Ozark Minerals Co. v. Murphy

Appellant, Director of Labor of the State of Illinois, made an assessment of $403.95 against appellee for delinquent contributions which he found due and owing by appellee under the Unemployment Compensation Act, with respect to persons he found employed by it as prospectors, miners and drillers (hereinafter referred to as prospectors and miners) for the period from July 1, 1937, to October 1, 1939. On writ ofcertiorari the circuit court found those persons to be independent contractors and not employees of appellee, declined to pass on constitutional questions raised by appellee, ordered the assessment set aside and quashed the record filed in the cause. The Director here seeks review of the judgment of the lower court. No cross errors have been filed.

The facts are not in dispute. Appellee, Ozark Minerals Company, operates a silica processing mill at Elco, Alexander county, Illinois, obtaining its entire supply of crude silica from lands owned or controlled by it near the mill. The company denies liability under the act to make unemployment-compensation contributions for men engaged under individual contracts with it as prospectors and miners, though it is admitted that the work performed by such men is in the usual course of the company's business and upon company land. It further appears that of the men so engaged, most were farmers who did farm work in the summer, and others who engaged in odd jobs, and that they were at liberty to engage in other occupations during the existence of their contract. All the contracts in this record were in the name of and signed by each of two prospectors and miners. The two men worked together and employed no helper, except on rare occasions when one wished to be away from the work for a day or less. The contracts for such occupation are essentially the same. Each provided a scale of payment based on results actually completed, either as prospector or miner. Tools were to be furnished by the company, the workers to maintain and keep the same in good repair at their own expense, and on termination of the contract they were to return them in as good condition as when received, the usual wear excepted. The contractors agreed to mine, prepare and maintain at said mines an ample supply of crude silica as requested from time to time by the company, and on failure so to do the company had the right to make other arrangements for mining and preparing an ample supply of crude silica and charge the expense thereof to the contractors, or the company could elect to do such mining and preparing of crude silica upon its own account. The contract provided that the crude silica should be of a quality and grade ordinarily acceptable to the company for milling and manufacture into finished material at its mill in Elco, Illinois. The company had the right to reject any crude silica not of acceptable quality and grade and no payment was to be made for any rejected silica, one half the cost of handling such rejected silica to be paid by the contractors. The contracts were cancellable by either party after prescribed notice. The company had the sole right to assign its contracts and reserved the right to make agreements and contracts with other persons to perform work or conduct operations similar to those covered by the agreement. Certain requirements specified in the contract were to be followed by the contractors in performing their contract, viz., size of holes drilled, grade of silica mined and location of work on premises. In these contracts the contractors were given the right to employ additional help to fulfill the contracts. They assumed liability for damages for injuries or disease arising out of employment, to their employees, the public, and employees of others as well as property damage, and accepted exclusive liability for contributions under the Federal Social Security Act, Illinois Unemployment Compensation Act, and all similar acts. The contracts further provided that the contractors have full control of the manner, means and method of carrying out contracts and they were not barred from performing like services for others. Appellee states similar contracts have been used since 1932. The decision of the trial court was that those persons so contracting were not employees within the meaning of the act. Appellant assigns as error the court's ruling in that respect.

The pertinent provisions of the Unemployment Compensation Act are sections 2(d), 2(f)(1), and 2(f)(5). (Ill. Rev. Stat. 1937, chap. 48, par. 218, and as amended in 1939.) Subparagraph (d) of section 2 defines "employing unit." Subparagraph (f)(1) defines "employment" as follows: "Subject to the other provisions of this subsection, ``employment' means service, including service in interstate commerce, performed for wages or under any contract of hire, written or oral, express or implied." Subparagraph (f)(5) of section 2 provided: "Services performed by an individual for wages shall be deemed to be employment subject to this Act, unless and until it is shown to the satisfaction of the Director that — (A) Such individual has been and will continue to be free from control or direction over the performance of such services, both under his contract of service and in fact; and (B) Such service is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and (C) Such individual is engaged in an independently established trade, occupation, profession or business." Subparagraph (f)(1) was amended in 1939 by eliminating "for wages or under any contract of hire, written or oral, express or implied," and by inserting in lieu of the words eliminated "by an individual for an employing unit, and including all services performed by an officer of a business corporation." The words "for wages" were eliminated from subparagraph (f)(5) by the 1939 amendment. In 1941 the General Assembly amended section 2(f)(5) by striking out the language "shown to the satisfaction of the Director," and inserted in lieu thereof, "proven in any proceeding where such issue is involved." Ill. Rev. Stat. 1941, chap. 48, par. 218, sec. 2(f)(5), p. 1616.

The primary question is whether these prospectors and miners were employees or independent contractors. If they were not employees under the Unemployment Compensation Act, the judgment should be affirmed. If it be determined that they were employees, then it will be necessary to determine whether, as such, they were exempted under subparagraphs A, B, and C of section 2(f)(5) of the act. Appellee, to sustain the judgment, insists the workers were independent contractors, hence not covered by the act, and appellant insists they were employees, not exempt under subparagraph (f)(5) of section 2. In determining whether a workman is an employee or an independent contractor, the principal consideration, under the general rule pertaining to employer and employee, is the right to control the manner of doing the work. Not the actual exercise of the right by interfering with the work, but the right to control, constitutes the test. (Amalgamated Roofing Co. v. Travelers Ins. Co. 300 Ill. 487. ) "An independent contractor is one who undertakes to produce a given result without being in any way controlled as to the method by which he attains that result." (Jaggard on Torts, sec. 73.) The fact that payment is to be made by the piece, the job, the day, the hour, or the ton, does not necessarily control, where the workman is subject to the control of the employer as an employee and is not a contractor. Franklin Coal and Coke Co. v.Industrial Com. 296 Ill. 329; Bristol Gale Co. v. IndustrialCom. 292 Ill. 16; Decatur Railway and Light Co. v. IndustrialBoard, 276 Ill. 472; Shearman Redfield on Negligence, (6th ed.) 165.

The test most often resorted to, in determining whether one is an employee or an independent contractor, is to ascertain whether the one doing the work represents the master as to the result of the work only, or as to the means. If he represents the master only as to the result and himself selects the means, he must be regarded as an independent contractor. (Pace v. Appanoose County,184 Iowa, 498, 168 N.W. 916.) The mere fact that the owner may have an overseer or architect to see that the work complies with the contract or that the work is done to the owner's satisfaction, does not change the character of the contract, if it meets the test stated. Pace v. Appanoose County, 184 Iowa 498; Humpton v.Unterkircher, 97 Iowa 509, 66 N.W. 776; Thompson on Negligence, (2d ed.) sec. 629.

In Vane v. Newcombe Smith, 132 U.S. 220, 33 L. ed. 310, Vane contracted with Newcombe Smith as receivers of a telegraph company to string and attach six additional wires to poles between Freeport, Ohio, and Hammond, Indiana, at an agreed price of $45 per mile, the receivers to furnish all material, pay freight and deliver the material to Vane without cost to him. In a suit to perfect an employee's first lien upon the property of the telegraph company, the Circuit Court of Appeals held that Vane was not an employee within the meaning of the statute considered, but an independent contractor, and that he had no lien under the statute. In affirming the judgment the Supreme Court of the United States said: "It seems clear to us that Vane was a contractor with the Company, and not an employee within the meaning of the statute. We think the distinction pointed out by the circuit court is a sound one, namely, that to be an employee within the meaning of the statute Vane ``must have been a servant, bound in some degree at least to the duties of a servant, and not,' as he was ``a mere contractor, bound only to produce or cause to be produced a certain result, — a result of labor, to be sure, — but free to dispose of his own time and personal efforts according to his pleasure, without responsibility to the other party'."

In the case before us appellee, under the terms of the contract, did not nor could it exercise any control over the work of the miners and prospectors other than set out in the contract, and reserved only the right to reject silica that was not of acceptable grade, in which case the miners were not paid for mining the silica. It seems clear that under the general rule these miners and prospectors were not employees but contractors.

The act, however, defines "employers" or "employing units" and "employment," as those terms are used in the act. The act was adopted to alleviate the stress of unemployment, and this court held in Miller, Inc. v. Murphy, 379 Ill. 524, that the act rather than the common-law concept of master and servant governs that relationship. In Rozran v. Murphy, 381 Ill. 97, that holding was extended to the issue whether the services were those of an employee or contractor, but in no case has this court held that where the service does not come within the definition of "employment" or "employing unit" as defined in this act, the one rendering that service becomes an employee. The act in no way destroys the relation of contractor or subcontractor. The miners and prospectors were independent contractors and not employees of appellee, unless it can be said that appellee came within the definition of an "employing unit" in section 2(d), and unless it can further be said that under the act the miners and prospectors are deemed to be in "employment."

Section 2 of the Unemployment Compensation Act, in subparagraph (d), defines "employing unit" and "who shall be deemed to be an employee." That subsection, so far as applicable to the present inquiry, is as follows: "``Employing unit' means any individual or type of organization, including any partnership, association * * * which has or subsequent to January 1, 1936, had in its employ one or more individuals performing services for it within this state. * * * Whenever any employing unit contracts with or has under it any contractor or subcontractor for any work which is part of its usual trade, occupation, profession, or business, unless such contractor or subcontractor at the same time that he is performing work for such employing unit performs work or is in fact actually available to perform work for anyone who may wish to contract with him and is also found to be engaged in an independently established trade, business, profession or enterprise, or unless the employing unit as well as each such contractor or subcontractor is an employer by reason of section 2, subsection (e), or section 3, subsection (c) of this Act, the employing unit shall for all the purposes of this Act, be deemed to employ each individual in the employ of each such contractor or subcontractor for each day during which such individual is engaged in performing such work; except that each such contractor or subcontractor who is an employer by reason of Section 2, subsection (e) or Section 3, subsection (c) of this act shall alone be liable for the employers' contributions measured by wages payable to individuals in his employ, and except that any employing unit who shall become liable for and pay contributions with respect to individuals in the employ of any such contractor or subcontractor who is not an employer by reason of Section 2, subsection (e) or Section 3, subsection (c) of this Act, may recover the same from such contractor or subcontractor. Each individual employed to perform or to assist in performing the work of any agent or employee of an employing unit shall be deemed to be employed by such employing unit for all the purposes of this Act, whether such individual was hired or paid directly by such employing unit or by such agent or employee, provided the employing unit had actual or constructive knowledge of the work."

This section brings the employees of an independent contractor or subcontractor dealing with an "employing unit" within the act as employees of the "employing unit," with the exceptions therein specified. Nowhere does the act declare that an independent contractor or subcontractor may be considered an employee of the employing unit.

The miners and prospectors in this case being contractors, available to perform work for anyone who might wish to contract with them, and they and each of them being engaged in other work, such as farming, gardening, and other independent employment except during such time as they chose to devote to mining and prospecting, it cannot be said that as to them appellee was an employing unit.

That the General Assembly intended to tax only employing units upon the wages of employees and not independent or subcontractors, is clearly shown by subparagraphs (f)(1) and (f)(5) of section 2. We believe the reasonable construction of section 2(f)(1) as in force from 1937 to July 1, 1939, is that to constitute "employment" it was required that there be services performed for wages or under a contract of hire. Here, there were no wages, nor was there a contract of hire. Webster defines "hire" as, "to engage or purchase the labor or services of anyone for compensation or wages, as to hire a servant, an agent, or advocate." By the amendment of section 2(f)(1) in 1939, (Ill. Rev. Stat. 1939, p. 1614,) "employment" means services by an individual for an employing unit. By the language of subsection (d) there is excluded such services of an independent contractor, as there provided. True it is, appellee owned or leased the land in which the minerals were found, and it could, as a part of its operations, have employed workmen to prospect and mine silica under its direction and for a specified wage. Instead it elected to contract with others to do the prospecting, at a given rate per foot of digging, and to mine the silica at a given rate per ton for all acceptable silica mined. If no prospecting was done and no silica mined, it was under no obligation to pay. The prospectors and miners worked when they pleased. They were not under the direction or control of appellee, but did their work as they saw fit to do it. It can scarcely be said from these facts that appellee engaged or purchased labor or services of the prospectors and miners. The contract did not provide for compensation for labor but for a tunnel or for a ton or tons of silica mined and ready for loading. It can not be said that the owner of a lot who engages an independent contractor to dig a cistern of named dimensions and to pay, for such cistern, a stated sum per cubic yard for the excavation, when finished, is paying wages, any more than it could be said that if A contract with B and C to build a barn on his farm he is paying them wages for such construction. In such case, what A is paying for is a barn and not wages.

Before appellee was liable to pay under section 2(f)(5), it must be shown that it was, so far as these contractors were concerned, an "employing unit." Appellee was not an employing unit so far as such prospectors and miners were concerned, hence section 2(f)(5), as in force in 1937, has no application. The amendment of section 2(f)(5) eliminating the words "for wages," does not affect appellee, as the prospectors and miners were, under the view we take, independent contractors and not performing services for appellee. The judgment of the circuit court was right and is affirmed.

Judgment affirmed.