Court Opinion

ID: 882620
Source: CourtListenerOpinion
Date Created: 2013-06-05 01:40:49.241959+00
Date Added: 2024-06-11T09:11:14.006850
License: Public Domain

NO.    91-197

                IN THE SUPREME COURT OF THE STATE OF MONTANA
                                                1992

STATE COMPENSATION MUTUAL INSURANCE FUND,
               Petitioner and Respondent,
     -vs-
LEE ROST LOGGING,
               Employer, Defendant and Appellant.

APPEAL FROM:                In The Workers‘ Compensation Court
                            The Honorable Timothy W. Reardon, Judge presiding.

COUNSEL OF RECORD:
               For Appellant:
                            James C. Bartlett, Hash, O’Brien and Bartlett,
                            Kalispell, Montana
               For Respondent:
                            Richard E. Bach, State Compensation Mutual
                            Insurance Fund, Helena, Montana

                                          Submitted on Briefs:              November 8, 1991
                3AN 2 8 1992                                     Decided:   January 28, 1992
Filed:                      ‘2
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                        -1
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         CLERK OF S U P R E M E COUR’I’
            STATE OF MONTANA                            f   ,J
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                                                Clerk
Justice Terry N. Trieweiler delivered the opinion of the Court.
    Appellant Lee Rost Logging (Rost) is a logging business in
Bigfork.     A hearing officer for the Department of Labor and
Industry determined that Rost did not have to pay          workers'
compensation insurance premiums on payments made to employees
reimbursing them for the use of their pickup trucks.    The hearing
officer also determined that Rost had made excessive payroll
deductions for payments to employees which reimbursed them for the
use of their chain saws.     On appeal, the Workers' Compensation
Court reversed the hearing officer on the issue of pickup rentals
and affirmed on the issue of saw rentals.     Rost appeals from the
decision of the Workers' Compensation Court.        We reverse the
Workers' Compensation Court on the issue of pickup rentals, and
affirm on the issue of saw rentals.
     Rost raises the following issues:
     1.     Did the Workers' Compensation Court err in reversing the
hearing officer's decision on the issue of pickup rentals?
     2.     Should the hearing officer's decision regarding pickup
rentals be affirmed on the basis of res judicata     and collateral

estoppel?
     3.     Did the Workers' Compensation Court err in affirming the
hearing officer's decision on the issue of saw rentals?
     Appellant Lee Rost runs a small logging business out of his
home in Bigfork. He has been in the logging business for more than
20 years.   During 1984 and 1985, Rost had several employees working
for him, including sawyers, skidders, and equipment operators.
                                  2
Rost's logging operations were often in remote backwoods areas,
requiring the use of four wheel drive vehicles to access the
logging sites.         Rost   needed to transport equipment, parts,
supplies, and fuel for machinery to the remote job sites, along
with his workers.        He had found that he suffered a considerable
expense if he supplied the necessary vehicles to his employees, due
to the short useful life of vehicles under such adverse driving
conditions.       Rost    found it less expensive to reimburse his
employees for using their own vehicles for travel to and from the
job sites.
       Like other employers in the logging industry, Rost also
compensated his employees when they furnishedtheir own chain saws.
Rost paid his employees a base pay of $60 per day, plus amounts for
pickup rentals and saw rentals in the range of $20 to $60 per day
in each category.
       Rost carried workers' compensation insurance with respondent
State Compensation Mutual Insurance Fund (State Fund). The premium
for this insurance was based in part on the employer's payroll.
The employer was required to report wages, commissions, piece work
payments, and other payments in money or in kind. The employer was
not    required   to     report travel   allowances made   to   reimburse
employees for their expenses. The payroll report instructions also
provided that the employer was to report only 75 percent of the
total remuneration paid to an employee furnishing his own chain
saw.

                                     3
       In September 1985, the Department of Labor and Industry
informed Rost that it would be auditing his unemployment insurance
and workers' compensation insurance accounts for periods during
1984 and 1985. The audit was performed in early 1986. The auditor
reviewed Rost's payroll records, and the amounts listed as wages,
pickup rentals, and saw rentals.         The auditor felt that Rost had
insufficient documentation that the payments for pickup rentals
were related to the employees' actual expenses.         The auditor also
felt that Rost had excluded from his payroll excessive amounts of
saw rental payments.       The auditor concluded that Rost owed $30,616
in premiums for workers' compensation insurance.
       In June 1986, Rost requested an administrative review of the
audit.    Rost attempted to supply documentation for the pickup
rental amounts by calculating the mileage driven by different
employees and multiplying the mileage by $0.21 per mile, the
reimbursement allowed at that time by the Unemployment and Workers'
Compensation Divisions.         However, because these records were
prepared after the audit, the reviewing administrator was unwilling
to reduce the assessed premium.
       Rost then sought a hearing before the Department of Labor and
Industry.     This hearing was delayed, and then postponed several
times at Rost's request. At the same time, Rost was also appealing
from    the   additional    assessment   claimed   by   the   Unemployment
Insurance Division, based upon the same payroll audit.               Rost
requested the two Divisions to coordinate their appeal procedures.

                                     4
     On September 29, 1987, the hearing officer in the unemployment
insurance case ruled that Rost was not allowed to deduct payments
for pickup rentals from reportable wages.                 Rost appealed this
decision to the Board of Labor Appeals. The Board of Labor Appeals
reversed and determined that the pickup rentals represented a
reasonable   reimbursement      for     the     mileage    driven    by   Rost's
employees. The Board of Labor Appeals further determined that Rost
had relied in good faith on a 1980 decision of the Eleventh
Judicial District Court, Flathead County, which had ruled on a
similar issue in favor of an employer and against a workers'
compensation insurer.      The Board of Labor Appeals concluded that
Rost's payments for pickup rentals were not "wages" subject to
unemployment insurance premiums.
     Rost's contested case in the workers' compensation insurance
matter was still pending. The hearing was finally held on July 17,
1990.   The hearing officer found that the vehicle payments to
Rost's employees were based upon Rost's personal review of the
routes to the logging sites, including the actual mileage and
quality of the roads.       The hearing officer also found that the
reimbursed travel was for the benefit of the employer because the
workers transported tools, spare parts to repair the equipment,
fuel for various machines, and other supplies. The hearing officer
determined that these travel expenses generally were within the
guideline    of   $0.21   per   mile,     and    constituted    a    reasonable
reimbursement for employment-related expenses.                  He    found no
evidence of cheating or misrepresentation.                The hearing officer

                                      5
noted that Rost had won a favorable decision in his appeal of the
unemployment insurance matter, and agreed with the Board of Labor
Appeals that Rost had relied in good faith on the earlier decision
of the Eleventh Judicial District Court.                The hearing officer
concluded that Rost had provided sufficient documentation of these
travel expenses, and that the pickup rental payments were properly
excluded from gross wages in determining the workers' compensation
premiums.
       The hearing officer also concluded that Rost was entitled to
deduct    25   percent of gross payroll for sawyers as a business
expense where the employees furnished their own chain saws.
Although the Workers' Compensation Court had ruled in June                    1989

that an injured sawyer was entitled to workers' compensation
benefits based on his gross earnings, without the                     25   percent
deduction for saw rentals, see Guckenberg v. Bill Free Logging, Iiic. (Work.

Comp. Ct.      1989),   NO.   8808- 4883,   the hearing officer noted that in
1984   and   1985   the State Fund had allowed the      25   percent deduction
to other employers.           However, the hearing officer found that Rost
had exceeded the        25   percent allowable deduction for saw rentals in
certain instances and that Rost should be assessed premiums on that
excess.
       The     hearing       officer   accordingly   reversed   the    auditor's
findings on the issue of pickup rentals, concluding that no
additional premiums were owed.              On the issue of saw rentals, the
hearing officer ordered Rost to pay additional premiums because of
excessive saw rental deductions.
                                            6
    Rost and the State Fund both appealed the hearing officer's
decision to   the Workers'    Compensation Court.     The Workers'
Compensation Court disagreed with the hearing officer on the issue
of travel expenses.       The court did not    feel that Rost had
adequately demonstrated that the pickup rental payments were
related to actual expenses.      The court found that the hearing
officer's findings on this issue were not supported by substantial
evidence, and reversed.    The Workers' Compensation Court agreed
with the hearing officer on the saw rentals issue.        The court
affirmed the hearing officer's determination that 25 percent of the
gross payroll for sawyers should be deducted from wages and
considered a business expense.
     Lee Rost Logging appeals from the decision of the workers'
Compensation Court.

     Did the Workers' Compensation Court err in reversing the
hearing officer's decision on the issue of pickup rentals?
     Rost contends that the Workers' Compensation Court erred in
reversing the hearing officer's decision on the issue of pickup
rentals.   We agree.
     The hearing officer determined that pickup rental payments
constituted a   reasonable reimbursement for employment-related
expenses. The Workers' Compensation Court ruled that this finding
was not supported by substantial evidence, and reversed on this
basis. See 5 2-4-704 (2) (a)(v), MCA, which provides that a reviewing

court may reverse an agency's decision if it is "clearly erroneous
                                  7
in view of the reliable, probative, and substantial evidence on the
whole record."
       This Court recently explained the application of the "clearly
erroneous" test in the context of reviewing the findings of a trial
court sitting without a jury:
            We adopt the following three-part test to determine
       if a finding is clearly erroneous. First, the Court will
       review the record to see if the findings are supported by
       substantial evidence.          Second, if the findings are
       supported by substantial evidence, we will determine if
       the trial court has misapprehended the effect of
       evidence. Western Cottonoi~ v. Hodges (C.A. 5th 1954) , 218
                                    Co.
       F .2d 158 : Narragansett Improvement Compaity v. United States ( [ 1st
       Cir.] 1961), 290 F.2d 577.             Third, if substantial
       evidence exists and the effect of the evidence has not
       been misapprehended, the Court may still find that "[A]
       finding is 'clearly erroneous' when, although there is
       evidence to support it, a review of the record leaves the
       court with the definite and firm conviction that a
       mistake has been committed." U[?tited]Sltates] v. US.Gypsum Co.
       (1948), 68 S.Ct. 525, 3 3 3 U.S. 364, 92 L.Ed. 746.

Interstate Production Credit Ass   11.                 .
                                         v. DeSaye (Mont 19 9 1), 48 St.Rep. 986, 987   .
To the extent that our discussion of the standard for reviewing
agencies       findings of fact in Cily of Billings v. Billings Firefigliters (1982),

200 Mont. 421, 651 P.2d 627,                 is inconsistent with the standard set
forth above, that case is overruled.                       Applying this test to the
hearing officer's findings on the issue of pickup rental payments,
we conclude that the findings were not clearly erroneous.
       Rost and several of his employees testified before the hearing
officer on July 17, 1990.                 The employees testified that they had to
drive many miles, often more than 100 miles per day, over rough
logging roads to reach the job sites. In addition to expenditures
for gasoline and normal highway wear and tear, the workers

                                                 8
testified that they had extra expenses for servicing their vehicles
and replacing parts worn out from traveling on bumpy roads in
dusty, muddy, and snowy conditions.    Rost's employees testified
that they carried extra saws, tools, equipment, spare parts, and
fuel to the job sites for their employer.     The heavy equipment
operators, in particular, brought extra fuel, as much as 100
gallons of gasoline, and everything they would need to keep Rost's
equipment running.
     Rost testified that it was to his benefit to pay his workers
for the use of their vehicles because it would have cost him more
to furnish his own trucks.   In the past, he had purchased his own
vehicles for the logging operation, and found it was too expensive.
Rost testified that when he bid a job he considered the costs of
getting materials to and from the job site, the quality and
condition of the roads, and mileage. He drove all of the roads and
considered what it would cost his employees to travel to the job
sites.   He paid certain employees more if they had to haul more
materials to the job.   Rost stated that he included more in his
calculations than just the mileage traveled, although mileage was
one of the factors considered.
     Rost's employees testified that the money they received for
the use of their pickup trucks was about equal to what it cost them
to provide the vehicles.
     Based on this and other evidence, the hearing officer made his
findings of fact. The hearing officer noted that the pickup rental
payments were based upon Rost's personal review of the job sites

                                 9
and his experience in determining vehicle costs.         The hearing
officer found that these travel expenses were incurred for the
employer's benefit.    The hearing officer found that the travel
expenses generally were within the $0.21 per mile guideline set by
the state, and were a reasonable approximation of actual expenses.
The hearing officer concluded from these facts that Rost had paid
reasonable reimbursement to his employees for employment-related
expenses, and that these payments were properly excluded from gross
wages in determining the workers' compensation insurance premiums.
     We conclude, based on the standard of review set forth above,
that the hearing officer's factual findings on this issue were not
clearly erroneous.
                                 I1

     Should the hearing officer's decision regarding pickup rentals
be affirmed on the basis of resjudicata and collateral estoppel?

     Because we conclude that the hearing officer's decision
regarding pickup rentals was not clearly erroneous, we need not
consider the application of res judicata or collateral estoppel.

                                 I11

     Did the Workers' Compensation Court err in affirming the
hearing officer's decision on the issue of saw rentals?
     The   hearing   officer determined   that   Rost   had   deducted

excessive amounts from gross payroll for saw rentals.              Rost
contends the Workers' Compensation Court erred in affirming this
determination.   We disagree.

                                 10
       At the time of the audit, the State Fund allowed employers in
the logging industry to deduct from gross payroll 2 5 percent of the
total remuneration paid to employees who furnished their own chain
saws.      Although this practice was discontinued following the
June    1989   decision of the Workers' Compensation Court in Guckenbetg,

the hearing officer determined that Rost was entitled to take the
deduction as other employers had in        1984   and   1985.    The hearing
officer determined, however, that Rost had deducted more than
25   percent of the sawyers' pay.
       Rost contends that there was insufficient evidence to support
this finding, and complains that it has taken too long for the
State Fund to determine exactly how much he owes in underpaid
premiums.       These contentions are not persuasive.
       The evidence before the hearing officer included Rost's
payroll reports, the auditor's payroll calculations, and testimony
at the hearing and at Rost's deposition.          Rost had recorded in one
notebook the bimonthly wages and withholdings for each employee,
and in a separate notebook the saw and pickup allowances paid to
each employee during the same periods.             Each employee's wages,
pickup rentals, and saw rentals can be added together:            25   percent
of this total represents the allowable deduction for saw rentals.
It is clear from a review of the payroll records that the saw
rental payments, in several instances, exceeded         25   percent of gross
pay.     The hearing officer noted that Rost had paid some employees
more as "saw rental" than as "wages" in certain payroll periods.
The hearing        officer specifically cited the         1985   records as
exemplifying this problem.      There was sufficient evidence to
support the hearing officer's findings.
    Regarding Rost's claim that it has taken too long to determine
exactly how much he owes in underpaid premiums, we note that much
of the delay in reaching a final determination on this question is
due to the challenges Rost has raised to the State Fund's original
calculation of the premium owed.      We note that Rost, on several
occasions, requested a delay in these proceedings.     Rost has not
been prejudiced by the delay.
     Since we conclude that there was sufficient evidence to
support the hearing officer's findings as to both the saw rentals
and the pickup rentals, we affirm the Workers' Compensation Court
on the issue of saw rentals, we reverse the Workers' Compensation
Court on the issue of pickup rentals, and we remand this matter to
the Workers' Compensation Court for further proceedings consistent
with this opinion.

     Chief Justice

                                 12
           IN THE SUPREME COURT OF THE STATE OF MONTANA
                               NO.   91- 197

STATE COMPENSATION W T U A L                                APR 2 199

     V.

LEE ROST LOGGING,
                                               1
          Respondent and Appellant.            )

     This Court's opinion was delivered on January 2 8 , 1 9 9 2 . On
February 3, 1 9 9 2 , the appellant petitioned for rehearing and
requested that this Court ' s opinion be amended by excluding "pickup
rentals" from the formula suggested on page 11 of the opinion for
calculating saw rental deductions.
     On February 6, 1 9 9 2 , the respondent filed its petition for
rehearing, and among other bases for its petition, requested the
same modification at page 11 of our opinion. Since that date, the
appellant has withdrawn his petition and objected to the
respondent's petition.
     After reviewing the opinion of the hearing examiner for the
Department of Labor and Industry, which was affirmed by this
Court's opinion, and the payroll report instruction sheet provided
by the State Fund to the appellant, which was the basis for the
hearing examiners opinion, we conclude that there is merit in the
respondent's petition.
     The general reporting requirements provide that a travel
allowance need not be reported as earnings. They then provide that
only 7 5 percent of "total remuneration" need be reported €or an
employee who furnishes his own chain saw. It would be inconsistent

                                     1
to exclude travel allowances from the earnings that need be
reported, but then to include those payments in calculation of the
chain saw allowance.
     For these reasons, this Court's previous opinion of
January 28, 1992, is amended as follows:
     The words "pickup rentals" are deleted from line 7 of page 11.
     Except to the extent provided for in the preceding paragraph,
the respondent's petition for rehearing is denied.
     The clerk shall mail true and correct copies of this order to
all counsel of record and to Timothy W. Reardon, Judge of the
Workers'
     DATED this

                                        Justices

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