NO. 82-254
IN T i SUPRElIE COURT OF THE STATE OF MONTANA
IE
1984
DAVID D. SOLHEIM,
Claimant and Appellant,
-vs-
TOM DAVIS RANCH, Employer,
and
STATE COMPENSATION INSURANCE FUND,
Defendant and Respondent.
APPEAL FROPI: Workers' Compensation Court, The Honorable Timothy
Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Tom L. Lewis, Regnier & Lewis, Great Falls,
Montana (Argued)
For Respondent :
J. Daniel Hoven, Agency Legal Services, Helena,
Montana (Argued)
Submitted: November 10, 1983
Decided: February 29, 1984
Filed:
Clerk
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
David D. Solheim (Claimant) appeals from the judgment of
the FJorkers' Compensation Court finding him ineligible for
compensation following an injury sustained while unloading a
hay truck near Sand Springs, Montana. The Court concluded
that claimant was an independent contractor rather than an
employee under the Workers' Compensation Act. We affirm.
The issues are:
1. Whether the Workers' Compensation Court erroneously
concluded that claimant was an independent contractor rather
than an employee within the meaning of the Workers'
Compensation Act?
2. Whether the Workers' Compensation Court erred in
concluding that claimant was not automatically entitled to
benefits because the insurer failed to accept or deny his
claim within 30 days as required under section 39-71-606,
MCA, even in the absence of an employment relationship under
the Act?
In January of 1981, Tom Davis of Tom Davis Ranch agreed
to sell 500 tons of hay from his ranch near Augusta, Montana
to the 7-W Ranch near Sand Springs, Montana, whose owner had
agreed to purchase the hay. Because the hay was needed
promptly and because the 7-W Ranch agreed to pay for the hay
upon delivery of -
all 500 tons, Tom Davis contacted
approximately 25 trucking businesses, including claimant, in
order to arrange delivery of the hay as soon as possible.
The offer made by Tom Davis to the truckers, including
claimant, was to pay $28 per ton. Payment was to be made to
the truckers when all the hay was delivered and when Tom
Davis had been paid by 7-W Ranch. All of the contracted
truckers were to furnish their own vehicles. Davis advised
the truckers, including claimant, that Davis would have a
Freeman stacker available to load trucks on certain days of
the week when use of that stacker was not otherwise required
on his feedlot a number of miles away. Davis also told the
truckers there would be help available at the 7-W Ranch to
unload. Claimant understood that the truckers would help
with the unloading as is the general custom. +
Claimant has run his own trucking business since 1972.
He describes himself as an "independent trucker" and files
his own income taxes as a sel-£-employed individual. The logo
on his truck is "Solheim Trucking." Claimant pays for the
insurance and licenses on his truck. He carries cargo
insurance on his loads and had coverage in effect during the
shipping of the Davis hay. Claimant generally does not work
for pay on an hourly or weekly basis. Claimant works for
persons other than Davis.
On January 17, 1981, approximately ten semi-trucks were
loaded at the Davis Ranch by use of the Davis Freeman
stacker. Claimant was unable to be there on January 17. On
the following day, January 18, claimant and two other
truckers, claimant's father and Dick McAdams, loaded their
trucks at the Davis Ranch. They used McAdams' tractor for
loading because the Davis stacker was not available that day.
Tom Davis was present for about ten minutes and pointed out
the haystack from which the bales were to be loaded. He also
drew a rough map showing the way from Sand Springs to the 7-W
Ranch. Davis gave no instructions as to the loading or
unloading of the trucks or the route to the 7-W Ranch. Davis
testified that if he were dissatisfied with the way a trucker
was doing his job, he had "a right to tell him about it and
correct the situation."
Claimant, his father, and McAdams drove their three
loaded trucks together to the 7-W Ranch and were directed to
the unloading area. Because there was no one present to help
them, they unloaded McAdamsl truck first and then moved on to
the elder Solheim's truck. At this point, Drew Burke of 7-W
Ranch arrived and began to assist with the unloading.
Claimant was on the stack when Burke threw a bale from the
truck, knocking claimant to the ground with a resulting
fracture to his left hip bone and left femur. After
preliminary treatment by a veterinarian, claimant was flown
to Great Falls for hospitalization. Claimant's brother
continued driving claimant's truck, transporting hay from the
Davis Ranch to the 7-W Ranch until the entire 500 tons had
been delivered by the various truckers hauling for Davis.
Immediately after payment by the 7-W Ranch, Davis paid
claimant and all other truckers. The date of payment was
approximately one month after the date of injury.
On June 4, 1981, claimant filed a claim for benefits
with the Workers ' Compensation Division. The claim was
timely filed pursuant to section 39-71-601(l), MCA. BY
letter addressed to claimant and dated June 17, 1981, the
claims examiner for the State Compensation Insurance Fund
acknowledged the receipt of Solheim's claim for compensation.
That letter stated that before compensation benefits can be
awarded there must be medical evidence on file and advised
that no medical information had been received. The claims
examiner therefore stated "We are, therefore, unable to award
any compensation at this time." The letter also said that a
letter had been mailed to claimant's physician requesting the
physician's report. Claimant denied receiving the letter.
Claimant did submit additional medical information at a later
date.
On July 28, 1981, claimant filed a petition for an
emergency hearing. After several vacations of trial dates,
trial was held on January 22, 1982. Findings of fact,
conclusions of law and judgment for the defendants were
entered by the Court on June 11, 1982. The Court concluded
in its judgment that claimant was not an employee as defined
by section 39-7-18( a , MCA, but rather was an
independent contractor as defined by section 39-71-120, MCA.
The Court further concluded that claimant was not entitled to
benefits under the Act. Claimant appeals from that judgment.
Did the Workers' Compensation Court erronously conclude
that claimant was an independent contractor rather than an
employee under the Workers' Compensation Act?
Claimant maintains that the Court mistakenly concluded
he was an independent contractor within the meaning of
section 39-71-120, MCA, which states:
"Independent contractor defined. An 'independent
contractor' is one who renders service in the
course of an occupation and:
(1) has been and will continue to be free from
control or direction over the performance of the
services, both under his contract and in fact; and
(2) is engaged in an independently established
trade, occupation, profession, or business."
Claimant, defendants, and the Workers1 Compensation
Court agree that the leading Montana case on independent
contractors is Sharp v. Hoerner Waldorf Corp. (1978), 178
Mont. 419, 584 P.2d 1298. In Sha.rp, this Court adopted the
"four-factor test" for right of control as set forth in
Larson ' s Workmen ' Compensation -
s Law,
8-31. We stated:
"Larson's treatise enumerates four factors to
consider when attempting to determine right of
control in a given situation. Those factors are:
(1) direct evidence of right or exercise of
control; (2) method of payment; (3) furnishing of
equipment; and ( 4 ) right to fire. Larson, $44.31,
p. 8-35. The treatise further points out that the
consideration to be given these factors is not a
balancing process, rather '. ..independent
contractorship ... is established usually only by
a convincing accumulation of these and other tests,
while employment ... can if necessary often be
solidly * roved on the strenqth of one of the four
A -
items [above].' Larson, supra." Sharp, 178 Mont.
at 425, 584 P.2d at 1301-02.
In Sharp this Court concluded that Sharp was an employee
although she owned an independently established cleaning
5
business because the employer controlled and routinely
changed the details of her cleaning work, paid her monthly
rather than on a completed contract basis, and could
terminate her employment a.t any time. All of these factors
strongly indicated an employer-employee relationship.
In the recent case of Carlson v. Cain (Mont. 1983), 664
P.2d 313, 40 St.Rep. 865, this Court developed the standard
articulated in Sharp. Where both factual determinations and
legal conclusions are challenged, two standards of review
apply To the extent that factual determinations are
questioned, we must apply the test set forth in Sharp and
defer to the fact-finder where substantial evidence exists to
support the determinations. When, however, an issue raises
only a question of law, this Court is free to reach its own
conclusions from the evidence presented. Carlson, 664 P.2d
at 915-16, 40 St.Rep. at 868-69. In the present case, as in
Carlson, questions of both law and fact are presented.
We will first consider the facts of this case in light
of the "four-factor test" and whether the facts support the
lower Court's conclusion that claimant was acting as an
independent contractor at the time of his accident.
(1) Direct evidence of right or exercise of control.
While Larson emphasizes that it is the right, and not the
exercise of that right, which is conclusive, he points out
that "if control of a trucker goes no farther than directions
on where to pick up or put down the load, this i.s usually
held to be only a part of the end result." Larson S44.20, p.
8-52. The lower court found that the truckers were free to
load as and when they wished, to choose their own route,
speed, time of travel, and driver. Concluding that there was
little evidence of right or exercise of control, the court
stated:
"Claimant makes much of the fact that Tom Davis
told them where to load and unload. In every
transportation contract there has to be a shipping
point and a destination and in the informal world
of transportation of agricultural commodities this
fact is equally supportive of a contract
relationship."
Claimant contends that general statements that Davis was
"the boss'' and could correct an improper or dangerous
situation should be sufficient to establish an employee
relationship. The right of control by the Davis Ranch was
limited to those few matters required to insure a
satisfactory end result. We conclude there is substantial
evid.ence to support the conclusion of the court that the
first factor indicated an independent contractor status.
(2) Method of Payment. Payment on a time basis is
strong evidence of employment status. Sharp, 178 Mont. at
425, 584 P.2d at 1302; Larson, §44.33(a), p. 8-74. Payment
on a. completed project basis is consistent with, but not
conclusive of, independent contractor status. Larson,
S44.33 (c), p. 8-93. Payment on a piece-work or commission
basis is consistent with either status and, depending upon
other factors, may be an indication of either employee or
independent contractor status. Larson, §44.33(b), pp. 8-83 -
8.85. The trial court found that claimant was paid $28 a ton
after all the hay was hauled. There is substantial evidence
to support that conclusion. This factor weighs heavily
against claimant's contention that he wa.s an employee.
(3) Furnishing of equipment. According to Larson, when
an employer furnishes valuable equipment, an employment
relationship almost invariably exists, but the test does not
cut in both directions with equal force. Proof showing a
worker furnished his own equipment is not necessarily fata.1
to a finding of employee status. Larson, S44.34, pp. 8-95 -
8-104. A trucker who is paid by the hour, or performs a
continuous service for one employer, or leases his vehicle to
another and then drives for that party, may well be an
employee. The lower court found that the claimant furnished
his own equipment, did not work exclusively for Tom Davis,
did not lease his equipment, and was not paid by a time
period. There is substantial evidence to support these
findings. Claimant argues that Tom Davis supplied an
expensive loader to truckers and controlled its use, which
indicates employment. In the present case, undisputed
evidence shows that claimant did not choose to use any
equipment furnished by the Davis Ranch on the day the hay was
loaded, and instead used the tractor owned by a fellow
trucker. The undisputed facts indicate claimant's freedom to
load when and as he chose. We therefore agree with the
Workers' Compensation Court conclusion that the furnishing of
equipment indicates an independent contractor relationship.
(4) Right to fire. Larson states at 544.35, pp. 8-116
"The power to fire ...
is the power to control.
The absolute right to terminate the relationshi-p
without liability is not consistent with the
concept of independent contract, under which the
contractor should have the legal right to complete
the project contracted for and to treat any attempt
to prevent completion as a breach of contract."
In addition at p. 124, Larson notes:
"Examples could be multiplied in which most of the
other indicia - method of pa-yment, furnishing of
equipment, skilled na-ture of the work, sometimes
provision by the employee even of his own
assistants and insurance, and not infrequently
contractual disavowals of right of control and of
employment relation - have pointed toward
independent contractorship; yet the one element of
right to fire, with its attendant implied right to
control, has carried the day for employment
relationship."
Here, the Workers' Compensation Court concluded that the
evid.ence shows that either party to this contract could
terminate the contract at any time. The court concluded that
because Tom Davis would be liable to claimant "for any
tonnage previously hauled" if he fired claimant, Davis could
not terminate without liability, which is an indication of an
independent contractor relationship. However, if claimant
were an employee and had in fact performed work in hauling
hay, he would also be entitled to payment for the work
performed even though he had been terminated as an employee.
Similarly, if claimant were an independent contractor and had
been terminated, he still would be entitled to payment for
his performance of the contract in the hauling of hay up to
the time of termination.
Claimant testified as follows in response to the leading
question of his counsel:
"Q. As you understood the agreement with Mr.
Davis, did Mr. Davis have the right to let you go
at any time?
"A. Yes."
On cross-examination, claimant testified:
"Q. Before you started hauling Mr. Davis' hay, did
he tell you that you had to make so many runs with
the hay?
"A. No.
"Q. If you made one run with that hay, you could
have terminated your relationship, isn't that
right?
"A. Yes, I could have.
"Q. But you would have only got paid for the one
run, right?
"A. Yes.
"Q. And he didn't say that payment was conditioned
on you making five runs or six runs or whatever?
The testimony of Tom Davis does not specify whether or not he
believed he could terminate at will.
We conclude that there is substantial evidence to
support the finding on the part of the Workers1 Compensation
Court that either party could terminate the arrangement at
will. However, there is no evidence to support a conclusion
that such right of termination could be exercised at any
time. As an example, there is no indication that Tom Davis
could have stopped Solheim while he was driving down the road
and replaced him with a different driver. The uncontradicted
facts support the conclusion that either claimant or the
employer could have terminated the relationship at the end of
any run, that being at the end of the delivery of a load of
hay to the 7-W Ranch. The evidence does not justify a
conclusion that the employer could fire claimant at any time,
as was true in Sharp. We therefore conclude that the Davis
R.anch did not have an absolute right to terminate the
relationship at any time without liability. Such a
conclusion supports a finding of independent control or
independent contractor relationship, as distinguished from
that of employer-employee.
We affirm the conclusion by the Workers1 Compensation
Court that consideration of all four factors shows that
claimant was an independent contractor and that he is
therefore excluded from coverage by virtue of section
39-71-118 (1)(a), MCA.
I1
Claimant argues tha.t, regardless of any determination as
to his status as an independent contractor, he is entitled to
compensation benefits because of the insurer's failure to
deny his claim within 30 days. Section 39-71-606(l), MCA
states:
"Insurer to accept or deny claim within thirty days
of receipt- noticeof denial - notice to employer.
7
(1) Every insurer under any plan forthe payment
of workers1 compensation benefits shall, within 30
days of receipt of a claim for compensation, either
accept or deny the claim, and if denied shall
inform the claimant and the division in writing of
such denial."
Claimant argues that insurers should not be more liberally
treated than an injured worker.
Injured. workers are held to strict notice requirements
under section 39-71-603, MCA and. may not qualify if their
claims are filed late. Claimant argues that by overlooking
10
the mandatory language of section 39-71-606(l), MCA and
holding that there must be an employment relationship before
claimant can become eligible for benefits, the Workers '
Compensation Court rendered that section "a nullity" and
established a harsh and unjust double standard more favorable
to the insurers than to the workers. Claimant also refers
this Court to Montana Workers' Compensation Manual, which
states:
"This section [39-71-6061 is mandatory and
presumably an insurer that does not comply with its
requirements is considered to have accepted any
claim for benefits submitted. " Norman H.
Grosfield, Montana Workers' Compensation Ma.nua1,
S5.30, p. 28.
Claimant also refers to an unappealed decision of the
Workers' Compensation Court in which that court concluded
that a claim must be accepted as compensable until further
order of this Court, because a defendant had failed to accept
or deny the claim within 30 days, as required under section
39-71-606, MCA.
Claimant contends that section 39-71-606, MCA is
comparable to the 60-day notice statute. Section 39-71-603,
MCA states in pertinent part:
"Notice of injuries other than death - - to be
submittedwithin - A
~
sixtv davs. No claim to recover
benefits under the Workers ' compensation Act, for
-
injuries not resulting in death, may be considered
compensable unless, within 60 d a y s after the
occurrence of the accident which is claimed to have
caused the injury, notice of the time and place
where the accident occurred and the nature of the
injury is given to the employer or the employer's
insurer by the injured employee or someone on the
employee's behalf . . .."
(emphasis added)
In that section there is the clear conclusion by the
Legislature that no claim may be considered compensable
unless notice is given within 60 days. It is important to
note no such conclusion is contained in the 30-day notice
provision of section 39-71-606, MCA.
In a simi1a.r manner, the general statute of limitations,
section 39-71-601(1), MCA states in pertinent part:
"Statute - limitation on presentment of claim -
of
waiver. (1) In case of-personal injury-or death,
-writing to t h e employer, the insurer, or the
all claims shall be forever barred unless presented
in
division, as the case may be, within 12 months from
the date of the happening of the accident, either
by the claimant or someone legally authorized to
act for him in his behalf."
Again we find the clear expression of intention of the
Legislature that the claim shall be forever barred unless
presented within the time period.
In construing the 30-day provision of section
39-71-606(1), MCA, we must determine the plain meaning of the
words used, interpreting the language in accordance with
usual, ordinary and accepted meaning, and the intention of
the Legislature should be gathered from the language therein.
Cosgrove v. Industrial Indemnity Company (1976), 170 Mont.
249, 254, 552 P.2d 622, 624. Where the Legislature has not
inserted a penalty provision, we should be extremely cautious
before inserting any such penalty. That caution seems
particularly significant here where the contention is made
that coverage should be granted because of the failure to
deny the claim, notwithstanding a finding that the claimant
in fact was not an employee.
In view of the disagreement between the members of this
Court as to the application of section 39-71-606, MCA, it is
well to consider the statements a.nd conclusions of the
Workers1 Compensation Court:
"Claimant contends that he should prevail in this
case, irregardless of this Court's finding on
whether claimant was an employee or an independent
contractor, on the basis that insurer failed to
accept or deny claimant's claim within 30 days
after receipt of the claim. While this claim is
ingenious, it ignores the basic fact that the
insurer must be found liable under section
39-71-407 MCA before any benefits under Chapters 6
or 7 of the Act may be awarded. Section 39-71-407
MCA provides:
"'39-71-407. Liability of Insurers. Every insurer
is liable for a paymentof compensation, in the
manner and to the extent hereinafter provided, to
the employee - - employer - insures who receives
of an it
an injury arising out of and in the course of his
employment .
. .'
"As the emphasized portion of the above statute
makes clear, there must be an em~lovment L 2
relationship first, and liability must be
established before a. claimant becomes elisible for
any benefits ...
Here, the Court has f6und that
no-'employmentrelationship existed between claimant
and Tom Da.vis ..
. and -therefore the insurer is
not liable to the claimant for benefits under
section 39-71-606 MCA. Simply stated, - the
employment relationship - - cornerstone upon
is the
which all benefits under - - - founded. If
the Act are
there - - employment relationship, the insurer i
is no s
not liable for any benefits." (emphasis added)
We agree that the employment relationship is a
cornerstone upon which workers' compensation benefits are
founded. Nonetheless, we must consider the mandatory
requirement for acceptance or denial of a claim within 30
days. This is a specific legislative requirement. In the
absence of a legislatively designed penalty, we must consider
whether or not claim approval must be granted in order to
afford reasonable protection to a claimant.
We therefore consider the penalty provision of section
39-71-2907, MCA which in pertinent part provides for an
increase of award because of a delay in payment:
"When payment of compensation -- unreasonabl
has been
delayed or refTsed by an insurer, either prior oz
subsequent to the issuance of an order by the
workers' compensation judge granting a claimant
compensation benefits, the full amount of the
compensation benefits to a claimant may be ...
increased by the workers' compensation judge by
20%. " (emphasis added)
It is clear that the foregoing section allows a 20%
penalty for an unreasonable delay in payment. That speaks
directly to the delay problem involved in the failure to deny
a claim within 30 days. We conclude that this 20% penalty
provision can be applied where there has been a delay in
making a decision within the 30 days provided by section
39-71-606, MCA.
P?e hold that the claimant h.as failed to show a need for
such a drastic penalty as the granting of claim approval for
failure to accept or deny the claim within 30 days, and
conclude that the 20% penalty provision affords reasonable
protection for claimants in the same position as the claimant
in this case. We hold that section 3 9 - 7 1 - 6 0 6 , MCA does not
automatically entitle a claimant to benefits because of the
failure of an insurer to accept or deny a claim within 3 0
days.
The judgment of the Workers ' Compensation Court is
af firmed.
We concur:
Chief Justice
Justices
Mr. Justice Frank B. Morrison, Jr. dissents as follows.
The majority correctly quotes section 39-71-606(1), MCA.
This statute ma.kes it mandatory that every insurer shall,
within 30 days of receipt of a claim for compensation, either
accept or deny the claim. The only logical consequence of
failure to deny is acceptance. The Montana Workers '
Compensation Manual, Norman H. Grosfield, section 530, p. 28,
agrees. In fact, I would surmise that this has been the
understanding among practitioners, and although I acknowledge
this goes outside the record, that is the luxury of dissent.
The majority has effectively repealed section
39-71-606(1), MCA. This seems to me to be nothing less than
result-oriented judicial activism from those of my brothers
generally considered to be opposed to such conduct.
I would like to see more consistency in judicial
Mr. Justice John C. Sheehy:
I concur in the dissent of Mr. Justice Morrison.
Mr. Justice Daniel J. Shea dissenting:
I would reverse the Worker's Compensation Court because
the State Fund failed in its mandatory statutory duty to
accept or deny the claim within 30 days of its receipt. The
failure to do so results in the acceptance of the claim. The
staute is clear. Section 39-71-606(1), MCA provides:
" (1) Every insurer under any plan for the payment
of workers' compensation henefits shall within 30
days of receipt of a claim for compensation, either
accept or denv the claim. - - denied shall
and if
inform the claimant - - division - writing -
and thd in of
.
such denial " (Emphasis added) .
The majority gives no meaning to this statute other than
to read it together with the possible penalities that apply
under section 39-71-2907, MCA, if an insurer has
"unreasonably delayed or refused. . ." to pay benefits to a
claimant. I assume by the majority opinion that if the
insurer does not accept or reject a claim within 30 days, and
if it is later found to be compensable, that the majority
would hold the 20 percent penalty under section 39-71-2907 to
be automatic. Or, under the majority rationale, must the
claimant establish also that the insurer was "unreasonable"
in not notifying him within 30 days of its position on the
claim.
While i.t is possible to construe section 39-71-2907 to
apply to a situation under 39-71-606(1) where the mandatory
statutory duty of notice has not been given, this statute
cannot serve the purpose that the majority lets it serve
here. The statutory 20 percent penalty statute has nothing
to do with notice. In fact, a fair reading of the statute is
that it assumes a notice has been given to the claimant and
the only question is whether the insurer's position was
unreasonable in "delaying" or in "refusinq" to pay the
benefits owed.
I believe, on the other hand, that t-he notice statute,
section 39-71-606(l), stands alone in determining the time
limits within which an insurer must act to accept or deny a
claim once it has been presented to the insurer. The statute
can only mean that coverage is deemed to exist as a matter of
law if the insurer has neither accepted nor denied the claim
within the mandatory 30 days.
The last clause of section 39-71-606(l) is important.
Tt reads: " .. .and if denied shall inform the claimant and
the division of such denial." (Emphasis added). Its purpose
is clear. If a claim is accepted, no prejudice can befall a
claimant by not immediately notifying him and the division,
except perhaps the prejudice of not immediately receiving
benefits - a prejudice that can in almost all cases be cured.
But the prejudice is clear if the insurer denies the claim
but fails to notify the claimant of the denial. The statute
is designed to protect against that kind of prejudice by
imposing a duty on the insurer to notify the claimant within
30 days that his claim has been rejected. Failure to give
this statutory written notice results in acceptance of the
claim as a matter of law.