Case Title: State Unemployment Comp. Com. v. Bates

Citation: 217 Or. 121, 341 P.2d 119

Docket Number: 

State: oregon

Court: Oregon Supreme Court

Date: 1959-07-08T00:00:00Z

Document:
Reversed July 8, 1959.
*122 Roland V. Brown, Assistant Attorney General, Salem, argued the cause for appellant. With him on the brief were Robert Y. Thornton, Attorney General, E. Nordyke and Harry G. Spencer, Assistant Attorneys General, Salem.
Sam F. Speerstra, Salem, argued the cause for respondent. On the brief were Rhoten, Rhoten and Speerstra, Salem.
Before McALLISTER, Chief Justice, ROSSMAN, O'CONNELL and CRAWFORD, Justices.
REVERSED.
ROSSMAN, J.
This is an appeal by the State Unemployment Compensation Commission from a judgment which the circuit court entered in favor of the defendant, Walter E. Bates, after it had sustained the defendant's motion for a directed verdict. The commission, which avers that the defendant is an employer within the meaning of ORS 657.025, instituted this action to recover from him sums which it says are due to it as employer contributions under the Unemployment Compensation Act, *123 ORS chapter 657. The primary issue submitted by the appeal is whether the various workmen, such as lathers, plumbers and roofers, who performed work in constructing houses for the defendant are his employees, as the commission avers, or are independent contractors, as the defendant claims.
The following are the sections of the Unemployment Compensation Act which are material to the issues before us:
The only evidence before the trial judge when he sustained the defendant's motion for a directed verdict came from two witnesses produced by the commission. As transcribed, it covers only twenty pages. One of the two witnesses was an employee of the commission whose testimony was not concerned with the problem *124 submitted by the appeal  that is, the nature of the relationship between the defendant and those who constructed the houses. The other witness was the defendant.
The defendant testified that all of the workmen who helped construct the houses which he built performed their services "upon a contract basis." At times the purported contracts were termed "bid proposals." None of the instruments was introduced in evidence and their terms were not disclosed during the trial. It developed shortly that in many instances the so-called contracts were not prepared or signed until after the work had been performed. The defendant explained that circumstance by saying:
According to the defendant, he supplied in most instances the material used in the construction of the houses but the workmen furnished their own tools and equipment. The defendant testified that he handed the workmen blueprints  seemingly for the purpose of guiding them in the performance of their work. The defendant admitted that the men were permitted to depart from the blueprints if they obtained the defendant's or his wife's approval. The defendant's testimony indicates that the workmen, for the most part, served regularly over long periods of time. By way of illustration he said:
He thought that "a day to two or three weeks" was required *125 for the completion of the undertakings, depending upon the nature of the work.
According to the defendant, he could not terminate upon his own volition any of the so-called contracts. He testified:
The fact that he was the one who furnished the materials seemingly caused him to be asked:
to which he answered:
The record, as we have said, does not include a copy of the purported "contracts" into which the defendant and the workmen entered, nor does it disclose the terms of those papers. The defendant, however, swore that the men were not paid upon an hourly basis. He said that they were paid:
The evidence does not show that any of the workmen who rendered services to the defendant had "an independently established business" as that term is employed in ORS 657.040 (2) unless an inference to *126 that effect can be drawn from the following testimony given by the defendant:
Unless the words "worked for everyone else as a subcontractor" indicate that the men had "an independently established business," we know of nothing in the record which tends to establish that needed fact. The evidence does not reveal the name of any one except the defendant for whom any of the men worked nor does it reveal whether any of them had a shop or employees of his own who helped him perform the undertakings which the defendant termed subcontracts. It does not even indicate whether the men performed personally the defendant's work or did it through others. Subcontractors frequently choose for their business ventures assumed names; if any of the men who performed services for the defendant had a little enterprise of his own and had selected a name for it the evidence makes no mention of the fact. No one mentioned whether the workmen set their own hours for beginning and ending the day's labor or were required to conform to a schedule established by the defendant. Nothing indicates whether the men were paid weekly, in the manner that is common among employees, or were paid at the close of the job after presentation of a statement.
The above is a summary of the evidence.
1. Although some courts determine the issue of employee v. independent contractor by common-law tests, this court, as well as many others, uses the rule that *127 the statutory tests set forth in the Unemployment Compensation Act must be employed in the determination of that issue: Singer Sewing Machine Company v. State Unemployment Compensation Commission, 167 Or 142, 103 P2d 708, 116 P2d 744, 138 ALR 1398; Rahoutis v. Unemployment Compensation Commission, 171 Or 93, 136 P2d 426 and Journal Publishing Company v. State Unemployment Compensation Commission, 175 Or 627, 155 P2d 570.
2. In Rahoutis v. Unemployment Compensation Commission, supra, the question arose as to the effect, if any, which should be given to the commission's finding that the defendant was an employer. The decision held that in actions such as this the finding is entitled to no weight. The commission does not now argue against that holding but contends that when it has presented evidence showing that service was rendered, the defendant has the burden of establishing that he comes within the exceptions set forth in ORS 657.040. The Rahoutis decision so held, and we remain satisfied with that conclusion. See to the same effect Young v. Bureau of Unemployment Compensation, 63 Ga App 130, 10 SE2d 412.
3. We see from the above that the commission showed by the testimony of the defendant that many individuals performed services for him (compare Journal Publishing Company v. SUCC, supra, where the issue was whether there was a "service" relationship or a "vendor-vendee" relationship) and thereby brought the case within the first paragraph of ORS 657.040, above quoted. That being true, the burden was cast upon the defendant to establish that each workman, whom he claimed was an independent contractor, was "free from control or direction" by him and had *128 "an independently established business," as those terms are used in ORS 657.040.
It is difficult in many instances to determine whether a workman whose status is under analysis is an employee or an independent contractor. Possibly the person for whom he is rendering a service, say in the construction of an object, in order to be assured of a product of superior merit, retained a considerable amount of control over the manner in which the work was to be performed. That fact may render it difficult, if we employ common-law standards (Restatement of the Law, Agency, § 220), to decide whether the workman was an employee or an independent contractor.
The Unemployment Compensation Act deals with a social problem, that is, the economic condition of a working man when he becomes unemployed. Definitions of the term "employee" which are used in tort actions and produce there desirable results may not yield in unemployment compensation cases the results which the authors of the act intended it should produce. The act, therefore, contains its own set of definitions and, as we have seen, those definitions must be employed. As Singer Sewing Machine Company v. State Unemployment Compensation Commission, supra, held, the tests set forth in the act impose something more than the common-law standard of master and servant. However, common-law tests must not be completely ignored. The definitions set forth in the act supplement and augment the common-law tests.
A man who works for a daily wage is frequently dependent upon it for his livelihood and may be unable to cope with the vicissitudes of a period of unemployment; but one who has "an independently established business," as that term is employed in ORS 657.040, *129 may be able to deal with a long-continued period of adverse economic conditions without experiencing severe evil results. Accordingly, the act provides benefits for only the employee.
Writers have commented upon the subject of inquiry to which we just adverted. For example, Jacobs, "Are `Independent Contractors' Really Independent?" 3 DePaul L Rev 23, states:
Wilcox, "The Coverage of Unemployment Compensation Laws," 8 Vanderbilt L Rev 245, points out:
Recent Cases, appearing in 37 Or L Rev 88, says:
A proposed set of United States Treasury rules which was intended to render more certain the meaning of legislative provisions such as ORS 657.040 appears in 12 Fed Register 7966 (Nov. 27, 1947). The publication has received favorable comment. We quote the part which we deem applicable to the issue before us:
Restatement of the Law, Agency, § 220, to which we have referred, gives the following tests for the purpose of distinguishing a servant from an independent contractor:
It will be observed that the Restatement does not mention the right to terminate the relationship and attaches no significance to the matter of furnishing the materials. We believe that the following caution given by Fahey v. Terp, 235 Minn 432, 51 NW2d 173, is pertinent:
We deem it unnecessary to proceed further. Although the defendant had the burden of establishing that the workmen whom he claimed were independent contractors had independently established businesses of the kind required by ORS 657.040, the record is devoid of proof to that effect. No finding is warranted, therefore, that any of those men were other than employees of the defendant. The circuit court erred when it sustained the defendant's motion for a directed verdict.
Reversed.