Court Opinion

ID: 8199111
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:22:46.862405+00
Date Added: 2024-06-11T08:46:22.980369
License: Public Domain

Fairchild, J.
(dissenting). I do not agree that respondent York was, in any sense of the word, an independent contractor in his relation with appellant Schlimgen Memorials, Inc.
Contracts for personal services with reference to the application of the Workmen’s Compensation Act are, (1) contracts of hire, where the party rendering the service is the employee of the other party; (2) where contracts for personal services are of such character that the party rendering the service stands in relation to the other party only as an independent contractor.
*156Where, dealing at arm’s length, the first .party, having work to be done, and interested only in the result, makes an agreement with, the second who, under the agreement, has such control over matters concerning the doing of the work as to be independent in all things and responsible bo the first party only for the finished results, no objection can be urged against considering the party rendering the service as an independent contractor. But the principal test is whether the party to whom the service is to be rendered has the right of general control. In Honnold, Workmen’s Compensation, § 6,6, it is said:
“When the doing of the specific work is intrusted to one who exercises an independent employment, and selects his own help, and has the immediate control of them, and the right to control the method of conducting the work, the contractor is an independent contractor.”
The test of whether a party contracting to render services is within the definition of “employee,” sec. 102.07 (4), Stats., is objective. The terminology or the form of the contract used is of minor importance. A contract which is fundamentally a contract of hire when judged by the actual relationship of control which is set up, is still a contract of hire even though the parties are referred to as “independent contractors,” and though the person rendering the service agrees to assume the risk of injury in the course of his employment.
To say to a former’employee, “I cannot carry on my business unless you will relieve me of the burden of compensation insurance fixed upon me by law; but if you will call yourself an independent contractor, we will meet the situation together; I can then carry on as before and you can have your job as before,” may have considerable appeal as a practical matter, but it does not change the law as enacted by the legislature. The employee is not an independent contractor when control is so planned and adjusted that his efforts as well as final results in the work are regulated by the one for *157whom the work is done, especially when accompanied by provisions negativing in every way the suggestion of independence and the right to conduct a separate business for profit. Whatever form may be assumed or name adopted, if the control of the work, as well as the control of the end results, and the risk of loss or chance of gain from the business, are in the person for whom the services are to be performed, and if the person performing the services does not have independence of action as to matters other than end results, then the relationship is that of employer and employee.
Considering the articles of partnership and the lease together, what is the actual relationship of York and the other workmen to the Memorials Company, judged by the standards of control, bearing of the risk of profit and loss, and independence of action?
The company retained control of the amount of work to be done. It had the right to terminate the arrangement on five days’ notice. A disagreement between the company and Dieke, one of the so-called partners, resulted in a new partnership agreement among the remaining three workmen. At the time, Mr. Schlimgen called York into his office and told him of a dispute. York testified that Mr. Schlimgen said: “Should I let him gO' now, or do you think you need him until Memorial Day?” and further, “I said, ‘I feel like we should have him here until after Memorial Day providing you are going to' let him god ‘Well,’ he says, ‘it is up to1 j^ou. If you want him to stay on until after Memorial Day, you need his work, I will let him stay, but then,’ he says, ‘he is going. He can’t be here any longer. He has been asking for this for a long time.’ ” The partnership was not permitted to do work for others than the company; it might hire no outside help.
A system of compensation whereby the partners would receive approximately what they had received as employees was arranged by the articles of partnership and the lease agree*158ment. There was fixed a rental of $225 per month to be paid by the partnership1 to the company for the use of the company’s plant, tools, and equipment, which the partnership was required to use. The appellant was to be the sole distributing and sales agent of the partnership1, and the appellant agreed to purchase manufactured articles from the partnership and pay the sum of $8,000 to it in éxcess of the cost price of materials used, plus freight thereon. Deducting the rental from the $8,000 leaves $5,300 to' be divided among the four partners after the power bill and certain other charges were paid. This sum, roughly estimated, left about enough to equal the pay roll oí the appellant to the former employees when operating this branch of its business prior to the agreement under consideration. During the year prior to the beginning of the partnership arrangement, York received a maximum of $48 per week when working forty-eight hours per week at $1 per hour. Under the partnership arrangement and on the basis of an $8,000 volume of business, York’s weekly compensation would be $45.60, subject to deduction for his share of expenses of power, light, water, heat, etc. It was also provided in this instrument that in the event that the manufactured articles purchased varied as to the amount, then the rentals of the property were to1 be adjusted by a scale arranged in a schedule attached to1 the lease, and each month was to be treated separately with the understanding that the basis of the rent paid “is the total volume of business done in the particular month; but in any event the partnership is to1 pay a minimum of $112.50 per month.” The scale provided that if the volume per month were $500, the rent would be $112.50; if $625, $141; if $750, $225; and so on up to a monthly volume of $2,000, where the rent would be $450. The agreement was that the control of the volume of the work to be given the partnership- and the price to- be paid for it “within a reasonable range below the market price at which such articles can be purchased elsewhere” was to be in the appellant.
*159A partnership is an association of two or more persons to carry on as co-owners a business for profit. Has such an association been created here? The control of the work, the duration, and the membership' of the partnership is literally, impliedly, and actually given to an outside individual, the appellant company. Does this association carry on a business • for profit? The majority opinion states that this “partnership” is a true partnership because, under the agreement, losses are to be shared by the partners. Nominally this may be true, but there has been framed by the agreement a situation where the possibility of losses to be shared is virtually eliminated, because a “business” in the ordinary sense of the term is not being carried on. The rewards to be received by the so-called partners are roughly the same as under the contract of employment, previously in force. Books were-kept under the so-called partnership, undoubtédly as shop records had been kept before. The amount of work tO' be done over a long period will be determined by the company. The equipment used and leased is controlled by the company. Materials will be purchased by the company. The only costs to be paid directly by the partnership are those for light, heat, and power, which must have been relatively constant. Every element of risk of loss or possibility of gain is upon the company ; none is on the so-called partnership.
A serious problem evidently confronted appellant and its four employees. They tried.to create a partnership SO' as to develop a situation where an independent contractor relationship might exist, so that the company might be free from the necessity of carrying compensation insurance. But keeping control in the company in the interest of maintaining efficiency is not consistent with the creation of an independent contractor relationship. It was the effort to' keep control in the company that caused limitations to be imposed by the agreement to such an extent that they prevented the partnership from coming into' being. The so-called partnership was so limited as to deprive it of certain essential faculties, and it *160was so definitely connected with appellant’s business as to leave no other conclusion than that it was still appellant’s business and under its control. The control was exercised just as effectively as before for appellant’s own peculiar purpose and for the. sole and peculiar benefit of its business. It seems clear to' me that it was not the intention of the parties to establish a new, free, complete, independent business entity, and to set it in motion in the business world as such. Many cases might be cited in support of the proposition that the veil used to cloak a transaction or the style or title applied does not completely conceal its substance, and that it is the substance of the matter that gives the true character. Nestle’s Food Co. v. Industrial Comm. 205 Wis. 467, 237 N. W. 117; Ford Hydro-Electric Co. v. Aurora, 206 Wis. 489, 240 N. W. 418; Utility Coal Co. v. Rogez, 170 Okla. 264, 39 Pac. (2d) 60; People v. Levine, 160 Misc. 181, 288 N. Y. Supp. 476.
The majority opinion cites Jenkins v. Moyse, 254 N. Y. 319, 172 N. E. 521, and suggests an analogy between the situation in this case and the situation where a borrower, by arrangement with the lender, incorporated his business and borrowed the money in the corporate name to evade the usury statute of New York. The two situations are markedly dissimilar. In the New York case, the borrower organized a corporation in fact as well as in name. Plere the new entity was purely nominal.
In Kneeland-McLurg Limber Co. v. Industrial Comm. 196 Wis. 402, 220 N. W. 199, the lumber company contracted with several men to construct a railroad grade and right of way. The men agreed to furnish all tools, dynamite, and other necessary supplies. The amount of payment was proportional to the number of feet of right of way constructed. The case is readily distinguishable from the case in hand. There the contract was for a particular piece of work; the men were paid at a flat rate for work accomplished. In the present case, the contract calls for work over a period of time at a number of jobs, specifications for which are to be *161made known later; the company will pay the cost of materials. The company will be the sole agent to handle all work done. In the Lumber Co. Case, so long as the work was done by the time specified, there was nothing to prevent the same partnership from using the same equipment to do construction work for other parties.
In Badger Furniture Co. v. Industrial Comm. 200 Wis. 127, 227 N. W. 288, the points of distinction are even more obvious. In that case the alleged employee was a salesman for the Badger Furniture Company. His compensation was on a commission basis; he received no return for his expenses and had no drawing account. He handled other lines of goods; he was uncontrolled as to his movements about his territory, which was nearly the whole state. He was an independent contractor.
The case of Deep Rock Oil Co. v. Derouin, 194 Wis. 369, 216 N. W. 505, cited by the majority, does not apply here. In that case the lessee of premises for the purpose of selling the lessor’s products solely was not restricted by the contract as to the volume of sales he might make nor the hiring of his help. This court held that agreement, in so far as it created a relation other than that of lessor and lessee, an executory sales contract.
This dissent is based upon my interpretation of the state of facts and the law applicable thereto. The majority view the matter differently. But the assumption of risk by the workman is so definitely inconsistent with the philosophy of workman’s compensation liability that unless a thoroughly genuine independent contractor relationship is shown to exist, all matters should be resolved against such a claim as is here made. For these reasons, I am impelled to record this dissent.
I am authorized to state that Mr. Justice Martin concurs in this dissent.
Wickhem, J., took no part.