Court Opinion

ID: 9704848
Source: CourtListenerOpinion
Date Created: 2023-08-26 00:48:09.488821+00
Date Added: 2024-06-11T18:22:05.825825
License: Public Domain

*723Smith, J.
(concurring). This case represents the problem of the compensation of the partner who is-injured at his work. More specifically, an interpretation of a recent amendment to the “employee” definition section of the workmen’s compensation act (CL 1948, §411.7, suhd 2, as amended by PA 1949, No 284 [Stat Ann 1950 Rev §17.147, suhd 2]), and its application to working partners. What we actually have in the entire area of the working partner’s compensation for industrial accidents is a conflict between the conceptualism of the common law and the realities of modern social legislation. A glance at the past will reveal its outline.
There is no need to more than mention the objectives of the workmen’s compensation act. It was horn, in part at least, out of the conviction of our people that the impoverishment and tragedy of industrial accidents were a “risk of trade” which should not he shouldered exclusively by the victim of the accident and his family, but should be borne as well “by those who profit by the industry,” as was cogently set forth in the messages of President Theodore Roosevelt to the Congress as early as 1906, which messages may still he studied with profit. (41 Cong Rec 22, 26 • 42 Cong Rec 68, 72, 1347). In order that such act acconplish its objectives of relieving and protecting the wage earner, it is almost universally held that it should he extended “to include all employments and services which can reasonably he said to come under its provisions” and so construed “that in a doubtful case an injured employee may not he deprived of the benefits of the act.” (Continental Casualty Co. v. Haynie, 51 Ga App 650, 652 [181 SE 126], aff’d, 182 Ga 608 [186 SE 683]). Our own Court, in Adkins v. Rives Plating Corporation, 338 Mich 265, while noting that the compensation law ivas not general insurance, observed (p 271) that it was “to be construed liberally *724to provide indemnity for accidents peculiarly incidental to employment.”
The problem of the compensation of the partner for injuries received at his labors has been controversial for many years. See Brown, Working Partners, in Proceedings of the 13th Annual Meeting of the International Association of Industrial Accidents Boards and Commissions.* Most American jurisdictions, influenced by the English case of Ellis v. Joseph Ellis & Co. (1905) , 1 KB 324, have denied recovery. The Ellis conclusion was reached upon the theory that if a partner were held to be a workman under the act, he would be both employer and employee, both master and servant, and that the employment relation involved 2 persons, a situation not present in the partnership cases, since the partnership, the court pointed out, as distinguished from the corporation, was not an entity. The court is thinking in .terms of traditional tort law, traditional business law, the concepts of the legal “person” and the “entity” of the association in a business enterprise of a group of persons. It is a process of doubtful validity in'the construction of a compensation act. As Mr. Justice Reed commented, in United States v. Silk, 331 US 704, 712 (67 S Ct 1463, 91 L ed 1757), in construing the social security act, “the terms ‘employment’ and ‘employee’ are to'be construed to accomplish the purposes of the legislation. As the Federal social security legislation is an attack upon recognized evils in our national economy, a constricted interpretation of the phrasing by the courts would not comport with its purpose.” See, also, the discussion by Wolfe in 41 Columbia LR 1015, Determination of Employer-Employee Relationship in Social Legislation.
With these considerations in mind, the Ellis conclusion is not an inevitable one, despite its wide ac*725ceptance. At least one American court, unaided by statute (Ohio Drilling Co. v. State Industrial Commission, 86 Okla 139, 143 [207 P 314, 25 ALR 367]) refused to follow it. As to the Ellis reasoning that the employment relation demanded 2 persons the court commented that it could “see no good reason why the members of a partnership cannot jointly or severally perform the work or labor incident to the success of the joint undertaking and at the same time draw wages from the earnings of the partnership,” finally concluding, as a matter of law, that:
“The character of the business of the partnership brought them clearly within the provisions of the act, and the fact that the members of the partnership performed the labor incident to its business rather than hire other employees to.perform the labor, it seems, in no way hazarded the risk of the insurance carrier or gave it any reasonable excuse for avoiding its obligation to the partnership or to the State.”
We do not find it necessary, however, to test the validity of the Ellis conclusions against modern partnership law as found in the uniform partnership act, though the case of DeMartini v. Industrial Accident Commission, 90 Cal App2d 139 (202 P2d 828) is instructive in this respect. In 1921 the Michigan legislature considered the problem, and by amendment (PA 1921, No 173), the definition of employee was broadened to include “working members of partnerships, receiving wages irrespective of profits from such.”
Under this statute it could no longer be doubted that the working partner described became eligible for workmen’s compensation. But the difficulty with the amendment was that it pitchforked into an admittedly complex legal problem (the determination of whether or not a partnership existed, a matter of intent) the additional requirement that a partner’s *726“take” from the firm be wages irrespective of profits. In a small operation, such as the one in the case at bar (or, in fact, any enterprise conducted in the partnership form) after the claims of third-party creditors are met, the remainder of the money, if any, belongs to the partners. If they have designated and received a part thereof as “wages,” taking the balance as profits, they are safely covered under the act. But if'they take the entire remainder as profits, it is argued that they are not covered. In each-case the workman has performed the same labors, as consideration for which he has received the same total sum of money, in each case the operation ■of the business has subjected him to exactly the same hazards, but in the one ease he is protected by the act. while in the other he and his family remain exposed to all of the hazards of unrecompensed industrial accidents.
Does, in truth, the language of the 1921 amendment place a premium on accounting procedures and semantics, at the expense of ready and certain compensation for industrial accidents? If so, the. multitude of. small partnerships throughout the State may well be assuming they have a protection which does not in fact obtain. The financial conduct of the business in the case at bar is revealing. Mrs. Kramer, we agree with our Brother, was a copartner with her husband in the Charlevoix Beach Hotel. Bier funds had aided in the purchase. She worked in the office, had been hostess, clerk and stenographer. It was she who kept the books. As to the distribution of the common fund, each of the parties withdrew personal money as it was needed and was available. “If we wanted anything, we drew a check for it, if we had it in the bank and needed it.” She was certain that these personal accounts were considered in dividing up the profits at the end of the year, but as to how this was done she replied: “Well, *727after all, the account just goes on and on. The bills are paid out of it.” Pressed for a reply on how she divided up the profits she replied:. “Well, sir, I don’t know how to answer that.” But she said she was certain they did not receive wages. This was how they operated:
“For instance, if you collect $50 and you have a bill of $25 that you are going to pay in order to get that $50, that leaves you $25, doesn’t it? All right. Mr. Kramer might come along and take $10 for his personal, and I will take $10, and that will leave a balance of $5. All right. The $5 is left in the bank. Maybe we will have to use that $5 to buy something for the business. The money isn’t drawn out at the end of every year and divided.”
Thiis the distributions were made, or taken. The legislative requirement that, for compensability, when Mr. Kramer “took his personal” of $10, he must have taken it as wages irrespective of profits, becomes extremely difficult, if not impossible, to apply with accuracy in this kind of an operation, with the books kept as they were. As Mrs. Kramer testified: “Well, I wouldn’t say that I was a C.P.A. or anything like that, but I tried to keep the accounts accurate— as accurate as possible.” There are numerous such small businesses scattered throughout the State. Their resources are slender and their hazards great, since the limited scale of the business requires, as in the case at bar, that the partners themselves perform many of the services purchased by the more prosperous concerns. We are loath to conclude that the legislature was insensitive to these considerations in the extensive amendment later to be discussed.
We have set forth these extracts from the record at some length because they illustrate the practical pitfalls, for those unversed in accounting and the law, of a wage test for a partner’s compensation *728coverage. This type of difficulty is not unknown elsewhere under the same statutory phraseology. In Mary Len Mine v. Industrial Accident Commission, 64 Cal App2d 153 (148 P2d 106), the California court was faced with a case in which the partnership agreement spoke freely of wages, but much of the evidence before the commission with respect thereto was in sharp conflict, one óf' the partners stating that (p 157) “they were to continue drawing these amounts until a profit was obtained from the mine, if any.” The court held, under this phase of the case, that the decedent was entitled to the benefits of the act. But in Skodas v. I.A.C., 19 I.A.C. 113, the agreement was that the cook, Skodas, was to be paid $5 a day for cooking, plus board of the reasonable value of $1.00 per day. It was held that this sum of $35 per week “was more in the nature of a drawing account” and compensation was denied. In our case of Thurston v. Detroit Asphalt & Paving Co., 226 Mich 505, the issue resolved by this Court was whether a certain allocation of moneys was a wage, as claimed, or a division of profits, the Court holding it was the latter.
We are not, of course, concerned with the wisdom of the legislative test for compensability. That is a matter for the legislature, not the courts. The experience of the courts, however, in construing legislation, may cast light upon the possible reasons for legislative amendments, and it is against such background that we turn to the amendment here involved.
In the 1949 session of the legislature, it was proposed in the senate (Senate Bill No 245) that section 7 of the workmen’s compensation act be amended to read, in part, as follows:
“44 Every person in the service of another, under any contract of hire,
*72945 express or implied, including aliens, including working members of part-
46 nerships, receiving wages irrespective of profits from such, INCLUD-
47 INC ANY PERSON INSURED FOR WHOM AND TO THE EX-
48 TENT PREMIUMS ARE PAID BASED ON WAGES, EARNINGS
49 OR PROFITS, and also including minors, who, for the purpose of this * * *
54 in which ease only single compensation shall be paid, receive compensa-
55 tion double that provided elsewhere in this act.”
The House, after consideration, returned  the proposed bill to the Senate with the following amendments :
“1. Amend section 7, line 45, after the second ‘including,’ by striking out ‘working.’
“2. Amend section 7, line 46, after ‘nerships’ by striking out the balance of line 46, all of lines 47 and 48 down to and including ‘PROFITS’ in line 49 and inserting ‘EXCEPT AS HEREINAFTER PROVIDED.’
' “3. Amend section 7, line 55, after ‘act,’ by inserting a new paragraph to read as follows: ‘ANY POLICY OR CONTRACT OF WORKMEN’S COMPENSATION INSURANCE MAY, BY INDORSEMENT, EXCLUDE COVERAGE AS TO ANY 1 OR MORE NAMED PARTNERS. NO PARTNER SO EXCLUDED SHALL BE SUBJECT TO THE PROVISIONS OF THIS ACT.’ ”
Thus the amendment, under the House view, would read as follows:
“including members of partnerships, except as hereinafter provided. * * *
“Any policy or contract of workmen’s compensation insurance may, by indorsement, exclude cover*730age as to any 1 or more named partners. No partner so excluded shall he subject to the provisions of this act.”
It would be well to pause for a moment at this point and examine what is proposed. The amendments, it is clear, are aimed at the problem of the compensability of a partner for injury. The House wishes to avoid entirely the wage-profit criteria we have heretofore examined, and to liberalize broadly, subject only to the proviso that there may be exclusions, in the policy, of any partner or partners.
Conference followed, as a result of which the House and Senate differences were resolved.  The House agreed to recede from its amendments 1 and 2, and the Senate from its disagreement to House amendment 3. In this spirit of compromise the final amendment in its present form was born. The tests for a partner’s compensability have been changed. It will still be required that the partner in question be a working partner, as distinguished, presumably, from the limited partner, the partnership financier, the mere investor in a noncorporate enterprise. (See 45 Yale LJ 895.) We still thus retain the over-all objective of “workmen’s” compensation. But although the wage-profit requirement of coverage has not been abandoned and remains for those who can qualify, it no longer stands alone. Working partners shall include, also, those who have obtained appropriate insurance which is based upon wages, earnings, or profits. No longer have we placed a premium on form or terminology over substance. No longer does the distinction between partnership wage and partnership profit, a distinction easy for the learned and the skilled, but confusing and deceptive for the many, govern compensation for injury. The law has *731thus been clarified and made more certain in its application.
We are fortified in these conclusions by our previous decision on this same amendment. The contention was made in Scott v. Alsar Company, 336 Mich 532, that the amendment was broad enough in its literal terms to cover independent contractors. They were working “for” another and they had purchased insurance. A divided court rejected the argument. The amendment, then, we have decided, does not include the independent contractor. If, likewise, it does not include the working partner, it is difficult to-answer on any realistic basis (in view of the above quoted history of the amendment) appellee’s penetrating question:
“If the above (i.e., that the working partner wlm has purchased insurance is covered under the act) is not the reasonable interpretation of the 1949' amendment what classes of persons are defined by the 1949 amendment to be employees that were not covered as employees before? The legislature certainly cannot be presumed to have added the amendment to cover no additional persons or for no purpose.”
A subordinate question remains. The plaintiff was insured by defendant insurance company under a policy which provided (paragraph 7, Michigan workmen’s compensation indorsement) in part as follows:
“If this employer is a partnership, the remuneration of each of its partners shall be included at the fixed amount of $2,000 per annum (later increased to $3,600) and premium shall be paid thereon unless such partner is designated in the declarations or by indorsement as excluded.”
With respect to such policy, defendants’ application for leave to appeal in the nature of certiorarii states, in part, as follows:
*732“The policy recited that the so-called partners received a fixed salary or wage of $3,600 each per year. Premiums were paid by plaintiff and his wife on this alleged ‘salary’. Investigation subsequently revealed that neither E. L. Kramer or Irene Kramer, his wife,ever drew any wages, the record being undisputed on this point. Premiums which had been collected on this nonexistent ‘salary’ were tendered back by Travelers Insurance Company, and were refused by the Kramers.”
Insofar as the above complains of the $3,600 figure used in the policy, defendant insurance company is in no position to urge that it is erroneous. The figure of $3,600 had its origin with the defendant itself, not the plaintiff. Plaintiff could have employed no other. The language used admits of no other construction: remuneration shall be included at the fixed amount of $3,600, which is the figure upon which the premium shall be paid.
But we need not rest our conclusions upon such fragmentation of tim language, revealing though it may be. We take judicial notice of the filings by, for and on behalf of the defendant with the commissioner of insurance of this State in accordance with PA 1947, No 99.  The Michigan workmen’s compensation rating bureau there filed, on behalf of its member insurance companies, of which defendant Travelers Insurance Company is one, “The Basic Manual of Buies, Classification, and Bates for Workmen’s Compensation and Employers’ Liability Insurance,” which manual contained the following general Buie 7, with specific Michigan rule not inconsistent therewith, respecting the compensation insurance of copartnerships:
*733“7. Copartnerships. The following rule is applicable in States where copartners are subject to the workmen’s compensation law or where the law provides that copartners may elect to come within its scope:
“Where an employer is a copartnership, any member of which is covered by the policy, the name of any such member so covered shall be stated in the policy and assigned to the classification properly describing his employment. The payroll of each such co-partner for purposes of premium computation shall be the fixed amount of $3,600 per annum.”
We need not, we assume, explore the rate-making problems involved in such provision. Those interested may profit from Biesenf eld’s excellent exposition (p 372 et seq.), in Modern Social Legislation, Biesenfeld and Maxwell; Somers and Somers, Workmen’s Compensation, p 102 et seq.; and Kulp’s “The Bate-Making Process in Property and Casualty Insurance—G-oals, Technics and Limits,” in 15 Law and Contemporary Problems (Autumn 1950), pp 493-522.
Not only, then, is the philosophy of the amendment obvious, but the mechanics of insurability equally so. If we have a working partner, he may procure compensation insurance. It must be based upon wages, earnings, or profits, but the statute does not require the actual receipt of any stated sum from the copartnership as a condition precedent to insurability under the act or the collection of insurance benefits. Whether the work is financially productive or not, his hazards remain the same. In truth, considering that one of the purposes of workmen’s compensation is to keep workmen’s families off the relief rolls, it may well be that the working partner in a hand-to-mouth operation has designedly received more legislative solicitude than his spectacularly successful competitor. It is clear that the in*734jured partner in this case has met the requirements of the act and should receive his compensation under it.
The award is affirmed, with costs.

 United States Bureau of Labor Statistics Bulletins, No 432, p 190 et seq. (1926).