Source: http://mn.gov/workcomp/2011/Wheeler-10-05-11.html
Timestamp: 2013-05-18 10:32:09
Document Index: 659623718

Matched Legal Cases: ['§ 176', '§ 176', '§ 176', '§ 176', 'art:\n2', '§ 176', '§ 176', '§ 176', '§ 2', 'art 1', 'art 2', 'art 2', '§ 4', 'arts 5224']

Wheeler v. Menard, Inc.
RAY A. WHEELER, Employee/Appellant, v. MENARD, INC., and ZURICH N. AM., Employer-Insurer, NORTH SHORE ANESTHESIA, LAKEWALK SURGERY CTR., BLUE CROSS/BLUE SHIELD OF MINN., RAINY LAKE MED. CTR., and ORTHOPAEDIC ASSOCS. OF DULUTH, Intervenors.
No. WC11-5250
EMPLOYMENT RELATIONSHIP - INDEPENDENT CONTRACTOR. Substantial evidence supports the compensation judge’s determination that the appellant, a truck owner-driver, was an independent contractor, not an employee.
Determined by: Milun, C.J., Pederson, J., and Johnson, J.
Compensation Judge: Peggy Brenden
Attorneys: James W. Balmer, Falsani, Balmer, Peterson, Quinn & Beyer, Duluth, MN, for the Appellant. Timothy P. Jung, Lind, Jensen, Sullivan & Peterson, Minneapolis, MN, for the Respondents.
The appellant appeals the compensation judge’s finding that he was an independent contractor and therefore was not an employee of Menard, Inc. We affirm.
Ray Wheeler, the appellant, entered into a delivery service contract with Menard Inc., which was insured for workers’ compensation liability by Zurich North America, collectively the respondents, to perform delivery services using and driving his own truck while hauling a trailer owned by Menard. The contract was a standard form written agreement created by and for Menard, Inc., between haulers and Menard. The agreement stated that appellant, the hauler, is an independent contractor, and “nothing in this Agreement shall be construed as creating an employer-employee relationship between Menard and Hauler.”[1] In the agreement, the hauler’s compensation was determined by a zone mileage charge and fuel cost surcharges. Menard also paid handling charges that were outlined in the written agreement. Bonuses were available and were tied to the net selling price of the products delivered. The hauler was responsible for providing necessary insurance coverage, including workers’ compensation insurance for any employees, motor vehicle insurance, general liability insurance, and cargo insurance. The appellant and a Menard manager also signed a waiver of workers’ compensation coverage.[2]
The hauler was required to complete every delivery as soon as possible within normal business hours on the day that Menard notified hauler that a delivery job had been allocated to hauler, and all deliveries had to be made only during the normal store hours of Menard. The appellant testified that he hired a driver to help him with deliveries, and that he provided workers’ compensation coverage for that employee. He declined workers’ compensation coverage for himself.[3]
The contract required the hauler to acquire a truck that would haul a trailer owned by Menard. The truck used to haul a Menard trailer was expected to meet the “recommended vehicle requirements” set out in the agreement, including truck model and year. After reviewing the contract with a Menard representative, the appellant signed the agreement and purchased a truck within the recommended vehicle requirements for hauling, model, and year, but not the recommended color. The agreement also required the hauler to have a sign on the truck with his business name and phone number on it and identifying that the delivery service was operated by the hauler. The appellant testified that he was required to make deliveries during inclement weather and when the trailer was overweight, but he also testified that he had refused to deliver loads during such circumstances without any negative consequences from Menard.[4]
The agreement allowed the appellant to subcontract deliveries under the terms of the agreement with written authorization from Menard and submission of employment and background information on any employees hired by the hauler. The appellant also agreed that any driver or helpers making deliveries would wear clean uniforms labeled with the person’s name and the name of the delivery service.
On April 30, 2009, the appellant sustained a broken clavicle while delivering Menard products to a Menard customer. On March 5, 2010, the appellant filed a claim petition alleging that he had sustained that injury as an employee of Menard Inc. The respondents denied an employment relationship with the appellant. A hearing was held on December 14, 2010. The compensation judge found that the appellant was an independent contractor on the date of injury, and denied the claim. This appeal followed.
The appellant argues that the Workers' Compensation Court of Appeals may review the issue on appeal, whether the appellant was an independent contractor, de novo as a question of law. The Minnesota Supreme Court has stated that “the determination of employment status is, ultimately, a legal one.”[5] A decision which rests upon the application of a statute or rule to essentially undisputed facts generally involves a question of law which this court may consider de novo.[6] This court has clarified, however, that in a case “with facts which might fit a particular work situation into more than one of the criteria, or where a criterion is partially met, the compensation judge must weigh those facts and the credibility of the witnesses to make the final determination.”[7] The court has also noted that “[i]n such a case, the compensation judge's determination must be given the deference reserved for factfinders under this court's standard of review.”[8] Under that standard, this court must determine whether “the findings of fact and order [are] clearly erroneous and unsupported by substantial evidence in view of the entire record as submitted.”[9] Substantial evidence supports the findings if, in the context of the entire record, “they are supported by evidence that a reasonable mind might accept as adequate.”[10]
Independent contractors are statutorily exempt from coverage under the Minnesota Workers’ Compensation Act.[11] The compensation judge found that the appellant was an independent contractor at the time of his injury on April 30, 2009, not an employee of Menard, and therefore his injury was not compensable. The appellant asserts that Menard’s extensive control on the manner in which the appellant performed his delivery duties created an employer-employee relationship between the parties in spite of the written contract to the contrary. The respondents assert that the evidence on record supports the findings by the compensation judge that the appellant, not Menard, had substantial control over his work under the contract, and therefore, was an independent contractor on the date of injury. The respondents further contend the compensation judge applied the proper law to the facts of this case.
In determining whether a petitioner is an employee or an independent contractor, traditionally the factors considered were the right to control the means and manner of performance, the mode of payment, the furnishing of material or tools, the control of the premises where the work is done, and the right of the employer to discharge.[12] Criteria listed in Minnesota Rules for specific occupations are derivative of this traditional five-factor analysis.[13] “Furthermore, the fundamental test of employment is the right, not just the exercise, of the employer to control the details of the work.”[14]
The compensation judge determined that the appellant was an independent contractor by applying the factors listed in Minn. Stat. § 176.043,[15] which was effective August 1, 2009. The appellant was injured on April 30, 2009, before Minn. Stat. § 176.043 became effective. Minn. R. 5224.0290[16] was in effect on the date of injury[17] and therefore is the appropriate rule to analyze whether the appellant was an independent contractor or an employee of Menard on April 30, 2009.
The appellant argues that Minn. R. 5224.0290 is not applicable in this case based on the wording of the rule. The rule refers to an owner-operator of a truck, tractor, or truck-tractor, and one of the factors listed is that the individual owns the equipment or holds it under a bona-fide lease arrangement. The appellant argues that the critical equipment in this case is the trailer, which is owned by Menard, and not the truck, which is owned by the appellant, and since the rule does not discuss ownership and control of the trailer, it is not applicable to this situation. Therefore, the appellant claims that Minn. R. 5224.0320 regarding general criteria for nonspecified occupations, as listed in Minn. R. 5224.0330 and 5224.0340 should apply.[18] We disagree. Minn. R. 5224.0290 clearly applies to truck owner-drivers or operators of trucks, tractors, or truck-tractors without regard to ownership of the trailers being hauled by those vehicles.
The factors listed in Minn. R. 5224.0290 are very similar to the factors listed in Minn. Stat. § 176.043. The factors to be considered when classifying a relationship as an independent contractor under the workers’ compensation act include ownership and maintenance of the equipment, responsibility for operating costs and supplying the necessary personal services to operate the equipment, compensation based on factors related to the work performed and not on the basis of the hours or time expended, determination of the details and means of performing the services, and a contract that specifies the relationship to be that of an independent contractor and not that of an employee. Both Minn. R. 5224.0290 and Minn. Stat. § 176.043 require that each of the factors be present in order for the individual operator to be considered an independent contractor. The compensation judge analyzed the appropriate factors in determining whether the appellant was an independent contractor or an employee of Menard.
In general, a truck owner-driver is any individual who owns or holds a vehicle and who leases that vehicle together with driver services to a business which transports freight for-hire or transfers freight for a private motor carrier.[19] Under Minn. R. 5224.0290, a truck owner-driver will be classified as an independent contractor when performing services in the operation of his truck when certain factors are present in the execution of the agreement that create an independent contractor relationship. In this case, the appellant purchased a truck within the recommended vehicle requirements for hauling, model, and year, but not the recommended color. The appellant was the truck owner and driver transporting and delivering products for Menard. He was responsible for maintenance and repair of the truck, and was responsible for all operating costs for diesel fuel charges, oil changes, services, and purchases for truck parts regardless of the designated driver. The appellant was not paid by the hour, but was paid according to the contract under a zone mileage charge plus fuel cost surcharges and handling charges. The appellant also hired a driver to help him with deliveries using his truck, and provided the driver with workers’ compensation coverage. The appellant signed a waiver of workers’ compensation coverage, which stated that any injuries to himself or to any of his employees while performing services under the delivery service agreement would not be covered under any workers’ compensation insurance policy held by Menard. The appellant’s delivery service contract with Menard specifically stated that he was an independent contractor.
The appellant claims that the compensation judge erred by finding that he controlled the means of performing the work required under the contract. He first argues that Menard had extensive control over the means of performing the services under the contract since Menard supplied the trailer, determined the cargo, required delivery during certain hours, and required a uniform. The compensation judge noted in her memorandum that the contract requirements to deliver products during Menard’s normal business hours and to place those delivered products in locations directed by the customer are not evidence of substantial control by Menard to classify the relationship as employer-employee. Likewise, the judge noted that Menard’s dress code was essentially a general requirement to “make explicit the basic expectation of all business relationships - that work be done during a reasonable time frame in a reasonably professional way.”[20] The compensation judge reasonably considered those contract requirements as conditions that define and explain expectations of the parties in most business relationships and are not exclusive to an employer-employee relationship.
The appellant also argues that the non-compete clause included in his contract indicates control by Menard. The compensation judge noted that the non-compete clause only limited the appellant’s ability to drive for Menard competitors. Employers often require their employees to execute employment agreements that contain covenants not to compete. However, the appellant testified that his driving was limited to delivery services for Menard because he did not know anyone else who was interested in delivery services. The non-compete clause was not unduly burdensome on the appellant’s right to earn a living and this court is reluctant to find the restriction to be confirmation of an employer-employee relationship.
Further, Menard did not exercise any control over how the appellant’s truck got to the delivery site; he chose his own route. The appellant was able to refuse to make deliveries without any consequences from Menard. Menard also exercised no control over the change of drivers performing delivery services for Menard. Overall, the appellant controlled the means and manner of performing services by providing his own truck, paying truck operating costs, exercising his right to accept or reject a delivery job, choosing his own delivery routes, and hiring his own drivers. All these factors create a relationship of an independent contractor with Menard. Substantial evidence supports the compensation judge’s finding that the employee controlled the means of performing the work required under the contract.
We recognize contract or waiver provisions that classify a relationship as an independent contractor and deny an employer-employee relationship, standing alone, are not conclusive evidence to establish an independent contractor relationship between the appellant and Menard. In this case, the compensation judge properly analyzed the relationship using the owner-operator’s truck as the essential piece of equipment contemplated under the delivery service contract. The appellant is a truck owner-driver who operates his own truck to deliver Menard’s products. The transport and delivery of goods is performed by operation of the appellant’s truck pulling a Menard’s trailer. The compensation judge made findings on the factors used to determine whether a truck owner-driver was an independent contractor and not an employee. Substantial evidence supports all of the compensation judge’s findings. We conclude that the compensation judge considered the appropriate factors to reach her conclusion and affirm her decision that the appellant was an independent contractor at the time of the April 30, 2009, injury.
[1] Appellant’s Ex. D. The contract provides, in part:
2. Independent contractor. Hauler agrees that Hauler is an independent contractor, and nothing in this Agreement shall be construed as creating an employer-employee relationship between Menard and Hauler.
5. Time of Delivery. Hauler shall complete every delivery as soon as possible within normal business hours on the day that Menard notified Hauler that a delivery job has been allocated to Hauler. All deliveries shall be delivered only during the normal store hours of Menard. Delivery times shall be dictated by the Guest purchasing the material. Hauler understands that TIME IS OF THE ESSENCE for the performance of this Agreement, and Hauler represents to Menard that Hauler has sufficient equipment or alternate equipment and manpower to fulfill the requirements of this Agreement.
6. Loading/Unloading. Menard may assist Hauler with the loading of the material and merchandise at the Menard store if team members of Menard are available, but Hauler shall be solely responsible for the manner of the loading and for securing the load.
At the time of loading, Hauler shall inspect the materials and merchandise for damage, verify the quantity loaded, and thereafter, be solely responsible for any damage to, or loss of, material or merchandise. Merchandise damaged by the Hauler will be paid for by the Hauler at the full retail price. Upon payment, the Hauler may keep the merchandise damaged . . . .
10. Maintenance and Use of Equipment
C. Maintenance of Hauler owned equipment.
1. Hauler is responsible for all maintenance and repairs of Hauler equipment.
2. Hauler is to maintain and keep Hauler’s equipment and uniforms neat and clean so that a favorable general impression is left on the guests who have purchased the delivered merchandise.
3. It is understood that Menard will not be called on or expected to come to the aid of the Hauler after the Hauler leaves the yard. Nor shall Menard be responsible for any towing expenses whether it be due to the failure of any equipment or getting stuck.
12. Insurance Coverage. Hauler agrees at Hauler’s own expense it will obtain all insurance necessary to protect Hauler and Menard from any claims, which may arise as a result of this Agreement . . . . These insurance coverages include but are not limited to:
a. Worker’s Compensation coverage policy covering all employees and any other persons assisting in the delivery process in any way. If an owner is the only person handling the deliveries under the contract, the Waiver of Worker’s Compensation Coverage must be completed.
14. Subcontracts. . . . Hauler may sub-contract with any other party for any deliveries to be made in compliance with and under the same terms and conditions as this agreement, upon proper written authorization from Menard. Said authorization shall not be unreasonably withheld.
21. Conflict of Interest and Non Compete Agreement. Hauler also agrees not to do contract hauling for any competitor of Menards that is located within 100 miles of any Menard store they do deliveries for while they are making deliveries for Menards or for one year thereafter.
[2] Appellant’s Ex. D. The waiver provides, in part:
I, the undersigned Hauler (hereinafter “Hauler”), having entered into a Delivery Service Agreement with Menard, Inc. (hereinafter “Menard”) agree that I am an Independent Contractor and I am not now, nor will I ever be, and employee of Menard.
As an Independent Contractor, I understand and agree that any injuries occurring to my person, or to the person of any individual employed by this Hauler, while performing services under the Delivery Service Agreement, will not be covered by any Worker’s [sic] Compensation Insurance Policy held by Menard at the present time, or in the future.
[3] Tr. at 77-78.
[4] Tr. at 62-63.
[7] Stacken v. Peace Villa Apartments, 52 W.C.D. 201, 211 (W.C.C.A. 1994) (citing Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 37 W.C.D. 235 (Minn. 1984)), summarily aff'd, (Minn. Jan. 27, 1995).
[9] Minn. Stat. § 176.421, subd. 1.
[10] Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984).
[11] Minn. Stat. § 176.041, subd. 1(12).
[12] Guhlke v. Roberts Truck Lines, 268 Minn. 141, 143, 128 N.W.2d 324, 326, 23 W.C.D. 175, 177-78 (1964).
[13] Hunter, 501 N.W.2d at 624, 48 W.C.D. at 638.
[14] Id. at 624, 48 W.C.D. at 639.
[15] Minn. Stat. § 176.043 (effective Aug. 1, 2009) provides:
Act of May 13, 2009, ch. 89, § 2, 2009 Minn. Laws 1306, 1307-08.
[16] Minn. R. 5224.0290 (repealed effective Aug. 1, 2009) provides:
Subpart 1. Definition. A truck owner-driver is any individual, partnership, or corporation (hereinafter referred to as "individual") who owns or holds a vehicle as defined in subpart 2 under a bona fide lease and who leases that vehicle together with driver services to an entity which holds itself out to and does transport freight as a for-hire or private motor carrier.
Subp. 2. Independent contractor. In the trucking industry, an owner-operator of a vehicle that is licensed and registered as a truck, tractor, or truck-tractor by a governmental motor vehicle regulatory agency is an independent contractor, not an employee, while performing services in the operation of his or her truck, if each of the following factors are substantially present.
A. The individual owns the equipment or holds it under a bona fide lease arrangement.
B. The individual is responsible for the maintenance of the equipment.
C. The individual bears the principal burden of the operating costs, including fuel, repairs, supplies, vehicle insurance, and personal expenses while on the road.
D. The individual is responsible for supplying the necessary personal services to operate the equipment.
E. The individual's compensation is based on factors related to the work performed including a percentage of any schedule of rates or lawfully published tariff and not on the basis of the hours or time expended.
F. The individual generally determines the details and means of performing the services, in conformance with regulatory requirements, operating procedures of the carrier, and specifications of the shipper.
G. The individual enters into a contract that specifies the relationship to be that of an independent contractor and not that of an employee.
Subp. 3. Employee. An owner operator of a vehicle as defined in subpart 2 is an employee, not an independent contractor, while performing services in the operation of the individual's truck, if all of the following criteria are substantially met.
A. The individual is paid compensation for his or her personal services:
(1) based solely on wage by the hour or a similar time unit that is not related to a specific job or freight movement;
(2) on a premium basis for services performed in excess of a specified amount of time; and
(3) from which FICA and income tax is withheld.
B. The individual is treated as an employee by the firm with respect to fringe benefits offered to employees by the firm.
C. The individual usually works defined hours.
D. The employer requires that the individual must perform the work personally and cannot change drivers.
E. The individual has no choice in the acceptance or rejection of a load.
F. The individual and firm have no written contract; or, if there is a written contract, it does not specify the individual's relationship with the firm as being that of independent contractor.
[17] Minn. R. 5224.0290 was repealed effective August 1, 2009. Act of May 13, 2009, ch. 89, § 4, 2009 Minn. Laws 1306, 1309.
[18] Even if we agreed that Minn. R. 5224.0320 did apply in this case, the rule indicates that even in cases where the factors are not met, the factors that are met are considered evidence of that status and control where a conflicting result is indicated by parts 5224.0330 to 5224.0340.
[19] Minn. R. 5224.0290, subp. 1.
[20] Memo. at 4.