(dissenting). I respectfully dissent and would affirm the decision of the Worker’s Compensation Appellate Commission (wcac).
Plaintiff argues that defendant is liable for the benefits as a statutory employer under MCL 418.171; MSA 17.237(171). His position is that he was an employee of HCM Heating and Air Conditioning, Inc., which was under contract with defendant. Because HCM did not carry worker’s compensation insurance, by operation of § 171, defendant, as the principal to HCM, is liable for plaintiffs worker’s compensation benefits. Defendant disagrees with plaintiff’s characterization *646of himself as an employee of HCM. It argues that plaintiff was a subcontractor to HCM and thus not an employee of HCM as that term is defined under § 161 of the Worker’s Disability Compensation Act (wdca).
The magistrate found that plaintiff was not an employee of HCM. The magistrate found that plaintiff maintained a separate business and held himself out to and rendered service to the public:
Mr. Blanzy testified he did not advertise, but he did have business cards and did perform work, which he obtained byword of mouth, for entities other than Brigadier General. Beyond that, plaintiff listed his occupation on his individual income tax returns as “self-employed,” he filed social security self-employment tax, his U.S. Individual Income Tax Returns reflected business income rather than wages or salary and he filed a schedule C, Profit or Loss from Business (Sole Proprietorship).
The wcac disagreed with the magistrate. It found little or no evidence to support the magistrate’s apparent finding that plaintiff was a subcontractor to HCM because he maintained a separate business and held himself out to and rendered service to the public. Instead, the WCAC found the evidence on the entire record to support a contrary conclusion: plaintiff was HCM’s employee. The wcac also found that plaintiff and HCM had not excluded plaintiff as an employee covered by the wdca, as allowed under subsections 161(4) and (5), MCL 418.161(4) and (5); MSA 17.237(161)(4) and (5). It found that the magistrate had erred in her legal conclusion, and reversed her decision.
The limited question to be addressed in this case, as directed by our Supreme Court, is whether defend*647ant was a statutory employer of plaintiff under § 171, which provides:
(1) If any employer subject to the provisions of this act, in this section referred to as the principal, contracts with another person, in this section referred to as the contractor, who is not subject to this act or who has not complied with the provisions of section 611, and who does not become subject to this act or comply with the provisions of section 611 prior to the date of the injury or death for which claim is made for the execution by or under the contractor of the whole or any part of any work undertaken by the principal, the principal shall be liable to pay to any person employed in the execution of the work any compensation under this act which he or she would have been liable to pay if that person had been immediately employed by the principal. . . .
(2) If the principal is hable to pay compensation under this section, he or she shall be entitled to be indemnified by the contractor or subcontractor. The employee shall not be entitled to recover at common law against the contractor for any damages arising from such injury if he or she takes compensation from such principal. The principal, in case he or she pays compensation to the employee of such contractor, may recover the amount so paid in an action against such contractor.
(3) This section shall apply to a principal and contractor only if the contractor engages persons to work other than persons who would not be considered employees under section 161(l)(d).
Section 161 defines “employee” for purposes of the WDCA. At the time of plaintiffs injury, subsection lfilQOCb)1 defined “employee” as “[e]very person in the service of another, under any contract of hire, *648express or implied . . . Subsection 161(l)(d)2 provided that an employee under the act includes
[ejvery person performing service in the course of the trade, business, profession or occupation of an employer at the time of the injury, provided the person in relation to this service does not maintain a separate business, does not hold himself or herself out to and render service to the public, and is not an employer subject to this act. [MCL 418.161(l)(d); MSA 17.237(161)(l)(d).J
Our Supreme Court recently discussed the definitions of “employee” as presented in subsections 161(l)(b) and (d) in Hoste v Shanty Creek Management, Inc, 459 Mich 561; 592 NW2d 360 (1999). First, the Court concluded that subsections 1(b) and 1(d) are separate and that a plaintiff first must establish that he is an employee under subsection 1(b) and then must survive the test of subsection 1(d). Hoste, supra at 573.
In Hoste, the Court explained that under subsection 161(l)(b), a plaintiff must establish that he was under a “contract of hire” with the employer. This requires that “compensation must be payment intended as wages.” Hoste, supra at 576. In the present case, the record supports a conclusion that plaintiff performed work for HCM and received compensation in return. The record shows that HCM compensated plaintiff for work performed by paying him for his services. Therefore, plaintiff was an employee of HCM under subsection 161(l)(b).
It next must be established that plaintiff passes subsection 161(l)(d). It is in this respect that the magistrate and the wcac differed. In Hoste, the Court *649explained that subsection 161(l)(d) supersedes the old economic realities test, although it incorporates some of the factors of that test. Hoste, supra at 572. The Court instructed that the common-law economic realities test may not be used to supersede subsection 161(l)(d) by considering factors not contained within the statute, but the factors enumerated in the statute “can be construed by reference to the case law development of those same factors.” Hoste, supra at 572.
Thus, it must be determined whether the wcac erred in reversing the magistrate’s conclusion regarding subsection 161(l)(d). The three factors that must be considered are whether plaintiff (1) maintained a separate business, (2) held himself out to and rendered service to the public, and (3) was not an employer subject to the act. The parties do not dispute that plaintiff was not an employer under the act. Therefore, only the first two factors need be considered.
HCM occasionally employed others or subcontracted work. Plaintiff did not advertise, but he admitted using business cards. The record does not indicate whether the business cards were in plaintiff’s name or that of HCM. His customers contacted him through word of mouth. The truck he used on the job did not have HCM’s name on it. To compensate himself from HCM, plaintiff would determine what he was owed for a particular job and write himself a check. HCM had a checking account that was separate from plaintiff’s personal checking account. According to plaintiff, the entity with whom he most often contracted was defendant. When defendant contracted with HCM for the job on which plaintiff was *650injured, defendant issued a check to HCM for the materials.
Plaintiff and his accountant testified regarding plaintiffs individual tax returns and those for HCM for the years 1988 through 1990. The corporate returns do not list wages or salaries paid or compensation to officers, but list payments for subcontractor services. On his federal taxes, plaintiff reported both wages and business income, and he identified his business as heating and air conditioning. Plaintiffs accountant testified that a portion of the subcontractor services reported by HCM was paid to plaintiff and reported on his individual income tax return as part of his business income. However, the accountant explained that the fact that the money is characterized on the corporate return as “subcontractor services” and paid to plaintiff does not mean that plaintiff was a subcontractor to HCM. The accountant testified that the money was paid by HCM to plaintiff as an expense for services rendered.
The accountant explained that HCM should have paid plaintiff through a W-2 form, but plaintiff did not conduct HCM’s business in that manner. The accountant reported plaintiff’s income on his individual return as business income so plaintiff could pay social security taxes on it to make up for the fact that the corporation did not pay social security taxes on the money. The accountant also testified that, with the exception of a small amount of income reported by plaintiff received from work unrelated to HCM’s business, all of plaintiff’s income came from HCM.3
*651The magistrate found that plaintiff maintained a separate business. The magistrate appeared to have rested her decision primarily on the manner in which plaintiff reported his income on his individual tax returns. The WCAC concluded that this finding was not supported by the evidence. It noted that plaintiffs accountant testified that plaintiffs entire income came from HCM. It further noted that the accountant testified that he treated plaintiff as an employee of HCM, not a subcontractor; his income from HCM was for services rendered. The failure of the tax returns to accurately categorize the income earned by plaintiff should not be dispositive of whether plaintiff maintained a separate business.
The WCAC did not exceed the scope of its reviewing power in concluding that the magistrate’s finding that plaintiff maintained a separate business is not supported by the evidence. Goff v Bil-Mar Foods, Inc (After Remand), 454 Mich 507, 512-513; 563 NW2d 214 (1997). Here, the WCAC acted in a manner consistent with the concept of administrative appellate review that is less than de novo in finding that the magistrate’s decision was not supported by competent, material, and substantial evidence on the whole record because the WCAC carefully examined the whole record, did not misapprehend or misapply the substantial evidence standard, was cognizant of the deference to be given to the magistrate, and gave adequate reasons grounded in the record for reversing the decision of the magistrate. Id. at 516-517; Holden *652v Ford Motor Co, 439 Mich 257, 267-269; 484 NW2d 227 (1992). There is no evidence that plaintiff maintained a separate business from HCM. While plaintiff reported income as business income, his accountant explained the reasons for doing so and testified that plaintiff did not report any income for heating and air conditioning service and installation separate from that he earned from HCM. There is no evidence that plaintiff earned income as an individual or through another business other than that earned while working for HCM.
Similarly, with regard to whether plaintiff held himself out to and rendered service to the public, presumably separate from the work he performed for HCM, there is limited evidence on the issue. While plaintiff testified he had business cards, there is nothing to confirm that these business cards were in plaintiffs name only or that of HCM. There was also no clear evidence that plaintiff held himself out and rendered service as an individual separate from HCM. Therefore, the wcac did not exceed its scope of review in concluding that the magistrate erred in finding that plaintiff held himself out to and rendered service to the public as an individual separate from HCM’s business.
This Court’s review is limited to whether the wcac understood and did not misapprehend or grossly misapply the substantial evidence standard. Here, the wcac clearly found that the findings of the magistrate were not supported by competent, material, and substantial evidence on the whole record. The WCAC considered the entire record and stated its reasons for reversing the magistrate’s decision. Its reasons were *653based on the record. It did not err in rejecting the magistrate’s findings and legal conclusion.
Defendants also argue that plaintiff should not be deemed an employee of HCM because to do so would render the indemnification provisions of § 171 meaningless. Defendants rely on Davidson v Wayne Co Bd of Rd Comm’rs, 86 Mich App 592; 272 NW2d 740 (1978). However, unlike Davidson, this case involves a separate plaintiff and corporate employer. In Davidson, the plaintiffs were independent owner-operators of taxi cabs. There was no corporate entity involved. The indemnification provisions of § 171 allow defendants to seek indemnification from HCM. Therefore, a finding that plaintiff is an employee of HCM would not render the indemnification provisions meaningless.
I would affirm the decision of the wcac.
The statute has undergone substantial revisions and this subsection is now designated subsection 161(1)(1).
This is now subsection 161(l)(n).
As noted by the wcac, plaintiff performed work as a temporary fill-in heating inspector for the city of Farmington Hills. However, this was work that HCM did not engage in; thus, as noted by the wcac, it was distinct *651from HCM’s business. There was also evidence that one of the subcontractors made a payment in plaintiff’s name, rather than that of HCM to which the money was intended. However, there is no indication that this was the result of plaintiff’s holding himself out as separate from HCM.