THE STATE OF SOUTH CAROLINA
In The Court of Appeals
Francisco Cedano Ramirez, Employee, Appellant,
v.
May River Roofing, Inc., Employer, and American
Zurich Insurance Co., Carrier, and Cedano Roofing,
Employer, and Travelers Property & Casualty Co.,
Carrier,
Of which May River Roofing, Inc., American Zurich
Insurance Co., and Travelers Property & Casualty Co. are
Respondents.
Appellate Case No. 2018-000652
Appeal From The Workers Compensation Commission
Appellate Panel
Opinion No. 5827
Heard November 12, 2020 – Filed June 23, 2021
AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED
Joseph DuBois, of Liberty Oak Law Firm, LLC, of
Hilton Head Island, for Appellant.
Lee E. Dixon, of Hedrick Gardner Kincheloe & Garofalo,
LLP, and Nikole Deanna Haltiwanger, of Holder,
Padgett, Littlejohn & Prickett, LLC, both of Columbia,
for Respondents.
HEWITT, J.: Francisco Cedano Ramirez appeals the Workers' Compensation
Commission's decision denying his claim for benefits. He argues the Commission
erred in ruling he elected to be excluded from the policy he purchased from Travelers
Insurance for his sole proprietorship. He also appeals the Commission's denial of
his alternative claim that he was either a direct employee or a statutory employee of
May River Roofing; a company with which he had a years-long continuous
relationship. There is also an issue about average weekly wage, but the
"compensability" issues are the core of this appeal.
The Commission correctly ruled Ramirez was not covered under the Travelers
policy and was not May River's statutory employee. However, we reverse the ruling
that Ramirez was not May River's direct employee based on our analysis of the
four-factor employment test when applied to these facts. We also reverse the
Commission's ruling that the parties stipulated to Ramirez's average weekly wage.
FACTS
Ramirez earned a living as a roofer in Beaufort County and was the sole proprietor
of Cedano Roofing. When he started the business, he purchased a general liability
and workers' compensation insurance policy from Travelers. Ramirez did not elect
to cover himself as an employee under the workers' compensation portion of the
policy. Doing so would have significantly raised his insurance premium.
Ramirez began working with May River about a year after he started Cedano
Roofing and worked continuously and exclusively with them for about three years.
In January 2016, Ramirez was working on a job for May River when he fell
approximately sixteen feet from the roof to the ground below. He sustained
significant injuries to his back, neck, shoulders, chest, ribs, lungs, and upper
extremities as a result of the fall.
Ramirez filed two workers' compensation claims arising from the accident. In one,
he claimed he was May River's direct or statutory employee. In the other, he claimed
he was covered under the Travelers policy he purchased for Cedano Roofing.
The Single Commissioner found Ramirez was not covered under the Travelers
policy because he had elected not to cover himself. The Single Commissioner also
found Ramirez was not May River's direct or statutory employee because he was an
independent contractor. The Single Commissioner further found the parties
stipulated to Ramirez's average weekly wage.
Ramirez filed a Form 30 requesting review of the Single Commissioner's decision.
After oral argument, an appellate panel affirmed the Single Commissioner's findings
with little to no changes. This appeal followed.
ISSUES
1. Whether Ramirez was excluded from coverage under the Travelers policy.
2. Whether Ramirez was May River's statutory employee.
3. Whether Ramirez was May River's direct employee.
4. Whether the parties stipulated to Ramirez's average weekly wage.
STANDARD OF REVIEW
An appellate court normally owes deference to the Commission's factual findings
because the Administrative Procedures Act mandates that those findings will stand
unless they are clearly erroneous in the view of the reliable, probative, and
substantial evidence on the record as a whole. See Lark v. Bi-Lo, Inc., 276 S.C. 130,
132-35, 276 S.E.2d 304, 305-06 (1981). But the question of whether an individual
is an employee or independent contractor for the purposes of workers' compensation
is jurisdictional; therefore, this court may take its own view of the preponderance of
the evidence. See Wilkinson v. Palmetto State Transp. Co., 382 S.C. 295, 299, 676
S.E.2d 700, 702 (2009); S.C. Workers' Comp. Comm'n v. Ray Covington Realtors,
Inc., 318 S.C. 546, 547, 459 S.E.2d 302, 303 (1995).
COVERAGE UNDER THE TRAVELERS POLICY
Ramirez argues he is covered under the Travelers policy because the policy's plain
language lists him as the "insured." He also argues the policy is the only evidence
the Commission should have considered on this issue and that the Commission erred
in looking outside the policy to Ramirez's application for coverage.
"Insurance policies are subject to the general rules of contract construction." B.L.G.
Enters., Inc. v. First Fin. Ins. Co., 334 S.C. 529, 535, 514 S.E.2d 327, 330 (1999).
"An insurer's obligation under [an insurance policy] is defined by the terms of the
policy and cannot be enlarged by judicial construction." S.C. Ins. Co. v. White, 301
S.C. 133, 137, 390 S.E.2d 471, 474 (Ct. App. 1990). "When a contract is
unambiguous, clear, and explicit, it must be construed according to the terms the
parties have used." B.L.G. Enters., Inc., 334 S.C. at 535, 514 S.E.2d at 330.
The Travelers policy has clear and unambiguous language stating that it is subject
to the workers' compensation laws of South Carolina. The law hinges a sole
proprietor's inclusion in his business's coverage on whether he notified his insurance
company of an election to include himself as one of the business's employees. S.C.
Code Ann. § 42-1-130 (2015); see also Smith v. Squires Timber Co., 311 S.C. 321,
324-25, 428 S.E.2d 878, 880 (1993). The policy obligates Travelers to "pay
promptly . . . the benefits required of you by the workers' compensation law." In
plain English, the policy makes clear its purpose was not to protect Ramirez if he
was injured. The policy protected him and his business by obligating Travelers to
pay if someone else was injured and brought a claim against them.
The fact that the Travelers policy lists Ramirez as the "insured" has no bearing on
whether the policy protected him in the event that he was hurt at work. As noted
above, for the purpose of this policy, that question is controlled by whether Ramirez
notified Travelers of his election to be included as one of the business's employees.
Nothing in the policy bolsters Ramirez's argument that he elected to include himself.
His application for coverage plainly reveals he chose to be excluded.
STATUTORY EMPLOYEE
Ramirez argues he was May River's statutory employee. See S.C. Code Ann.
§§ 42-1-400, -410, & -420 (2015) (the "statutory employment" provisions). Ramirez
also cites the "certificate of insurance" statute as supporting his position. See S.C.
Code Ann. § 42-1-415(A) (2015) (allowing upstream businesses to protect
themselves against liability to statutory employees by securing proof that a
subcontractor has workers' compensation insurance).
Settled law commands that Ramirez's "statutory employee" argument must fail. A
sole proprietor's employees may be the statutory employees of another business, but
the sole proprietor may not be a statutory employee. In Smith v. T.H. Snipes & Sons,
Inc., our supreme court said there were situations when a sole proprietor could be a
statutory employee. 306 S.C. 289, 411 S.E.2d 439 (1991). Two years later, the court
limited Snipes to its facts and held a subcontractor must elect coverage in order to
be considered a statutory employee. Squires Timber Co., 311 S.C. at 325 n.3, 428
S.E.2d at 880 n.3. Based on this binding precedent, South Carolina law does not
support a finding that Ramirez was May River's statutory employee.
The "certificate of insurance" statute is also a dead end as far as compensability is
concerned. See S.C. Code Ann. § 42-1-415(A) & (B) (2015). Even if May River
failed to comply with this statute and did not properly secure proof Cedano Roofing
had workers' compensation coverage, that failure would not turn May River into
Ramirez's statutory employer. The effect of May River straying from the statute
would be that May River could not transfer liability for a statutory employee's claim
to the Uninsured Employers' Fund. The certificate of insurance statute controls who
pays a statutory employee's claim. It has no bearing on who is (or is not) a statutory
employee.
DIRECT EMPLOYEE
Ramirez argues the Commission erred in finding he was not May River's direct
employee. "Under settled law, the determination of whether a claimant is an
employee or independent contractor focuses on the issue of control, specifically
whether the purported employer had the right to control the claimant in the
performance of his work." Wilkinson, 382 S.C. at 299, 676 S.E.2d at 702. "In
evaluating the right of control, the Court examines four factors which serve as a
means of analyzing the work relationship as a whole: (1) direct evidence of the right
or exercise of control; (2) furnishing of equipment; (3) method of payment; (4) right
to fire." Id. As already noted, our standard of review on this issue is de novo. Id.
1. Right or Exercise of Control
Here, there are facts that weigh both for and against a finding that May River
exercised control over Ramirez. In terms of regular supervision, there appears to be
conflicting testimony. Ramirez says the owner of May River supervised his work
and would sometimes give him directions. May River contends Ramirez had no
supervision other than May River verifying his work once he completed a job. This
dispute aside, everyone concedes Ramirez is a skilled roofer who did not need
day-to-day supervision. To sum, there is little direct evidence May River controlled
the finer points of how Ramirez went about his work as a roofer.
Some aspects of this relationship lend themselves to the view that Ramirez had a
great deal of autonomy. Ramirez set his own schedule, did not punch a time clock,
and was free to negotiate for additional payment when he arrived at a job site or
choose to decline the job. Ramirez was also free to enlist others if the job was too
big for him to handle. He had the discretion to hire people to assist with his work
and did not need May River's approval.
Still, there are also facts that show May River directly controlling Ramirez. Ramirez
was required to wear May River branded t-shirts and display a magnetic May River
decal on the side of his truck. May River claimed they gave the shirts out to
everyone as a marketing strategy, but they also specifically required all
"subcontractors" like Ramirez to wear May River shirts while at a jobsite.
The exclusivity of Ramirez's relationship with May River also weighs in favor of an
employment relationship. Ramirez worked with May River continuously for
roughly three years, and May River ceaselessly provided Ramirez with all of his
work throughout their relationship. Ramirez believed he was not allowed to work
with any other roofing companies. May River disputed this, but admitted it preferred
workers like Ramirez to only accept jobs from May River. The apparent exclusivity
of this relationship weighs in favor of finding May River exercised control over
Ramirez. The fact that Ramirez relied on May River for work suggests May River
had the right to control Ramirez by withholding work.
These features—an exclusive relationship and controlling Ramirez's clothing—may
seem trivial, but we think they are not. An independent contractor is someone who
is hired "to do a piece of work according to his own methods" and is not subject to
anyone's control except as to the result of his or her work. Chavis v. Watkins, 256
S.C. 30, 32, 180 S.E.2d 648, 649 (1971). There is no disputing May River directly
exercised control over Ramirez's appearance and, thus, was controlling more than
would be found in a true independent contract relationship. The exclusivity of this
arrangement also suggests Cedano Roofing was less an "independent" business, and
more an extension of May River. Cf. Watkins v. Mobil Oil Corp., 291 S.C. 62, 352
S.E.2d 284 (Ct. App. 1986) (agency between oil company and service station
employee not established when employee was permitted to wear clothing with oil
company's emblem, when service station merely sold oil company's products, and
when there was no evidence oil company controlled station operations).
There is a previous appellate case involving roofers, but it is meaningfully
distinguishable. In Marlow v. E. L. Jones & Son, Inc., our supreme court found a
roofer was an independent contractor for the purposes of workers' compensation.
248 S.C. 568, 569-71, 151 S.E.2d 747, 747-48 (1966). That claimant worked a
full-time job in a textile mill and "moonlighted" with other members of his family
as a roofer. Id. Although there are some similarities between Marlow and the
present case, we believe the control May River exercised by being the exclusive
provider of work in his full time profession and by controlling Ramirez's appearance
while working distinguishes this case from that one.
Based on the facts discussed above, we find May River had the right to and exercised
control over Ramirez in a manner consistent with an employment relationship.
Accordingly, we find this factor weighs in Ramirez's favor.
2. Furnishing Equipment
An owner who purchases and supplies equipment tends to retain the right to control
how the equipment is used. The inference of control in this situation "is a matter of
common sense and business." Shatto v. McLeod Reg'l Med. Ctr., 406 S.C. 470, 479,
753 S.E.2d 416, 421 (2013) (quoting 3 Arthur Larson & Lex K. Larson, Larson's
Workers' Compensation Law § 61.07[2] (2013)).
The furnishing of equipment prong weighs in favor of an employment relationship.
May River provided Ramirez with all of the materials he used for roofing jobs.
While Ramirez provided his own tools and vehicle, May River's complete
assumption of the material costs suggests May River retained the right to direct how
the materials were used and is direct evidence of control over Ramirez.
May River would also occasionally lend Ramirez equipment and assisted Ramirez
financially when he purchased some of his own equipment. And, as mentioned
above, May River provided Ramirez with a branded t-shirt and magnetic decal for
his truck. Given that May River provided Ramirez with clothing, marketing
materials, and the materials necessary to complete each roofing job, we find the
furnishing equipment factor weighs in favor of an employment relationship.
3. Method of Payment
Payment based on time tends to show employment. Id. at 480, 753 S.E.2d at 421.
Payment on the basis of a completed project tends to show the worker is an
independent contractor. Id.
The method of payment factor weighs in favor of an independent contractor
relationship. Though Ramirez was paid by the hour for repair work, most of his
work was compensated "per roofing square;" as apparently is common in the roofing
industry. In other words, for most of his work, Ramirez's compensation depended
on how much work he did. It did not depend on the amount of time he spent working.
4. Right to Fire
The right to fire prong does not favor either party. Apparently there were individual
contracts for each roofing job. These were typically executed before multi-day
projects but after smaller, single day projects. The only sample contract in the record
between Ramirez and May River was bare bones and of no help to our review of this
issue.
The right to unilaterally and immediately end the relationship without future liability
is a hallmark of an employment relationship. Id. at 481, 753 S.E.2d at 422. An
independent contractor, however, typically has the right to complete the job unless
the parties' agreement provides otherwise. Id. Nothing in this record points
decisively in either direction.
It is possible to view Ramirez's continuous relationship as tending to show
employment since it seems May River could stop offering jobs to Ramirez at any
moment, for any reason, and leave Ramirez without recourse. Even so, we find this
factor does not favor either party. There is little to nothing in the record suggesting
what right May River had to terminate Ramirez from a job, what right Ramirez had
to quit, and what claims (if any) the parties had against each other in those
circumstances.
***
The modern bellwether case on the employment test is Wilkinson. There, our
supreme court found a sole proprietor working with a trucking company was an
independent contractor. 382 S.C. at 300-04, 676 S.E.2d at 702-04. The trucking
company had some drivers who were employees and other drivers with written
independent contractor arrangements. Our supreme court examined and discussed
the trucking company's entire operation in the course of finding the trucking
company legitimately used the two categories of workers and that the company did
not exercise sufficient control over the sole proprietor to indicate an employment
relationship. Id.
Here, as there, we believe it is instructive to examine the putative employer's entire
operation. Unlike the trucking company in Wilkinson, May River has no employees
who perform roofing work other than the occasional repair. Unlike the trucking
company in Wilkinson, there was no written and detailed independent contractor
arrangement between Ramirez and May River. And, unlike the trucking company
in Wilkinson, there was no requirement that Ramirez purchase coverage protecting
himself against the risk he would be hurt in a workplace accident.
According to the record, May River switched some years ago from roofers who were
admittedly employees to a roofing workforce consisting entirely of people
purportedly classified as independent contractors. May River claims to have made
this change for a variety of reasons, including that it found workers more motivated
and responsible when they were paid more money as independent contractors and
paid by the job rather than by the hour.
We do not doubt May River's sincerity or motivation. Still, the undisputed purpose
of the Workers' Compensation Act is to protect workers, owners, and businesses by
requiring a business covered by the Act to insure its workforce against the cost of
industrial accidents. Parker v. Williams & Madjanik, Inc., 275 S.C. 65, 70, 267
S.E.2d 524, 526 (1980); Marchbanks v. Duke Power Co., 190 S.C. 336, 362, 2
S.E.2d 825, 836 (1939). This structure was designed to build the costs of industrial
accidents into the cost of goods and services and to ultimately pass those costs to the
consumers whose demand for the goods and services brought about the conditions
that led to the claimant's injury. Marchbanks, 190 S.C. at 362, 2 S.E.2d at 836; see
also 5 Arthur Larson & Lex K. Larson, Larson's Workers' Compensation Law §
60.05[1] (2020).
We see this case as meaningfully different from Wilkinson, especially for the reasons
noted above. If the record—as in Wilkinson—contained a detailed independent
contractor agreement requiring Ramirez to protect himself against the cost of being
hurt at work, we would likely feel differently. As it stands, we lean in favor of
coverage based on the facts of this case and in order to serve the Act's beneficent
purpose. See James v. Anne's Inc., 390 S.C. 188, 198, 701 S.E.2d 730, 735 (2010)
("[T]he general rule [is] that workers' compensation law is to be liberally construed
in favor of coverage in order to serve the beneficent purpose of the Act; only
exceptions and restrictions on coverage are to be strictly construed.").
AVERAGE WEEKLY WAGE
Ramirez argues the Commission erred in finding the parties stipulated to his average
weekly wage. There is no doubt the parties did not enter such a stipulation. The
parties mentioned their diverging views at the beginning of the Single
Commissioner's hearing. There is no evidence those views ever changed.
May River argues this issue is not preserved for our review. We respectfully
disagree. Ramirez specifically raised the issue to the Commission in his addendum
to his Form 30. He also discussed it in his brief to the appellate panel. Although it
is fair to note he mentioned this in his argument on the "method of payment" factor
of the employment test, one cannot come away from the brief believing Ramirez
agreed with the Single Commissioner's finding on his average weekly wage.
CONCLUSION
Based on the foregoing, we affirm the Commission's finding that Ramirez was not
covered under the Travelers policy. However, we reverse the Commission's
compensability finding as to Ramirez's claim against May River. We also reverse
the finding that the parties stipulated to the compensation rate. The case is remanded
for further proceedings consistent with this opinion.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
THOMAS and HILL, JJ., concur.