COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Moon, Judges Fitzpatrick and Annunziata
Argued at Salem, Virginia
JAMES GRANT WHITLOCK
OPINION BY
v. Record No. 3072-96-3 JUDGE JOHANNA L. FITZPATRICK
SEPTEMBER 2, 1997
WHITLOCK MECHANICAL/CHECK SERVICES, INC.
and PENNSYLVANIA MANUFACTURERS'
ASSOCIATION INSURANCE COMPANY
FROM THE VIRGINIA WORKERS' COMPENSATION COMMISSION
Rhonda L. Overstreet (Gary L. Lumsden;
Lumsden & Overstreet, on brief), for
appellant.
Paul C. Kuhnel (Wooten & Hart, P.C., on
brief), for appellees.
The issue in this appeal is whether James G. Whitlock
(claimant) was, at the time of his injury, a sole proprietor who
qualified as an "employee" and thus was entitled to workers'
compensation benefits under Code § 65.2-101(1)(n). Claimant
argues that the Workers' Compensation Commission erred in finding
that he was an independent contractor who failed to properly
elect coverage pursuant to Code §§ 65.2-305 and 65.2-101(1)(n)
and that he was not entitled to benefits as a sole proprietor
under these code sections. For the reasons that follow, we find
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no error and affirm the judgment of the commission.
1
Employer also contends that the deputy commissioner erred
by failing to take judicial notice of certain insurance
provisions. However, we do not address this issue, as we affirm
on other grounds.
I. BACKGROUND
On October 17, 1994, claimant fell and broke his leg and
ankle during the course of his employment. At the time of his
injury, claimant was a sole proprietor, trading as "Whitlock
Mechanical," who engaged in the business of providing heating and
air conditioning services. Claimant had procured the job from a
custom builder. The job involved installing an air conditioner
in the ceiling of a new home.
During that period, claimant had a business relationship
with an entity called Check Services, Inc. 2 (Check). For a small
fee, Check performed various tasks for claimant. Check withheld
claimant's state and federal taxes, performed payroll services,
and occasionally referred claimant jobs in his field. The nature
of Check's business was unrelated to the heating and air
conditioning trade; rather, it was a "leasing" company that was
"essentially a bookkeeping service."
Pennsylvania Manufacturers' Association Insurance Company
(PMA) provided workers' compensation coverage for Check.
Following his injury, claimant applied for workers' compensation
medical benefits through PMA. By letter dated August 2, 1995,
PMA denied claimant's workers' compensation claim, stating that
claimant was "not technically an employee of [the] insured, Check
Services."
2
Check Services, Inc. went out of business in December 1994.
2
A hearing regarding claimant's coverage by PMA was held on
May 9, 1996 before a deputy commissioner. Claimant described the
relationship between his company and Check in the following
terms: "Hunt Financial and Check Services, I work for them. And
the[] way I did that is she took out my Workmen's Comp.
[premiums] and she took out my federal and state income tax."
Claimant explained that a representative from Check told him that
Check Services was a "leasing company."
Claimant further testified that Whitlock Mechanical was a
sole proprietorship, and that he, trading as Whitlock Mechanical,
had no other employees. He indicated that at the time he was
injured, he "just worked for [him]self" and was in "control at
the jobsite." Finally, he admitted that he did not fill out or
sign any document that he understood to be an application for
workers' compensation insurance and that he did not make a
specific election for coverage under Code §§ 65.2-305 and
65.2-101(1)(n).
Mike Stafford, an account claims executive with PMA, also
testified at the hearing. He reviewed the PMA insurance policy
and stated that "the coverage for Check Services, Inc. would be
to all officers or employees of Check Services." He further
testified that the policy covered only the "named insured" and
that claimant was not covered under this policy because "he was
not an employee of Check Services but that he was a sole
proprietor and that he had control over his work product, and for
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that reason was not [an] employee."
By opinion dated May 10, 1996, the deputy commissioner found
that claimant was "covered under Check Services' policy" and that
"the claimant contracted with Check Services, Inc. for very
specific reasons, reasons which included workers' compensation
coverage." In reaching this decision, the deputy commissioner
specifically referred to the certificate of insurance produced by
claimant "which indicated that 'WHITLOCK MECHANICAL' had
'WORKERS' COMPENSATION' coverage under Check Services' policy at
the time of the accident."
However, upon review, the full commission determined that
claimant was an independent contractor, not an employee of Check,
and reversed the deputy commissioner's decision. Additionally,
the commission found that claimant operated Whitlock Mechanical
as a sole proprietor and as such did not come within the purview
of the Workers' Compensation Act.
Although the commission confirmed that Check occasionally
obtained contracts for air conditioning services for Whitlock
Mechanical to perform, provided bookkeeping services for
claimant, collected money for work performed by claimant,
deposited state and federal taxes on behalf of claimant, and
issued checks to claimant, the commission found that Check
exercised no control over claimant or his work. The commission
concluded as follows:
PMA covered only the employees of the
independent contractor, Whitlock Mechanical,
and [] this was the purpose of the
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certificate. The claimant himself, as an
independent contractor, could not be a
statutory employee of another contractor, nor
of Check Services, Inc. Only Whitlock
Mechanical's employees, had there been any,
would qualify as statutory employees
(§ 65.2-302, Code of Virginia). 3
We find no contract of employment
between Check Services, Inc. and the claimant
. . . . We find insufficient evidence that
3
Code § 65.2-302 provides, in pertinent part, as follows:
A. When any person . . . undertakes to
perform or execute any work which is a part
of his trade, business or occupation and
contracts with any other person . . . for the
execution or performance by or under such
subcontractor of the whole or any part of the
work undertaken by such owner, the owner
shall be liable to pay to any worker employed
in the work any compensation under this title
he would have been liable to pay if the
worker had been immediately employed by him.
B. When any person . . . contracts to
perform or execute any work for another
person which work or undertaking is not a
part of the trade, business or occupation of
such other person and contracts with any
other person . . . for the execution or
performance by or under the subcontractor of
the whole or any part of the work undertaken
by such contractor, then the contractor shall
be liable to pay to any worker employed in
the work any compensation under this title
which he would have been liable to pay if
that worker had been immediately employed by
him.
C. When the subcontractor in turn
contracts with still another person . . . for
the performance or execution by or under such
last subcontractor of the whole or any party
of the work undertaken by the first
subcontractor, then the liability of the
owner or contractor shall be the same as the
liability imposed by subsections A and B of
this section.
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the claimant himself has elected to be
covered under the PMA policy . . . . Such an
election is provided by [Code § 65.2-305],
but it is clear that this [s]ection
contemplates the employer itself directly
applying with an insurance carrier for such
insurance and being specifically a named
insured [Code § 65.2-101(1)(n)]. In this
case, the claimant attempts to establish
coverage through the policy issued to another
insured. His effort fails for the reasons
set forth above.
(Emphasis added).
II. INDEPENDENT CONTRACTOR v. EMPLOYEE
It is undisputed that at the time of his injury, claimant
was a sole proprietor. However, on appeal, claimant argues that
the commission erred in finding that he was an independent
contractor rather than an employee of Check.
A sole proprietor . . . is not
necessarily an independent contractor. A
sole proprietor may have employees who are
subject to the act. A sole proprietor may
also elect to be an employee covered by the
act. Whether a sole proprietor who does not
so elect is an employee or an independent
contractor depends upon the nature of the
relationship, particularly whether the person
who hires him or her retains the right to
control the work to be performed. Whether
such a person is an employee under the act is
usually a question of fact.
Metropolitan Cleaning Corp., Inc. v. Crawley, 14 Va. App. 261,
265, 416 S.E.2d 35, 38 (1992) (emphasis added) (citations
omitted). "'What constitutes an employee is a question of law;
but, whether the facts bring a person within the law's
designation, is usually a question of fact.' The worker's status
'must be determined from the facts of the particular case in the
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light of well settled principles.'" Intermodal Servs., Inc. v.
Smith, 234 Va. 596, 600, 364 S.E.2d 221, 224 (1988) (quoting
Baker v. Nussman, 152 Va. 293, 302, 147 S.E. 246, 249 (1929), and
Brown v. Fox, 189 Va. 509, 516, 54 S.E.2d 109, 113 (1949)).
"'On appellate review, we must construe the evidence in the
light most favorable to the party prevailing below. Factual
findings by the commission that are supported by credible
evidence are conclusive and binding upon this Court on appeal.'"
White Elec. Co., Inc. v. Bak, 22 Va. App. 17, 23, 467 S.E.2d
827, 830 (1996) (quoting Barnes v. Wise Fashions, 16 Va. App.
108, 109, 428 S.E.2d 301, 301-02 (1993)); see also Celanese
Fibers Co. v. Johnson, 229 Va. 117, 120, 326 S.E.2d 687, 690
(1990).
Generally, "a person is an employee if
he works for wages or a salary and the person
who hires him reserves the power to fire him
and the power to exercise control over the
work to be performed." The right of control
is the determining factor in ascertaining the
parties' status in an analysis of an
employment relationship. And the right of
control includes not only the power to
specify the result to be attained, but the
power to control "the means and methods by
which the result is to be accomplished." An
employer-employee relationship exists if the
party for whom the work is to be done has the
power to direct the means and methods by
which the other does the work. "[I]f the
latter is free to adopt such means and
methods as he chooses to accomplish the
result, he is not an employee but an
independent contractor."
Intermodal Servs., 234 Va. at 601, 364 S.E.2d at 224 (citations
omitted).
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In the instant case, the record clearly established that
Check exercised no control over claimant or his work. Check
primarily provided unrelated administrative services for
claimant. Check had no contract of employment with claimant.
Check did not pay claimant a salary or wages nor did it have the
power to fire him. Claimant maintained exclusive control over
his work. Accordingly, we find that credible evidence supports
the commission's determination that claimant was not an employee
of Check but was an independent contractor.
III. COVERAGE UNDER THE ACT
Additionally, claimant contends that he meets the statutory
definition of "employee" as set forth in Code § 65.2-101(1)(n)
and that he elected workers' compensation coverage by entering
into an employment contract with Check and by paying premiums to
Check. Claimant also argues that the commission misinterpreted
Code § 65.2-305. 4 As support for his contention, claimant points
to Check's policy and the Certificate of Insurance issued by PMA
identifying Whitlock Mechanical as a covered contractor.
It is uncontroverted that claimant was a sole proprietor at
the time of his injury. A sole proprietor may obtain coverage as
an "employee" as defined in Code § 65.2-101(1)(n) as follows:
Any sole proprietor or all partners of a
4
Claimant argues that under Code § 65.2-305 he was not
responsible for notifying PMA of his election for coverage and
that he was not responsible for "directly apply[ing] to the
insurance company for coverage." However, claimant cites no
authority for this proposition. We find no basis to support
claimant's interpretation of Code § 65.2-305.
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business electing to be included as an
employee under the workers' compensation
coverage of such business if the insurer is
notified of this election. Any sole
proprietor or the partners shall, upon such
election, be entitled to employee benefits
and be subject to employee responsibilities
prescribed in this title.
When any partner or proprietor is
entitled to receive coverage under this
title, such person shall be subject to all
provisions of this title as if he were an
employee; however, the notices required under
§§ 65.2-405 and 65.2-600 of this title shall
be given to the insurance carrier, and the
panel of physicians required under § 65.2-603
shall be selected by the insurance carrier.
(Emphasis added). Additionally, the provisions of Code
§ 65.2-305(A) provide:
Those employers not subject to this
title may, by complying with the provisions
of this title and the applicable rules of the
Commission, voluntarily elect to be bound by
it as to accidents or occupational diseases
or both.
(Emphasis added). Thus, the crux of the issue is whether
claimant's actions constituted an "election" under the Act and
whether the insurer was sufficiently "notified" of his election.
It is undisputed that Check was the insured of PMA. As
stated above, claimant was not an employee of Check and thus was
not covered under the insurance policy in that capacity.
Moreover, no evidence in the record proved that claimant
specifically elected to be covered under the policy as a sole
proprietor, and no evidence proved that he gave express notice to
the insurer of his intention to be personally covered. While
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claimant testified he paid Check to retain workers' compensation
coverage, he also testified that he never filled out or signed
any document or form that he understood to be an application for
workers' compensation insurance. Claimant gave no written notice
to PMA or to Check that he elected to be covered under workers'
compensation. Claimant admitted that he dealt only with Check
personnel up until the time of his injury, and nothing in the
record indicates that claimant communicated with any agent of PMA
or any other insurance underwriter for the purpose of electing
coverage as a sole proprietor.
Moreover, the commission stated that "PMA covered only the
employees of the independent contractor, Whitlock Mechanical, and
that this was the purpose of the [insurance] certificate." The
commission found no contract of employment between Check and
claimant; rather, the commission determined that claimant was a
customer of Check and that Check provided bookkeeping services
for claimant and referred work to him occasionally. The
commission further established that Check was not in the building
or construction trade, or any business that required services of
a heating and air conditioning mechanic. The commission
specifically decided as follows:
[There is] insufficient evidence that the
claimant himself has elected to be covered
under the PMA policy . . . . Such an election
is provided by statute [Code § 65.2-305], but
it is clear that this [s]ection contemplates
the employer itself directly applying with an
insurance carrier for such insurance and
being specifically a named insured [Code
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§ 65.2-101(1)(n)]. In this case, the
claimant attempts to establish coverage
through the policy issued to another insured.
His effort fails . . . .
Giving deference to the matters coming within the
cognizance, expertise, and knowledge of the Workers' Compensation
Commission, Metropolitan Cleaning Corp., Inc., 14 Va. App. at
265, 416 S.E.2d at 38, and construing the evidence in the light
most favorable to the employer, who prevailed below, White Elec.
Co., 22 Va. App. at 23, 467 S.E.2d at 830, we find that claimant
made no election for coverage as a sole proprietor and provided
no notice of any such election to the insurer. Thus, we hold
that claimant was ineligible to receive benefits as an "employee"
pursuant to Code § 65.2-101(1)(n).
For the foregoing reasons, we affirm the decision of the
commission.
Affirmed.
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