Yoshino v. Saga Food Service

• Decision Date: 19 April 1978
• Docket Number: No. 6024,6024
• Citation: 59 Haw. 139,577 P.2d 787
• Parties: Ryoji YOSHINO, Claimant-Appellee, v. SAGA FOOD SERVICE and John Mullen and Company, Employer, Insurance Carrier-Appellant, and Mid-Pacific Institute and First Insurance Company of Hawaii, Employer, Insurance Carrier-Appellee.
• Court: Hawaii Supreme Court

Page 787

577 P.2d 787

59 Haw. 139

Ryoji YOSHINO, Claimant-Appellee, v. SAGA FOOD SERVICE and John Mullen and Company, Employer,

Insurance Carrier-Appellant, and Mid-Pacific

Institute and First Insurance Company of

Hawaii, Employer, Insurance

Carrier-Appellee.

No. 6024.

Supreme Court of Hawai'i.

April 19, 1978.

Syllabus by the Court

1. The paramount consideration in determining whether an alleged special employer is in fact a special employer of an employee in workers' compensation lent employee cases is whether the alleged special employer exercises control over the details of the work of the loaned employee, and such control strongly supports the inference that a special employment exists.

2. Under HRS § 386-1, when an employee is loaned or hired out to another employer, the employee may be regarded as the exclusive employee of that other employer for purposes of workers' compensation benefits, notwithstanding the fact that the employee continues to be paid directly by his or her original employer.

3. Before an employer can be held fully responsible for the workers' compensation benefits to which an employee loaned or hired out to that employer is entitled, two conditions must be met under HRS § 386-1: first, the employee must be loaned or hired out to the employer for the purpose of furthering that employer's trade, business, occupation, or profession, and, second, control of the employee must be transferred from the original employer to that second employer. If these two conditions are met, the employee will then be considered to be the employee of the second ("special") employer, and that special employer will then become responsible for payment of all workers' compensation benefits to which the employee is entitled.

4. Provision of free lodging by original employer to its employee while the employee was loaned to special employer does not, under facts of this case, create any "enhanced" relationship between general employer and lent employee for purposes of determining responsibility for payment of workers' compensation benefits.

5. This Court cannot conclude that the substantial rights of the parties will be prejudiced by the findings and conclusions reached by the Labor and Industrial Relations Appeals Board where the record fails to reveal any clear error, arbitrariness or capriciousness, or abuse of discretion on the part of the Board.

Edward M. Sanpei, Honolulu (Conroy, Hamilton, Gibson, Nickelsen & Rush, Honolulu, of counsel), for employer, insurance carrier-appellant.

Jeffrey S. Portnoy, Honolulu (Cades Schutte Fleming & Wright, Honolulu, of counsel), for employer, insurance carrier-appellee.

Before RICHARDSON, C. J., and KOBAYASHI, OGATA, MENOR and KIDWELL, JJ. OGATA, Justice.

Saga Food Service (Saga) and its insurer, John Mullen and Company (Mullen), appeal from a decision rendered by the Labor and Industrial Relations Appeals Board (Board). The Board's decision, which affirmed an earlier decision of the Director of Labor and Industrial Relations, awarded workers' compensation benefits to Claimant Ryoji Yoshino (Yoshino), with payment of such benefits being assessed entirely against Saga and Mullen. No liability for workers' compensation benefits was assessed by the Board against Mid-Pacific Institute (Mid-Pacific) and its insurer, First Insurance Company of Hawaii.

Saga's contention is that Mid-Pacific and Saga were joint employers of Yoshino, and, as a result, Mid-Pacific should be required to share with Saga any liability for workers' compensation benefits awarded to Yoshino. We are of the view that under the provisions of HRS § 386-1 (1976 Repl.), Saga was the sole employer of Yoshino, and Saga was thus liable for the full measure of workers' compensation benefits awarded to Yoshino. Hence, we affirm the decision and order of the Board.

There is no dispute as to the facts. The Mid-Pacific Institute is a private educational institution located in Honolulu. In conjunction with its educational programs, Mid-Pacific has provided room and board for its students. Yoshino was employed as a chef by Mid-Pacific from 1947 until July, 1971. Beginning July 1, 1971, Saga began to operate the Institute's food service, which had theretofore been operated entirely by Mid-Pacific. A written agreement between Mid-Pacific and Saga, which was dated July 1, 1972, regarding Saga's operation of the food service was in effect at the time that Yoshino's injury occurred in 1973.

The termination by Mid-Pacific of its own operation of the food service would ordinarily have necessitated Yoshino's release from employment by Mid-Pacific. However, rather than terminate Yoshino's employment, Mid-Pacific reached an agreement with Saga whereby Yoshino would remain as a chef in the food service operation to be run by Saga. Pursuant to that agreement, Yoshino remained on the Mid-Pacific payroll, although Saga reimbursed Mid-Pacific for the wages and benefits paid by Mid-Pacific to Yoshino. ¹ This arrangement enabled Yoshino to continue to be eligible for retirement benefits from Mid-Pacific. These benefits would have otherwise been lost to Yoshino if Mid-Pacific had released him from its payroll. It was for the sole purpose of preserving Yoshino's eligibility for retirement benefits that this employment arrangement was negotiated between Mid-Pacific and Saga.

Therefore, from July 1, 1971, until the time of his industrial accident, Yoshino continued in his capacity as Head Chef at the Mid-Pacific Institute food service facility under the management supervision of Saga. As Head Chef, Yoshino supervised other food service employees and was responsible for the timely and satisfactory completion of food preparation. Yoshino was immediately responsible, however, to a Food Service Director employed by Saga at the Mid-Pacific facility.

Saga thus arranged all menus, ordered all food supplies, and gave Yoshino full instructions regarding menu preparation. In addition, Saga prescribed other details of Yoshino's employment, such as hours of duty, break periods, vacation schedule, overtime employment, days off, and other rules regarding conduct at work. It also furnished uniforms to Yoshino and bore the expense of laundering those uniforms. However, Saga was understood to have been required to consult with Mid-Pacific in the event that any disciplinary action, change in wage or fringe benefits, or termination of employment was contemplated by Saga with respect to Yoshino.

Yoshino worked for Saga for approximately ten-and-a-half months out of the year. This period coincided with the regular nine-month school year plus approximately one-half of the summer period. For the remaining one-half of the summer period, Yoshino was employed exclusively by Mid-Pacific, which operated the food service facility during that period in conjunction with summer conferences and similar events.

Besides preparing food for Mid-Pacific Institute, Saga also utilized the Mid-Pacific food service facility to prepare food on a regular basis for three other schools in the area. Saga then turned over to Mid-Pacific a portion of the income from these three other schools as compensation for Saga's use of the Mid-Pacific facility.

Yoshino was injured on February 25, 1973, while moving a metal rack containing a large number of pies. He was pushing the rack into a freezer when he twisted his back and neck. None of the parties disputes the fact that Yoshino's injuries arose out of and in the course of his employment and are thus compensable under our Workers' Compensation Law. ² See HRS § 386-3 (1976 Repl.).

Saga concedes that it is responsible for at least a portion of the workers' compensation benefits payable to Yoshino. However, it argues that the Board erred in assessing full liability for those benefits upon Saga and its insurer, Mullen. The sole controversy, therefore, is whether Saga alone, or whether both Saga and Mid-Pacific, will be held liable for the workers' compensation benefits payable to Yoshino.

In reaching its decision, the Board utilized two general tests for determining whether more than one employer is liable for workers' compensation benefits. One test was referred to as the "relative nature of the work test", which involves a balancing of factors regarding the general relationships which the employee has with regard to the work performed for each of his employers. The other test, called the "control test", looks to the degree of control exercised by each employer with regard to the employee. Although the Board utilized both of these tests in reaching its decision, it stated a clear preference for the relative nature of the work test.

While we agree with the result reached by the Board in finding Saga solely responsible for Yoshino's workers' compensation benefits, we must disapprove of the Board's primary emphasis upon the relative nature of the work test. Our decision in Kepa v. Hawaii Welding Co., 56 Haw. 544, 545 P.2d 687 (1976), which we acknowledge was decided subsequent to the Board's decision in the instant case, made clear that the control test is the primary guideline for determining whether an employer is a special employer for workers' compensation purposes. As we stated in Kepa :

The paramount consideration in determining whether the alleged special employer is in fact a special employer of the worker in workmen's compensation lent employee cases is whether the alleged special employer exercised control over the details of the work of the loaned employee and such control strongly supports the inference that a special employment exists.

Id. at 548, 545 P.2d at 691.

The present case certainly falls within the ambit of the "lent employee" provisions of HRS § 386-1 (1976 Repl.), ³ and the Kepa rule stated above is thus applicable here. It is clear...