Source: https://www.davis-stirling.com/HOME/Case-Law/Heiman-v-Workers-Comp
Timestamp: 2019-04-24 22:58:06+00:00

Document:
Petitioner, a professional property manager, hired an unlicensed and uninsured contractor to install rain gutters on a condominium building, and an employee of the contractor was seriously injured on the first day of the job. The Workers' Compensation Appeals Board (WCAB) concluded that petitioner was the employer liable for workers' compensation. Petitioner contends that the WCAB erred because petitioner was instructed to hire the unlicensed contractor as the agent of the condominium homeowners association or the condominium owners, which were found not liable for workers' compensation under the Labor Code.
We conclude that petitioner and the unlicensed contractor were dual employers that are jointly and severally liable for workers' compensation. The unlicensed contractor employed the injured employee, and petitioner hired the unlicensed contractor as a professional property manager and the agent of the homeowners association. The homeowners association was not an owner or exempt employer under the Labor Code. Even if petitioner was the agent of the condominium owners, an agent may be liable for performing an act authorized by the principal whose rights are not imputed to the agent. Since liability for an agent's authorized act is imputed to the principal and the homeowners association was a legal entity separate from the owners, we further conclude that the liability of petitioner as agent is imputed to the homeowners association as principal.
Accordingly, the WCAB's decision is affirmed in part and annulled in part, and the matter is remanded for further proceedings consistent with this opinion.
Petitioner, Robert P. Heiman, individually, and doing business as Pegasus Properties (Pegasus), a property manager business, entered into a Condominium Management Agreement (Agreement) with Montana Villas Homeowners Association (Association), an unincorporated association of residential condominium owners. The Agreement provided that Pegasus as the agent of the Association would manage the condominium property and arrange for repairs of the common area for a fee. The Agreement further provided that employees hired by Pegasus to maintain or repair the property would be employees of the Association, although Pegasus had responsibility to comply with labor laws. The Agreement also provided that expenditures in excess of $100 required approval by the Association, and that Pegasus would be reimbursed for any advances or costs.
At an Association meeting, condominium owners agreed that new rain gutters should be installed on part of the condominium building as recommended by Pegasus. Pegasus hired Mark Hruby doing business as Rube's Rain Gutter Service (Hruby), an unlicensed contractor that was also uninsured for workers' compensation. The job contemplated was no more than two days and the cost was $1050.
Hruby hired Freddy Aguilera to perform some of the work at $65 a day. On November 5, 1997, the first day of the job, a rain gutter contacted a high voltage electrical wire and Aguilera was severely shocked and fell and was seriously injured. Hruby completed the job and was paid by check.
Aguilera filed for workers' compensation naming Hruby as the employer, and the Uninsured Employers Benefits Trust Fund (Fund), Pegasus, the Association and the individual condominium owners (owners) were joined as defendants. The parties proceeded to trial and Hruby and Aguilera testified.
The workers' compensation administrative law judge (WCJ) determined that Hruby was the employer of Aguilera and was liable for workers' compensation including 90 percent permanent disability. In the opinion, the WCJ explained that even though Hruby did not have the required contractor's license and was not an independent contractor under section 2750.5, the owners were not employers under section 3351(d) because Aguilera had not worked sufficient hours under section 3352(h) and Cedillo v. Workers' Comp. Appeals Bd. (2003) 106 Cal.App.4th 227 (Cedillo). In addition, Aguilera did not have enough hours for casual employment under section 3715(b). The WCJ also reasoned that, "the agents, whether the Association or Pegasus, would be entitled to the rights and liabilities of the owners and should, be deemed owners within Labor Code §§ 3351(d) and 3352(h)." Aguilera petitioned the WCAB for reconsideration that he was permanently totally disabled, and agreed with the Fund that the Association may be liable.
The WCAB granted reconsideration and determined that Hruby "did not possess a valid contractor's license at the time of the injury and therefore is not the employer of applicant for purposes of liability for workers' compensation benefits." The WCAB determined further that Hruby was hired by Pegasus, "a professional property management business" and "an agent for the homeowners' association", and "therefore under Labor Code section 2750.5, became the employer of applicant, Freddy Aguilera." The WCAB awarded Aguilera workers' compensation to be paid by Pegasus. The WCAB also ordered further development of the record by the WCJ to determine whether Aguilera was permanently totally disabled.
Pegasus petitions for writ of review and contends that the WCJ was correct that it was the agent of the Association or owners and not liable under sections 3351(d), 3352(h) and 3715(b). Pegasus also claims that the Association or owners selected Hruby from three bids and paid for the rain gutter installation.
The Fund answers that sections 3351(d) and 3352(h) do not apply since Pegasus was not an owner, even if Pegasus was the agent of the owners or the Association. Pegasus was the joint employer of Aguilera under section 2750.5 since Pegasus hired Hruby, an unlicensed contractor, as expressly found by the WCJ and WCAB. In addition, all the defendants may have liability as employers under section 3715(b) because Aguilera's labor cost in excess of $100.
Aguilera answers that he is permanently totally disabled and the Association, which is a separate legal entity, may be liable because Pegasus hired Hruby on behalf of the Association. This court requested further briefing from the parties regarding ownership of the property and liability under the principles of agency.
The WCAB responds that Hruby was hired by Pegasus as agent of the Association, which is indicated by the Agreement and minutes from an Association meeting. The WCAB concludes that as the principal the "homeowners' association may also be held liable as a joint employer of the unlicensed contractor under Labor Code section 2750.5." The Association is not an exempt employer under sections 3351(d) and 3352(h) because it was not an owner and "homeowner associations are separate and independent legal entities from the unit owners." Even if the Association was an owner, the WCAB reasons, "the unlicensed contractor's work for the homeowners' association was not "personal" because it was in the course of the association's trade or business, management of the common areas of the condominium complex."
Pegasus responds that it hired Hruby as instructed by the directors of the Association and in compliance with the Agreement. It argues the Association is not an owner according to the governing documents and Civil Code, and is a liable employer unprotected by sections 3351(d) and 3352(h); therefore, Pegasus and the directors are not liable.
The owners answer that the Association should be deemed an owner under the Labor Code because homeowners associations have rights and liabilities of owners under the Civil Code. Otherwise, the owners contend, they would not receive the benefit of sections 3351(d) and 3352(h) as intended by the Legislature.
2. Hruby Was An Unlicensed Contractor.
a. Legal Consequences of Hiring an Unlicensed Contractor.
However, the owner or occupant of a residential dwelling, who hires an unlicensed contractor whose employee is injured, may not be the "employer" liable for workers' compensation under section 2750.5 or section 3351(d) unless the employee worked sufficient hours under section 3352(h). (Cedillo, supra, 106 Cal.App.4th at pp. 235-236; see also Furtado v. Schriefer (1991) 228 Cal.App.3d 1608 [matter remanded to determine whether homeowner "employed" injured unlicensed painter under section 3352(h), which controls over section 2750.5].) Nevertheless, a homeowner may be an "employer" liable in tort under section 2750.5, and the unlicensed contractor who was also uninsured may be a dual employer with tort liability under section 3706. (Cedillo, supra, 106 Cal.App.4th at pp. 236-237.) Since Hruby was an unlicensed contractor when he contracted with Pegasus and at the time Aguilera was injured on the job, it is necessary for us to examine the potential employment relationships in order to determine liability.
3. Hruby Is A Liable Employer Under Division 4 Of The Labor Code.
The WCAB determined that Pegasus was the "employer" liable for workers' compensation under section 2750.5 and the Labor Code. Pegasus contends that the WCJ correctly found that Hruby was the liable employer.
4. Pegasus Is A Liable "Employer" Under Section 2750.5.
The WCAB determined that Pegasus is the liable "employer" for workers' compensation under section 2750.5, State Fund and Blew because Pegasus hired Hruby who was an unlicensed contractor when Aguilera was injured. Pegasus contends that the WCAB erred because the Association or owners selected Hruby from three bids and instructed Pegasus to hire Hruby as indicated by the Agreement and payment from the Association's account. The Fund answers that the claimed bids and payment are not part of the record, and the WCAB's finding that Pegasus hired Hruby is based on substantial evidence and must be affirmed.
a. Substantial Evidence Supports The Finding That Pegasus Hired Hruby.
Only the invoice from Hruby, which was billed to Pegasus, is part of the record and the alleged bids and documentation of who actually paid for the work is not. However, the WCJ reported that the owners agreed to the installation of new rain gutters at an Association meeting, and the WCAB indicates that Pegasus was authorized to obtain bids based on the Association's minutes. We also note that the Agreement provides that repairs in excess of $100 must be approved by the Association, and that Pegasus was the Association's agent. The Agreement further provides that Pegasus was an independent contractor in the business of managing properties, which is undisputed.
Nevertheless, there is no evidence that the Association or owners received bids, instructed Pegasus who to hire or had any direct involvement with Hruby. In addition, Hruby testified at trial that he agreed to install rain gutters on the condominium building with Pegasus, and did not recall contact with the owners or whose check paid for the job. These facts confirm that the agreement for installation of the rain gutters was between Hruby and Pegasus, which was an independent contractor in the business of managing properties that was acting on behalf of the Association. Therefore, the WCAB's determination that Hruby was hired by Pegasus is supported by substantial evidence. Since Hruby was an unlicensed contractor when Aguilera was injured on the job and when Pegasus hired Hruby, Pegasus was an "employer" that is jointly and severally liable for workers' compensation under section 2750.5, State Fund and Blew.
b. Pegasus Was The Association's Agent.
Pegasus contends further that even if it hired Hruby, the WCJ was correct that it was the agent of the Association or owners and should be deemed an owner and exempt employer under sections 3351(d) and 3352(h) and Cedillo. However, the WCAB determined that Pegasus was the agent of the Association and neither were owners. The Fund argues that Pegasus was not an owner regardless of agency status. Although Pegasus concedes it was not an owner, we shall address whether Pegasus was the agent of the Association or owners and should be deemed an owner within the meaning of sections 3351(d) and 3352(h).
There is substantial evidence supporting the WCAB's finding that Pegasus was the Association's agent when Pegasus hired Hruby. An agent generally represents the principal in dealings with third persons (Civil Code § 2295), may be authorized to do any act the principal may do (Civil Code § 2304), and receives authority either by prior agreement or ratification (Civil Code § 2307). Prior authority was clearly provided by the Agreement and the Association meeting. The Agreement was between the Association and Pegasus, and was also executed by the Association's President and Treasurer and Pegasus. Moreover, the Agreement provides that Pegasus is an independent contractor in the business of managing properties and the agent of the Association. The Agreement also states that Pegasus is authorized to manage the condominium building and provide for repairs, including the hiring of others, with Association oversight, approval of expenditures over $100 and reimbursement for advances or costs. Pursuant to the Agreement and the Association meeting, the rain gutter repair and installation was authorized and Pegasus hired Hruby who completed the job and was paid.
(2) The Davis-Stirling Common Interest Development Act.
The agency relationship between Pegasus and the Association under the Agreement is also consistent with the statutory scheme under Civil Code section 1350 et seq., which specifically address common interest developments such as condominium projects and associations and is known as the Davis-Stirling Common Interest Development Act. (See Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 252 (Lamden) [property damage from unincorporated homeowners association spot treatment of termite infestation is subject to good faith business judgment rule and not personal injury negligence standard)].) Under Civil Code section 1363(a), "A common interest development shall be managed by an association that may be incorporated or unincorporated." In addition, "the association is responsible for repairing, replacing, or maintaining the common areas" under Civil Code section 1364(a).
Civil Code section 1363.2 also provides for a "managing agent", which under subdivision (f) is defined as "a person or entity, who for compensation, or in expectation of compensation, exercises control over the assets of the association" and "does not include a full-time employee of the association." The statute further provides that the "managing agent" is authorized to receive funds belonging to the association for deposit into a trust fund account. (See also Corp. Code, § 18065, which was enacted in 2004 and provides: "Except to the extent this title provides a specific rule, the general law of agency, including Article 2 (commencing with Section 2019) of Chapter 2 of Title 6 of, and Title 9 (commencing with Section 2295) of, Part 4 of Division 3 of the Civil Code, applies to an unincorporated association."
In this case, the Association was unincorporated and a separate legal entity that delegated management and maintenance of the condominium building to Pegasus as the "managing agent" under the Agreement and the Davis-Stirling Common Interest Development Act. Consistent with the Civil Code, the Agreement further provided that Pegasus was a paid independent contractor and not an employee, whose duties included collecting and depositing into the Association's account membership dues, fees, or assessments and preparing checks.
c. Pegasus's Liability Is Unchanged By Its Agency Status.
Pegasus contends that as the agent of the Association or owners, it has the same rights or legal status as its principal under Civil Code section 2330 and is an owner and exempt employer under sections 3351(d) and 3352(h). We disagree.
Civil Code section 2330 plainly states that rights and liabilities accrue from the agent's authorized acts to the principal. The statute does not state that the principal's rights or defenses accrue to the agent. Moreover, Pegasus was the agent of the Association, not the owners, as determined by the WCAB.
It is also well established that an agent may be liable for his or her own acts on behalf of the principal whether or not the principal is liable. (See Frances T., supra, 42 Cal.3d at pp. 505, 511.) For example, in Cowell v. Industrial Acc. Com. (1938) 11 Cal.2d 172, 176-177 (Cowell), a corporate cement business, which also managed the stockholders' ranch and hired the ranch hand who was injured, was determined to be the agent and joint employer. And although liability of the county as the state's agent was not addressed in In-Home Supportive Services, supra, 152 Cal.App.3d at pages 729 730, the state as principal was determined to be a dual employer because the county hired the injured employee and both had the right of supervision and control.
5. The Association Is Liable As Principal.
The owners admit the agency relationship between Pegasus and the Association but contend, as determined by the WCJ, that the Association should be deemed an owner and exempt "employer" under sections 3351(d) and 3352(h). Otherwise the owners will not benefit from sections 3351(d) and 3352(h) as the Legislature intended, "since imposing liability on the homeowner's association would necessarily impose liability on each individual homeowner."
However, we need not decide whether the Association should be deemed an owner and an exempt "employer" since we agree with the WCAB that the duties of Hruby and Aguilera were not "personal" and were in the "trade or business" of the Association contrary to section 3351(d). The owners do not address this issue.
Although under section 3351(d) an employee is a person "whose duties are incidental to the ownership, maintenance, or use of the dwelling, including the care and supervision of children, or whose duties are personal and not in the course of the trade, business, profession, or occupation of the owner or occupant" (emphasis added), the WCAB's interpretation that the language defining duties should be read together rather than separately is entitled to great weight unless clearly erroneous. (See Boehm & Assocs., supra, 76 Cal.App.4th at pages 515-516; Ralphs Grocery Co., supra, 38 Cal.App.4th at page 828; Nunez v. Workers' Comp. Appeals Bd. (2006) 136 Cal.App.4th 584, 587.) We note that when the Legislature added and revised section 3351(d) and Insurance Code sections 11590 and 11591, so that homeowner liability policies would provide workers' compensation coverage for residential employees, coverage for duties performed in the business of the insured was expressly excluded. Moreover, each statute contains language or references to the other statutes that indicate the Legislature intended these statutes to be interrelated and read together. Therefore, the WCAB's interpretation of section 3351(d), that the language defining duties should be read together, is consistent with the statutory scheme.
In addition, the WCAB's determination that the rain gutter repair and installation was not "personal" and was in the "trade or business" of the Association under section 3351(d) is consistent with the record, the Labor Code and the Davis-Stirling Common Interest Development Act. The Association managed the condominium building and provided for maintenance or repairs pursuant to the Agreement and Civil Code section 1364(a). The services provided by Hruby and Aguilera were also for maintenance or repairs within the meaning of section 3355, and management and maintenance by the Association were provided on a regular basis under the Agreement and section 3356. Moreover, the Association had corporate powers to finance, contract and conduct business under Civil Code section 1363(c) and Corp. Code section 7140. The Association performed these functions through its officers or directors and Pegasus as the paid "managing agent" under the Agreement and the Civil Code. Consequently, the duties performed by Hruby and Aguilera were not "personal" and were in the "trade, business" of the Association, and the Association was not an owner and exempt "employer" under sections 3351(d) and 3352(h). Therefore, the Association is liable for workers' compensation as the principal of Pegasus.
6. The Owners Are Not Liable For Workers' Compensation.
We agree with the WCJ and the WCAB that the owners are not liable for workers' compensation as either an "employer" under section 2750.5 or an employer under section 3351(d) because Aguilera did not work sufficient hours under section 3352(h). (Cedillo, supra, 106 Cal.App.4th at pp. 235-236.) Even if the Association or Pegasus is the agent of the owners as suggested by the WCJ, "employer" liability for workers' compensation is not imputed to the owners as principal because of the statutory immunity provided under the Labor Code. (See ECC Construction, Inc. v. Ganson (2000) 82 Cal.App.4th 572, 575-576 [condominium owners not personally liable under Corp. Code § 7350 for construction contract with condominium association that was nonprofit mutual benefit corporation, although association may look to members for debt].) Nor are the owners an "employer" that is liable for workers' compensation solely for being a member of the Association since generally "A member of an unincorporated association does not incur liability for acts of the association or acts of its members which he did not authorize or perform." (See White, supra, 17 Cal.App.3d at page 827; Orser v. George (1967) 252 Cal.App.2d 660, 670-671, which is cited by White, and Security-First Nat. Bk. v. Cooper (1944) 62 CalApp.2d 653, 667 [Security-First National Bank)].) Therefore, the owners are not liable for workers' compensation and thus benefit from sections 3351(d) and 3352(h) as the Legislature intended.
Hruby and Pegasus were dual employers of Aguilera that are jointly and severally liable for workers' compensation under the Labor Code. Pegasus was also the agent of the Association, which was a separate legal entity that is liable for workers' compensation as the principal. Pegasus and the Association were not owners or exempt employers under sections 3351(d) and 3352(h). The WCAB's decision awards Aguilera workers' compensation to be paid solely by Pegasus. We reject that limited conclusion and hold that Hruby is jointly and severely liable with Pegasus and the Association is also liable as Pegasus' principle. To the extent that WCAB's decision is inconsistent with our conclusion, it is annulled. The award will otherwise be affirmed.
The decision of the WCAB is affirmed in part and annulled in part, and the matter is remanded for further proceedings consistent with this opinion.

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