Opinion
W. C. No. 4-678-723.
May 10, 2007.
FINAL ORDER
The respondent seeks review of an order of Administrative Law Judge Martinez (ALJ) dated November 28, 2006, which determined the claimant was an "employee" when he suffered work-related injuries and, therefore, required the respondent to provide workers' compensation benefits. We affirm
The parties stipulated the claimant was performing duties arising out of and in the course of his service as a taxi driver when he was hit by another vehicle on June 25, 2005, and that the respondent had no policy of workers' compensation insurance covering the claimant. The parties further stipulated regarding a number of other issues including the identity of the authorized medical providers, the claimant's average weekly wage, the date of maximum medical improvement and the extent of permanent medical impairment.
On the issues in controversy the ALJ's pertinent findings of fact are as follows. The claimant entered into a lease entitled "Taxicab Operation Agreement" with the respondent, and was driving a taxicab for the respondent pursuant to that agreement when he was involved in the accident. The lease agreement states that the driver acknowledges that he is not entitled to workers' compensation benefits and that he is an independent contractor. Under the terms of the lease agreement members of the traveling public pay the claimant and he in turn pays the respondent for lease of the vehicle. The claimant did not provide similar service for any entity other than the respondent. The claimant was covered by "Occupational Accident Insurance" and as the policyholder paid the premium for this policy. The coverage offered to the claimant under the policy was not comparable to the benefits offered under the Workers' Compensation Act (Act).
The ALJ determined that the criteria set forth for resolving the issue of a claimant's status as an independent contractor found in § 8-40-202(2), C.R.S. 2006 were not applicable to the instant case. Instead the ALJ determined that § 8-40-301, C.R.S. 2006 and § 40-11.5-102, C.R.S. 2006 were applicable. Therefore, finding that the insurance coverage under the "Occupational Accident Insurance" offered to the claimant was not comparable to the benefits offered under the Act, the ALJ further found the claimant was not an independent contractor. The ALJ determined that the claimant was an employee of the respondents at the time of the accident and that the injury was compensable.
On appeal the respondent contends the claimant is an independent contractor under § 8-40-202(2) and that the obligation to provide complying insurance provisions of § 8-40-301 and § 40-11.5-102 merely provided the parties with an alternative method for structuring their relationship. The respondent argues that the criteria found in § 8-40-202(2) were met in this case and that the claim should be dismissed. We disagree.
Section 8-41-301 C.R.S. 2006 requires that in order to recover workers' compensation benefits that the claimant must be the respondent's "employee" at the time of the injuries. Section 8-40-202(2)(a), C.R.S. 2006, provides:
Notwithstanding any other provision of this section, any individual who performs services for pay for another shall be deemed to be an employee, irrespective of whether the common-law relationship of master and servant exists, unless such individual is free from control and direction in the performance of the service, both under the contract for performance of service and in fact and such individual is customarily engaged in an independent trade, occupation, profession, or business related to the service performed.
However, under § 8-40-301(5), C.R.S. 2006, a person working as a driver under a lease agreement meeting the requirements set forth in § 40-11.5-102 C.R.S. 2006, is excluded from the definition of "employee." Further, a lease agreement which meets the requirements of § 40-11.5-102(4) creates a presumption that the lessee is an independent contractor and that presumption may only be overcome by "clear and convincing evidence."
Section 40-11.5-102(5)(a), provides, however, that a lease agreement that qualifies to exclude a driver from the definition of an "employee" must also "provide for coverage under workers' compensation or a private insurance policy that provides similar coverage." Section 40-11.5012(5)(b), defines the term "similar coverage" as disability insurance for on and off the job injuries, health insurance and life insurance.
In USF Distribution Services, Inc. v. Industrial Claim Appeals Office 111 P.3d 529, (Colo.App. 2004) the issue arose of whether the claimant's failure to secure complying coverage changed his status from that of an independent contractor to that of an employee. The court noted that § 8-40-301(5) was enacted simultaneously with § 8-40-301(6) and § 40-11.5-102(5). See Colo. Sess. Laws 1992, ch. 224 at 1798-801. The court determined that the purpose of these amendments was to clarify that drivers working for contract carriers under qualifying lease agreements are to be treated as "independent contractors" for purposes of workers' compensation benefits liability. The court recognized that § 8-40-301(5) evidences a clear legislative intent to exclude leased drivers from the definition of "employee." However, the court also noted that when the statute is viewed in combination with both § 8-40-301(6) and § 40-11.5-102(5) it becomes clear that the exclusion takes effect only when the lease agreement includes complying coverage. The scheme created by these statutes shares the same purpose underlying the statutory employer provision, see § 8-41-401(1)(a), C.R.S. 2006, which is to prevent an employer from evading compensation coverage by contracting out work instead of directly hiring the workers.
In USF Distribution Services the court also explained that pursuant to § 8-40-202(2)(c), C.R.S. 2006, nothing in § 8-40-202(2)(a) or (b) was intended to conflict with § 8-40-301 or to otherwise relieve any obligation imposed by that statute. The court further reasoned that excepting the driver from the definition of an "employee" under § 8-40-202(2)(a) might conflict with the obligation to provide complying insurance imposed in § 8-40-301(6). Therefore the court concluded that § 8-40-202(2)(a) did not apply to the truck driver in USF Distribution Services. The court further ruled that since the claimant established that the policy negotiated through respondent did not comply with the requirements set forth in § 40-11.5-102(5), the claimant was an employee at the time of his industrial injury. In our view there is no principled distinction between USF Distribution Services and the facts of this case.
In the present case the ALJ found that the insurance coverage offered to him under the "Occupational Accident Insurance" was not comparable to the benefits offered under the Act. The respondent appears not to have contested this at the time of the hearing. Therefore, in our opinion USF Distribution Services, Inc. is controlling and we perceive no error in the ALJ's reliance on it to find that the claimant was an employee at the time of the accident and not an independent contractor.
The respondent's reliance on Kalat v. Metro Taxi, Inc. W.C. No. 4-180-144 (March 21,1995) is misplaced. Kalat involved the question of whether penalties under the general penalty statute could be imposed against a taxi company for failing to provide coverage similar to workers' compensation insurance under § 40.11.5-102(5). The respondent argues that under Kalat a taxi driver may be excluded from the definition of "employee" § 8-40-202(2) or he may be excluded under § 8-40-301(5) if he has a lease agreement which complies with § 40.11.5-102. In our view, Kalat does not compel reversal of the ALJ's order. That case did not directly address the issue of the claimant's status as an employee as a result of the interplay of § 8-40-202(2) and § 8-40-301(5). In affirming an order that denied statutory penalties we held that the consequence for an employer's failure to procure insurance is pursuant to § 8-43-408(1), which provides for an increase of fifty percent on benefits. In the present case the ALJ did in fact impose such a penalty. In any event, Kalat was decided before the announcement of the court of appeals' decision in USF Distribution Services, Inc., which is controlling in this case.
The respondent also relies upon Scott v. Matlack, 1 P.3d 185 (Colo.App. 1999) rev'd on other grounds, 39 P.3d 1160 (Colo. 2002), holding that a driver who was also sole owner of his business was not an "employee" pursuant to § 8-40-301(5). However, we agree with the ALJ that in Scott there was no dispute that coverage at least comparable to that provided by the Act had been provided to the plaintiff under the lease and the exclusion takes effect only when the lease agreement includes complying coverage. Matlack therefore has little relevance to the present case.
We conclude that the ALJ did not err in rejecting the employer's position on the grounds that the criteria set forth in § 8-40-202 are not applicable and in relying on USF Distribution Services, Inc. Therefore, it is unnecessary to address the additional issue raised by the respondent whether the ALJ erred in concluding that the claimant was an employee under the criteria set forth in § 8-40-202.
The respondent next argues that the ALJ abused his discretion in imposing penalties for the respondent's failure timely to admit or deny liability, as required by § 8-43-203(2)(a), C.R.S. 2006.
The parties stipulated that the employer knew on June 25, 2005, that the claimant was in an accident on that date, and that the employer knew on June 29, 2005, that the claimant had been unable to work for more than three days on account of the injuries sustained in the accident of June 25, 2005. While the respondent disputed that the claimant was an employee, the respondent did not dispute that if it were to be determined that the claimant was an employee, a notice of contest or admission would have been due no later than July 29, 2005. The claimant's average weekly wage was $675.27. The respondent filed a notice of contest on April 13, 2006. The ALJ imposed a penalty at the rate of $675.27 per week from July 30, 2005 through April 12, 2006.
The respondent contends that the imposition of a penalty under § 8-43-203(2)(a) is discretionary and under the circumstances of the case a penalty should not be imposed. The respondent argues that, relying on its understanding that the claimant was an independent contractor, it did not file a notice of contest and instead assisted the claimant with his accident insurance claim. The employer asserts that its assistance resulted in the claimant receiving significant benefits.
Our authority to review the ALJ's order is defined in § 8-43-301(8), C.R.S. 2006. That statute precludes us from disturbing the ALJ's order unless the ALJ's findings of fact are insufficient to permit appellate review, the ALJ has not resolved conflicts in the evidence, the record does not support the ALJ's findings, the findings do not support the order, or the order is not supported by the applicable law.
Section 8-43-203(2)(a), C.R.S. 2006 allows the ALJ to impose a penalty up to one day's compensation for each day the employer fails to admit or deny liability in compliance with § 8-43-203(1). We agree with the respondent that the ALJ's authority under that statute is discretionary. However, an abuse of discretion is present only if, under the totality of the circumstances, the ALJ's order exceeds the bounds of reason. Rosenberg v. Board of Education of School District #1, 710 P.2d 1095 (Colo. 1985). In addition the absence of an "abuse of discretion," we may not interfere with the amount of a penalty imposed by an ALJ. See Hall v. Home Furniture Co., 724 P.2d 94 (Colo.App. 1986).
Here, the respondent does not contest the sufficiency or accuracy of the ALJ's factual determinations on the issue of penalties nor does the respondent make any arguments concerning the amount of the penalty. Instead the respondent contends that it acted at all times in a good faith assertion of a meritorious position and no penalty should be imposed.
Under the facts of this claim as determined by the ALJ, we cannot say that the imposition of a daily penalty for the failure to admit or deny liability equal exceeds the bounds of reason. The imposition of penalties by the ALJ is consistent with the statutory procedural safeguard designed to notify claimants that they are involved in "a situation with legal ramifications." Smith v. Myron Stratton Home, 676 P.2d 1196 (Colo. 1984). Therefore, we perceive no basis on which to disturb the ALJ's order. Section 8-43-301(8); Pueblo School District No. 70 v. Toth, 924 P.2d 1094 (Colo.App. 1996).
IT IS THEREFORE ORDERED that the ALJ's order dated November 28, 2006 is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ Curt Kriksciun
____________________________________ Thomas Schrant
Bidu Gebrekidan 7640 East Harvard Ave. #304 Denver, CO, Erica West, Esq. 837 East 17th Ave # 102 Denver, CO, (For Claimant)
Hamil/Hecht LLC Charles B. Hecht, Esq. 140 East 19th Ave #600 Denver, CO, (For Respondents)