Reed v. Yackell, Docket No. 126534. COA. No. 4.

CourtSupreme Court of Michigan
Citation703 N.W.2d 1,473 Mich. 520
Docket NumberDocket No. 126534. COA. No. 4.
PartiesRicky REED, Plaintiff-Counter-Defendant-Appellee, v. Linda Susan YACKELL, Defendant and Cross-Defendant, and Buddy Lee Hadley, Gerald Michael Herskovitz and Mr. Food, Inc., Defendants, Counter-Plaintiffs, Cross-Plaintiffs-Appellants.
Decision Date28 July 2005

John Carlisle, Grosse Pointe, MI, and Law Offices of Larry A. Smith (by Larry A. Smith), Southfield, MI, for the plaintiff.

Vandeveer Garzia, P.C. (by Hal O. Carroll), Troy, MI, for Buddy Lee Hadley, Gerald Michael Herskovitz, and Mr. Food, Inc.

Martin L. Critchell, Detroit, MI, for amicus curiae the Workers' Compensation Section of the State Bar of Michigan.

TAYLOR, C.J.

We granted leave in this case to determine whether plaintiff, Ricky Reed, who was fired from defendant Mr. Food, Inc., but continued to assist with deliveries on a periodic basis, was an employee of Mr. Food within the meaning of MCL 418.161(1)(l) and (n) of the Worker's Disability Compensation Act (WDCA)1 and, thus, prohibited from maintaining a tort action for employment-related personal injury in the circuit court against Mr. Food, its owner, and its delivery supervisor. We determine that Reed was an employee of Mr. Food under MCL 418.161(1)(l) at the time he was injured because he was in the service of Mr. Food under a contract for hire. We therefore affirm the decision of the Court of Appeals in part. However, we further determine that Reed was an employee of Mr. Food under MCL 418.161(1)(n) at the time he was injured because he was performing a service as a deliveryman for Mr. Food in the course of its business and did not maintain a separate business offering that service, hold himself out to and render that service to the public, or qualify as an employer subject to the WDCA. We therefore reverse the decision of the Court of Appeals in part and remand this case to the circuit court for entry of a directed verdict in defendants' favor. Jurisdiction is thereafter transferred to the Bureau of Worker's Disability Compensation.

FACTS AND PROCEDURAL HISTORY

Defendant Gerald Michael Herskovitz is the owner of defendant Mr. Food, Inc., which is a retail marketer of meat products. Defendant Buddy Lee Hadley is an employee of Mr. Food and is in charge of its meat deliveries. In 1997, Hadley suggested that Herskovitz hire Reed, whom Hadley had known for approximately ten years, and Herskovitz did so. Herskovitz was not pleased with Reed's performance, however, and fired Reed after a period of only five or six months in December 1997.

After being fired by Herskovitz, Reed primarily supported himself by painting his relatives' homes. But, Reed's association with Mr. Food did not end completely after he was fired, and he supplemented his income by occasionally helping Hadley with deliveries. Specifically, Hadley testified that, on approximately three to five occasions after Reed was fired near the end of 1997, he would hire Reed to help with his deliveries for the day, for which Reed would be paid between $35 and $40 in cash. Although Herskovitz authorized Hadley to obtain help with his deliveries on these days, he testified that he did not know that it was Reed that Hadley actually hired.

On May 7, 1998, during one of these days that deliveries were being made, Reed was riding in a cargo van owned by Mr. Food that was being driven by Hadley. As the van approached an intersection, a car driven by Linda Yackell did not stop at a red light because her brakes malfunctioned. Hadley, who was looking down at paperwork, did not see Yackell's car in time and hit her car. Reed suffered a closed head injury as a result of the accident.

On December 10, 1998, Reed filed a complaint in the circuit court, alleging negligence by the drivers, Hadley and Yackell, liability by Herskovitz pursuant to the owner's liability statute, MCL 257.401, and liability by Mr. Food under the theory of respondeat superior. Hadley, Herskovitz, and Mr. Food (defendants)2 as relevant to this appeal, defended by asserting that the suit was barred because Reed was an employee of Mr. Food under MCL 418.161(1)(l) and (n)3 and, thus, his exclusive remedy was under the WDCA.4 During trial, defendants moved for a directed verdict on this basis. Reed countered that he was not an employee, but was rather an independent contractor of day labor. The trial court denied defendants' motion. At the end of trial, the jury returned a unanimous verdict in Reed's favor and awarded him $1,256,320, allocating sixty percent of the fault for the accident to Yackell and forty percent to Herskovitz, Hadley, and Mr. Food collectively. A judgment in the amount of $502,528 was subsequently entered against Hadley, Herskovitz, and Mr. Food.

Defendants thereafter moved for judgment notwithstanding the verdict (JNOV), again asserting that Reed was an employee at the time of the accident. The trial court again denied defendants' motion, stating that Reed was not an employee of Mr. Food at the time of the accident but was instead an independent contractor that held himself out to the public to perform general labor.

Defendants appealed to the Court of Appeals, which affirmed in an unpublished decision.5 Defendants then sought leave to appeal in this Court. Pursuant to MCR 7.302(G)(1), in lieu of granting leave to appeal, we vacated the decision of the Court of Appeals and remanded this case to the circuit court with instructions that it determine, either on the existing record or after additional evidentiary hearings, whether Reed was an employee of Mr. Food at the time of the accident. The trial court was also to submit findings of fact to this Court regarding whether Reed was in the service of Mr. Food under either an express or implied contract for hire as set forth in MCL 418.161(1)(l) and explained in our then-recent decision in Hoste v. Shanty Creek Mgt., Inc., 459 Mich. 561, 592 N.W.2d 360 (1999). Further, in order to determine if he was outside the definition of employee in MCL 418.161(1)(n), the trial court was to determine whether Reed both maintained a separate business and held himself out to the public as having such a business.6 On remand, the circuit court issued a written order and findings of fact, based on the existing record, stating that Reed was not an employee of Mr. Food at the time of the accident. With respect to MCL 418.161(1)(l) and Hoste, the trial court determined that Reed was not performing a service for Mr. Food under either an express or implied contract for hire. In reaching this conclusion, the trial court focused on the fact that Herskovitz had fired Reed before the accident, that Herskovitz had testified at trial that he did not know that Reed was helping Hadley at the time of the accident, and that no evidence had been introduced that income taxes had been withheld from Reed or that he had ever claimed employee status. The trial court reasoned that these facts negated the possibility that either an express or implied contract for hire had been formed because both parties were not aware of its existence and had not agreed to its terms. Finally, the trial court determined that Reed was not an employee under a contract "for hire," reasoning that he did not receive a regular income from Mr. Food but, instead, received only $35 to $40 on three to five occasions. The court concluded that this did not equate to "real, palpable, and substantial consideration" that was intended as wages7 because, spread over the entire period of about five or six months when the occasional employment took place, it amounted to less than $1 per day.

In considering the questions under MCL 418.161(1)(n), the trial court held that Reed did have a qualifying separate business because he was a house painter performing day labor. The court apparently concluded that there was a sufficient holding of himself out for this service to meet the requirements of MCL 418.161(1)(n). But, the court did not elaborate on the evidence it found to establish that.

After receiving the trial court's findings of fact, we remanded this case to the Court of Appeals for reconsideration of whether Reed was an employee within the meaning of MCL 418.161(1)(l) and (n) and, if necessary, of additional issues the Court of Appeals had addressed in its earlier decision.8

On remand, in an unpublished decision that echoed the previously vacated one, the Court of Appeals affirmed the trial court's determination that Reed was not an employee of Mr. Food at the time of the accident.9 Unlike the circuit court, the Court of Appeals determined that Reed was an employee under MCL 418.161(1)(l) because he was under a contract for hire. Yet, because he had, in the view of the Court of Appeals, a separate business in which he held himself out for the performance of the same service he was performing for Mr. Food, he was removed from the definition of employee by virtue of MCL 418.161(1)(n). Interestingly, while expressly acknowledging that in Hoste we held that the common-law "economic realities test" for determining whether a worker is an employee or an independent contractor was superseded to the extent that it was inconsistent with MCL 418.161(1)(n),10 the Court then expressly focused on those same superseded common-law factors (such as how Reed was paid, whether taxes were withheld, whether Mr. Food, Herskovitz, and Hadley had control of Reed's duties, and whether the services Reed performed were an integral part of Mr. Food's business) in making its holding regarding whether Reed was an employee. At no point was an effort undertaken to reconcile this approach with the holding in Hoste precluding the consideration of these no longer recognized common-law "economic realities" factors.

Unsurprisingly, defendants again filed an application with this Court for leave to appeal, and we granted defendants' application limited to the issue whether Reed was an employee within...

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