No. 90-573 IN THE SUPREME COURT OF THE STATE OF MONTANA 1991

KENNETH DOIG, Claimant and Appellant,

WILLIAM GRAVELEY

### , Employer and 

### APR

# -21991 STATE COMPENSATION INSURANCE FUND, Defendant and Respondent. 

# EdSLtL CLERKOFSUPREMECOURT STATEOFMONTANA

APPEAL FROM: Workers' Compensation Court The Honorable Timothy Reardon, Judge presiding.

COUNSEL OF RECORD: For Appellant: Norman H. Grosfield; Utick & Grosfield; Helena, Montana For Respondent: Elizabeth A. Horsman; State Compensation Mutual Insurance Fund; Helena, Montana

Filed: Submitted on Briefs: February 21, 1991 Decided: April 2, 1991Justice Fred J. Weber delivered the Opinion of the Court. Claimant, Kenneth Doig, appeals from the decision of the Workersv Compensation Court finding him to be an independent contractor and denying him workersv compensation benefits. We affirm. The issues for our review are: 1. Did the Workersv Compensation Court err in its finding thatMr. Doigwas an independent contractor rather than an employee at the time of his injury? 2. Did the Workers' Compensation Court err in its finding that Mr. Doig was not a statutory employee under the provisions of § 39-71-401(3), MCA? Mr. Doig, a horseshoer, advertised his availability as an experienced horseshoer in veterinary clinics and feed stores in and around Deer Lodge, aswell as in theWestern Shoppernewspaper. Mr. Doig set his own appointments, and shod the horses where they

were kept, not at his own home. He was paid on a per horse basis in the amount of $30 per horse for shoeing and $20 per horse for trimming. He had not applied to the Division of Workers' Compensation for a certificate to designate himself as an independent contractor. Mr. Charles Graveley, of the Graveley Ranch, called Mr. Doig and arranged for him to come to the ranch to shoe three horses on May 21, 1988. This was the first time Mr. Doig had ever shod any of the Graveley Ranch horses. Mr. Graveley caught the horses and tied them to the corral for Mr. Doig to replace the shoes. 2One of the horses, Hobo, had been diagnosed as having navicular disease, which is a hoof condition not uncommon in Western Montana. Mr. Graveley conveyed brief instructions to Mr. Doig that he be shod "short in the front and long in the heels." When Mr. Doig began his work with Hobo,Mr. Graveley left to buy horseshoes. When he returned to the ranch,he found Mr. Doig dazed, wandering around looking for a lens to his glasses. Mr. Doig told Mr. Graveley he had been kicked by the horse. Mr. Doig then went back to work finishingHobo and filing thehooves of the second horse. Mr. Graveley stayedwith Mr. Doig because of concern forhis injury. Mr. Graveleydid not assist with thehorseshoeing, but only talked to Mr. Doig and was available if the second horse gave him trouble. Mr. Doig was trimming the third or fourth leg of the second horse when a sharp pain in his head caused him to fall to his knees. Mr. Graveley immediately drove him to the hospital in Deer Lodge. Mr. Doig was 34 years old at the time of the accident. The injury has left Mr. Doig confined to a wheelchair and totally disabled. Mr. Doig fileda claim forworkerstcompensation benefitswith the State CompensationMutual InsuranceFund as an employee of the GraveleyRanch. Liability was denied,based on its conclusionthat Mr. ~oig was an independent contractor at the time of theaccident. Mr. ~oig fileda request for rehearing intheWorkerstcompensation Court claiming that he was an employee rather than an independent contractor. A rehearing was denied. Mr. Doig appealstheWorkers'compensation Court's decision.

Did the Workers' Compensation Court err in its finding that Mr. Doig was an independent contractor rather than an employee at the time of his injury? This appeal presents both questions of law and questions of fact. Theparties agree that theproper standard of review in such

caseswas set out in Solheimv. Tom Davis Ranch (1984), 208 Mont.

Where both factual determinations and legal conclusions are challenged, two standards of review apply. To the extent that factual determinations are questioned, we must apply the test set forth in Sharp and defer to the fact-finder where substantial evidence exists to support thedeterminations. When, however,an issue raises only a question of law, this Court is free to reach its own conclusions from the evidencepresented. Mr. Doig maintains that theWorkers' Compensation Court erred in concluding that he was an independent contractor rather than an employee. Theapplicable statute,5 39-71-120,MCA (1987),defines "independent contractorn: (1) An "independent contractorg~is one 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.

(2) An individual performing services for remuneration isconsideredtobe an employee under thischapter unless the requirements of subsection (1) are met. The key element is the control factor. There are four factors to considerwhen determining a right of control in a given situation:(1) Direct evidence of right or exercise of control; (2) Method of payment; (3) Furnishing of equipment; and (4) Right to fire. Sharp v. Hoerner Waldorf Corp. (1978), 178 Mont. 419, 584 P.2d 1298. Direct Evidence of Riqht or Exercise of Control Mr. Doig maintains that the instructions astohowHobo should be shod "short in the front and long in theheelsf1 established that Mr. Graveley was in control. He also contends that the fact he would always defer to the wishes of the horse owner and proceed only on the instructions of the rancher revealed control by Mr. Graveley

# . State Fund maintains that the instructions as to how a horse shouldbe shod arenothingmore than control over those fewmatters necessary to insure a satisfactory end result. State Fund further maintains that the fact that Mr. Doig was hired on a one-day, 2- 3 hour horseshoeing job where there was no evidence that a continuing employment relationship was intended to exist past the completion of the job, is indicative of an independent contractor. We agree. Therefore, we conclude that there is substantial evidence to support the conclusion of the court that the first factor indicated an independent contractor status. Method of Payment Mr. Doig maintains that his method of payment on a per horse basis is an indication of employee status. Thismethod of paymentis the standard for horseshoers. StateFundurges thatgiventhemethod ofpayment and the fact that this was the only time Mr. Doig had worked on the Graveley Ranch, it cannotbe said theMr. Doigwas under the control of Mr. Graveley

# . TheWorkers' CompensationCourt held thattherewas nopayment

on a per-hour, per-week or per-month basis thatwould indicate an employee status,and that "payment on a completedproject basis is consistent with, but not conclusive of, an independent contractor status." The court also found that at the time of the injury,Mr. Doighad shod one horse and trimmed all four feet of anotherhorse. Mr. Graveleypaid Mr. Doig on the per-unit basis of one horse shod and one horse trimmed. We conclude that substantial evidence supports the Workers' Compensation Court's conclusion. Furnishinq of Equipment Mr. Doig maintains that the type and manner of the equipment furnished for the shoeing operation, such as thoseprovided by the ranch inthis case,areof significant importanceasa contribution by the horse owner. He argues that while he did bring his own tools to perform the services, these items were of no greater significance than the facilities, halters, and shoes provided by the Graveley Ranch. Mr. Doig relies on Larson's The Law of Workman's Compensation,byArthur Larson, for theproposition that when an employer furnishes valuable equipment, an employment relationship almost invariably exists. State Fund maintains that the only "tools'1 or "equipmentnallegedly provided by the Graveley Ranch are generic ranch items, not analogous to the professional tools Mr. Doig brought to the ranch. The Ranch provided a halter and lead rope, a corral fence and horseshoes. State Fund urges that the items provided by the Graveley Ranch are not "equipmentNas contemplated by the Larson treatise. Mr. Doig provided nippers, a nail clincher, a hammer, anvil, nails,raspsand horseshoeing chaps. StateFund argues that the toolsprovided by Mr. Doig himself are the tools of the trade. The fact that a horse owner supplies a halter for his horse is not indicative of supplying ltequipmentll for the horseshoer. The halter itself is not part of horseshoeing equipment anymore than a corral or enclosure that the horse is kept in. We conclude that substantial evidence exists to support the Workers' Compensation Court's holding that the tools necessary to perform the servicewere furnished by Mr. Doig, indicating an independent contractor relationship. Riqht to Fire Mr. Doigmaintains that the right existed for eitherparty to end theoperation without liability,a factnot consistentwith the concept of an independent contractor relationship. He argues that Mr. Graveley could have terminated thehorseshoeing for any reason with no obligation to pay. State Fund maintains that Mr. Doig's argument disregards the nature of both the horse-owner's property interest and of the horseshoeing operation itself. State Fund contends that an incompetent horseshoer can lame a horse. It argues that a horseowner cannot be expected to stand quietly by while a horseshoer lames his horse. State Fund maintains that the Workers1 Compensation Court correctly held that an independent contractor can be terminated if the service are not being performed to the accepted standards. We agree. We affirm theWorkers' Compensation Court's conclusion that the right to terminate services of the claimant was consistent with independent contractor status. Independent Occupation The second part of the test set forth in 5 39-71-120(1)(b)

### , MCA (1987), requires that the worker must be engaged in an independently established trade, occupation, profession, or business. Mr. Doig maintains that as part of his general ranch work throughout his working life, he has done horseshoeing. Mr. Doig argues that as a part-time horseshoer,he was not engaged in an independent occupation. State Fund maintains that there is substantial evidence to supporttheWorkers1CompensationCourt'sfindingthathorseshoeing is itself an independently established trade. State Fund cites Taylor 

### v. Local No. 7, IntllUnion of Journeyman Horseshoers (4th Cir. 1965)

### , 353 F.2d 593, for itsholding that horseshoerswere not employees of the horse trainers and owners. State Fund contends that Mr. Doig was clearly engaged in an independent trade or business as an independent contractor because he: (1) publicly advertised his services as a horseshoer; (2)brought his own tools to the work place; (3)maintained an appointmentbook in the course of his business; (4) had no social security, FICA or otherdeductions or withholding by Mr. Graveley or any of the other ranchers for whom he had shod horses; and (5) continued horseshoeing in the area prior to his injury even though he had begun fill-time work at the Montana State Prison two weeks before his injury. We agree with the Workers' Compensation Court's conclusion thatMr. Doig met the independent occupation test. We affirm the conclusion of the Workers' Compensation Court that Mr. Doig was an independent contractor at the time of his injury

# .

Did the Workers1 Compensation Court err in its finding that Mr. Doigwasnot a statutory employeeunder theprovisions of 5 39- 71-401(3), MCA? Section 39-71-401(3)(a), MCA (1987)

### , provides: (3) (a) A sole proprietor or a working member of a partnership who holds himself out or considers himself an independent contractor

# . . . must elect to be bound personallv and individually by the provisions of compensation planNo. 1, 2,or 3,but hemay apply to the division for an exemption from theWorkers' Compensation Act for himself. (Emphasisadded). Mr. Doig contends that during the 1983 legislative session, the ~ivisionof Workers' compensation attempted to address the problem of independent contractors who seek to become employees after an industrial injury. He urges that it was the position of the Division that the solution to this recurring problem was to establish a system whereby anypersonwho wished tobe exempt from workers' compensation coveragehad to seek certification from the Divisionasan independent contractor. If socertified,thepersonin questionwould then be exempt from coverage under the Workers1 CompensationAct. Mr. Doig urges that if a person hired someone to do work forhim or her, suchperson would be required to ask if the prospective worker had a certificate of exemption as an independent contractor or could showproof of coverage. In the present case, Mr. Doig did not have coverage on himself, and did not have a certificate of exemption from the Division. Mr. Graveley did not inquire as toMr. Doiglsexemption

or coverage. Therefore, Mr. Doig maintains that he is to be treated by the insurer as an employee. The Workers1 Compensation Court addressed this issue as follows: As enacted, Section 39-71-401(3) (a), MCA (1987) allows an independent contractor to elect to be bound by the provisions of compensation plan No. 1, 2, or 3,

## or he may apply to the Division for an exemption from the Workers1 Compensation Act for himself. Nowhere in the statutes or the Division rules is the independent contractorexemption fromworkers1compensation coverage made specifically mandatory in order for independent contractor status to exist. No Court has held that any independent contractor without such a certificate is automatically an employee and such an interpretation is not warranted from a reading of the statute or its history since enactment. Administrator Gary Blewettlsstatement in favor of HB 277 suggested a resultwhich was not achieved by the Division of Workers1 Compensation rules adopted to implement this legislation. Such administrative ruled did

## not create a llstatutory employeell if an independent contractor failed to obtain a certificate of exemption in ARM 24.29.706 (Eff. 6/30/84)

# . In fact,the opposite result was reached in ARM 24.29.706(5), which states: The exemption provided for under this rule is forworkers1compensationpurposes. The fact that an independent contractorneither applies for nor receives an exemption does not imply independent contractor status.Had the legislature intended in 1983 

# . . . that an independent contractor exemptionwas tobemandatory, it could have been clearly stated. Absent such specific language in Sections 39-71-401, 39-71-118 and 39-71-120, MCA, this Court must conclude that failure to obtain an independent contractor exemption does not create a "statutory employeevv by operation of law. As the lower court explained, the failure to obtain a certificate of exemption did not specifically create a statutory employee. In the constructionof a statute, a judge is vlsimplyto ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted 

# . . 

# . g 1-2-101, MCA. We agreewith the interpretationof theWorkersvCompensation Court. We hold that the Workers' Compensation Court did not err in its finding thatMr. Doigwas not a statutory employee under the provisions of b 39-71-401(3), MCA. Affirmed.

We Concur: 

## ./ 

# /f-T&/

Chief JusticeJustice William E. Hunt, Sr., dissenting: I dissent. I do not agree with the analysis and result of this case. I would hold that Mr. Doig was not an independent contractor but was an employee of Mr. Graveley. I would reverse the Workers' Compensation Court.