Opinion ID: 848615
Heading Depth: 2
Heading Rank: 2

Heading: Analysis of MCL 418.161(1)(l)

Text: Subsection 161(1)( l ) requires us to determine whether Reed was in the service of Mr. Food under any express or implied contract of hire. Because it is undisputed that Reed was in the service of Mr. Food at the time of the accident, our determination of this issue requires a two-pronged analysis focusing first on whether Reed was in that service pursuant to an express or implied contractual relationship and, second, as explained in Hoste, supra at 573-577, 592 N.W.2d 360, whether that contractual relationship was one of hire. With regard to the first inquiry, we agree with the Court of Appeals conclusion that the facts in this case are at least sufficient to establish that Reed was in the service of Mr. Food pursuant to an implied in fact contractual relationship. `A contract implied in fact arises when services are performed by one who at the time expects compensation from another who expects at the time to pay therefor.' In re Spenger Estate, 341 Mich. 491, 493, 67 N.W.2d 730 (1954), quoting In re Pierson's Estate, 282 Mich. 411, 415, 276 N.W. 498 (1937). As the Court of Appeals noted, Reed was expecting to be compensated for the services that he performed that day, just as he had been several times before. Moreover, Herskovitz, having told Hadley to obtain the help he needed to make his deliveries that day, expected to compensate whomever Hadley recruited, just as he had done in the past. The defendants argue that the failure of Herskovitz to know exactly who Hadley would hire is relevant to whether there was an implied in fact contract with Reed. This is not the case. All that is required to establish a contract with Reed is that Hadley had authority to hire. [14] Hadley incontestably had that authority. Accordingly, having determined that the services Reed was performing for Mr. Food were pursuant to an express or implied contractual relationship, our next inquiry is whether that contractual relationship was of hire. As we explained in Hoste, supra at 576, 592 N.W.2d 360, the linchpin to determining whether a contract is of hire is whether the compensation paid for the service rendered was not merely a gratuity but, rather, intended as wages, i.e., real, palpable and substantial consideration as would be expected to induce a reasonable person to give up the valuable right of a possible claim against the employer in a tort action and as would be expected to be understood as such by the employer. In the present case, the $35 to $40 that Reed received for the approximately eight hours of services he rendered satisfies the requirement we set forth in Hoste. In finding otherwise, the circuit court did not dispute that the wages were real, palpable, and substantial on an hourly basis but, instead, calculated them by averaging them over the entire five- to six-month period of the occasional employment to conclude that the wages were less than one dollar a day. This is a puzzling and even arbitrary approach to this issue of calculation that ignores the parties' actual contracted for rate of per diem compensation and replaces it with an approach not taken by the parties. In fact, it seems to be without justification other than it effectively serves to reduce the compensation rate by a high multiple. In contrast, when the neutrally derived approach we are adopting is used, examining the actual agreement to determine the unit of pay, it is clear that this compensation was indeed real, palpable, and substantial when measured against the services performed. Here, Reed provided approximately eight hours of unskilled, manual labor helping Hadley deliver meat products. This was a service that did not require any particular level of skill, education, or experience. Indeed, the testimony at trial concerning Reed's duties showed only that they consisted of carrying and moving boxes, [15] while even such minimal tasks as handling the paperwork, arranging the delivery schedule, and driving the delivery truck were handled by Hadley. For these eight hours of unskilled, manual labor delivering meat, Reed was paid approximately $35 to $40. Because this was roughly equivalent to the minimum wage rate at the time, it is confounding that a court could conclude that this was not a real or substantial wage and that it was, instead, as it has to be under the Hoste test, a mere gratuity. We reject, with some impatience, such a counterintuitive conclusion. It is also appropriate to point out that the circuit court's ad hoc approach of averaging over the entire period of occasional employment, even though there was no such agreement between the parties, would, were it the law, cause most any occasional worker's wage to be insubstantial under Hoste, thus making worker's compensation protections for, say, all persons working episodically on a part-time basis unavailable. The facile answer to this, no doubt, is that such workers will have a tort remedy. But, they probably will not. These injured people will be, simply, injured without a remedy. History shows no less. In fact, the leaders of this state a century ago were painfully familiar with the crushing inequity created by this illusory solution of leaving workers with only a tort remedy. As they made clear in passing our original worker's compensation law, this tort remedy was hollow because of the fellow servant rule, as well as the difficulty of the worker's burden of demonstrating, among other things, employer negligence and an absence of contributory negligence on the worker's part. As the Worker's Compensation Commission appointed in 1912 by Governor Chase S. Osborn to draft our first Workmen's Compensation law concluded, after examining data regarding the average compensation paid and the wage loss sustained, on average, injured workers did not receive compensation proportionate to their injuries under the common-law, negligence based system. According to the commission, [t]his low average was, of course, brought about by the large number of accidents to which, there being no negligence on the part of the employer, there was no legal liability to pay damages. [16] Moreover, the commission concluded that, even in cases where injured workers did procure recovery in the courts, the compensation received was inadequate because of the expense of litigation and attorney fees, and because of the great delay that generally occurred between the time of the injury and the final settlement of the action. Indeed, the commission's examination of the cases that were actually litigated revealed that the damages for injuries similar in effect and extent were widely variant in amount and were on average less than the compensation proposed under suggested compensation acts. [17] It is the case then that our courts, rather than straining to devise some too clever reading of the parties' agreement that has as its end game the allowing of tort claims by a particular injured worker (which formula invariably will be devastating to yet unknown injured workers who, under the new formula, will be unable to secure worker's compensation), should simply look to the parties' actual contract to determine the nature of what was actually agreed on and rule accordingly. All of which is to say that we should recall the venerable axiom that hard cases make bad law and not fall into the practice of allowing them to do so. Therefore, we conclude that Reed was an employee of Mr. Food at the time of his injuries within the meaning of subsection 161(1)( l ) because the service he performed was pursuant to an expressed or implied contract of hire and the compensation was real and substantial. It was a wage. Accordingly, our next task is to determine whether Reed meets the requirements of subsection 161(1)(n).