Opinion
CLAIM NO. E602244
OPINION FILED JULY 13, 1998
Upon review before the FULL COMMISSION in Little Rock, Pulaski County, Arkansas.
Claimant represented by the HONORABLE KENNETH BUCKNER, Attorney at Law, Pine Bluff, Arkansas.
Respondent represented by the HONORABLE BETTY DEMORY, Attorney at Law, Little Rock, Arkansas.
Decision of the Administrative Law Judge: Affirmed.
OPINION AND ORDER
[2] The respondent appeals an opinion and order filed by the administrative law judge on July 28, 1997, finding that the claimant was an employee of the respondent and awarding benefits for a compensable injury. For the reasons set out below, we find that the administrative law judge reached the correct decision and her opinion is, accordingly, affirmed.The claimant sustained a severe crush injury to his left foot on September 26, 1995. The injury occurred when a tree the claimant was attempting to cut down "kicked back", smashing his left foot. The claimant contends that, at the time of his injury, he was an employee of the respondent employer. The respondent contends that the claimant was an independent contractor and not an actual employee. In support of that contention, the respondent relies upon a Certificate of Non Coverage issued by the Commission, indicating that the claimant was a sole proprietor who had no employees. The claimant responded by arguing that he was, at no time, an independent contractor or sole proprietor and that he was an employee of Randy Wiggins Logging. The claimant further states that the Certificate of Non Coverage was obtained either by deception or fraud and that it should not operate as a bar to his claim.
The administrative law judge found that the claimant was an employee of the respondent and further held that the Certificate of Non Coverage was without effect. The administrative law judge reached that conclusion based upon the fact that the claimant did not appear to have the requisite experience or knowledge to function as a sole proprietor, and the fact that the application that he filed for the Certificate of Non Coverage was not knowingly made. The administrative law judge also cited various factors that can be considered in determining whether or not an individual is an employee or a sole proprietor and found that the evidence overwhelmingly supported the conclusion that the claimant was an employee. The administrative law judge also cited Ark. Code Ann. § 11-9-108 (a), which provides that an employee cannot, by agreement, waive any rights he may have to workers' compensation benefits. From that decision, the respondent has filed the present appeal.
There does not appear to be any dispute that the claimant did suffer an injury to his foot while cutting down a tree as he described. However, the issue in this case is whether the claimant was an employee or an independent contractor at the time of his injury.
The Courts in Arkansas have considered this issue on many occasions. In reaching a determination as to whether a particular claimant is, or is not, an independent contractor, the Courts have designated a number of factors that can be considered in reaching that conclusion. In Franklin v. Arkansas Craft, Inc., 5 Ark. App. 264, 635 S.W. 2d 286 (1982), the following factors were listed as those that may be considered depending upon the facts of the given case:
1. The right to control the means and method by which the work is done;
2. The right to terminate the employment without liability;
3. The method of payment, whether by time, job, piece, or other unit of measurement;
4. The furnishing, or the obligation to furnish, the necessary tools, equipment, and materials;
5. Whether the person employed is engaged in a distinct occupation or business;
6. The skill required to do a particular occupation;
7. Whether the employer is in business;
8. Whether the work is an integral part of the regular business of the employer; and
9. The length of time for which the person is employed.
In considering those factors, we note that the Courts and the Commission have frequently placed emphasis upon the amount of control an employer has exercised over the claimant. This is sometimes referred to as the relative nature of the work test. See Silvicraft, Inc. v. Lambert, 10 Ark. App. 28, 661 S.W.2d 403 (1983). In the Lambert case, the claimant was a log hauler. The claimant in that case was furnished a pulp wood truck by the respondent, but the respondent withheld the cost of the truck from the wages being paid to the claimant. Also, the claimant signed a promissory note for the truck in question. Apparently, the claimant was directed to the timber that was to be cut, and after cutting it, he delivered it to Silvicraft. Also, Silvicraft did not withhold income taxes or social security taxes from the claimant's pay checks.
The Court in Lambert affirmed the Commission's decision finding that the claimant was an employee of the respondent. In reaching that conclusion, the Commission had apparently relied upon the fact that the employer exercised a great deal of control over the claimant and that the claimant could have been terminated by the respondent, that the respondent had co-signed, and otherwise financed a note on the claimant's truck and that the note could have been called in had the claimant intended to haul pulp wood for one of the respondent's competitors; that the respondent's sole business was that of purchasing pulp wood from private owners and that the respondent could not have performed its work without the services of the claimant and other similar persons; and that the claimant had been employed for a significant period of time by the respondent and would have continued to be employed by them except for his injury.
In reviewing the facts of the present claim, we note that there was no form of written agreement between the parties setting out what the relationship was between the claimant and the respondent. Also, it does not appear that the respondent made any withholdings for payment of social security taxes or income taxes from monies paid to the claimant. It is also significant that the parties were able to terminate their employment at will, without penalty. In fact, the record indicates that the claimant had worked for the respondent on previous occasions. Also, it is not disputed that the respondent did provide the claimant a chain saw, chaps, and a tape measure to be used during his employment. It was also agreed that the respondent was withholding money from the claimant's pay checks for the cost of this equipment.
The claimant was transported from his home to the work site by Mr. Randy Wiggins, the owner of the respondent employer. Once at the job site, the claimant would continue to work sawing logs and would spend the night at the work site in a camper furnished by the employer. The testimony also indicated that Mr. Wiggins remained on the job site during the day overseeing the loading of logs and otherwise supervising the operation.
Both Mr. Wiggins and his wife testified at the hearing. Mrs. Wiggins stated that she was the bookkeeper and generally handled the business's paper work. She stated that she was not aware that the claimant had ever worked for the respondent as an employee. She insisted that his status was that of a subcontractor. According to Mr. Wiggins, the claimant was hired as an independent contractor. He also stated that the claimant, and his other workers, were free to leave the job site at any time that they wished. Mr. Wiggins stated that he provided transportation to the claimant merely as a convenience for the claimant since the claimant did not have an automobile.
In applying the facts of this case to the factors identified by the Court of Appeals in the Lambert decision, we are of the opinion that the claimant was an employee and not an independent contractor. The claimant testified that he did not believe that he was an independent contractor nor did he consider himself as an owner of a business. We also note that when the claimant was hired, he, even by the admission of Mr. Wiggins, did not have adequate tools or equipment necessary to perform his job duties. Also, the claimant was clearly under the direct supervision and control of Mr. Wiggins throughout his employment with him. It is equally apparent that the contract of employment was subject to being terminated by either party at will. It is also obvious from the testimony of the claimant and Mr. Wiggins that the claimant was in no way in a position to be a sole proprietor or, in any other way, operate his own business. The claimant lacked the resources to buy his own equipment, furnish his own transportation, or perform any other task normally associated with operating a business. The claimant also stated that he was unfamiliar with the terms sole proprietor, independent contractor, subcontractor, or similar definitions. In short, it is apparent that the claimant does not have the business acumen or experience sufficient to allow him to manage a business operation of his own.
We also note that the facts of this case are somewhat similar to the Silvicraft v. Lambert decision, cited above. In Lambert, the claimant was furnished equipment in a manner similar to the method used here. Also, both claimants testified that they cut the timber they were told to cut by their employer. Likewise, both employees were under the direct supervision and control of the employers in question and even though it is alleged that both claimants were independent contractors, there was no formal written agreement or contract evidencing such a relationship. For the reasons set out above, we find that claimant was an employee of the respondent employer for workers' compensation purposes.
Another issue which must be considered in this case is the effect of the Certificate of Non-Coverage issued to the claimant. In this regard, the record reflects that on or about August 25, 1995, the claimant was transported from the job site to an insurance agency in Fordyce, Arkansas. The claimant testified that this trip was made after he was advised by Mr. Wiggins that he needed to make some arrangements for insurance. The claimant stated that Mr. Wiggins transported him to an insurance agent in Fordyce, where he signed some documents which, according to the claimant, he thought, were to provide him with insurance coverage. The claimant stated that he did not read these documents as he trusted Mr. Wiggins. The claimant testified that he was only at the insurance agent's office for about ten minutes and after signing the documents, Mr. Wiggins paid the insurance agent a fee of $100.00.
Mr. Wiggins stated that he did transport the claimant to an insurance agent's office but he did not remain after dropping the claimant off. He also denied having paid the agent, or anyone else, a $100.00 fee on that day.
The insurance agent also testified in the case. He stated that he did remember meeting with the claimant on or about August 25, 1995, however, he stated that he conducted a detailed discussion with the claimant regarding workers' compensation coverage and the difference between sole proprietors and employees. He also stated that the claimant advised him that he was a sole proprietor and that he did not wish to pay the premium for workers' compensation insurance of approximately $8,600.00. After that discussion, the agent stated that he had his secretary prepare an application for a Certificate of Non-Coverage along with a questionnaire for his own reference and had the claimant sign both documents. He further stated that he then sent the application for the Certificate of Non-Coverage to the Workers' Compensation Commission. He testified that he charged the claimant a fee of $100.00 for performing this "service".
Two sections of the Workers' Compensation Act would appear to apply to the present issue. Ark. Code Ann. 11-9-108 (A) provides as follows:
No agreement by an employee to waive his right to compensation shall be valid, and no contract, regulation, or device whatsoever shall operate to relieve the employer or carrier, in whole or in part, from any liability created by this chapter, except as specifically provided elsewhere in this chapter.
Another statute that relates to this topic is Ark. Code Ann. § 11-9-402 (c) (1) (B) (i). That section provides as follows:
A sole proprietor or the partners of a partnership who do not elect to be covered by this chapter and be deemed employees thereunder and who deliver to the prime contractor a certification of non coverage issued by the Workers' Compensation Commission shall be conclusively presumed not to be covered by the law or to be employees of the prime contractor.
The obvious intent of Ark. Code Ann. § 11-9-108 (A) is to prevent employees, as a result of coercion or persuasion, or because of a lack of information, from executing a waiver or other document that relieves their employer of the obligation to provide workers' compensation coverage. On the other hand, Ark. Code Ann. § 11-9-402 (c) (1) (B) (i) is designed to allow subcontractors, who are functioning as an independent business, and who are not required to have workers' compensation insurance because they have no employees, to avoid having a general contractor or prime contractor require them to purchase workers' compensation insurance by withholding the cost of the premium from what they were paid.
Significantly, the Certificate of Non-Coverage statute indicates that, when sole proprietors or partners of a partnership obtain such a certificate, they are conclusively presumed not to be covered by the law or to be employees of the prime contractor. The respondent is relying upon that section to act as a bar to the present claim. They contend that the fact that the claimant obtained a Certificate of Non-Coverage constitutes a conclusive finding that he is, in fact, an independent contractor and is not the employee of the respondent herein. However, if the statute is interpreted in the manner suggested by the respondent, and the person attempting to obtain the Certificate of Non Coverage is an employee, then a direct conflict is created with Ark. Code Ann. § 11-9-108 (a). After all, if an employee could obtain a Certificate of Non Coverage by filling out an application and sending it to the Workers' Compensation Commission, and if the issuance of such a certificate would then relieve their employer of workers' compensation coverage, then the application would effectively function as a waiver.
In our opinion, this is clearly not the result intended by the legislature when the Commission was authorized to issue Certificates of Non Coverage. The certificates were intended to be issued only to sole proprietors or partners who were conducting independent businesses. We do not believe that it was intended to act as a "waiver" for individuals who are employees. If the latter were the case, then employers could avoid the Workers' Compensation Act simply by declaring that their employees were independent contractors and terminating any who would not obtain a Certificate of Non-Coverage. Obviously, such a situation is contrary to the purposes and objectives of the Workers' Compensation Act.
We also note that the legislature has directed the Commission and the Courts to strictly interpret the Workers' Compensation Act. Since the statute in question only permits sole proprietors or partners in a partnership to obtain a Certificate of Non-Coverage, we believe that it would be a significant expansion of the Workers' Compensation Act to interpret it in such a manner that employees were able to obtain Certificates of Non-Coverage so as to act as a waiver. Such a holding would constitute a significant expansion of the Workers' Compensation Act, something that is expressly prohibited by the Act. See Ark. Code Ann. § 11-9-1001.
For the reasons set out above, we hold that Certificates of Non-Coverage are only effective for sole proprietors or partners in a partnership at the time the certificate is applied for. Such a result would act to permit those for whom the statute is intended to benefit, to obtain certificates unimpeded, and would prevent the use of certificates as waivers to avoid an employer's statutory obligation to provide workers' compensation coverage to his employees.
We also note that the insurance agent testified that it was his routine practice to charge people $100.00 to "assist" them in obtaining a Certificate of Non-Coverage. We find it disturbing that a person would charge $100.00 for providing an application for a Certificate of Non-Coverage when those certificate forms can be obtained by simply calling a toll free number to any of the Workers' Compensation Commission's offices. The form itself merely requires the applicant to answer three yes or no questions and to mail the form back to the Commission's Little Rock office. Accordingly, we are referring this file to the Workers' Compensation Fraud Investigation Unit of the State Insurance Department for investigation.
For the reasons set out above, we find that the claimant was an employee of the respondent on or about September 26, 1995, and that the injury he sustained upon that date was incurred while acting in the course of his employment. Accordingly, the respondent is ordered to provide to the claimant all appropriate workers' compensation benefits, including reasonable and necessary medical care and temporary and permanent disability benefits.
All accrued benefits awarded herein shall be paid in a lump sum without discount. This award shall also bear interest at the maximum legal rate until paid. The claimant's attorney is awarded the maximum attorney's fees as provided by Ark. Code Ann. § 11-9-715, plus an additional fee of $250.00 for prevailing upon this appeal. One half of said attorney's fees shall be paid by the respondent and the balance shall be paid by the claimant out of benefits he receives pursuant to this award.
IT IS SO ORDERED.
MIKE WILSON, Commissioner
CONCURRING AND DISSENTING OPINION
[30] I respectfully dissent in part from the majority opinion. I would reverse the decision of the Administrative Law Judge finding that claimant was an employee of respondent at the time of claimant's injury on September 26, 1995. However, while I disagree with the majority's conclusion regarding claimant's employment status, I do concur with the majority's analysis that the Certificates of Non-Coverage cannot act as a waiver for individuals who are employees. The Certificates of Non-Coverage are only applicable for sole proprietors or partners who are conducting independent businesses.The nature of claimant's relationship with Mr. Wiggins prior to August of 1995 is in dispute. Claimant testified that he believed himself to be an employee of Mr. Wiggins and that he had worked for Mr. Wiggins intermittently over a period of several years. However, Mr. Wiggins testified that he contracted with Victor Blackman to cut logs for him and that claimant worked for Victor Blackman in some capacity. Claimant even admitted that prior to August of 1995 Mr. Blackman was also there with him at the work sites. Claimant further admitted that after an argument ensued between claimant and Mr. Blackman, claimant ceased cutting Mr. Wiggins' logs until Mr. Wiggins personally called claimant and asked claimant to come to work. As part of the agreement for claimant to cut logs directly for Mr. Wiggins, a new saw was purchased for claimant and claimant reimbursed Mr. Wiggins for the saw out of his weekly paycheck. In addition, it was agreed that claimant would receive a $1.60 per ton for the logs which he cut. The evidence reflects that no federal income tax, state income tax, or social security were withheld from claimant's paychecks. The only withholdings made from claimant's paychecks were for reimbursements of money borrowed.
With regard to the ownership of the chainsaw used by claimant in the fall of 1995, claimant testified that he never owned a chainsaw. It is claimant's testimony that he always used a chainsaw supplied by the people for whom he worked. Yet claimant admitted under oath that after his injury he sold the new chainsaw to a friend "because I didn't have no more use for it." At the hearing it was in claimant's best interest to describe his relationship with Mr. Wiggins as one of employee-employer with Mr. Wiggins providing all the equipment. However, claimant's actions after the accident speak volumes and are in direct conflict with this testimony. These actions clearly indicate that claimant knew he was the owner of the equipment he used to perform his work.
If claimant were an employee of Mr. Wiggins prior to this time, and if claimant's testimony is to be believed, then it would have been Mr. Wiggins, the alleged employer, who provided claimant with a saw at the time he was cutting logs with Mr. Blackman. Since Mr. Wiggins had to help claimant acquire a saw after Mr. Wiggins contacted claimant and asked claimant to cut logs for him, it can only be assumed that claimant did not have a functioning saw at that time. As explained by claimant, his "employer" always provided the saws. Thus, it can logically be presumed that Mr. Blackman was the employer, and he provided claimant with a saw. When his employment relationship with Mr. Blackman ceased, claimant was once again in need of a saw.
The evidence reflects that on August 25, 1995, claimant signed an application for a Certificate of Non-Coverage. This application indicates the company name was Patrick Golden with an address at Rt. 1, Box 256, New Edinburg, AR 71660. The application further indicates that claimant is a sole proprietor, owning his own saw and that claimant does not employ others.
In my opinion, the evidence clearly shows that claimant was an independent contractor at the time of his injury. The financial agreement between claimant and Randy Wiggins Logging is highly indicative of an independent contractor relationship. Claimant was paid by the ton for the amount of logs cut, not for the actual amount of time put into the jobs. In addition no income taxes or social security taxes were deducted from claimant's payments. This method of payment is one usually utilized between a prime and sub-contractor.
Although the evidence reflects that Randy Wiggins did have the right to control claimant's activities to some extent, particularly in identifying the tract of land on which to cut logs, this is not necessarily conclusive of an employee/employer relationship. When contracting with others, one has the right to control as much of the details of the work as is necessary to assure that the end result is what he bargained for and the existence of this right is not indicative of an employment relationship. See Larson's Workman's Compensation Law, section 44.2 (1993). Mr. Wiggins may have the right to control claimant's activities with regard to which tract of land to cut from; however, claimant testified that this control did not extend to the manner and method in which claimant chooses to cut the logs on that tract. Once the tract of land was identified, the right of control was no longer exercised; claimant was free to cut whichever trees and in whatever manner he chose. I do not find (as the majority apparently has) that the right of control over claimant existed beyond that described above. Claimant's testimony indicates otherwise.
The evidence is also clear that claimant did not have to stay overnight if he did not want to. Claimant testified that if he had his own means of transportation he would not have relied upon Mr. Wiggins to take him to the job site. Claimant would have driven himself to the job site each morning and would have driven home each night if he could. Therefore, I am not persuaded to find that Mr. Wiggins exercised control over the time claimant spent performing his job.
Likewise, when the other factors set forth in the majority opinion are reviewed I find that claimant was an independent contractor and not an employee. Although claimant denied owning the saw, claimant's actions in later selling the saw belie claimant's testimony. Claimant owned his own equipment and tools which he utilized to perform his job duties of cutting timber. I am not persuaded, as the majority is, by the fact that Mr. Wiggins originally purchased the saw for claimant as a factor in support of an employee/employer relationship. The record reflects that claimant reimbursed Mr. Wiggins for the cost of the saw and that claimant later sold the saw, evidencing claimant's ownership of the saw. Moreover, claimant was an experienced logger which requires specific skills to be able to perform the job. Although the Administrative Law Judge characterized the work as unskilled labor, I cannot agree that an unskilled laborer cannot be an independent contractor. On the contrary, the majority of independent contractors in this state fall within the broad category of work classified as unskilled. However, this does not mean that a person lacking in education and formal training cannot master the duties of a given profession to possess the skills necessary for that particular occupation.
It appears the Administrative Law Judge and the majority were swayed by the fact that claimant did not have assets or business skills and therefore concluded that claimant was not capable of operating as an independent contractor. However, this is not the test in determining one's employment status. Money management ability is of no consequence to one's employment status.
When all these factors are coupled with the Certificate of Non-Coverage applied for by claimant, I find that claimant was an independent contractor at the time of his injury. The Administrative Law Judge and the majority found this certificate void on the basis that claimant was an employee and that Ark. Code Ann. § 11-9-108(a) prohibits an employee from waiving his right to compensation. However, the evidence reflects that claimant applied for a Certificate of Non-Coverage as a sole proprietor and that this application bears his signature. Although claimant testified that he thought the application was for workers' compensation insurance, under Arkansas Law a person is bound to know the contents of the paper he signed. Carmichael v. National Life Insurance Co., 305 Ark. 549, 810 S.W.2d 39 (1991). Moreover, there was testimony from the independent insurance agent that claimant was advised as to the significance of the application for the Certificate of Non-Coverage. The agent even testified that the claimant understood what was being explained to him regarding the nature of the application. Furthermore, after sustaining his injury, claimant relied upon the Certificate of Non-Coverage to obtain medical benefits through his wife's insurance. Now that claimant has suffered a prolonged period of temporary total disability, it is in claimant's best interest to testify that he did not understand the nature of the application for the Certificate of Non-Coverage. Obviously, when it was to claimant's benefit to have the Certificate he used the Certificate to his advantage. Now that he wants to seek temporary total disability benefits, the Certificate has become a liability and claimant wants to declare it void. However, I find that claimant has simply failed to present sufficient evidence that he was an employee of respondent, and that the Certificate of Non-Coverage was procured by fraud. In my opinion, claimant's actions after the accident to use the Certificate to obtain medical coverage through his wife's group policy weigh heavily in favor of finding that claimant understood the purpose of the Certificate. Moreover, as a high school graduate who can read and write, claimant has no real excuse for claiming to misunderstand the nature of the documents he signed. Consequently I am not persuaded by claimant's testimony that he thought he was securing insurance as an employee of Mr. Wiggins. Therefore, I must respectfully dissent from the majority opinion finding claimant to be an employee of respondent.
While I do not reach the same conclusion as the majority with regards to claimant's employment status, I do concur with the majority's position that the Certificates of Non-Coverage do not and cannot apply to employees. As evidenced by this claim, the Certificates of Non-Coverage pose potential problems for those who rely upon them when it is found, as the majority did in this case, that the one who applied for the Certificate is not eligible for the benefits provided. I concur in referral of this matter to the Fraud Unit of the Insurance Department.
While it may not be necessary to the disposition of this case, I cannot help but observe that the present law authorizing certificates of non-coverage cries out for review or amendment by the General Assembly. At present, the Workers' Compensation Commission has issued approximately 50,000 such certificates, and must do so simply on the unsworn application of any person desiring same, for an indefinite period of time. The potential for fraud and abuse is obvious and should be remedied.