under the Act, E. g., Askew v. Macomber, Supra ; Schulte v. American Box Board Co., 358 Mich. 21, 99 N.W.2d 367 (1969); McKissic v. Bodine, Supra, but all of those factors concern one or both of the above inquiries. ³ Mindful of the purpose of the "economic reality test" and guided by the decisions of our appellate courts concerning its application, we turn to the facts of the instant case.

Defendant owned a small number of farms and was engaged in the dairy and beef cattle business. He made an oral contract with the plaintiff by which the latter agreed to farm the land, milk the dairy stock and care for the beef cattle. In return plaintiff received rent-free residence in the farmhouse, 30% Of the gross receipts from the sale of the milk, and a 30% Interest in all livestock existing at or born after the time of the agreement. ⁴

In the daily operation of the farm, plaintiff's manner of performance was left almost entirely to his discretion. Defendant provided all tools and machinery and also had arranged for the marketing of the milk. No cattle could be sold without his approval.

We first consider whether plaintiff's work contributed toward the accomplishment of the defendant's[85 MICHAPP 155] business objectives so as to constitute an integral part of the business operation. Askew, Supra ; McKissic, Supra. Defendant's business was selling beef cattle and milk; plaintiff's work was the daily operation of that business. There is no doubt that plaintiff's work constituted an integral part of defendant's enterprise.

Defendant argues, however, that the arrangement under which plaintiff undertook to work for him was not an employment relationship but rather a contractual "business arrangement". Since it is apparent that the plaintiff was working for the defendant, the critical question is whether he was doing so as an employee or as an independent contractor. ⁵

" 'An independent contractor is one who, carrying on [85 MICHAPP 156] an independent business, contracts to do a piece of work according to his own methods, and without being subject to control of his employer as to the means by which the result is to be accomplished, but only as to the result of the work. Generally the circumstances which go to show one to be an independent contractor, while separately they may not be conclusive, are the independent nature of his business, the existence of a contract for the performance of a specified piece of work, the agreement to pay a fixed price for the work, the employment of assistants by the employee who are under his control, the furnishing by him of the necessary materials, and his right to control the work while it is in progress except as to results.' " Stratton v. Maine, 336 Mich. 163, 167, 57 N.W.2d 480, 482 (1953); Kendrick v. Graddis, 75 Mich.App. 383, 386, n. 1, 255 N.W.2d 14 (1977). ⁶ (Citations omitted.)

The circumstances mentioned in Stratton, Supra, closely correspond to the remaining factors suggested for consideration by Askew, Supra, Schulte, Supra, and McKissic, Supra :

(1) Whether plaintiff's work was of a nature customarily performed by an independent contractor?

(2) Whether plaintiff had held himself out to the public as one ready and able to perform specific tasks?

(3) Whether the plaintiff furnished his own equipment and/or materials?

(4) What liability the defendant would have incurred if he had terminated the relationship without cause?

(5) Whether the plaintiff depended for his living expenses primarily upon the emolument received from the defendant?

[85 MICHAPP 157] (6) Whether the method of payment indicated an employment relationship or an independent contract?

(7) Whether the defendant exercised significant "control" over the plaintiff's work?

Although one or more of the answers to the above inquiries may tend to show independent contract relationship, its establishment usually requires a convincing accumulation of factors indicating that the services were rendered in the course of the worker's pursuit of his separate business enterprise of selling those services. 1A Larson, Workmen's Compensation (hereinafter Larson), § 44.31, p. 8-36; see Stratton v. Maine, Supra, O'Brian v. Michigan Unemployment Compensation Comm., 309 Mich. 18, 14 N.W.2d 560 (1944); Begovac v. Northwestern Cooperage & Lumber Co., 264 Mich. 508, 250 N.W. 292 (1933). We now apply these principles to the facts before us.

Nothing in the record indicates whether plaintiff's work was of a type customarily performed by independent contractors or whether plaintiff held himself out to the public as one ready and willing to perform specific farming tasks. The only pertinent finding of the board in this regard is that the plaintiff was sought out by the defendant by referral when the latter was in need of someone to operate his farm. Furthermore, the operation of the farm was a full-time job for the plaintiff.

An employment relationship is strongly indicated where the worker does not hold himself out to the public as performing an independent business service and regularly devotes all his time to a particular employer. 1A Larson, § 45.31(a), p. 8-109; see Stratton, Supra.

Also indicative of an employment relationship is the fact that defendant provided the tools, machinery[85 MICHAPP 158] and everything else necessary for the operation of the business. Stratton, Supra ; O'Brian, Supra. ⁷

Another factor tending to establish plaintiff's status as an employee is that the defendant would have incurred no liability for breach of contract if he had terminated the relationship without cause. Insofar as the unjustified termination of an independent contract would give rise to damages, E. g., Hitchcock v. The Supreme Tent of the Knights of the Maccabees of the World, 100 Mich. 40, 58 N.W. 640 (1894), the freedom to terminate employment without liability is inconsistent with the notion of an independent contractual relationship. 1A Larson, § 44.35, p. 8-68. See Askew, Supra, Powell, Supra.

There is no dispute that the plaintiff's sole sources of maintenance during the relationship was the emolument received from the defendant. Such dependence further evidences plaintiff's employee status. Powell, supra.

From the method of payment we can draw no conclusion. Although payment was not on a ...