No. 90-345
IN THE SUPREME COURT OF THE STATE OF MONTANA
1991
JESS K. WALLING,
Claimant and Appellant,
-vs-
HARDY CONSTRUCTION,
Employer, MAR 19 '199%
and
CIGNA INSURANCE COMPANY,
Defendant and Respondent.
APPEAL FROM: Workers' Compensation Court
The Honorable Timothy W. Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Tom L. Lewis; Reqnier, Lewis & Boland, P.C., Great
Falls, Montana
For Respondent:
Randall H. Gray; James, Gray & McCafferty, Great
Falls, Montana
Chip McKenna, CIGNA Insurance Company, Portland,
Oregon
Submitted on Briefs: February 21, 1991
Decided: March 19, 1991
Filed:
Clerk
Justice John Conway Harrison delivered the Opinion of the Court.
On June 6, 1990, the Montana Workers' Compensation Court
determined that claimant Jess K. Walling, as an independent
contractor, could not recover workers1 compensation benefits from
Hardy Construction, the general contractor. From this decision,
Walling appeals. We affirm.
The following issues are presented:
1. Was the evidence sufficient for the Workers' Compensation
Court to find that Walling was an independent contractor, rather
than an employee of Hardy Construction?
2. In concluding that walling was an independent contractor,
did the Workers1 Compensation Court err in its analysis of the
control factor of 5 39-71-120, MCA?
3. Did the Workers1 Compensation Court err by applying 5 39-
71-401, MCA, as a basis for denying Hardy Constructionls liability
under the Workers1 Compensation Act?
Summary of Facts
In September 1984 Hardy Construction, a general contractor,
was awarded a $6.5 million contract for construction of a new
Fergus County high school. Hardy Construction negotiated a
subcontract, signed on January 10, 1985, with Jess Walling,
proprietor of Walling Construction, a business in operation from
1976 to 1985. In submitting his bid for the concrete flatwork,
Walling advised Hardy Construction that Walling did not want to
set the forms, but only wanted to do the pouring and finishing.
Walling agreed to pour and finish concrete slabs on the school
construction project for 28 cents per square foot.
Paragraph VII of the subcontract provided that Walling was to
Ivobtain,maintain and pay for such workmen's compensation insurance
as may be required by the General Contract or by law . . . .Iv
Walling complied with this requirement of the subcontract by
providing workers' compensation insurance through the State Fund
for his employees. As allowed by law, Walling elected not to pay
for workersv compensation insurance for himself.
The agreement specified that the subcontractor was to Ivproceed
with the work in the sequence directed by the Contractor and to
abide by the Contractor's decision as to the allotment of all
storage and working space on the Project."
The subcontract required Walling to provide vv[l]abor and
equipment to place and finish concrete. Iv Equipment provided by
Walling included shovels, rakes, wheelbarrows, cement finishing
machines worth $200 to $350, and hand tools. Under the terms of
the subcontract, Hardy Construction provided concrete, cure,
sealer, hardener, concrete saw worth $1,000, installation of forms,
reinforcing steel, and visqueen.
On one occasion Hardy Construction allowed Walling to use a
forklift, operated by a Hardy Construction employee, for lifting
concrete to mezzanine level. On three occasions, in order to speed
up the work, Hardy Construction made available to Walling a Bobcat
tractor driven by a Hardy Construction employee.
Under the terms of the subcontract, Hardy Construction had the
authority, which it never exercised, to fire any Walling employee
Hardy Construction considered objectionable. If the subcontract
were terminated, the subcontractor retained the right to withhold
service and to extend the time for completion of the work if delay
were the fault of Hardy Construction.
On the job Hardy Construction s superintendent, Norm ~jorndal ,
pursuant to the subcontract, controlled the sequence of work by
subcontractors. Walling checked with Bjorndal daily to find out
when and where concrete was to be poured. Bjorndal told Walling
and his employees where they had to work and how much concrete to
pour each day. At times, Bjorndal ordered Walling to pour concrete
over Walling's objections that rain would ruin the concrete. By
altering the method of setting the screed, Bjorndal changed
Walling1s procedure for making the concrete surface flat . Bjorndal
also determined whether to "burn the floor," giving the concrete
a high gloss finish, or whether to leave the concrete with a rough
finish. Walling worked along with his employees.
On the other hand, Walling or one of his foremen, Jim
Plovanich or Dan Oblander, supervised the Walling employees.
Bjorndal did not instruct Walling on which employees or how many
employees to have on the construction site. Bjorndal did not tell
Walling which Walling employees were to perform certain tasks or
what tools to use. Walling, rather than Bjorndal, controlled when
the Walling employees would take lunch and coffee breaks or could
leave the job site.
Walling employees did not make out time cards as did Hardy
Construction employees. Rather, Walling paid his own employees.
According to the subcontract, Walling was paid within sixty days
of submittal of a certified monthly estimate to Hardy Construction,
provided that the architect had certified the monthly estimate,
that Walling was not in default, and that Hardy Construction had
been paid by the project owner. Payment to Walling was usually
made monthly. In contrast, Hardy Construction employees were paid
weekly whether or not Hardy was paid by the owner of the project.
Each month Hardy Construction obtained lien waivers from
Walling and its other subcontractors.
On May 28, 1985, Walling, while working, severely injured his
back when he slipped on some wet forms at the construction site.
Due to his injuries, Walling underwent surgery on June 27, 1985.
About 90 per cent of Walling's work had been completed at that
point. After Walling's injury, Bjorndal took over Walling's crew
until the work was finished in July, 1985.
Walling claimed that he was eligible for workers1 compensation
benefits as an employee of Hardy Construction, rather than an
independent contractor. On December 6, 1989, a trial was held
before the Workers' Compensation Court on the issue of liability,
which was bifurcated from the question of the nature and extent of
Walling's injury. From the court's decision in favor of Hardy
Construction, Walling appeals.
I
Was the evidence sufficient for the Workers1 Compensation
Court to find that Walling was an independent contractor, rather
than an employee of Hardy Construction?
Walling claims that he was an employee of Hardy Construction,
not an independent contractor. See 5 3 9 - 7 - 1 8 1 (a), MCA. An
"independent contractorI1 is defined as follows:
[Olne 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.
Section 39-71-120, MCA.
The parties agree that Walling Construction, as an
independently established trade or business, satisfies subsection
(2) of 39-71-120, MCA. However, Walling alleges that when
working for Hardy Construction, he was not "free of direction or
control over the performance of service^,'^ as required by
subsection (1).
In Sharp v. Hoerner Waldorf Corp. (1978), 178 Mont. 419, 584
P.2d 1298, this Court developed a four-part test for determining
whether or not an employer has the right of control: (1) direct
evidence of right or exercise of control; (2) method of payment;
(3) furnishing of equipment; and (4) right to fire. Sharp, 178
Mont. at 425, 584 P.2d at 1301-02. A finding that an individual
is an independent contractor demands l1la convincing accumulation
of these and other tests, 'I1 while a finding of employee status
"'can if necessary often be solidly proved on the strength of one
of the four items.I1' Sharp, 178 Mont. at 425, 584 P.2d at 1302
(quoting 1C A. Larson, Workmen's Compensation Law § 44.10, at 8-
35 (1952)) .
Control
The traditional test of employer/employee status is the riqht
of the employer to control details of the work, not necessarily the
exercise of that control. Carlson v. Cain (1983), 204 Mont. 311,
324, 664 P.2d 913, 919. An employer of an independent contractor
controls the "end result" of the contractor's work, while control
of the llmeansll which the work is accomplished indicates that the
by
worker is an employee. Johnson v. Department of Labor & Industry
(1989), 240 Mont. 288, 292-93, 783 P.2d 1355, 1358. Without
destroying independent contractor status, the owner or general
contractor ''is entitled to as much control of the details of the
work as is necessary to ensure that he gets the end result from the
contractor that he bargained for.'' 1C A. Larson, Workmen's
Compensation Law 5 44.20, at 8-57 (1990).
Walling contends that Hardy Construction exercised control
over Walling's work by determining when and where Walling would
work. The subcontract provided that Hardy Construction could
control the sequence of the work, a condition necessary to ensure
the end result on a project employing as many as forty Hardy
Construction employees and approximately fifteen subcontractors.
This provision in the subcontract was not enough to strip Walling
of control.
Walling cites Bjorndalls ordering some concrete work to be
performed in bad weather against Walling's advice as one way in
which Hardy Construction exercised direction and control over
Walling. These actions of Bjorndal fell within Hardy
Construction's right to control the sequence of the work on the
construction project.
Walling argues that Hardy Construction managed the means by
which the work was accomplished when B j orndal changed Walling s
screeding method. Bjorndal made the change because Hardy
Construction altered its method of setting forms, a responsibility
of Hardy Construction under the subcontract.
Bjorndalls decisions as to what type of finish to put on the
concrete also were within Hardy Construction's prerogative to
control the end result. When Walling's crews were working, either
Walling himself or one of his foreman directed their activities.
We hold that Hardy Construction did not exert any more control over
Walling than necessary to oversee construction of the project and
ensure the end result.
Method of Payment
-
Walling was paid 23 cents per square foot of completed
concrete. Walling had to submit certified monthly estimates to
the contractor and payment had to be certified by the project
architect. Final payment to Walling was conditioned upon the
architect's certification of final payment to Hardy and provided
that Walling would be paid only if Hardy Construction were paid by
Fergus County. Hardy Construction paid its employees weekly,
whether or not Hardy Construction received payments from the
County. Walling paid his own employees. According to 1C A.
Larson, Workmen's Compensation Law, 5 44.33, at 8-94 (1990):
[playment on a time basis is a strong indication of the
status of employment. Payment on a completed project
basis is indication of independent contractor status.
Payment on a piece-work or commission basis is consistent
with either status.
"When payment is by quantity or percentage, the method of payment
test . . . largely cancels itself out and becomes neutral." 1C A.
Larson, Workmen's Compensation Law 5 44.33 (b), at 8-106 (1990).
We hold that the method of payment to Walling was at best a neutral
factor, and more indicative of independent contractor status when
compared with the manner in which other Hardy Construction
employees were paid and the conditions which had to be met for
Walling to be paid.
Furnishins of Equipment
-
Providing valuable equipment indicates employment status as
explained in IC A. Larson, Workmen's Compensation Law § 44.34(b),
When it is the employer who furnishes the equipment, the
inference of right of control is a matter of common sense
and business. The owner of a $10,000 truck who entrusts
it to a driver is naturally going to dictate details such
as speed, maintenance, and the like, in order to protect
his investment. Moreover, since he has capital tied up
in this piece of equipment, he will also want to ensure
that it is kept as productive and busy as possible.
Walling or his employees provided the equipment, including
expensive cement finishing machines, ordinarily used during the
course of work. On the few occasions when a Bobcat and forklift
were used, the machines were operated by Hardy Construction
workers. Provision and use of equipment were consistent with
independent contractor status.
Risht to Fire
Termination at will or for failure to perform certain details
unrelated to the end result strongly indicates employee status.
Carlson, 204 Mont. at 324, 664 P.2d at 919. Although, pursuant to
the subcontract, Hardy Construction reserved the right to fire
unsatisfactory employees of Walling, Hardy Construction could not
"firen Walling without terminating the contract and incurring
liabilities. Walling could withhold service and extend the time
for completing its work due to the fault of Hardy Construction.
The conditions set forth in the contract for termination are
consistent with independent contractor status.
Unless the facts are undisputed, the question of independent
contractor versus employee status is not a matter of law. Carlson,
204 Mont. at 317, 664 P.2d at 916. Since certain facts were
disputed, in this case the I1sufficiency of the evidence" standard
is appropriate. Solheim v. Tom Davis Ranch (1983), 208 Mont. 265,
272, 677 P.2d 1034, 1038.
When determining whether evidence supports the findings and
conclusions of the Workers1 Compensation Court, the scope of review
is limited. The Supreme Court cannot substitute its judgment as
to the weight of the evidence and cannot overturn the judgment of
the Workers1 Compensation Court if substantial evidence supports
the findings. Schrapps v. Safeway Stores, Inc. (1989), 238 Mont.
355, 356-57, 777 P.2d 887, 888.
We hold that substantial evidence supports the finding of the
Workers1 Compensation Court that Walling was not an employee of
Hardy Construction, but an independent contractor.
In concluding that Walling was an independent contractor, did
the Workers1 Compensation Court err, as a matter of law, in its
analysis of the control factor of 5 39-71-120, MCA?
In considering questions of law, this Court is not bound by
the conclusions of the Workers1 compensation Court, but is free to
draw its own conclusions fromthe evidence presented. Carlson, 204
Mont. at 317, 664 P.2d at 916. Walling alleges that the Workers1
compensation Court erred as a matter of law by examining the
control granted to Hardy construction according to the "four
corners of the contract itself," as stated in the court's
conclusions of law:
All of the functions of control exercised by Hardy fit
within the four corners of the contract itself. Hardy
reserved to itself the ability or right to determine when
and where to pour concrete as the sequence of work was
solely at Hardy's discretion. The fact that Bjorndal
ordered certain work performed against Walling's advice
due to weather does not alter that contract provision.
The same is true of the furnishing of equipment which
paragraph XIX permits by agreement. No additional duties
outside the terms of the contract were imposed on Walling
as was the case in Sharp . . ..
~ccording the statutory definition, an independent contractor's
to
direction and control must be determined "both under his contract
and in fact.'' Section 39-71-120, MCA. As stated in Sharp, "in
determining this right of control, attention must be directed to
the employment contract and the fact of the employment situation.I1
Sharp, 178 Mont. at 425, 584 P.2d at 1301.
We find no error because we read the court's conclusion as
examining both the subcontract and what in fact occurred on the job
site. Hardy ~onstruction's control over the sequence of work
performed and provision of equipment, gave Hardy construction no
more direction and control over Walling than necessary to ensure
the end result.
Did the Workers1 compensation Court err by applying subsection
(3) of § 39-71-401, MCA, as a basis for denying Hardy
Construction's liability under the Workersr Compensation Act?
Since we have upheld the Workers' Compensation Court's
determination that Walling was an independent contractor, we need
not discuss the court's application of § 39-71-401(3), MCA.
Walling further contends that he should be afforded insurance
coverage by Hardy construction under the statutory provision
governing liability of an employer who contracts out work:
(2) Where an employer contracts to have any work to
be done by a contractor other than an independent
contractor, and the work so contracted to be done is a
part or process in the trade or business of the employer,
then the employer is liable to pay all benefits under
this chapter to the same extent as if the work were done
without the intervention of the contractor, and the work
so contracted to be done shall not be construed to be
casual employment. Where an employer contracts work to
be done as specified in this subsection, the contractor
and the contractor's employees shall come under that plan
of compensation adopted by the employer.
Section 39-71-405 (2) , MCA (emphasis added).
We have previously interpreted this statutory subsection,
identical to the 1983 version, in State Insurance Compensation Fund
v. Castle Mountain Corporation (1987), 227 Mont. 236, 739 P.2d 461.
While this Court recognized that subsection (2) could be read to
require a general contractor to provide benefits for a
subcontractor if the subcontractor were a non-independent
contractor, we concluded that "the subsection was not intended to
address situations where the contractor is sufficiently independent
to carry its own workers1 compensation insurance.I1 Castle
Mountain, 227 Mont. at 241, 739 P.2d at 464.
Since we have held that the evidence was sufficient to find
that Walling was an independent contractor, 5 39-71-405(2), MCA,
does not apply.
The judgment of the Workers' Compensation Court is affirmed.
We concur: