White v. RGV Pizza Hut
| Decision Date | 11 June 2021 |
| Docket Number | 239,122 |
| Court | Court of Appeals of Kansas |
| Parties | Daniel White, Appellee, v. RGV Pizza Hut and Argonaut Insurance Co., Appellants. |
NOT DESIGNATED FOR PUBLICATION
Appeal from Workers Compensation Board. Opinion filed June 11, 2021. Affirmed and remanded with directions.
Kip A Kubin, of Martin Pringle Attorneys at Law, of Overland Park for appellants.
Brian D. Pistotnik, of Pistotnik Law Offices, L.L.C., of Wichita for appellee.
Before Bruns, P.J., Green and Atcheson, JJ.
RGV Pizza Hut contends that as a Texas corporation it cannot be liable under the Kansas Workers Compensation Act merely because it contracted with Shomberg, Inc., a Kansas corporation, to paint restaurants in its home state. Daniel White, an employee of Shomberg, fell and was seriously injured working at one of RGV's restaurants. But Shomberg had neither workers compensation insurance nor the financial resources or a legal obligation to pay benefits that might be due White. Although RGV has no ongoing ties to Kansas, the Workers Compensation Appeals Board ruled that the company can be legally liable for those benefits as a statutory employer. RGV has appealed that ruling.
The Kansas Workers Compensation Act covers employees of Kansas corporations who are injured while working outside the state. K.S.A. 44-506. So Shomberg could be held to account for White's covered injuries. Likewise, under the Kanas Workers Compensation Act, a corporation that subcontracts out work that is an integral or inherent part of its business may be liable for benefits due employees of the subcontractor. K.S.A. 44-503(a). On appeal, RGV has failed to show that, in tandem, those provisions do not impose workers compensation liability on it. Moreover, by contracting with a Kansas business for onsite labor, RGV submitted to personal jurisdiction in Kansas for workers compensation proceedings consistent with the Due Process Clause of the Fourteenth Amendment to the United States Constitution.
The Board also found that White properly availed himself of the protections in K.S.A. 2020 Supp. 44-523(f)(2) to avert having his claim for benefits dismissed for lack of prosecution.
We find no error in the Board's resolution of those points. We, therefore, affirm the Board's decision and remand this case for further proceedings consistent with this opinion.
For purposes of the issues on appeal, the underlying facts can be stated succinctly. RGV owns and operates 45 Pizza Hut restaurants in Texas. Under the franchise agreement with Pizza Hut, RGV must run the restaurants in conformity with detailed rules governing product preparation, physical layout and appearance, and other matters. Pertinent here, the agreement requires RGV to keep the roofs of the restaurants in good repair and specifies the color the roofs must be painted. Pizza Hut may terminate the franchise agreement if RGV violates its terms.
RGV has no restaurants in Kansas and does not otherwise extensively or regularly conduct business in this state. Over the years, RGV has contracted with Shomberg from time to time to clean, repair, and paint the roofs on its Pizza Hut restaurants. This is skilled work done with specialized equipment that requires some training and experience to operate. Likewise, the work is done on pitched roofs well above ground level, so there is a predictable, if statistically small, risk of injury for a literal misstep. RGV has never had its own employees do any work on the roofs. Nor does the company own equipment used to clean or paint the roofs.
In April 2016, Chris Wicker, the longtime general manager of RGV and a principal in the company, contacted Christian Shomberg, the owner of Shomberg, to arrange for the maintenance and painting of the roofs of about 10 of the Pizza Hut restaurants. Christian Shomberg had begun to wind down that business in favor of other commercial enterprises. Nonetheless, he agreed to have Shomberg do the roofing work for RGV. The communications between Wicker and Christian Shomberg consisted largely of e-mails; the two companies never signed a written contract for the 2016 work.
Christian Shomberg placed an advertisement for workers skilled in commercial roof maintenance and painting. White responded, and he was hired. Christian Shomberg and White apparently did a little work before heading to Texas-mostly so Christian Shomberg could assess White's skills. For this appeal, we consider White to be an employee of Shomberg under the Workers Compensation Act. That employment relationship was not in dispute before the Board.
Christian Shomberg, White, and a third person went to Texas to do the work for RGV. In November 2016, White fell from the roof of one of the restaurants and seriously injured his leg. The injury required surgery. White later testified that he walked with a limp and began experiencing back and hip pain. Again, for purposes of this appeal, there is no dispute White's injury occurred in the scope and course of his employment with Shomberg and is covered under the Workers Compensation Act. Everyone also agrees Shomberg is not available as a source of workers compensation benefits, and the company has been dismissed from this action. The principal issues before us are whether RGV may be substituted for Shomberg as a statutory employer under K.S.A. 44-503 and whether that substitution would offend the Due Process Clause by imposing personal jurisdiction over RGV despite its limited contacts with Kansas as the forum state. Given the procedural progression of the case, neither the administrative law judge nor the Board has considered what benefits, if any, White may be entitled to receive.
RGV has appealed adverse rulings of the Board, so this appeal comes to us through the Kansas Judicial Review Act, K.S.A. 77-601 et seq. K.S.A. 2020 Supp. 44-556(a). The scope of our review and the kinds of errors we may correct are set out in K.S.A 77-621. RGV bears the burden of establishing reversible error. K.S.A. 77-621(a)(1). We do not see that the primary issues turn on material factual disputes; we, therefore, exercise review without deference to the Board's resolution of what are functionally questions of law. See Mera-Hernandez v. U.S.D. 233, 305 Kan. 1182, 1185, 390 P.3d 875 (2017).
Shomberg and White had an employment relationship that triggered coverage under the Workers Compensation Act. As provided in K.S.A. 44-506, that coverage extended to the on-the-job injury White suffered in Texas.
The Workers Compensation Act also provides that commercial entities contracting out work may in some circumstances become liable for benefits due the subcontractor's employees for on-the-job injuries sustained while performing the subcontract. K.S.A. 44-503(a). The principal contracting out the work is then considered a "statutory employer" under the Workers Compensation Act. See Bright v. Cargill, Inc., 251 Kan. 387, 390, 837 P.2d 348 (1992). The Board found RGV to be a statutory employer of White.
Under K.S.A. 44-503(a), a principal becomes a statutory employer if it subcontracts work that is "part of [its] trade or business" or that it "has contracted to perform." The Board found that RGV's business included maintaining and painting the roofs of the Pizza Hut restaurants, thus comporting with the first test for a statutory employer. One Board member concurred, finding that RGV had contracted with Pizza Hut to maintain and paint the restaurant roofs and, in turn, subcontracted that work to Shomberg, satisfying the second test in K.S.A. 44-503(a). We discount the concurrence. The franchise agreement obligates RGV to keep up the appearance of its restaurants but does not specify a means for accomplishing that obligation. In other words, RGV did not contract with Pizza Hut to perform the roof maintenance and painting with its own employees. So RGV wasn't contracting out specific work duties it had agreed to perform when it hired Shomberg.
The Kansas Supreme Court has developed two independent criteria for determining when a principal becomes a statutory employer under the first test set out in K.S.A. 44-503(a): (1) the subcontracted work is "inherent in and an integral part of [its] trade or business"; or (2) the subcontracted work "ordinarily [would] have been done by [its] employees." Hanna v. CRA, Inc., 196 Kan. 156 Syl. ¶ 1, 409 P.2d 786 (1966); see Bright, 251 Kan. 387, Syl. ¶ 3 (endorsing Hanna criteria). Either is sufficient to impose statutory employer status under the Workers Compensation Act. In Bright, the court refined the first criterion to focus the assessment of inherency and integrality on whether similar business entities perform the work with their own employees. 251 Kan. at 399. Thus, the first criterion looks at whether businesses in a particular industry or commercial field typically perform the work with their own employees. If so, a business subcontracting the work will be considered a statutory employer of the subcontractor's workers. The second criterion looks at what the responding employer itself typically does. If it usually performs the work but subcontracted on a specific occasion, it becomes the statutory employer of the subcontractor's workers. Here, everyone agrees the second criterion does not apply to RGV, since it does not do roof maintenance and painting with its own employees and never has.
The operative language in K.S.A. 44-503(a) has remained intact through multiple revisions of the Workers Compensation Act. The standards for a statutory employer continue to be those set out in Hanna as modified in Bright. See Ramirez v. Garay's Roofing, No. 119, 948, 2019 WL 3367831, at *3-4 (Kan. App. 2019) (unpublished...
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