State Compensation Ins. Fund v. Workers' Comp. Appeals Bd.

• Decision Date: 17 October 1985
• Citation: 706 P.2d 1146,219 Cal.Rptr. 13,40 Cal.3d 5
• Court: California Supreme Court
• Parties: , 706 P.2d 1146 STATE COMPENSATION INSURANCE FUND, Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD and Virgil J. Meier, Respondents. L.A. 32046.

Page 13

219 Cal.Rptr. 13

40 Cal.3d 5, 706 P.2d 1146

STATE COMPENSATION INSURANCE FUND, Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD and Virgil J. Meier, Respondents.

L.A. 32046.

Supreme Court of California,

In Bank.

Oct. 17, 1985.

Richard A. Krimen, Michael J. Brodie, Arthur Hershenson, Fernando Da Silva and Robert A. La Porta, San Francisco, for petitioner.

Samuel E. Meredith and Goshkin, Pollatsek, Meredith & Lee as amici curiae on behalf of petitioner.

Boone & Lampi by William R. Lampi, Mammoth Lakes, for respondents.

Jim Mills, Mills, Lane & Drace, A Professional Ass'n as amici curiae on behalf of respondent Meier.

BROUSSARD, Justice.

The workers' compensation appeals judge found that applicant Virgil J. Meier was an employee of Warren Chichester when injured and awarded compensation benefits. The Workers' Compensation Appeals Board denied reconsideration, and in this review proceeding the State Compensation Insurance Fund claims that the judge and board erred in concluding that the penultimate paragraph of Labor Code section 2750.5 required a determination that applicant Chichester owns a small ranch which he works with his son. Wanting to construct a bedroom and a bath in the attic of his ranch house with a stairway providing access, Chichester approached Meier and discussed the project.

was an employee and not an independent contractor. ¹

Meier submitted a bid on a sheet from a Pacific Structural Concrete scratch pad for $9,493, and the bid was accepted. The bid also provided that if Chichester's son worked on the job $7 per hour would be deducted from the bid price. While Meier testified that the bid was based on a figure of $15 per hour for his time, the bid included all labor and material and did not purport to be based on an hourly wage plus materials. Meier furnished whatever plans were utilized, purchased and supplied all materials, and provided all tools used except that Chichester's son furnished his own hammer and nail apron. Meier hired another man to help with the work and paid him with a personal check. Neither Chichester nor his son controlled the manner in which the work was done.

Meier did not have a contractor's license or work under anyone else's license. Chichester did not ask whether he was licensed, and he did not say that he was not. He had held a general contractor's license for about eight years until 1969 when he went bankrupt. He thereafter did concrete work, carpentry, and job estimates. He did numerous jobs, and at one time was vice-president of Pacific Structural Concrete. Using his brother's contractor's license, he built a home for Tony Leon, and Leon recommended him to Chichester.

While working on the remodeling job, Meier fell from a scaffold sustaining a broken neck which rendered him a quadriplegic.

Chichester and his son do most of the ranch work themselves without other employees. The son as an employee of the ranch business was covered by a workers' compensation policy issued by State Compensation Insurance Fund. After the injury, an arrangement was made to pay premiums on Meier's salary. However, State Fund concluded Meier was an independent contractor, refunded the premiums, and ceased paying benefits.

At the hearing before the compensation judge, it was stipulated that the work being done by Meier at the time of injury required a contractor's license. The judge determined that under Labor Code section 2750.5 and the decision in Travelers Ins. Co. v. Workers' Comp. Appeals Bd. (1983) 147 Cal.App.3d 1033, 195 Cal.Rptr. 564, the defense of independent contractor was not available where a worker performing any function or activity for which a contractor's license was required did not have the requisite license. The judge also determined that Meier was not estopped to deny he had a license. In denying reconsideration, the board adopted the judge's determinations.

State Fund argues (1) that the penultimate paragraph of section 2750.5 is not applicable in workers' compensation proceedings, (2) that even if it has some applicability in such proceedings, it is only applicable where the worker is seeking independent contractor status and is not applicable where the worker seeks employee status, and (3) that an unlicensed worker who contracts with a homeowner to undertake remodeling requiring a contractor's license without disclosing the lack of a license should be estopped to deny his status as an independent contractor.

THE STATUTES

Divisions 4 and 4.5 of the Labor Code deal with workers' compensation. Section 3353, found in division 4, provides: " 'Independent contractor' means any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished."

Section 2750.5 is in division 3 of the Labor Code. Section 2700 which is also in that division was adopted in 1937. (Stats. 1937, ch. 90, p. 258.) It states: "The provisions of this division shall not limit, change, or in any way qualify the provisions of Divisions 4 and 4.5 of this code, but shall be fully operative and effective in all cases where the provisions of Divisions 4 and 4.5 are not applicable."

Labor Code section 2750.5 enacted in 1978 provides in its first paragraph for a rebuttable presumption affecting the burden of proof that a person for whom a license is required pursuant to chapter 9 (commencing with § 7000) of division 3 of the Business and Professions Code is an employee rather than an independent contractor. The section then provides for the factors which may rebut the presumption. They are listed in subdivisions (a), (b) and (c).

The last two paragraphs were not in the original bill but were added by amendment. The penultimate paragraph of Labor Code section 2750.5 provides: "In addition to the factors contained in subdivisions (a), (b), and (c), any person performing any function or activity for which a license is required pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code shall hold a valid contractors' license as a condition of having independent contractor status." The final paragraph as amended in 1979 (Stats.1979, ch. 605, p. 1879), provides: "For purposes of workers' compensation law, this presumption is a supplement to the existing definition of employee and independent contractor, and is not intended to lessen the coverage of employees under Division 4 and Division 5." ² When originally enacted in 1978, the final paragraph contained the words "of Section 3353 of the Labor Code" instead of the words "of employees under Division 4 and Division 5." (Stats.1978, ch. 1246, p. 4058.) ³

APPLICABILITY OF SECTION 2750.5

Three Court of Appeal cases have concluded that the penultimate paragraph of section 2750.5 is applicable in workers' compensation cases. In Foss v. Anthony Industries (1983) 139 Cal.App.3d 794, 189 Cal.Rptr. 31, a wrongful death action, the trial court concluded that section 2750.5 was applicable only to workers' compensation cases and was not applicable to tort cases. Pointing out that Assembly Bill No. 3429 (1978 Reg.Sess.) which ultimately became the section did not refer to workers' compensation as originally introduced, the appellate court concluded that the section applies to both workers' compensation and tort cases. The court relied in part on section 2700. (139 Cal.App.3d at pp. 797-799, 189 Cal.Rptr. 31.) (The court ultimately held that the penultimate paragraph could not be applied in the case before it because the paragraph made a substantive change in the law and was enacted between the accident and the trial.) (139 Cal.App.3d at pp. 799-800, 189 Cal.Rptr. 31.)

In the second case, Fillmore v. Irvine (1983) 146 Cal.App.3d 649, 657, 194 Cal.Rptr. 319, the court also by way of dictum stated that section 2750.5 was applicable to workers' compensation cases. In that case, an unlicensed worker sought to recover on a contract for services, and the defendants claimed that the action was barred by Business and Professions Code section 7031 which precludes action by an unlicensed contractor to collect the agreed compensation or to foreclose a mechanics lien. The case held that the penultimate paragraph was not applicable to such cases. The court reasoned in part that to apply the penultimate paragraph to determine that the worker was an employee rather than a contractor would work an implied repeal of section 7031.

The third case, Travelers Ins. Co. v. Workers' Comp. Appeals Bd. (1983) 147 Cal.App.3d 1033, 195 Cal.Rptr. 564 (Taylor), like the instant case, involved a claim for workers' compensation, and the court held that the penultimate paragraph of section 2750.5 "means that no person who performs any work for which a contractor's license is required shall be found to be an independent contractor unless such person holds a valid contractor's license." (147 Cal.App.3d at p. 1037, 195 Cal.Rptr. 564.) However, while the court affirmed an award of compensation benefits, it does not appear that the parties called section 2700 to the court's attention or argued that the penultimate paragraph of section 2750.5 should not be applied in workers' compensation cases.

We have concluded that section 2750.5, including the penultimate paragraph, must be interpreted as applying to workers' compensation cases. Although section 2700 states that the division is not applicable to workers' compensation but only to other matters, section 2700 was adopted in 1937, and the subsequent enactment and amendment of section 2750.5, including the last paragraph, show clearly that it was intended to have an effect in workers' compensation cases. The subsequently enacted special provision takes precedence over the general provision. (Code Civ.Proc., § 1859; Agricultural Labor Relations Board v. Superior Court (1976) 16 Cal.3d 392, 420, 128 Cal.Rptr. 183, 546 P.2d 687.) The...