Pinter Const. Co. v. Frisby
| Decision Date | 07 February 1984 |
| Docket Number | No. 18432,18432 |
| Citation | 678 P.2d 305 |
| Parties | PINTER CONSTRUCTION COMPANY and the State Insurance Fund, Plaintiffs, v. Clifford P. FRISBY and the Industrial Commission of Utah, Defendants. |
| Court | Utah Supreme Court |
Timothy C. Houpt, Salt Lake City, for plaintiffs.
David L. Wilkinson, Atty. Gen., Frank V. Nelson, Asst. Atty. Gen., Salt Lake City, David S. Kunz, James D. Vilos, Ogden, for defendants.
The plaintiffs, Joe Pinter Construction Company and the State Insurance Fund, seek reversal of an Industrial Commission order directing them to pay worker's compensation benefits to Clifford Frisby, the defendant, who was injured while constructing a metal building for Pinter. Pinter and the Insurance Fund claim that the Commission erred in ruling that Pinter Construction Company exercised the degree of control over Frisby necessary to make Frisby an employee rather than an independent contractor.
In April, 1979, Pinter Construction agreed to build a maintenance building for Heber Light and Power. The proposal was written on a Pinter Construction Company form which contained the following typed provision:
All material is guaranteed to be as specified. All work to be completed in a workmanlike manner according to standard practices. Any alterations or deviation from specifications below involving extra costs will be executed only upon written orders, and will become an extra charge over and above the estimate. All agreements contingent upon strikes, accidents or delays beyond our control. Owner to carry fire, tornado and other necessary insurance. Our workers are fully covered by Workmen's Compensation insurance. [Emphasis supplied.]
After receiving a bid from Frisby, Pinter hired Frisby to perform the metal erection portion of the job since Pinter had little experience with metal buildings. Frisby and Pinter entered into an oral agreement which provided that Pinter would pay 10 percent of the total price prior to commencement of the work in order for Frisby to purchase the needed materials. The remainder of the total $25,000 was paid in two lump sums. Pinter and Frisby made no agreements regarding the hiring or paying of any of Frisby's employees and there is no evidence of any agreement on a completion date, although Pinter estimated the total job would take forty days.
While installing metal siding, Frisby fell from a twelve-foot scaffold, severely injuring himself. He is now a quadriplegic. After the accident, Frisby applied to the Industrial Commission for a hearing to determine his entitlement to worker's compensation benefits. The Industrial Commission held that Frisby was entitled to benefits because he was an employee of Pinter. We affirm.
The Workmen's Compensation Act is to be construed liberally to further the statutory purposes of providing relief from injuries caused by industrial accidents. Maryland Casualty Co. v. Industrial Commission, 12 Utah 2d 223, 225, 364 P.2d 1020, 1022 (1961). The Industrial Commission is in the first instance responsible for effectuating the purposes of the Act by construing its provisions to secure its humane objectives.
In reviewing an Industrial Commission order, this Court may only set aside an order if (1) "the commission acted without or in excess of its powers" or (2) "the findings of fact do not support the award." U.C.A., 1953, § 35-1-84. We must sustain an order unless it is unsupported by any substantial credible evidence and is therefore arbitrary and capricious. McPhie v. Industrial Commission, Utah, 567 P.2d 153 (1977); Rustler Lodge v. Industrial Commission, Utah, 562 P.2d 227 (1977); Harry L. Young & Sons v. Ashton, Utah, 538 P.2d 316 (1975); Maryland Casualty Co. v. Industrial Commission, 12 Utah 2d 223, 364 P.2d 1020 (1961). Furthermore, as to questions of mixed law and fact, the Court "will not substitute its judgment for that of the agency as long as the commission's interpretation has 'warrant in the record' and a reasonable basis in the law." Salt Lake City Corp. v. Department of Employment Security, Utah, 657 P.2d 1312, 1316 (1982). 1
The question on appeal is whether Frisby was a statutory "employee" as that term is used in § 35-1-42(2), which states in relevant part:
Where any employer procures any work to be done wholly or in part 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, such contractor, and all persons employed by him, and all subcontractors under him, and all persons employed by any such subcontractors, shall be deemed, within the meaning of this section, employees of such original employer. [Emphasis supplied.]
Thus, if an employer hires a contractor, that contractor, his employees, and all subcontractors under him are "employees" if (1) the employer controls or supervises the contractor's work, and (2) such work is a part or process in the employer's trade or business.
The above-quoted language from § 35-1-42 is used in a class of statutes known as "statutory employer" or "contractor under" statutes. Most states have such statutes, the purpose of which is
to protect employees of irresponsible and uninsured subcontractors by imposing ultimate liability on the presumably responsible principal contractor, who has it within his power, in choosing subcontractors, to pass upon their responsibility and insist upon appropriate compensation protection for their workers.
1C A. Larson, Workmen's Compensation Law, § 49.11 at 9-12 (1982). Accord Lee v. Chevron Oil Co., Utah, 565 P.2d 1128 (1977).
An additional purpose of the statutory provision is to prevent an unscrupulous principal contractor who contracts out all or most of his work from avoiding responsibility for insuring his subcontractors. Professor Larson states:
The statute also aims to forestall evasion of the act by those who might be tempted to subdivide their regular operations among subcontractors, thus escaping direct employment relations with the workers and relegating them for compensation protection to small contractors who fail to carry ... compensation insurance.
A. Larson, supra, § 49.11 at 9-14 to 9-16 (footnotes omitted).
Other courts in states with similar provisions have indicated that the provisions are intended to expand liability to those who may not qualify as a common law employee. The Arizona Supreme Court, in interpreting provisions almost identical to Utah's, 2 has stated:
[This section] is a legislatively created scheme by which conceded non-employees are deliberately brought within the coverage of the [Workmen's Compensation] Act.
Young v. Environmental Air Products, 136 Ariz. 158, 665 P.2d 40, 43 (1983). Accord 1C A. Larson, Workmen's Compensation Law, § 49.00 (1982). See also Word v. Motorola, Inc., 135 Ariz. 517, 662 P.2d 1024 (1983); Basturo v. Utah Construction & Mining Co., 15 Ariz.App. 35, 485 P.2d 859 (1971). As Wisconsin recognized in interpreting statutory provisions similar to Utah's, see Wis.Stat. § 108.02(3)(a) & (b) (1975), it is possible for an individual to be an "independent contractor" in a common law sense, and yet be a "statutory employee" for workmen's compensation purposes:
It is apparent that the statutory concept of the employment relation includes individuals who were independent contractors at common law. The entire statutory scheme indicates a desire on the part of the legislature to extend the protection of these laws to those who might not be deemed employees under the legal concepts governing the liability of a master for the tortious acts of his servant.
Price County Telephone Co. v. Lord, 47 Wis.2d 704, 715-16, 177 N.W.2d 904, 910 (1970) (footnotes omitted). Accord Sears, Roebuck and Co. v. Department of Industry, Labor and Human Relations, 90 Wis.2d 736, 749-50, 280 N.W.2d 240, 243 (1979); Moorman Manufacturing Co. v. Industrial Commission, 241 Wis. 200, 203, 5 N.W.2d 743, 744 (1942).
In the instant case, the Commission specifically found:
The employer [Pinter] exercised sufficient control over the applicant [Frisby] to create an employer-employee relationship consistent with the Worker's Compensation Act. Additionally, no contractual evidence was presented that would indicate that the Applicant was held responsible for securing his own compensation coverage. It is therefore concluded that the Applicant was an employee as contemplated by the Act ....
A number of facts support the Commission's determination that Pinter exercised "sufficient control" for the purposes of § 35-1-42. Pinter and Frisby did not enter into a written contract; and their agreement was oral and informal, without specifications for the details involved in the work. The informality of the arrangement suggests that Pinter expected to have sufficient control over the work to make certain that the work was performed to his satisfaction. Customarily, general contractors obtain written contracts with independent contractors in order to clarify payment, duties, and other details since a general contractor does not have control over an independent contractor.
Pinter's control over Frisby was evidenced on at least four occasions when Pinter directed Frisby to get on with the work and expressed concern about the deadline for finishing the job. Pinter's assertion of some control over Frisby's activities indicates that Pinter in fact had the right to control and could have done so frequently. It is not the actual exercise of control that determines whether an employer-employee relationship exists; it is the right to control that is determinative. Hinds v. Herm Hughes & Sons, Inc., Utah, 577 P.2d 561 (1978); Bambrough v. Bethers, Utah, 552 P.2d 1286 (1976); Smith v. Alfred Brown Co., 27 Utah 2d 155, 493 P.2d 994 (1972). Pinter also maintained some control over the materials used on the job since Frisby could acquire the materials only after receiving payment from Pinter.
As stated, Arizona's workmen's compensation law...
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