Court Opinion

ID: 9620774
Source: CourtListenerOpinion
Date Created: 2023-08-22 05:47:25.456274+00
Date Added: 2024-06-11T18:04:54.295202
License: Public Domain

Wendell Griffen, Judge, dissenting. I agree that Clarence Callahan’s employer was Riddell Flying Services (RFS), not the Arkansas Forestry Commission (AFC). However, I dissent because the AFC should be Hable as the statutory employer (“prime contractor”) by virtue of its undisputed cooperative agreement with the United States Forestry Service (USFS) to provide fire-suppression services. I also dissent because our courts’ misunderstanding of the purpose of the statutory employer rule has led to improper refiance on contract-law analysis in determining statutory-employer liability. The AFC’s obligation to perform fire-suppression services is plainly demonstrated by stipulations that the parties entered into concerning the relationship between the AFC and the USFS. The parties stipulated that (a) the AFC entered into a cooperative agreement with the USFS to conduct fire-suppression activities; (b) that the AFC obtained funds from the Federal Emergency Management Agency (FEMA); and (c) that the FEMA funds were used to engage RFS to perform fire-suppression activities. I see no reason why those stipulations are not sufficient to meet the standard for establishing that AFC is a prime contractor under the legal standard set by the Arkansas Supreme Court in Bailey v. Simmons, 6 Ark. App. 199, 639 S.W.2d 526 (1982), the case upon which the majority relies. The majority acknowledges the undisputed facts that the AFC “received Federal Emergency Management Agency funds following ice storms in the region,” and that RFS “successfully bid on a state contract for Arkansas Forestry Commission” and was paid for its fire-suppression activities from the FEMA funds. It has long been settled law in Arkansas that a stipulation is the equivalent of undisputed proof, and it leaves nothing for the fact-finder to decide regarding the stipulated subject. See Brown v. Keaton, 232 Ark. 12, 334 S.W.2d 676 (1960). Thus, there is no substantial evidence disputing that the AFC engaged RFS to perform fire-suppression activities in furtherance of the cooperative agreement between the AFC and USFS. Because the AFC entered into a stipulation on this point at the hearing before the Administrative Law Judge, it should not now be permitted to disown that stipulation and argue that it had no obligation to perform fire-suppression activities. Yet, that is the practical effect of both the Commission’s decision and the majority opinion. The rationale of the Arkansas General Assembly in enacting the workers’ compensation laws is unmistakably clear. Arkansas Code Annotated Section ll-9-101(b)(Repl. 2002) states: The primary purposes of the workers’ compensation laws are to pay timely temporary and permanent disability benefits to all legitimately injured workers who suffer an injury or disease arising out of and in the course of their employment, to pay reasonable and necessary medical expenses resulting therefrom, and then to return the worker to the work force;.... (Emphasis added.) Given that the parties stipulated that Callahan was seriously injured in a plane crash on April 9, 1995, while performing fire-suppression activities pursuant to RFS’s contract with the AFC, the decisions by the Commission and majority fly in the face of the explicit purposes for which the workers’ compensation laws exist as well as settled law regarding the probative effect of stipulations during adjudicated proceedings. The Bailey v. Simmons line of decisions does not absolve a governmental entity from liability as a statutory employer merely because the governmental entity is not itself engaging in a commercial enterprise. To the contrary, the liability and duties countenanced by Ark. Code Ann. § 11-9-402 (Repl. 2002) are to benefit the uninsured subcontractor’s employees by preventing all employers (governmental or not) from relieving themselves from workers’ compensation liability by doing through independent contractors what they would otherwise do through direct employees. Liggett Const. Co. v. Griffin, 4 Ark. App. 247, 629 S.W.2d 316 (1982). This case is quite different from Sloan v. Voluntary Ambulance Service, 37 Ark. App. 138, 826 S.W.2d 296 (1992), which also involved the issue of whether a government entity was liable as a statutory employer. There, the citizens of the northeast portion of a county assessed a tax on themselves to secure dependable emergency ambulance services. The county collected and remitted the taxes to the ambulance service. The Arkansas Supreme Court held that arrangement did not create statutory employer liability for the county because the county served only as a conduit for collecting and remitting the tax. But here the AFC was much more than a mere conduit for payments. Pursuant to the AFC’s cooperative agreement with the USFS, it procured federal funds for the explicit purpose of engaging in fire-suppression service. The AFC then contracted with RFS to conduct those services. The AFC exercised control over the activities of RFS regarding how and when firebombing missions were flown. Both the majority and the Commission acknowledge these undisputed facts. Thus, reversal is entirely consistent with Bailey v. Simmons, supra, and its progeny. I also dissent because today’s decision is the latest in a long line of decisions in which the Commission and our appellate courts have misinterpreted the law concerning statutory employers. At some point, we should admit that those decisions demonstrate a fundamental misunderstanding of the rationale for statutory-employer liability based on what appears to be misapplication of contractual-privity reasoning when adjudicating statutory-employer liability. The purpose for the statutory-employer statute is to hold a contracting employer liable when its subcontractor does not carry workers’ compensation insurance so that injured workers have a remedy under the workers’ compensation law. Hobbs Western Co. v. Craig, 209 Ark. 630, 192 S.W.2d 116 (1946) (stating that the primary purpose of the statutory employer provision is to protect the employees of subcontractors who are not financially responsible, and to prevent employers from relieving themselves from liability by doing through independent contractors what they would otherwise do through direct employees); Liggett Constr. Co. v. Griffin, supra. Thus, the “prime contractor” becomes the “statutory employer” where the subcontractor carries no compensation insurance. Lewis v Indus. Heating & Plumbing, 290 Ark. 291, 718 S.W.2d 941 (1986). The purpose behind § 11-9-402 may more fully explained as follows: Most statutes impose a special compensation liability upon an employer who gets part of its regular work done by the regular employees of a contractor under it, if the intermediate contractor’s compensation liability is uninsured. Since one purpose of these statutes is to prevent evasion of compensation coverage by the subcontracting of the employer’s normal work, the test of applicability is the question whether the work being done under the contractor would ordinarily be done by employees, in view of this employer’s past practices and the practices of employers in comparable businesses. Arthur Lawson, Workers’ Compensation Law, Volume § 70 (2000) (emphasis added). We have strayed far afield from this original purpose by improperly injecting the notion of contractual privity into the determination of whether an entity is a statutory employer. The “prime contractor” concept holds that one cannot have a subcontractor unless there is a prime contractor who has already contracted to have the services performed. Bailey v. Simmons, supra. Granted, section 11-9-402 recognizes that before holding the purported statutory employer liable, it is appropriate to establish a contractual relationship between the immediate employer and the party alleged to be the statutory employer. In fact, that issue was the focus of the first case interpreting Ark. Stats. Ann. § 81-1306 (1947), a predecessor statute to § 11-9-402. Hobbs, supra (holding that there must be a contractual relation between the statutory employer and the subcontractor, and not merely a contract of purchase, in order for the prime contractor to become a statutory contractor under the statute). However, given the clear purpose of § 11-9-402 to provide a remedy to injured workers under the workers’ compensation statutes, it is untenable to suggest that by simply using the words “prime contractor” and “subcontractor” in § 11-9-402, the Arkansas General Assembly intended for an injured worker to bear the consequences of his immediate employer’s failure to provide workers’ compensation insurance because the entity with whom the immediate employer contracts is not otherwise contractually obligated to some unknown third party to perform the same services. It is, to be blunt, manifestly wrong to require an injured worker to show that the purported statutory employer satisfies a contractual definition of “prime contractor” or that his immediate employer is a “subcontractor” as that term is used in contract law before the employee can recover for his injuries under workers’ compensation law. The wrong turn began with the case of Brothers v. Dierks Lumber & Coal, 217 Ark. 632, 232 S.W.2d 646 (1950). Relying on Hobbs, supra, the Brothers court held that in order to be a principal contractor pursuant to § 81-1306, there must be a contract for the sale of goods, accompanied by an undertaking to render substantial services in connection with the goods sold. In a subsequent case, Huffstettler v. Lion Oil Co., 110 F. Supp. 222 (D.C. Ark. 1953), a federal district court relied upon the Brothers holding and reiterated the “contract for sale” requirement plus the rendering of “substantial services” requirement as enunciated by the Brothers court. The decisive step on the slippery slope came with the case of Lofton v. Bryan, 237 Ark. 642, 375 S.W.2d 221 (1964). In that case, the Arkansas Supreme Court relied on the Hujfstettler case to deny workers’ compensation benefits to an employee because the purported statutory employer did not have a contract with a third person in relation to the services the employee performed. The Lofton court held that the immediate employer was not considered a subcontractor under § 81-1306, which meant that there was no prime contractor and thus, no liability as a statutory employer. Although it is improper to inject contract-law notions of privity into a workers’ compensation analysis to assign statutory employer liability, that is what the Commission and our courts have consistently done by insisting that there be some sort of recognized contractual relationship between the purported statutory employer and a third-party. A thorough review of the purpose of the statutory-employer statute demonstrates that the determinative considerations are the relationship of the injured worker to the work and the relationship of the purported statutory employer to the work — not the relationship of the purported statutory employer or the work to a third party. Accordingly, the proper analysis is not whether the AFC was contractually Hable to a third party to carry out fire-suppression services, but whether Callahan was performing the regular work of the AFC. This case should be analyzed as follows: 1) Are fire-suppression services part of the AFC’s regular work? 2) If so, did the AFC have an agreement with RFS to perform fire-suppression services? 3) If so, was Callahan Riddell’s employee and was he engaged in fire-suppression services pursuant to the agreement between RFS and the AFC when he was injured? 4) If so, did Riddell carry workers’ compensation insurance? 5) If not, then the AFC is Callahan’s statutory employer and, as such, must bear workers’ compensation liability for his injuries and benefits. Pursuant to this analysis, it is clear that the AFC is Callahan’s statutory employer. Fire-suppression services are part of the AFC’s regular work. It maintains a cooperative agreement with the USFS that allows for the exchange of fire-suppression services on a reciprocal or reimbursable basis. The AFC used its FEMA grant to procure a contract with RFS to perform fire-suppression services in southeast Arkansas. Callahan was injured while performing fire-suppression services under the contract between AFC and RFS. Accordingly, the AFC is Callahan’s statutory employer and as such, should be liable for his compensable injuries because it contracted with an entity that did not secure workers’ compensation insurance. In short, excusing an entity from liability as a statutory employer merely because that entity is not contractually obligated to a third party to perform the activities the employee was performing when he was injured violates the purpose for enacting § 11-9-402. We should not continue this legal fallacy at the expense of workers whose injuries clearly arise out of the course of their employment. The rule that an employer is not a statutory employer unless it contracts with a third party leads to absurd and unfair results, nowhere more vividly demonstrated than in the instant case. By affirming, we are saying to Callahan, “Yes, you were clearly injured in the course of your work. Your injury is compensable under the workers’ compensation statutes. But, you cannot recover under those statutes simply because: (a) Riddell Flying Service failed to provide workers’ compensation coverage; (b) the AFC was not contractually obligated to a third party to perform fire-suppression services; and (c) the stipulation it entered into is meaningless.” Although not acknowledged by the majority opinion, today’s decision denies Callahan any remedy under the workers’ compensation system. That means RFS may be susceptible to suit in tort for Callahan’s injuries and related damages. This may seem, at first, to present Callahan with a chance to obtain a recovery. But when one remembers that the very purpose for creating the workers’ compensation system was to provide faster, less litigious, and more predictable relief to injured workers, any notion that Callahan is receiving just treatment is quickly erased. In view of the decisions he has received thus far, Callahan may wonder whether RFS will even be subjected to the penalty allowed under Ark. Code Ann. § 11-9-406 (Repl. 2002) for its failure to secure payment of compensation. When the Arkansas General Assembly made a sweeping overhaul of the workers’ compensation law in 1993, it issued a stern statement about its motivation: In the future, if such things as the statute of limitations, the standard of review by the Workers’ Compensation Commission or courts, the extent to which any physical condition, injury, or disease should be excluded from or added to coverage by the law, or the scope of the workers’ compensation statutes need to be liberalized, broadened, or narrowed, those things shall be addressed by the General Assembly and should not be done by administrative law judges, the Workers’ Compensation Commission, or the courts. Ark. Code Ann. § 11-9-1001 (Repl. 2002). The decision in this case represents the kind of mischief the General Assembly had in mind. The statutory-employer liability provided by § 11-9-402 has been so judicially narrowed that even a stipulation showing the connection by the purported statutory employer to the work that produces a com-pensable injury achieves nothing for an injured worker. Today’s decision is anything but just. I respectfully dissent.