Opinion
W.C. No. 4-261-540
July 26, 1996
ORDER OF REMAND
The claimant seeks review of a final order of Administrative Law Judge Wheelock (ALJ) insofar as it determined that he was an employee of Integrity Business Services (IBS), determined his average weekly wage and failed to impose certain penalties. IBS seeks review of the ALJ's order insofar as it determined that IBS was the claimant's employer and imposed penalties for its failure to insure. We set the order aside and remand for entry of a new order.
The claimant sustained a compensable back injury on March 22, 1995 while working as a carpet installer. The primary issue in the case is whether, at the time of the injury, the claimant was employed by IBS, or by Red Oak Carpet Center (Red Oak) which was insured by Allied Mutual Insurance (collectively Allied respondents).
The record reveals that Red Oak was a small privately held corporation engaged in the business of installing carpet. In August 1994, Red Oak hired Kevin O'Neil, apparently for the purpose of soliciting business. (Tr. p. 77).
In October 1994, Red Oak and IBS entered into a what is entitled an "Employee Services Contract." As the ALJ found, this contract provided that Red Oak would "transfer" all of its employees to IBS "as the employer," and Red Oak would become the "recipient of services and the employees." Thus, IBS became the "lessor" of the employees' services, and Red Oak became the "lessee."
The contract also provided that IBS was entitled to designate "one or more on-site supervisors for directing the daily activities of employees." Although Red Oak retained the right to determine "what daily activities" were needed, IBS acquired the exclusive right to "control" the job performance of employees, as well as rights to hire, fire and reprimand employees.
Following implementation of this agreement, O'Neil became an employee of IBS and was designated as the "on-site" supervisor for Red Oak. (Tr. pp. 73, 80). In approximately February 1995, O'Neil contacted the claimant concerning employment as a carpet installer. At the meeting between O'Neil and the claimant O'Neil did not mention any relationship between Red Oak and IBS. In fact, the ALJ found that O'Neil "may have had the appearance of acting on behalf of Red Oak Carpet Center," and the claimant was unaware of any "arrangement" between IBS and Red Oak at the time of his hiring or during his employment.
However, the ALJ also found the claimant was "paid on checks which came from" IBS and were drawn on the IBS bank account. Further, at the time of the hiring, the claimant completed several documents referencing IBS as the "employer."
Under these circumstances, the ALJ concluded that at the time of the injury on March 22, the claimant was an employee of IBS pursuant to the provisions of the Employee Services Contract. Moreover, relying on Evans v. Webster, 832 P.2d 951 (Colo.App. 1991), the ALJ held that, although IBS "loaned" the claimant's services to Red Oak, "this loaning did not constitute a new contract of hire or a special employment relationship . . . sufficient to shift liability to" Red Oak. In support of this conclusion the ALJ specifically found that because the claimant was unaware of the arrangement between IBS and Red Oak he could not have "acquiesced" in it. Moreover, the ALJ was persuaded by the fact that the right to control the claimant's activities rested solely with IBS through O'Neil.
The ALJ also found that IBS effectively admitted liability by making direct payments to the claimant, and failed to sustain its "burden of proof" to permit a "prospective withdraw" of the admission. Moreover, the ALJ found that IBS was not insured for workers' compensation, and increased the claimant's benefits by fifty percent pursuant to § 8-43-408(1), C.R.S. (1995 Cum. Supp.). The claim against the Allied respondents was dismissed.
I. A.
On review, the claimant contends that the ALJ erred in finding that he was an employee of IBS rather than Red Oak. Specifically, he argues that Red Oak conferred "apparent authority" on O'Neil to act as Red Oak's agent, and therefore, Red Oak is estopped from denying that the claimant was its employee. IBS concurs in this argument and, in addition, contends that Red Oak was the claimant's statutory employer under the provisions of § 8-41-401(1), C.R.S. (1995 Cum. Supp.). We conclude that the ALJ findings of fact are insufficient to permit appellate review of these legal theories. Section 8-43-301(8), C.R.S. (1995 Cum. Supp.).
Under § 8-40-202(1)(b), C.R.S. (1995 Cum. Supp.), an employee is defined as "every person in the service of any person . . . or private corporation . . . under any contract of hire, express or implied." In Olsen v. Industrial Claim Appeals Office, 819 P.2d 544 (Colo.App. 1991), the court held that this statute permits the creation of "contracts of hire" by estoppel. This is true "even though the employer does not intend to enter [a contract], if the employer's conduct causes the worker reasonably to believe that he or she is being employed." Needless to say, the doctrine of promissory estoppel connotes some element of "detrimental reliance" by the claimant on the putative employer's representations. Olsen v. Industrial Claim Appeals Office, supra.
Here, the ALJ made no express determination of whether the claimant became Red Oak's employee under a theory of estoppel. However, the ALJ did make findings of fact which suggest that the doctrine of estoppel applies.
In particular, the ALJ indicated that O'Neil "had the appearance of acting on behalf of Red Oak" when he hired the claimant, and the claimant was unaware of the contractual relationship between Red Oak and IBS. These conclusions are supported by the testimony of the claimant and O'Neil, as well as evidence that Red Oak maintained its own place of business where the claimant picked up his check. Moreover, "Exhibit A" is a paystub which could be interpreted as listing "Red Oak Carpet Center" as the claimant's employer.
It is true that there is some evidence from which the ALJ could find that Red Oak should not be estopped from denying any employment relationship with the claimant. This includes evidence that the claimant filled out documents listing IBS as the "employer." However, the ALJ did not explicitly resolve these conflicts in the evidence, and it is unclear whether she recognized their legal significance.
Neither are we persuaded by the Allied respondents' argument that this case is fundamentally distinguishable from Olsen v. Industrial Claim Appeals Office because Red Oak did not engage in any conduct which could have misled the claimant. As we have pointed out, Red Oak maintained its own place of business described as a "construction trailer." Further, the claimant testified that O'Neil gave him to understand that he was an employee of Red Oak, and the claimant picked up his check at Red Oak. Under these circumstances, we believe the ALJ could find that Red Oak gave O'Neil apparent authority to act on its behalf. Moreover, the claimant's willingness to enter into an employment contract with Red Oak, and therefore, subject himself to the limited remedies of the Workers' Compensation Act, could be viewed as an act of detrimental reliance. See 1B A. Larson, Workmen's Compensation Law, § 48.16.
Under these circumstances the matter must be remanded to the ALJ for specific findings of fact and conclusions of law concerning whether or not the claimant was Red Oak's employee under the doctrine of estoppel. In so doing, the ALJ should resolve the conflicts in the evidence, and make findings sufficient to resolve the issues as set forth in Olsen v. Industrial Claim Appeals Office, supra.
B.
The claimant also argues that he should be considered a statutory employee of Red Oak, even if no actual employment relationship existed. We again conclude that the findings of fact are insufficient to support appellate review of this argument.
Section 8-41-401(1) provides that any "corporation operating or engaged in or conducting any business by leasing or contracting out any part or all of the work to any lessee, sublessee, contractor, or subcontractor . . . shall be construed to be an employer as defined in articles 40 to 47 of this title." Section 8-41-401(2) provides that if the lessee or subcontractor purchases workers' compensation insurance, the employees of the lessee or subcontractor shall not have a right of "action of any kind" against the corporation which contracted for the services. The purpose for this statutory scheme is to prevent employers from "avoiding responsibility under the workers' compensation act by contracting out their regular work to uninsured independent contractors." Finlay v. Storage Technology Corp., 764 P.2d 62, 64 (Colo. 1988).
Further, an employer qualifies as a "statutory employer" under § 8-41-401 if the work "contracted out is part of the employer's `regular business' as defined by its total business operation." This test requires the court to consider the "routineness, regularity, and the importance of the contracted service to the regular business of the employer." Finlay v. Storage Technology Corp., 764 P.2d at 67. In applying this test the court should consider whether a putative statutory employer "would find it necessary to accomplish the work by use of the contractor's own employees rather than to forego the performance of the work." Finlay v. Storage Technology Corp., supra, see also, Campbell v. Black Mountain Spruce, Inc., 677 P.2d 379 (Colo.App. 1983).
Here, the record contains evidence from which it could reasonably be inferred that the claimant was a statutory employee of Red Oak. Assuming, arguendo, that the claimant was not an actual employee of Red Oak, the evidence suggests that Red Oak was in the carpet installation business. Therefore, the ALJ could plausibly conclude that if Red Oak did not lease employees to install carpets, it would be required to have and use its own employees to perform this service. However, the ALJ's order fails to address this issue, and the matter must be remanded for findings of fact and conclusions of law on this point.
We have considered Red Oak's argument that § 8-41-401(1) does not apply because "Red Oak stayed responsible for its performance of the carpet installation work, and in order to accomplish that work it leased employees from IBS." However, this argument is unpersuasive.
First of all, no great significance can be placed upon the contractual language under which Red Oak purported to "lease employees" from IBS. See Stampados v. Colorado D S Enterprises, Inc., 833 P.2d 815 (Colo.App. 1992) (permitting parties' contractual label rather than actual nature of relationship to control independent contractor status would be contrary to the policy of the Act by allowing evasion of workers' compensation liability). What is of significance is the evidence suggesting that Red Oak may have contracted with IBS to have IBS employees perform one of the essential functions of Red Oak's business, namely the installation of carpet.
Moreover, we disagree with the Allied respondents' argument that § 8-41-401 is irrelevant because the ALJ "correctly determined that this situation was a loaned employee arrangement in which Red Oak was the borrowing employer." To the contrary, the ALJ expressly found that the action of IBS in "loaning" the claimant to Red Oak "did not constitute a new contract of hire or a special employment relationship between the claimant and Red Oak Carpet Center." In this regard, the ALJ determined that it is "clear from the evidence that Red Oak Carpet Center itself had no authority to direct any of the employees' conduct." Thus, unlike the situation in Evans v. Webster, supra, the ALJ found insufficient evidence of "shared control" between Red Oak and IBS sufficient to create the "dual employment" essential to the "loaned servant" relationship.
As noted in Evans v. Webster itself, the statutory employment doctrine applies "when the general contractor has not borrowed the subcontractor's employee." The Webster court went on to state that, "in contrast to the borrowed employee relationship, the statutory employment relationship does not rest upon a finding of employer control." Evans v. Webster, 832 P.2d at 957; see also, Kiefer, Inc. v. Hoffman, 193 Colo. 15, 562 P.2d 745 (1977).
II.
As we have noted, both the claimant and IBS have raised other issues. However, resolution of these issues will depend upon the ALJ's findings and conclusions concerning the identity of the claimant's employer. On remand, the ALJ is free to alter her findings and conclusions as may be appropriate.
IT IS THEREFORE ORDERED that the ALJ's order dated November 28, 1995, is set aside, and the matter is remanded for entry of a new order consistent with the views expressed herein.
INDUSTRIAL CLAIM APPEALS PANEL
___________________________________ David Cain
___________________________________ Kathy E. Dean
Copies of this decision were mailed July 26, 1996 to the following parties:
William C. Wright, 2875 Lone Feather, Colorado Springs, CO 80909
Kevin O'Neil, Red Oak Carpet Center, 4250 Hancock, Colorado Springs, CO 80911
Integrity Business Services, Attn: Mike McQuiddy, 7150 Campus Dr., Ste. 325, Colorado Springs, CO 80920
Allied Mutual Insurance Co., Attn: Kathy Redmond, P.O. Box 5190, T.A., Denver, CO 80217-5190
W. Thomas Beltz, Esq., 316 N. Tejon St., Colorado Springs, CO 80903 (For the Claimant)
Chad J. Hessel, Esq., 101 N. Cascade Ave., Ste. 400, Colorado Springs, CO 80903 (For Integrity Business Services Respondent)
Ted A. Krumreich, Esq. John Lebsack, Esq., 1225 17th St., 28th Flr., Denver, CO 80202 (For Red Oak Allied Respondents)
By: _______________________