No. 92-394 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

DAVE POTTER, 

Petitioner and Appellant, --. 

Respondents and Respondents. 

APPEAL FROM: District Court of the Fourth Judicial District, 

In and for the County of ~avalli, 

The Honorable Douglas G. Harkin, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Judith A, Loring, Attorney at Law, Stevensville, 

Montana 

For Respondents: 

Daniel B, McGregor, Legal Services Div., Department 

of Labor & Industry, Helena, Montana 

Julio K. Morales, Morales ~aw Office, Missoula, Montana 

James Park Taylor, Attorney at Law, Missoula, Montana 

Submitted on Briefs: November 3.9, 1992 

Decided: May 27, 1993 

Filed: 
Justice John Conway Harrison delivered the Opinion of the Court. 

This is an appeal from the Fourth Judicial District, Ravalli 

County, the Honorable Douglas G. Harkin presiding. Appellant Dave 

Potter (Potter) appeals an order affirming a Board of Labor Appeals 

decision that in 1987 he was an independent contractor, not an 

employee, and therefore was not eligible for unemployment insurance 

benefits. We affirm. 

On May 23, 1988, the Department of Labor and Industry (the 

Department) determined that Potter, a carpenter and mason, had been 

an independent contractor in 1987. Potter appealed this 

determination. The Board of Labor Appeals (the Board) adopted the 

Department's determination after a telephone hearing on August 30, 

1988. Potter petitioned for review in district court, but after 

discovery the Department agreed to vacate its earlier decision and 

conduct a second, in-person hearing. 

Participants in the second hearing, held on January 28, 1991, 

included the Department and four of the other respondents in this 

appeal: John Bruton, Ed Kopfman, Beneke Construction, and Mort 

Arkava. All of the respondents had hired Potter in 1987 for 

specific carpentry or masonry projects. The sixth respondent, John 

Lohden Construction, was not present but did provide documents 

describing the association between Potter and John Lohden 

Construction as an independent contractor relationship. The 

hearing officer sustained the Department's May 23, 1988 

determination that in 1987 Potter was an independent contractor in 

his association with the respondents. Potter appealed to the 

2 
Board, which adopted the hearing officer's findings on June 6, 

1991. 

Potter again petitioned for judicial review in district court. 

The court reviewed the parties' briefs and on June 30, 1992 entered 

judgment upholding the determination that Potter was an independent 

contractor when he performed services for the respondent employers. 

STANDARD OF REVIEW 

Under Section 39-51-2410(5), MCA, the findings of the Board as 

to the facts are conclusive, if supported by evidence and in the 

absence of fraud, and the jurisdiction of a reviewing court is 

confined to questions of law. "Supported by the evidence" means 

supported by substantial evidence, which is "something more than a 

scintilla of evidence but may be less than a preponderance of the 

evidence." Gypsy Highview Gathering System, Inc. v. Stokes (1986), 

221 Mont. 11, 14, 716 P.2d 620, 623. Thus, the District Court must 

limit its review of the Board's findings to a consideration of 

whether they are supported by substantial evidence, and the same 

standard applies to this Court. Gv~sv Hishview Gatherinq System, 

716 P.2d at 623. See also Thornton v. Commissioner of Dep't of 

Labor & Industry (1980), 190 Mont. 442, 446, 621 P.2d 1062, 1065 

("This Court may not substitute its judgment for that of the trial 

court or agency as to the weight of the evidence on questions of 

fact."). With regard to questions of law, however, our task is to 

determine whether the agency's interpretation of the law is 

correct. Steer, Inc. v. Dep't of Revenue (1990), 245 Mont. 470, 

803 P.2d 601. 
Here, the threshold issue is whether Potter's status as 

independent contractor or employee is a question of law or a 

question of fact. When the facts surrounding a person's 

arrangement with employers are relatively undisputed, the question 

is one of law, and this Court is not bound by the conclusions of 

the District Court or the Board, as it would be regarding a 

question of fact. Solheim v. Tom Davis Ranch (1984), 208 Mont. 

265, 272, 677 P,2d 1034, 1038. See also Carlson v. Cain (19831, 

204 Mont. 311, 317, 664 P.2d 913, 916 ("[WJhere there is no dispute 

as to what the arrangement is, the question of employee or 

independent contractor status is one of law for the court."). 

When the facts are disputed, as here, the "substantial 

evidence1' test is appropriate. In Hammerquist v. Employment 

Security Division (1988), 230 Mont. 347, 350, 749 P.2d 535, 537, 

for example, we held that a hearing officer had applied the proper 

"legal standardr1 in determining that a construction worker was an 

employee and not a partner of a building contractor, but we also 

held that 'lsubstantial evidence supports the hearing officeris 

finding and conclusion that no partnership or joint venture 

exists," See also Connolly v. Board of Labor Appeals (1987), 226 

Mont. 201, 734 P.2d 1211 (substantial evidence test applied to a 

Board determination of employee misconduct). 

Here, the District Court reviewed the hearing officer's 

findings of fact, which were adopted by the Board, and found that 

they were supported in the hearing transcript and were therefore 

conclusive. This Court also is bound by those findings, to the 
extent that they are supported by substantial evidence. Larry% 

Post co. V. Unemployment Insurance Div. (1989), 238 Mont. 190, 193, 

777 P.2d 325, 327. If the factual findings are supported 

substantial evidence, we must then determine whether the Board's 

legal conclusion as to Potter's status was correct. Steer, Inc., 

THE INDEPENDENT CONTRACTOR ISSUE 

Potter was hired by the respondent employers in 1987 for the 

following projects: 

John Bruton: Build shelves and a check-out counter for 

Bruton's pharmacy 

Ed Kopfman: Lay a cabin foundation slab and remodel 

the cabin 

Beneke 

Construction: Form and pour concrete walls 

John Lohden 

Construction: Roof a building 

Mort Arkava: Lay blocks for a house, grout a wall, and 

pour concrete for a garage floor 

Potter states that he was paid by the hour for his work on all 

of these projects; that the employers provided most of the tools 

and all of the materials needed for each job; and that Beneke 

Construction and Lohden Construction hired him as one of several 

employees for their respective projects. 

The test for determining whether an individual is an 

independent contractor is stated in 5 39-51-201(14), MCA: 

"Independent contractorw means an individual who renders 

service in the course of an occupation and: 

(a) has been and will continue to be free from control 

or direction over the performance of the services, both 

under his contract and in fact; and 
(b) is engaged in an independently established trade, 

occupation, profession, or business. 

Potter clearly meets the second of these criteria. He admits 

that until 1987 he operated his own business, and most of the 

respondent employers testified that they had hired him before 1987 

as an independent contractor. The hearing officer found that 

Potter was "independently established in a business11 in 1987 

because he performed similar work for several persons and "offered 

his carpentry/masonry services to any person or groups needing help 

with work he was able to perform." 

Potter claims that in 1987 he "chose to give up his own 

independent busine~s~~ andwork only as an vlhourly employee." He 

explains that in 1986 he hired a helper, Steve Anderson, whom he 

believed to be an independent contractor. The Department, however, 

determined that Anderson was an employee and that Potter was 

required to make unemployment insurance contributions. Potter 

decided then to become an employee himself. In practice, this 

meant that he asked employers to pay him by the hour instead of by 

the job. He did not specifically tell them that he was no longer 

operating his own business, nor did he ask any employer to withhold 

payroll taxes or to make employer contributions. 

We hold that substantial evidence supports the hearing 

officer's finding that Potter had an independently established 

business in 1987. 

As to the first criterion, freedom from control, we recognize 

four factors to be considered: 

(1) direct evidence of the right or exercise of control; 

6 
(2) method of payment; 

(3) furnishing of equipment; and 

(4) right to fire. 

Johnson v. Dept. of Labor and Industry (1989), 240 Mont. 288, 292, 

783 P.2d 1355, 1358, citing Sharp v. Hoerner Waldorf Corp. (1978), 

178 Mont. 419, 425, 584 P.2d 1298, 1301-1302. Independent 

contractor status is usually established only by "a convincing 

accumulation of these and other tests," while a finding of employee 

status can often be "solidly proved on the strength of one of the 

four items. Sharp, 584 P.2d at 1302; Walling v. Hardy 

Construction (1991), 247 Mont. 441, 807 P.2d 1335. We have 

consistently held, however, that statutes used as guides in 

determining a worker's status Itmust not be distorted to allow 

persons who are truly independent in their operation to be held 

employees merely for tax purposes and resulting benefits derived 

from an employer-employee relationship." St. Regis Paper Company 

v. Unemployment Compensation Commln (l97l), 157 Mont. 548, 552, 487 

P.2d 524, 526, quoted in Johnson, 783 P.2d at 1358. 

The hearing officer concluded that three of the four factors 

indicated that Potter was an independent contractor in 1987. 

First, he found direct evidence of Potter's right of control in the 

following facts: each of the employers was interested only in the 

completed project; most of them were not capable of directing 

Potter's day-to-day work activities; and Potter usually performed 

the work on his own time schedule. 

Potter argues that each of the respondent employers possessed 

and exercised the right to control his work because each one hired 
him for a specific job, and most of them were at the job site 

daily, supervising his work and giving directions. 

The traditional test of employee status is whether the 

employer controls only the end result of the work, which indicates 

that the worker is an independent contractor, or whether the 

employer controls the means by which the work is accomplished, 

which indicates that the worker is an employee. Johnson, 783 P.2d 

at 1358. An employer of an independent contractor, however, "is 

entitled to as much control of the details of the work as is 

necessary to ensure that he gets the end result that he bargained 

for." Walling, 807 P.2d at 1339. 

Here, the record shows that none of the respondent employers 

controlled the days or hours of Potter's work, and that all of them 

except John Lohden Construction relied on Potter's expertise to 

complete the job. For example, Lisa Beneke testified that Beneke 

Construction had no experience with full-wall foundation forms and 

therefore hired Potter for his expertise in using his own forms to 

pour a full-wall foundation. The hearing officer found that Potter 

usually was free to determine the individual means of accomplishing 

the work he had agreed to do for these employers. 

Second, the hearing officer found that Potter provided almost 

all of the necessary tools, forms, and equipment for the respondent 

employerss projects, and that his use of rental equipment owned by 

Kopfman was not inconsistent with independent contractor status. 

Potter claims that the only tools he provided were vlsmall hand 

tools" and that each of the respondents furnished all the equipment 
necessary for his particular project. In particular, he claims 

that the two construction companies, Lohden and Beneke, provided 

llalllt or"90 percent" of the tools he used on their projects. On 

the other hand, Potter admits that when he worked for Bruton, the 

pharmacist, he used "a table saw that [Bruton] was considering 

purchasing from [Potter],lt and he testified at the Department 

hearing that he had supplied a cement mixer and a generator for the 

Kopfman job . 

The respondent employers testified that they had purchased 

materials ordered by Potter and that Potter was free to hire 

assistants or obtain needed equipment independently. 

When an employer furnishes valuable equipment, an employment 

relationship almost invariably exists. Solheim, 677 P.2d at 1038. 

Here, however, the record indicates that among the respondent 

employers, only Kopfman can be said to have furnished valuable 

equipment. 

Third, the hearing officer found that the respondent employers 

did not have an absolute right to fire Potter, since either party 

could terminate the relationship without Liability only if the end 

result were not accomplished as agreed. In Solheim, 677 P. 2d at 

1039 (quoting Larson, Workmen's Compensation Law, Vol. lC, 5 

44.35) , we described the right to fire as the power to control, 

noting that: 

The absolute right to terminate the relationship without 

liability is not consistent with the concept of 

independent contract, under which the contractor should 

have the legal right to complete the project contracted 

for and to treat any attempt to prevent completion as a 

breach of contract. 
Here, Potter asserts that he could have quit without incurring 

liability: he also points out that Kopfman laid him off without 

incurring liability. The respondent employers testified that they 

believed they could terminate the relationship but were not sure of 

the consequences. None of them had executed a written contract, 

and damages for failure to perform had not been discussed. 

The fact that neither Potter nor the employers were certain of 

their rights indicates that the employers did not have an absolute 

right to fire Potter. As we held in Solheim, 677 P.2d at 1039, the 

absence of an absolute right to terminate the relationship without 

liability supports the finding of an independent contractor 

relationship. Also see Johnson, 783 P.2d at 1359 (testimony 

indicating that neither party was certain of his rights as to the 

ability to terminate supported a finding of an independent 

contractor relationship). 

With regard to the fourth factor, method of payment, the 

hearing officer found that Potter Itwas free to bid or it appears 

did bid the work performed based on his normal hourly rate." He 

concluded that the fact that the respondent employers paid Potter 

on an hourly basis was not conclusive evidence of an employeremployee relationship. 

Potter insists that he was paid by the hour and not for the 

job, and that when he was an independent contractor he bid and was 

paid by the job. All of the respondent employers except Beneke 

Construction paid Potter weekly, for the number of hours worked. 

Beneke Construction paid him hourly wages at the end of each job. 
While payment on a time basis is strong evidence of employment 

status, Solheim, 677 P.2d at 1038, we have observed before that in 

the construction industry carpenters often work on an hourly basis. 

Johnson, 738 P.2d at 1359. Hourly pay therefore is not conclusive 

evidence of either an independent contractor or an employment 

status. 

In short, substantial evidence supports the hearing officer's 

findings of fact with regard to the four factors we recognized in 

Sham, Solheim, and Johnson. Because three of the factors 

indicated that Potter was not an employee, and the fourth was not 

conclusive, the District Court concluded correctly that Potter was 

an independent contractor and therefore not entitled to 

unemployment insurance benefits for 1987. 

AFFIRMED. 

We concur: I/ 

Justices 
Justice Terry N. Trieweiler dissenting. 

I dissent from the opinion of the majority. I especially 

disagree with the majority's treatment of appellant's relationship 

with all of the respondents as if they were the same. 

I conclude, based on the uncontroverted evidence, that Potter 

established an employer/employee relationship with John Bruton, Ed 

Kopfman, Beneke Construction, and John Lohden Construction as a 

matter of law. 

The majority correctly notes that 39-51-201(14), MCA, 

establishes a two-part test for determining whether someone 

rendering service for another is an independent contractor. It is 

not sufficient that petitioner has been or is engaged in an 

independent occupation or trade. He must also have been free from 

control over the performance of his services. 

As pointed out by the majority, in determining whether there 

was freedom from control we consider four factors: "(1) direct 

evidence of right or exercise of control; (2) method of payment; 

(3) furnishing of equipment; and (4) right to fire." Johnson v. Dept. 

oflabor& Indushy (l989), 240 Mont. 288, 292, 783 P.2d 1355, 1358. 

While it is true that the first factor was disputed by each of 

the alleged employers, it is not correct that the remaining factors 

were disputed. Plaintiff testified, and all four of the above 

employers agreed, that he was paid by the hour for his services, 

rather than based on a contract bid. In SoIheim v. Tom Davk Ranch 

(1984), 208 Mont. 265, 273, 677 P.2d 1034, 1038, we held that: 
Method of Payment. Payment on a time basis is 

strong evidence of employment status. Sharp [v. Hoerner 

WaldoifCop. (1978)l 178 Mont. at 425, 584 P.2d at 1302; 

Larson, Section 44.33 (a), p. 8-74. Payment on a completed 

project basis is consistent with, but not conclusive of, 

independent contract status. Larson, Section 44.33(c), 

p. 8-93. 

Potter also testified that each of the above respondents 

provided him with some of the tools or equipment that were 

necessary for the work that he did for them. John Bruton 

acknowledged that he provided the radial arm saw, and may have 

provided a few other tools. Ed Kopfman did not discuss the issue 

of tools. Lisa Beneke did not discuss tools, and John Lohden did 

not bother to show up and testify about anything. Therefore, the 

third part of the four-part test for control is also undisputed 

with regard to these four respondents. We previously held in 

Soheim that: 

According to Larson, when an employer furnishes 

valuable equipment, an employment relationship almost 

invariably exists, but the test does not cut in both 

directions with equal force. Proof showing a worker 

furnished his own equipment is not necessarily fatal to 

a finding of employee status. Larson, Section 44.34, 

pp. 8-95 - 8-104. 

Finally, Potter testified that he could have terminated his 

employment with any of the above respondents at any time without 

incurring liability to them and that they could have terminated his 

services without incurring further liability to him. He pointed 

out, in fact, that both Lohden and Beneke did terminate his 

services while work remained to be done. I do not agree with the 
majority's conclusion that there was substantial evidence to 

support the hearing officer's finding that these four respondents 

did not have an absolute right to fire Potter. Lohden did not 

appear, and therefore, never answered the questions. Beneke, when 

asked, did not respond directly to the question. However, both 

Kopfman and Bruton testified unequivocally that they could have 

discharged Potter at any time without incurring liability and that 

he could have quit at any time without incurring liability. In 

Solheim, we pointed out that: 

Larson states at Section 44.35 pp. 8-116 - 8-122. 

"The power to fire . . . is the power to control. 

The absolute right to terminate the relationship without 

liability is not consistent with the concept of 

independent contract, under which the contractor should 

have the legal right to complete the project contracted 

for and to treat any attempt to prevent completion as a 

breach of contract." . . . 

"Examples could be multiplied in which most of the 

other indicia - method of payment, furnishing of 

equipment, skilled nature of the work, sometimes 

provision by the employee even of his own assistants and 

insurance, and not infrequently contractual disavowals of 

right of control and of employment relation - have 

pointed toward independent contractorship; yet the one 

element of right to fire, with its attendant implied 

right to control, has carried the day for employment 

relationship. 

Solheim, 677 P.2d at 1039. 

According to my reading of the record in this case, there was 

no evidence to support the hearing officer's findings that three of 

the four factors considered in determining whether the respondents 

exercised control were not present. Based on my review of the 

record, the undisputed evidence establishes that three of the four 
factors were present. Therefore, as a matter of law, it must 

necessarily be concluded that at the times in question Potter was 

an employee of these four respondents. As we have previously held: 

In Sharp v. Hoerner WaIdorfCorp. (1978), 178 Mont. 419, 

584 P.2d 1298, this Court developed a four-part test for 

determining whether or not an employer has the right of 

control: (1) direct evidence of right or exercise of 

control; (2) method of payment; (3) furnishing of 

equipment; and (4) right to fire. Sharp, 178 Mont. at 

425, 584 P.2d at 1301-02. A finding that an individual 

is an independent contractor demands "'a convincing 

accumulation of these and other tests, "' while a finding 

of employee status "'can if necessary often be solidly 

proved on the strength of one of the four items. I' Sharp, 

178 Mont. at 425, 584 P.2d at 1302 (quoting 1C A. Larson, 

Worhenls Compensation Law 5 44.10 at 8-35 (1952)). 

WaIlingv. Hardy Construction (1991), 247 Mont. 441, 447, 807 P.2d 1335, 

Since, by the undisputed evidence there was not a significant 

accumulation of these factors to support a finding of independent 

contract status, I conclude that the petitioner, Dave Potter, was 

an employee of the four respondents previously mentioned, and that 

the judgment of the District Court in their favor should be 

reversed. 

I would affirm the District Court Is conclusion that as to Mort 

Arkava, Potter was an independent contractor.