Opinion ID: 354297
Heading Depth: 2
Heading Rank: 2

Heading: Idaho Workmen's Compensation Act.

Text: 43 Appellants, PVO and Polytron, insist that the eight small mining companies are not employers and so are not eligible for any immunity granted by the Idaho Workmen's Compensation Act. We agree. 10 44
45 The Idaho Code defines an employer as any person who has expressly or impliedly hired or contracted the services of another. Idaho Code § 72-102(10). This statutory language focuses on the party making the hiring decision. Prior to 1971 when the above definition was added to the Code, the Idaho cases, decided under the common law, established that the right to control and direct the activities of the workers is the key factor in finding an employer-employee relationship. Merrill v. Duffy Reed Construction Co., 82 Idaho 410, 353 P.2d 657 (1960). Thus, it is necessary to examine the operating agreements entered into by the third party defendants and Sunshine Mining Company to determine who had the right to hire workers and who exercised control over the activities of the miners. 46 Our job of interpreting these agreements is made more difficult by the fact that there are seven different agreements involved here. However, they share certain features. Sunshine Mining Company is given the exclusive right to conduct development and mining operations on all the claims owned by the small companies covered by these agreements. Most of the agreements give Sunshine the right to suspend operations and require that, even if the other party wishes to independently finance continued operations, Sunshine must be engaged to do the actual work. The agreements generally give the non-operating party a right to inspect the operation, but actual control over operations is vested in Sunshine. It is thus apparent that Sunshine Mining Company alone has the right to control the day to day activities of the miners. These agreements do not specify expressly who has the right to hire workers, but a strong and permissible inference is that the owners of the non-operating interests could not do so. 47 The unit agreement entered into by Sunshine, Hecla and Silver Dollar, which covers the area in which the fire took place, is even more explicit in investing Sunshine Mining Company with exclusive control over the workers. Article VII of that agreement provides that the number of employees of the unit operator and their selection and the terms of labor and compensation for services performed, shall be determined by the unit operator, and the said employees shall be the employees of the unit operator. To assert that this does not give Sunshine the exclusive power to hire requires a taste for literalism beyond reason. We hold that under both tests for establishing a direct employer, Sunshine Mining Company must be considered the sole direct employer. 48 Third party defendants present two arguments in an attempt to avoid this conclusion. They rely on the Idaho mining partnership law, Idaho Code § 53-401 et seq., and the Idaho cases concerning joint ventures. Since the workmen's compensation act specifically allows partnerships or associations to be employers, Idaho Code § 72-102(19), they argue that the joint entity created by the operating agreement is the direct employer. Should the entity not be recognized under Idaho law it follows, they argue, that each member of the entity must be considered the employer. 49 We agree that some form of joint venture existed here. We also recognize that control need not be shared equally between members of a joint venture, but can be delegated to one member of the group. Shell Oil Company v. Prestidge, 249 F.2d 413 (9th Cir. 1957). Thus, the limited control retained by third party defendants here does not preclude classification of these arrangements as joint ventures. We remain convinced, however, that under the terms of the unit agreements Sunshine alone was the direct employer. 50 Our holding requires that we examine Clawson v. General Insurance Company of America, 90 Idaho 424, 412 P.2d 597, 601 (1966). In Clawson the Idaho Supreme Court held that a joint venture is not an entity separate and apart from the parties composing it. Thus, there is no separate entity which can be considered the employer. Moving from this unassailable position, third party defendants insist that Clawson requires that members of a joint venture always be considered joint employers of those working for the venture. While Clawson treated members of the joint venture as joint employers it did so with respect to its particular facts. In Clawson two contractors formed a joint venture to construct a school. The joint venture, as such, had no insurance coverage, but each individual member of the joint venture was covered by a surety bond. The Idaho court held that an injured worker could claim against both of the sureties covering the individual members of the joint venture. 51 The Clawson court, in so holding, emphasized that the member's activities in the joint venture project were of the same type which they pursued in their private businesses in which both were then also actively engaged. Moreover, it does not appear that one member was subservient to the other with respect to the affairs of the joint venture. Under such circumstances the court, having refused to treat the joint venture as the employer, had no choice but to treat each member thereof as the employer. Being indistinguishable, parity of treatment was required. 52 Parity, however, may be improper when the members are distinguishable. Indeed, to establish the employer for the purposes at hand, once the joint venture is discarded, requires that each member be measured against Idaho's employer-determining tests. To discard the entity, on the one hand, and to then treat the members of the venture as fungible, on the other, is to do ultimately what initially one refused to do. Once the entity is swept away the members should be treated as individuals for the purposes at hand. To do otherwise is to reintroduce the entity. 53 Approached in this manner our conclusion becomes inevitable. Third party defendants did not work the mines. Sunshine did. Third party defendants did not control the employees. Sunshine did. Third party defendants did not have rights with respect to each and every joint venture. Sunshine did. Third party defendants did not hire the employees. Sunshine did. To clothe third party defendants with Sunshine's apparel merely because a joint venture existed would be inconsistent with Clawson 's rejection of entityship for joint ventures. 54 We recognize that third party defendants contributed to the costs of the workmen's compensation insurance coverage, under the cost-sharing provisions of the operating agreements. This is not the decisive factor in fixing the identity of the direct employer eligible for immunity under the statute. In order to avoid distorting the direct employer concept beyond recognition, the element of control over the employee must be present. This position is supported by recognition in the Idaho statute of an additional group, Statutory Employers, which receives employer treatment although they are not direct employers. See § 2 infra. This strongly suggests a legislative intent to restrict employer treatment to those who meet the ordinary employer-determining tests or come within the special statutory definition. Only Sunshine meets the ordinary tests; hence, we hold that it alone is the direct employer of the miners killed in the fire. 55
56 The Idaho statute provides that employer also includes the owner or lessee of premises, or other person who is virtually the proprietor or operator of the business there carried on, but who . . . for any other reason, is not the direct employer of the workmen there employed. Idaho Code § 72-102(10). Since the third party defendants do own some of the property being mined, it is argued they fit within the category of statutory employer. 57 The cases have established that right to control is not a factor in determining who is a statutory employer. Miller v. FMC Corp., 93 Idaho 695, 471 P.2d 550 (1970). Indeed, the purpose of including the special statutory definition was to broaden the concept of employer beyond what was recognized at common law. Adam v. Titan Equipment Supply Corp., 93 Idaho 644, 470 P.2d 409 (1970). 58 However, in a series of cases interpreting Idaho law, this circuit has established that the statutory employer classification is only available to those owners who are also an operator of the business being carried out by the workers. Kirk v. United States, 232 F.2d 763 (9th Cir. 1956); Ray v. Monsanto Company, 420 F.2d 915 (9th Cir. 1970). Thus, in the Monsanto case a manufacturing company was held not to be the employer of workmen hired by a construction company engaged in new construction at the manufacturing plant. The court found that Monsanto was not in the construction business and so could not be the employer of the construction workers. 59 Here, the small companies are not actively involved in the operation of the mine. They are not the operators of the business there carried on. They do share in the profits of the mining business being carried on, but theirs is a non-operating interest. Their position, while not identical, is similar in relevant respects to that of one who contracts to have work done for him. The Idaho cases, relied on in the Monsanto case, clearly establish that such a person is not an employer under the statutory definition, even though he benefits from the work done. Moon v. Ervin, 64 Idaho 464, 133 P.2d 933 (1943) (physician who contracted to have a house built is not the employer of workmen involved in the construction); Gifford v. Nottingham, 68 Idaho 330, 193 P.2d 831 (1948) (city which contracted for construction of sewer is not employer of workmen hired by subcontractor). Thus, we hold that the third party defendants are not statutory employers. 11 Since they are neither direct nor statutory employers of the miners, the statutory immunity is not available and the grant of summary judgment must be reversed. 60