Court Opinion

ID: 9734164
Source: CourtListenerOpinion
Date Created: 2023-08-26 17:26:43.71355+00
Date Added: 2024-06-11T18:26:46.077768
License: Public Domain

Smith, J.
(dissenting). We have presented to us in this case one of the most notorious of the contemporary legal puzzles, namely, whether or not one rendering a service for another is an independent contractor or an employee. I would not dispose of it in this Court, as would my Brother. It should go back to the triers of the facts for further determination in the light of what is herein contained.
We are, for the reasons noted by my Brother, remitted to the Federal law in effect in 1939. We need not grope for guidance by analogy. The United States supreme court examined our problem and ruled thereon in United States v. Silk (Harrison v. Grey van Lines, Inc.), 331 US 704 (67 S Ct 1463, 91 L ed 1757). It remains for us only to apply the rulé of that decision to the case at bar.
*593As a background for tbe understanding of what the supreme court did in these cases, it is necessary to understand that for years the determination of whether one was an independent contractor or a mere employee turned on the matter- of control. Such was the test. If - the man purchasing the service “controlled” the one rendering it, the latter was an employee. This is not the occasion to review the deficiencies of the test. Suffice to. say it was, and is, ambiguous, uncertain, and slippery, because, in part, under modern industrial conditions the master no longer works elbow to elbow with the servant, actually controlling his movements. Nowadays the control is usually “constructive.” ' Hence, the question arises and persists: Is control so indirect and elusive as to be deemed only “constructive,” still to be regarded as “control” in any real sense? The cases here divide and redivide. With respect to the tort cases the control test had at least an element of plausibility. It involved the idea of direction, of command, and it was not unreasonable that one who commanded a tort should respond in damages therefor. So, in general, ran the thinking of the formulating courts.
But this case does not involve a tort. It involves the problem of unemployment. What does control have to do with unemployment ? With this question unanswered, we will proceed to the Silk and Harrison Cases.
■ .Each of these cases involved owner-operators who had leased their trucks, and their services, to another. In that respect they parallel the. case at bar. In each the question was whether the owner-operator so leased was an employee or an independent contractor. In answering this question the lower Federal courts (as did the appeal board and the referee in the,case at bar) leaned heavily upon the control test, apparently regarding it as conclusive. This was found to be error on the facts presented to the su*594preme' court, but, since facts inevitably differ, it is not tbe ultimate finding but tbe reasoning of the court in reaching its holding with which we are concerned.
The reasons for the passage of the act were clearly set forth by the court (p 710):
“The social security act of 1935 was the result of long consideration by the President and Congress of the evil of the burdens that rest upon large numbers of our people because of the insecurities of modern life, particularly old age and unemployment.”
Equally clear, in the words of the court, are those to be protected by the statutory coverage (pp 711, 712):
“The very specificity of the exemptions, however, and the generality of the employment definitions indicates that 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 on recognized evils in our national economy, a constricted interpretation of the phrasing by the courts would not comport with its purpose. Such an interpretation would only make for a continuance, to a considerable degree, of the difficulties for which the remedy was devised and would invite adroit schemes by some employers and employees to avoid the immediate burdens at the expense of the benefits sought by the legislation. These considerations have heretofore guided our construction of the act.”
The court then addressed itself to our precise problem, the differentiation between the employee and the independent contractor, speaking as follows (p 713):
“The problem of differentiating between employee and an independent contractor, or between an agent and an independent contractor, has given difficulty *595through, the years before social legislation multiplied its importance. When the matter arose in the administration of the national labor relations act, we pointed out that the legal standards to fix responsibility for acts of servants, employees or agents had not been reduced to such certainty that it could be said there was ‘some simple, uniform and easily applicable test.’ The word ‘employee/ we said, was not there used as a word of art, and its content in its context was a Federal problem to be construed ‘in the light of the mischief to be corrected and the end to be attained.’ We concluded that, since that end was the elimination of labor disputes and industrial strife, ‘employees’ included workers who were such as a matter of economic reality. The aim of the act was to remedy the inequality of bargaining power in controversies over wages, hours and working conditions. We rejected the test of the ‘technical concepts pertinent to an employer’s legal responsibility to third persons for acts of his servants.’ This is often referred to as power of control, whether exercised or not, over the manner of performing service to the industry. 1 Restatement, Agency, § 220.”
It is indisputable that in its consideration of “economic realities” as determinative of employees’ status the court is placing emphasis upon the idea of the (relatively) distinct economic enterprise. This is not to imply that differentiations and distinctions can be made only between different industries. The court is careful to observe that parts of a process may in reality be lodged in the hands of independent contractors (p 714):
“Few businesses are so completely integrated that they can themselves produce the raw material, manufacture and distribute the finished product to the ultimate consumer without assistance from independent contractors. The social security act was drawn with this industrial situation as a part of the surroundings in which it was to be enforced. Where *596a part of an industrial process is in the hands of ■independent contractors, they are the ones who should pay the social security taxes.”
But the point made is one of dependence or independence as a matter of economic reality. This is clear from Bartels v. Birmingham, Collector of Internal Revenue (Greer v. Same), 332 US 126, 130 (67 S Ct 1547, 91 L ed 1947, 172 ALR 317), which contains a summary of the test applied in the Silk and Harrison Cases, phrased in the words of Mr. Justice Beed, who had written for the Court in the latter cases:
“In United States v. Silk, supra, we held that the relationship of employer-employee, which determines the liability for employment taxes under the social security act, was not to be determined solely by the idea of control which an alleged employer may or could exercise over the details of the service rendered to his business by the worker or workers. Obviously control is characteristically associated with the employer-employee relationship, but in the application of social legislation employees are those who as a matter of economic reality are dependent upon the business to which they render service. In Silk, we pointed out that permanency of the relation, the skill required, the investment in the facilities for work, and opportunities for profit or loss from the activities were also factors that should enter into judicial determination as to the coverage of the social .security act. It is the total situation that controls. These standards are as important in the entertainment field as we have just said, in Silk, that they were in that of distribution and transportation.”
In substance, then, the court held that one was an employee not because of control, or lack thereof, or because he did or did not employ his own means and methods in doing his work, but because of economic dependence, because he did his work “in the course *597of the' employer’s trade or business.” ' The worker thus, in essence, followed “the usual path of, an employee.” ' (Rutherford Food Corporation v. McComb, Wage and Hour Administrator, 331 US 722, 729 [67 S Ct 1473, 91 L ed 1772].) Consequently his ■ economic security was dependent upon the welfare of the owner’s business and he was an “employee” for -the purpose of this legislation.
The test derived, then, from the Silk and Harrison Cases is clear: Employees are those who as a matter of economic reality are dependent upon the business to which they render service. But it will not be taken as laboring the obvious,, we assume, if we observe that these cases should not be regarded as furnishing an automatic answer in this type of situation. We are looking at economic dependence, or independence. It is significant that in the Silk opinion the court notes that (p 707) “they (those hired) may and did haul for others when they pleased.” This has reference to those portions of the record in the United States supreme court, summarized in the words of the Tenth Circuit as follows:
“Frequently they haul coal for other dealers, haul grain, foodstuff, furniture, wood, rock, or any other material for other merchants or for private citizens of the community. This is done without interference or control by appellee over them in- any way.” United States v. Silk, 155 F2d 356, 357.
The hauler thus described, hauling for whomever he wished as a matter of right, offers marked contrast to the hauler in the case at bar. The agreement before us provides that Pazan should have “complete control” of the equipment involved. In addition the owner-operators had to conform to prescribed hours “of employment,” they were not advertised or listed in “phone or directories as being in such business and available to the public generally,” and, with *598respect to driving for others and the penalties suffered therefor, if any, the testimony was confused and conflicting, ranging from “We try to get rid of them,” to “We are very lenient and let them stay.” There is much to support the conclusion that they are in fact, as they described themselves in their agreement, “employer” and “employee.”
Error of law has thus come into the case, the wrong test of relationship having been applied. But it is not an error which we in this Court can correct because the facts necessary for an application of the proper test are not yet in the record. We have before us only the facts developed for the application of the discredited control test. As to what additional facts may be adduced to apply the test of economic dependence we have no way of knowing, since it will depend upon the degree of economic linkage existing between Pazan and the owner-operator. On that point we cannot assume that the record is now complete. It is utterly silent, for instance, as to the percentage of total income of the owner-operators which came from Pazan and the percentage from other sources, a factor which, while not controlling, would normally have a substantial degree of persuasion in determining whether the owner-operator is Pazan’s employee or an independent businessman. The assertion of economic independence by one who is obligated to another’s payroll for his every loaf of bread, every pair of shoes, and every payment on his car would ill comport with reality.
We undertake only a limited judicial review. Mooney v. Unemployment Compensation Commission, 336 Mich 344. There is ample statutory latitude below for the correction of error. Under the circumstances of this case, once we have indicated the basic criterion, it is the task of the agency to apply the proper legal standard" to the necessary objective findings, a task confided to it by the legisla*599ture in the light of its expert competence- in its specialized field.
In short, while I might feel on the record before us that the fortunes of the owner-operator are so inextricably linked to those of Arthur Pazan, doing-business as Pazan Motor Freight, that he is within the category of those designed to be protected in event of economic disaster to Pazan, nevertheless I cannot predict that a full development of all pertinent facts required for the application of the proper test might not lead to the opposite conclusion.
Judgment of the circuit court should be reversed and the cause remanded to the circuit court with instruction to remand the matter to the employment security commission for further proceedings not inconsistent herewith. No costs, a public question.