IN THE SUPREME COURT OF NORTH CAROLINA
No. 123A14
FILED 25 SEPTEMBER 2015
VINCENT BURLEY, Employee
v.
U.S. FOODS, INC.,
Employer,
INDEMNITY INSURANCE COMPANY OF NORTH AMERICA,
Carrier
(GALLAGHER BASSETT SERVICES, INC., Third-Party Administrator)
Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of
the Court of Appeals, ___ N.C. App. ___, 756 S.E.2d 84 (2014), reversing an opinion
and award filed on 28 June 2013 by the North Carolina Industrial Commission, and
remanding for rehearing. Heard in the Supreme Court on 17 March 2015.
Sumwalt Law Firm, by Vernon Sumwalt, for plaintiff-appellee.
McAngus, Goudelock & Courie, P.L.L.C., by Raymond J. Williams, III and
Jordan Benton, for defendant-appellants.
Hedrick Gardner Kincheloe & Garofalo, LLP, by Nicole C. Shoemaker and M.
Duane Jones, for North Carolina Association of Defense Attorneys, amicus
curiae.
JACKSON, Justice.
In this case we consider whether an employment contract was “made in this
State” when it was formed in South Carolina and allegedly modified in North
Carolina. N.C.G.S. § 97-36 (2013). We conclude that the modification that occurred
BURLEY V. U.S. FOODS, INC.
Opinion of the Court
here did not alter the state in which the contract was made. Accordingly, we reverse
the decision of the Court of Appeals.
Plaintiff is a resident of Augusta, Georgia. In May 2000, U.S. Foods, Inc.
extended plaintiff an offer of employment, which plaintiff accepted by signing the
offer letter. According to plaintiff’s testimony, he was in Fort Mill, South Carolina,
when he signed the offer letter. Subsequently, plaintiff began working for U.S. Foods
as a delivery truck driver. Plaintiff’s job responsibilities included driving a planned
route with stops in Georgia and South Carolina, but no travel in North Carolina was
involved.
As the result of a merger with another company in 2002, U.S. Foods ceased
operating in the Columbia, South Carolina location where plaintiff was assigned.
U.S. Foods then gave plaintiff the choice either to terminate his employment and
receive a severance package or to have supervision of his employment transferred to
Charlotte, North Carolina, or Lexington, South Carolina. Plaintiff elected to transfer
to the company’s Charlotte division, and the transfer was approved by U.S. Foods’
Human Resources Department in Charlotte. Throughout the transfer, plaintiff was
employed by U.S. Foods continuously. Thereafter, he performed the same job, and
his title and responsibilities did not change. Plaintiff made deliveries to different
customers after the transfer, and he earned more money because of a change in the
way his pay was calculated. But although plaintiff’s supervision was transferred to
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Opinion of the Court
Charlotte, plaintiff never had a route that involved any deliveries in North Carolina
during his employment with U.S. Foods.
On 23 September 2009, plaintiff received a back injury during a delivery in
Georgia. Plaintiff’s claim for benefits was accepted by defendants pursuant to the
Georgia Workers’ Compensation Act, and plaintiff began receiving disability and
medical compensation according to Georgia law. On 8 July 2011, plaintiff filed a
claim for benefits with the North Carolina Industrial Commission. After a hearing
on 17 April 2012, Deputy Commissioner Philip A. Baddour, III concluded that the
Commission did not have subject matter jurisdiction over plaintiff’s claim. Plaintiff
appealed to the Full Commission, which affirmed Deputy Commissioner Baddour’s
ruling.
Plaintiff appealed, and in a divided opinion, the Court of Appeals reversed,
holding that the Commission has jurisdiction over plaintiff’s claim. Burley v. U.S.
Foods, Inc., ___ N.C. App. ___, ___, 756 S.E.2d 84, 90 (2014). The majority concluded
that plaintiff’s transfer to U.S. Foods’ Charlotte division involved a modification of
plaintiff’s employment contract, id. at ___, 756 S.E.2d at 90, and that such a
modification “may be a proper basis to find a contract is ‘made’ within North Carolina”
for purposes of establishing the jurisdiction of the Commission pursuant to N.C.G.S.
§ 97-36, id. at ___, 756 S.E.2d at 88. Judge Dillon dissented, maintaining that
modification of plaintiff’s existing contract, in light of the facts presented here, is
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Opinion of the Court
insufficient to confer jurisdiction upon the Commission. Id. at ___, 756 S.E.2d at 91
(Dillon, J., dissenting). Based upon the dissent, defendants appealed to this Court as
of right pursuant to N.C.G.S. § 7A-30(2).
On appeal defendants argue that once an employment contract has achieved
an identifiable situs, that situs is not changed by a subsequent modification of the
contract in another state. Defendants therefore contend that, notwithstanding the
alleged modification in the case sub judice, plaintiff’s employment contract was not
made in North Carolina and does not establish the Commission’s jurisdiction
pursuant to section 97-36. We agree.
Generally, appellate review of the Commission’s decisions is limited to
“whether any competent evidence supports the Commission’s findings of fact and
whether [those] findings . . . support the Commission’s conclusions of law.” McRae v.
Toastmaster, Inc., 358 N.C. 488, 496, 597 S.E.2d 695, 700 (2004) (alterations in
original) (quoting Deese v. Champion Int’l Corp., 352 N.C. 109, 116, 530 S.E.2d 549,
553 (2000)). But “the Commission’s findings of jurisdictional fact are not conclusive
on appeal, even if supported by competent evidence.” Perkins v. Arkansas Trucking
Servs., Inc., 351 N.C. 634, 637, 528 S.E.2d 902, 903-04 (2000) (citing, inter alia, Lucas
v. Li’l Gen. Stores, 289 N.C. 212, 218, 221 S.E.2d 257, 261 (1976)). Accordingly, this
Court must review the evidence and make findings of fact independently. Id. at 637,
528 S.E.2d at 904 (quoting Lucas, 289 N.C. at 218, 221 S.E.2d at 261). “The
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Opinion of the Court
Commission’s conclusions of law are reviewed de novo.” McRae, 358 N.C. at 496, 597
S.E.2d at 701 (citing Grantham v. R.G. Barry Corp., 127 N.C. App. 529, 534, 491
S.E.2d 678, 681 (1997), disc. rev. denied, 347 N.C. 671, 500 S.E.2d 86 (1998)).
Section 97-36 specifies when an employee may be entitled to compensation for
an accident that occurs during employment outside of North Carolina. This statute
states in pertinent part:
Where an accident happens while the employee is
employed elsewhere than in this State and the accident is
one which would entitle him or his dependents or next of
kin to compensation if it had happened in this State, then
the employee or his dependents or next of kin shall be
entitled to compensation (i) if the contract of employment
was made in this State, (ii) if the employer’s principal place
of business is in this State, or (iii) if the employee’s
principal place of employment is within this State . . . .
N.C.G.S. § 97-36. Because the only issue addressed by the dissenting opinion
concerns whether the Court of Appeals correctly concluded that plaintiff’s
employment contract was “made in this State,” Burley, ___ N.C. App. at ___, 756
S.E.2d at 91; see also id. at ___ n.1, 756 S.E.2d at 87 n.1 (majority), we consider only
that basis for compensation pursuant to section 97-36, see N.C. R. App. P. 16(b).
“Under North Carolina law, a contract is made in the place where the last act
necessary to make it binding occurred.” Tom Togs, Inc. v. Ben Elias Indus. Corp., 318
N.C. 361, 365, 348 S.E.2d 782, 785 (1986) (citing Goldman v. Parkland of Dallas, Inc.,
277 N.C. 223, 227, 176 S.E.2d 784, 787 (1970)); see also Thomas v. Overland Express,
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Opinion of the Court
Inc., 101 N.C. App. 90, 96, 398 S.E.2d 921, 925-26 (1990), disc. rev. denied, 328 N.C.
576, 403 S.E.2d 522 (1991).
Although this case involves a matter of first impression in North Carolina,
courts of several other states that have considered similar factual situations long
have held that a modification of a contract did not change the location where the
contract was made. In Sims v. Truscon Steel Co., 343 Mo. 1216, 126 S.W.2d 204, cert.
denied, 307 U.S. 646, 59 S. Ct. 1045, 83 L. Ed. 1526 (1939), a company hired a worker
via a contract made in Missouri, but later argued that a new contract was entered
into by correspondence between the employee, who was then working in Kansas, and
the employer’s Illinois office. Id. at 1220, 126 S.W.2d at 206. The Missouri Supreme
Court rejected this contention, concluding that, although the correspondence resulted
in “additional duties and additional pay” for the employee, there still was “only one
contract of employment”: the original contract made in Missouri. Id. at 1224, 126
S.W.2d at 208. Similarly, in Selser v. Bragmans Bluff Lumber Co., 146 So. 690 (La.
Ct. App. 1933), a Louisiana appellate court determined that a “change in [the
employee’s] position and the increase of his salary” that occurred in another
jurisdiction “in no way abrogated or set aside” the remaining terms of the original
contract. Id. at 696. Furthermore, in Benguet Consolidated Mining Co. v. Industrial
Accident Commission, 36 Cal. App. 2d 158, 97 P.2d 267 (1939), a California appellate
court concluded that a three-year contract of hire originally made in California “was
still in effect in spite of the changes in duties and salary agreed upon in the
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Opinion of the Court
Philippines” and remained binding even after subsequent mutual agreements made
in the Philippines extended the worker’s employment beyond the time specified in
the original contract. Id. at 167, 97 P.2d at 272. Consistent with these decisions,
Larson’s Workers’ Compensation Law states that “[o]nce the contract has achieved an
identifiable situs, that situs is not changed merely because the contract is modified
in another state, as when there is a change in salary or other benefits made in the
second state.” 9 Arthur Larson & Lex K. Larson, Larson’s Workers’ Compensation
Law § 143.03[4], at 143-22 (2012) (citing United Airlines, Inc. v. Indus. Comm’n, 96
Ill. 2d 126, 449 N.E.2d 119 (1983); Crawford v. Trans World Airline, 27 N.J. Super.
567, 99 A.2d 673 (1953); Tobin v. Rouse, 118 Vt. 40, 99 A.2d 617 (1953)). We find this
authority persuasive.
Kuzel v. Aetna Insurance Co., 650 S.W.2d 193 (Tx. App. 1983), which plaintiff
references and which the Court of Appeals cited, does not contradict this result. The
court in Kuzel concluded that, based upon the specific facts before it, the initial
agreement regarding the plaintiff’s employment in that case “was no more than
preliminary negotiations,” while “[a] contract [was] established [in another state]
when agreement [was] reached on all terms, and the preliminary agreements
[were] . . . incorporated into the final offer and acceptance.” Id. at 195. As a result,
Kuzel did not involve a modification of an existing contract, but rather concerned
preliminary negotiations culminating in a subsequent final written employment
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Opinion of the Court
agreement. Accordingly, the court’s analysis in Kuzel is not persuasive in the case
sub judice.
Although the Fifth Circuit in Kilburn v. Grande Corp., 287 F.2d 371 (5th Cir.
1961), concluded that a modification may create a new contract, that decision was
based in part upon the premise that, because the employee’s “salary was to be paid
on an hourly basis,” thus indicating a less than “ ‘permanent’ type of employment,”
whatever employment contract existed “had life on a pay-period-to-pay-period basis,
and . . . a new contract was impliedly made each time that [the employee] reported to
work and was given work following a pay period.” Id. at 373. Because North Carolina
law looks to “the final act necessary to make [the contract] a binding obligation,”
Thomas, 101 N.C. App. at 96, 398 S.E.2d at 925, and does not imply the creation of a
new contract after each pay period, we find Kilburn unpersuasive.1 See also, e.g.,
Murray v. Ahlstrom Indus. Holdings, Inc., 131 N.C. App. 294, 296-97, 506 S.E.2d 724,
726 (1998) (citing Thomas and concluding that a contract for employment was
complete when the plaintiff accepted the employer’s offer in North Carolina, even
though the plaintiff completed the necessary paperwork in another state, where he
was assigned to perform his work).
1 Moreover, we note that the original agreement in Kilburn was never reduced to
writing by the parties, which further distinguishes Kilburn from the instant case. The lack
of a written agreement led the Fifth Circuit to find the absence of “an enforceable contract
of employment for any period of time in existence when [the employee] moved to [the other
state].” Kilburn, 287 F.2d at 373.
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Opinion of the Court
Ultimately, section 97-36 authorizes compensation pursuant to North Carolina
law if an individual’s employment contract was “made” in North Carolina—the
statute does not include the word “modified.” After interpreting this statute in light
of its plain language and upon consideration of decisions from other jurisdictions, we
conclude that section 97-36 does not apply to a contract initially made in another
state and subsequently modified in North Carolina.
Here the evidence in the record establishes that when plaintiff began working
for U.S. Foods, his employment contract was not made in North Carolina. After being
hired in South Carolina in 2000, plaintiff worked continuously for U.S. Foods and
never left the job until he was terminated following his injury. Plaintiff’s 2002
transfer involved administrative changes, new customers, and increased pay, but his
job title and responsibilities did not change. Plaintiff’s supervisor stated that plaintiff
had the “[s]ame job” following the transfer. In addition, although plaintiff’s pay
eventually increased by a substantial amount, much of the increase occurred between
2004 and 2005, long after the 2002 transfer at issue here. Plaintiff testified that he
was not informed about this change in salary before its implementation, suggesting
that it was not part of how he understood the transfer process at the time it was
taking place. We decline to hold that this internal transfer of supervision, which
essentially allowed plaintiff to continue working for U.S. Foods in the same capacity
throughout the merger, established a new employment contract. Accordingly, the
decision of the Court of Appeals is reversed.
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Opinion of the Court
REVERSED.
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HUDSON, J., dissenting
Justice HUDSON dissenting.
The majority holds that an employment contract modified in North Carolina
does not qualify as one “made” in North Carolina for purposes of conferring subject
matter jurisdiction on the North Carolina Industrial Commission, even when the
modifications to the employment relationship are substantial and where it is
undisputed that it was impossible for the employment relationship to continue on the
original terms. In my view, this holding contradicts the long-standing rule that North
Carolina courts must liberally construe the Workers’ Compensation Act in favor of
providing relief to workers injured in the scope of their employment. Accordingly, I
respectfully dissent.
The statute at issue here, N.C.G.S. § 97-36, governs when an employee may be
entitled to compensation for a work-related accident that occurs outside North
Carolina. Section 97-36 provides in relevant part:
Where an accident happens while the employee is
employed elsewhere than in this State and the accident is
one which would entitle him or his dependents or next of
kin to compensation if it had happened in this State, then
the employee or his dependents or next of kin shall be
entitled to compensation . . . if the contract of employment
was made in this State . . . .
N.C.G.S. § 97-36 (2013). In interpreting this provision, it is well settled that the
Workers’ Compensation Act, including section 97-36, “must necessarily be viewed
with liberality in order to accomplish its purpose[ ]” of providing compensation to
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HUDSON, J., dissenting
employees injured during the course and within the scope of their employment.
Essick v. City of Lexington, 232 N.C. 200, 208, 60 S.E.2d 106, 112 (1950); see also
Johnson v. Asheville Hosiery Co., 199 N.C. 38, 40, 153 S.E. 591, 593 (1930) (“It is
generally held by the courts that the various Compensation Acts of the Union should
be liberally construed to the end that the benefits thereof should not be denied upon
technical, narrow and strict interpretation.”). The question presented here is
whether a contract of employment qualifies as a contract “made” in North Carolina
when an employee is given a choice between termination and continuing the
relationship under terms so significantly different that the arrangement amounts, in
effect, to a new contract. I conclude that, on the facts presented here and against that
liberal interpretive backdrop, it does.
Here, plaintiff first accepted an offer of employment with defendant U.S. Foods
in May 2000. For two years, he worked as a delivery truck driver with an assigned
drop yard in Columbia, South Carolina and a planned route in the Augusta, Georgia
area. The customers to whom plaintiff made deliveries included health care facilities,
convenience stores, and restaurants. While there was some variation among these
customers, most of them remained the same during the time plaintiff had that route.
In 2002, U.S. Foods merged with another company, PYA Monarch, and
defendant elected to close the Columbia drop yard. Plaintiff, like many other
employees based out of the Columbia location, was given a choice: He could either
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HUDSON, J., dissenting
accept termination and a severance package, or he could transfer to a division based
in Lexington, South Carolina, or one located in Charlotte, North Carolina. Because
the Columbia drop yard was closing, the parties did not have the option of continuing
the employment relationship as it had existed up to that point. Faced with this
decision, plaintiff chose transfer to the Charlotte-based division of the company.
Plaintiff also negotiated for and received an additional benefit; specifically, plaintiff
and defendant agreed that while plaintiff worked out of the Charlotte-based division,
U.S. Foods would deliver plaintiff’s loaded trailer to him in Augusta, Georgia. The
company’s Human Resources Department, which was also located in Charlotte,
approved the transfer in October 2002, thereby finalizing the new agreement.
Once he came under the supervision of the Charlotte-based division of the
company, plaintiff’s employment changed in several other ways as well. As plaintiff
described in his testimony before the Industrial Commission, he drove a new route
and his “customers changed completely.” While he had previously made deliveries to
health care facilities, convenience stores, and restaurants, the “bulk” of plaintiff’s
deliveries when he was based in Charlotte were to chain restaurants such as Sonic,
KFC, Subway, and IHOP. In addition, the method by which plaintiff’s pay was
calculated was changed. When he was based in South Carolina, plaintiff was paid
based on an hourly weight-based commission system, under which he earned
approximately $400 to $500 per week. In North Carolina, however, he was first paid
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HUDSON, J., dissenting
an hourly rate, then under a component-based system.2 Under the component-based
system, plaintiff eventually earned more than twice as much as under the
commission-based system, up to $1400 per week.
In sum: When U.S. Foods merged with PYA Monarch, plaintiff was faced with
either termination or transfer to a division based in another State. Plaintiff chose
transfer to North Carolina and bargained for the inclusion of specific contractual
terms under the new arrangement. Upon approval by defendant’s Charlotte-based
Human Resources Department, plaintiff had a new supervisor stationed in a new
state. Plaintiff then drove a new route, served new customers, and earned
significantly more money through the use of a new method of calculating his pay. On
the whole, it appears that the only characteristics of the employment relationship
that remained the same were plaintiff’s general duties and title as a delivery driver,
and the name of his employer.
In my view, then, this was no mere modification, as when an employee accepts
a modest pay increase in exchange for taking on modest new responsibilities. Rather,
I conclude that the required break from the old employment arrangement, paired
with significant changes in how plaintiff’s employment would proceed moving
forward, warrants treating this arrangement as a new contract—one finalized when
Under the commission system, delivery drivers’ wages were based primarily on the
2
weight of the cargo they delivered. In contrast, under the component system, in addition to
receiving a base pay, drivers are paid based on a number of factors including a safety bonus,
the hours worked, and the number of stops and items of cargo.
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HUDSON, J., dissenting
defendant’s Human Resources Department in Charlotte approved the arrangement.
Based on these facts, and in light of the requirement that we liberally construe the
Workers’ Compensation Act in favor of awarding benefits, see, e.g., Essick, 232 N.C.
at 208, 60 S.E.2d at 112, I would hold that the contract in place when plaintiff suffered
his work-related injury on 23 September 2009 was a contract “made” in North
Carolina for purposes of N.C.G.S. § 97-36, and that the North Carolina Industrial
Commission has jurisdiction over plaintiff’s claim. On this basis, I would affirm the
decision of the Court of Appeals. Therefore, I respectfully dissent.
Justices BEASLEY and ERVIN join in this dissenting opinion.
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