Robert Hansen Trucking, Inc. v. Labor and Industry Review Com'n, Dept. of Industry, Labor and Human Relations

• Decision Date: 26 November 1985
• Docket Number: No. 83-2294,83-2294
• Citation: 126 Wis.2d 323,377 N.W.2d 151
• Parties: ROBERT HANSEN TRUCKING, INC., Plaintiff-Appellant-Petitioner, v. LABOR AND INDUSTRY REVIEW COMMISSION, DEPARTMENT OF INDUSTRY, LABOR AND HUMAN RELATIONS, and Michael R. Overholt, Defendants-Respondents.
• Court: Wisconsin Supreme Court

Page 151

377 N.W.2d 151

126 Wis.2d 323

ROBERT HANSEN TRUCKING, INC., Plaintiff-Appellant-Petitioner, v. LABOR AND INDUSTRY REVIEW COMMISSION, DEPARTMENT OF INDUSTRY, LABOR AND HUMAN RELATIONS, and Michael R. Overholt, Defendants-Respondents.

No. 83-2294.

Supreme Court of Wisconsin.

Argued Sept. 6, 1985.

Opinion Filed Nov. 26, 1985.

Daniel R. Dineen, Milwaukee, for plaintiff-appellant-petitioner.

Glenn E. Kelley, Madison, for defendant-respondent, Labor and Industry Review Com'n Jon P. Axelrod, Douglas L. Flygt and DeWitt, Sundby, Huggett, Schumacher & Morgan, S.C., Madison, amicus curiae, for Wisconsin Motor Carriers Ass'n.

SHIRLEY S. ABRAHAMSON, Justice.

This is a review of a published decision of the court of appeals which affirmed the judgment of the circuit court for Walworth County, Circuit Judge John J. Byrnes. See Robert Hansen Trucking, Inc. v. LIRC, 121 Wis.2d 509, 360 N.W.2d 698 (Ct.App.1984). The circuit court had affirmed a decision of the Labor and Industry Review Commission (LIRC) that Michael Overholt was an employee of Robert Hansen Trucking, Inc., within the meaning of sec. 108.02(3), Stats.1981-82, rendering Robert Hansen Trucking liable for payment of unemployment compensation benefits to Michael Overholt. We reverse the decision of the court of appeals.

This case involves a fairly common employment configuration: a principal employer, an intermediate employer, and a claimant. Hansen Trucking is the principal employer; Don Laupp Trucking, a contractor, is the intermediate employer; and Michael Overholt, an individual hired by the contractor, is the claimant. The issue is whether Hansen Trucking or Laupp Trucking shall be liable for paying Overholt's unemployment benefits. Put another way, is Overholt an employee of Hansen Trucking or of Laupp Trucking, as the word "employee" is defined in sec. 108.02(3) of the Unemployment Compensation Act.

We hold that when a contractor, in fulfilling a contract with a principal, hires an individual for employment for which the contractor is subject to the contribution or reimbursement provisions of chapter 108 (sec. 108.02(3)(e), Stats.1981-82), the individual is an employee of the contractor and not of the principal. Accordingly, an individual's status as an employee of the principal depends on whether the intermediate employer is a contractor within paragraph (e) of sec. 108.02(3). Because LIRC did not decide Laupp Trucking's status under paragraph (e), we reverse the decision of the court of appeals and remand the matter to LIRC.

The facts are not in dispute. Robert Hansen Trucking, Inc., an interstate motor carrier, entered into a "Motor Vehicle Lease Agreement" with Don Laupp Trucking. The contract required Laupp Trucking to furnish a tractor and driver and pay the driver's compensation, the fuel costs, the permit fees, and other specified charges. Hansen Trucking would pay Laupp Trucking 82 percent of the gross revenue of each haul. As required by federal law, the contract provided that Hansen Trucking "shall have exclusive possession, control and use of the equipment for the duration of the lease and shall assume complete responsibility for the operation of the equipment for the duration of this lease." ¹

Laupp Trucking hired Overholt to drive the tractor and paid his salary less amounts withheld for taxes. Both Laupp Trucking and Hansen Trucking exercised control over various aspects of Overholt's driving. Overholt generally received work assignments from Hansen Trucking's dispatcher, but occasionally Laupp Trucking would choose the loads. Laupp Trucking gave Overholt driving and maintenance instructions and sometimes set the routes which Overholt would take. Hansen Trucking gave Overholt instructions on completing trip reports.

Overholt drove for about 5 weeks; Laupp Trucking then terminated Overholt's services, terminated the contract with Hansen Trucking, and proceeded to sell the tractor.

Overholt applied for unemployment compensation and named Laupp Trucking as his employer. The Department of Industry Labor and Human Relations (DILHR) and the LIRC Appeal Tribunal determined that Hansen Trucking was liable for Overholt's unemployment benefits. Hansen Trucking sought review by the circuit court, secs. 108.09(7) and 102.23, Stats.1981-82, which affirmed LIRC's decision. The court of appeals affirmed the judgment of the circuit court.

Both Hansen Trucking and LIRC agree that sec. 108.02(3), Stats.1981-82, governs this case. Sec. 108.02(3) defines the word "employee" for purposes of the Unemployment Compensation Act and provides as follows:

"(a) 'Employee' means any individual who is or has been performing services for an employing unit, in an employment, whether or not the individual is paid directly by such employing unit; except as provided in par. (b) or (e).

"(b) Paragraph (a) shall not apply to an individual performing services for an employing unit if the employing unit satisfies the department as to both the following conditions:

"1. That such individual has been and will continue to be free from the employing unit's control or direction over the performance of his services both under his contract and in fact; and

"2. That such services have been performed in an independently established trade, business or profession in which the individual is customarily engaged.

"(c) This subsection shall be used in determining an employing unit's liability under the contribution provisions of this chapter, and shall likewise be used in determining the status of claimants under the benefit provisions of this chapter.

"(d) Any individual who is, under this subsection, an 'employe' of a given employing unit shall be deemed 'employed' by that employing unit for the purposes of this chapter.

"(e) Paragraph (a) does not apply to a contractor who, in fulfillment of a contract with an employing unit, employs any individual in employment for which the contractor is subject to the contribution or reimbursement provisions of this chapter."

The central dispute between DILHR and Hansen Trucking involves the meaning and interrelationship of paragraphs (a) and (e) of sec. 108.02(3). In order to explain the parties' positions regarding the meaning of these paragraphs, we must discuss the amendments to sec. 108.02(3), which the legislature adopted in 1980. ²

The 1980 amendments added paragraph (e) and amended paragraph (a) by repealing the last sentence. Prior to the 1980 amendments paragraph (a) set forth the circumstances under which an individual hired by a contractor would be deemed an employee of the principal. Under paragraph (a) a principal could be liable for unemployment compensation for individuals hired by a contractor if the contractor was an employee and was not an employer subject to the contribution provisions of chapter 108. The pre-1980 version of paragraph (a) provided as follows:

"(3)(a) 'Employee' means any individual who is or has been performing services for an employing unit, in an employment, whether or not he is paid directly by such employing unit; except as provided in par. (b). If a contractor performing services for an employing unit is an employee under this subsection and not an employer subject to the contribution provisions of this chapter, a person employed by the contractor in fulfillment of his contract with the employing unit shall be considered the employe of the employing unit." (Emphasis supplied.)

In interpreting the pre-1980 version of sec. 108.02(3)(a) and (b), this court concluded that the contractor could be an employee of the principal for his or her unemployment compensation purposes and also be a covered employer. Furthermore, this court held that if the contractor was a covered employer, the individuals hired by the contractor were considered employees of the contractor, not employees of the principal, for the purposes of sec. 108.02(3). See Price County Telephone v. Lord, 47 Wis.2d 704, 715-17, 719, 177 N.W.2d 904 (1970); Sears, Roebuck & Co. v. ILHR Department, 90 Wis.2d 736, 753, 280 N.W.2d 240 (1979). Thus, under the pre-1980 statute it would have been appropriate to determine the status of Laupp Trucking in order to determine whether Overholt was an employee of Hansen Trucking or of Laupp Trucking.

The question the parties present is whether the repeal of the second sentence of paragraph (a) and the creation of paragraph (e) eliminate the necessity of making a determination of the status of a contractor to determine whether a hired individual is an employee of the principal or of the contractor. For the reasons we set forth, we conclude that the 1980 amendments did not negate the necessity of making this determination.

According to Hansen Trucking, the legislature's objective in amending paragraph (a) and in creating paragraph (e) was to provide that if a contractor is a covered employer, the contractor is not an employee of the principal. Hansen Trucking further contends that in adopting the 1980 amendments the legislature did not intend to change the employee status of individuals hired by a contractor.

Hansen Trucking urges that Laupp Trucking is a contractor who, in fulfillment of a contract with Hansen Trucking, employs Overholt in employment for which Laupp Trucking is subject to the contribution or reimbursement provisions of chapter 108. Sec. 108.02(3)(e). ³ Accordingly, argues Hansen Trucking, neither Laupp Trucking nor Overholt is an employee of Hansen Trucking for purposes of chapter 108.

LIRC contends that the analysis forwarded by Hansen Trucking would continue to give effect to language deleted from paragraph (a) in 1980 and would be contrary to the plain meaning of paragraph (e). LIRC claims that the plain meaning of sec. 108.02(3)(a) is that an individual who performs service for an employing unit (the principal) is an employee of that unit and that an individual may be excepted as an employee of the principal only if the principal demonstrates that the...