Hoste v. Shanty Creek Management, Inc

561 N.W.2d 106 (1997) 221 Mich. App. 144

Lawrence J. HOSTE, Plaintiff-Appellant,
v.
SHANTY CREEK MANAGEMENT, INC., Hartford Insurance Group, and Second Injury Fund, Defendants-Appellees.

Docket No. 185014.

Court of Appeals of Michigan.

Submitted September 18, 1996, at Detroit. Decided January 21, 1997, at 9:05 a.m. Released for Publication April 9, 1997.

Moceri, Hoste and Bejin, P.C. by Douglas W. Hoste (Daryl Royal, Dearborn, of counsel), Mt. Clemens, for plaintiff-appellant.

Cox, Hodgman & Giarmarco by Marsha M. Woods, Troy, for Shanty Creek Management, Inc., and Hartford Insurance Group.

Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, and Angelita Espino, Assistant Attorney General, for the Second Injury Fund.

Before WAHLS, P.J., and FITZGERALD and L.P. BORRELLO^[*], JJ.

WAHLS, Presiding Judge.

Plaintiff appeals by leave granted the opinion and order of the Worker's Compensation Appellate Commission reversing the magistrate's award of disability benefits. We remand this matter to the commission to reinstate the magistrate's award.

On January 27, 1990, Schuss Mountain hosted a Plymouth Challenge Ski Race. Plaintiff, a member of the National Ski Patrol, was asked by the ski school director for Schuss Mountain to forerun the course, establishing the route for the competitors and assuring that the course was safe. Forerunning the course required plaintiff to ski aggressively. As plaintiff approached the bottom of the hill, he misjudged a gate and fell. He sustained a fracture of the C7 vertebra, causing paralysis from which he is unlikely to recover.

After defendants stopped their voluntary payment of worker's compensation benefits, plaintiff filed an application for hearing or mediation, and extensive hearings were conducted before the magistrate. The Second Injury Fund was added as a defendant on the basis of plaintiff's other employment as an electrician with Hoste Brothers, Inc. The central questions litigated were whether plaintiff was an employee of Shanty Creek Management, Inc., and whether his primary employment as an electrician constituted dual employment for which he should be compensated under § 372 of the Worker's Disability Compensation Act, M.C.L. § 418.372; M.S.A. § 17.237(372).

The magistrate concluded that although plaintiff did not receive any wages from Shanty Creek, he received benefits in the form of a ski pass and discounts on food and beverages that did constitute income. Compensation does not have to be in the form of wages to entitle an employee to disability benefits. Plaintiff did qualify as an employee of Shanty Creek under § 161(1)(b) of the WDCA, M.C.L. § 418.161(1)(b); M.S.A. § 17.237(161)(1)(b) because he rendered services to it. The magistrate found it compelling that Shanty Creek hired a professional to perform ski patrol duties during the week when National Ski Patrol members were unavailable. The magistrate concluded that plaintiff was an employee subject to the act and that his wages from Shanty Creek were $89 a week. Plaintiff's wages from Hoste Brothers were $966 a week. Plaintiff was totally and permanently disabled, and the resulting benefit was $427 a week, with the Second Injury Fund liable for 91.6 percent of the award.

Both Shanty Creek and the Second Injury Fund appealed to the Worker's Compensation Appellate Commission. The commission reversed the magistrate's award, characterizing the relationship between plaintiff and the ski resort as one of accommodation. It concluded that plaintiff was no different than any other skier using a complimentary lift ticket. Relying on this Court's opinion in Amerisure Ins. Cos. v. Time Auto Transportation, Inc., 196 Mich.App. 569, 493 N.W.2d 482 (1992), the commission applied the common-law economic reality test to determine plaintiff's employment status. The commission found that none of the eight principles identified in McKissic v. Bodine, 42 Mich. App. 203, 201 N.W.2d 333 (1972), supported a conclusion that plaintiff was an employee.

This Court must affirm the findings of fact of the commission if they are supported by any competent evidence. Holden v. Ford Motor Co., 439 Mich. 257, 267-269, 484 N.W.2d 227 (1992). A decision of the commission is subject to reversal if the commission operated within the wrong legal framework or if the decision was based on erroneous legal reasoning. O'Connor v. Binney Auto Parts, 203 Mich.App. 522, 527, 513 N.W.2d 818 (1994). Here, the commission erred as a matter of law in its application of the economic reality test and in its characterization of plaintiff's employment as an accommodation relationship.

At the time of plaintiff's injury, § 161(1) provided the statutory definition of an employee:

(1) As used in this act, "employee" means:

* * * * * *

(d) Every person performing service in the course of the trade, business, profession, or occupation of an employer at the time of the injury, provided the person in relation to this service does not maintain a separate business, does not hold himself or herself out to and render service to the public, and is not an employer subject to this act. [M.C.L. § 418.161(1)(d); M.S.A. § 17.237(161)(1)(d) ].

In Amerisure, supra, this Court held that all three provisions of § 161(1)(d) must be satisfied in order to find an individual an employee. The claimant must establish that he does not maintain a separate business, does not hold himself out to and render service to the public, and is not an employer subject to the act. Id., at 574, 493 N.W.2d 482. When there is a question concerning whether the individual is an independent contractor, the terms of the statute must be construed in conjunction with the economic reality test. Id., at 573, 493 N.W.2d 482.

Our review of the record shows that plaintiff met the three requirements of § 161(1)(d). The testimony of the owner of the ski resort established that use of members of the National Ski Patrol was an integral part of the operation of the resort. When members of the National Ski Patrol were unavailable, the resort hired a paid, professional ski patroller to service the resort. Plaintiff was performing service in the course of the business of an employer at the time of the injury. He was compensated for his services through benefits received from the resort. Compensation does not have to be in the form of money to qualify an employee for coverage under the act. Betts v. Ann Arbor Public Schools, 403 Mich. 507, 515, 271 N.W.2d 498 (1978). Plaintiff did not maintain a separate business as a ski patroller, did not hold himself out independently as a person providing such service to the public, and was not an employer subject to the act.

The commission erred in its analysis of the individual factors of the economic reality test. The economic reality test involves four basic factors: (1) control of the worker's duties; (2) payment of wages; (3) the right to hire, fire, and discipline; and (4) performance of the duties toward the accomplishment of a common goal. Williams v. Cleveland Cliffs Iron Co., 190 Mich.App. 624, 627, 476 N.W.2d 414 (1991). In applying these factors, the totality of the circumstances surrounding the work must be examined, with no single factor controlling. Tucker v. Newaygo Co., 189 Mich.App. 637, 639-640, 473 N.W.2d 706 (1991). The economic reality test has also been expressed as eight principles detailed in McKissic, supra, which the commission applied. The tests are basically the same, and each provides a rational framework for review. Williams, supra, 627, 476 N.W.2d 414. The McKissic factors are:

First, what liability, if any does the employer incur in the event of the termination of the relationship at will?

Second, is the work being performed an integral part of the employer's business which contributes to the accomplishment of a common objective?

Third, is the position or job of such a nature that the employee primarily depends upon the emolument for payment of his living expenses?

Fourth, does the employee furnish his own equipment and materials?

Fifth, does the individual seeking employment hold himself out to the public as one ready and able to perform tasks of a given nature?

Sixth, is the work or the undertaking in question customarily performed by an individual as an independent contractor?

Seventh, control, although abandoned as an exclusive criterion upon which the relationship can be determined, is a factor to be considered along with payment of wages, maintenance of discipline and the right to engage or discharge employees.

Eighth, weight should be given to those factors which will most favorably effectuate the objectives of the statute. [McKissic, supra, 208-209, 201 N.W.2d 333.]

The application of the economic reality test does not alter the result required by the statute. The first factor, potential liability of the employer on termination of the relationship, is neutral. There was no formal contract of employment, and either side could end the relationship at will. The relationship was closer to at-will employment than a contractual obligation. Rood v. General Dynamics Corp., 444 Mich. 107, 507 N.W.2d 591 (1993).

The commission clearly erred in its analysis of the second factor, whether the work is an integral part of the employer's business that contributes to a common objective. While the commission stated that the resort could operate without a ski patrol, this ignores the testimony of the president of the resort and its director of skiing that the resort would never operate without some form of ski patrol and that the ski patrol was an essential and integral part of the operation. Given this testimony from defendant's employees, the conclusion of the commission is totally unsupported by the record. Plaintiff's work was an integral part of the business.

The commission's finding with respect to the third factor, that plaintiff did not depend on the position for living expenses, is correct. Plaintiff did receive benefits from his position that constituted compensation. The fourth factor, furnishing of equipment and materials is split between the parties. Plaintiff furnished his own ski equipment, clothing, and first-aid pack, but the resort furnished a patrol room, snowmobiles, and toboggans and it replenished supplies. Contrary to the commission's conclusion, plaintiff supplied only a part of his equipment and supplies, and this factor does not weigh in favor of either side.

The commission also erred in its analysis of the fifth factor, whether the individual holds himself out to the public as one ready and able to perform certain tasks. While plaintiff did hold himself out as a person performing ski patrol duties, this was under the auspices of the resort. Plaintiff was not a free-lance ski patroller and only performed those duties at Schuss Mountain. He did not offer his services outside his regular weekend responsibilities at the hill. Unlike an independent contractor, he was not available for other assignments as a ski patroller.

The sixth factor, whether the work is customarily performed by an independent contractor, is not susceptible to a clear application in this context. There are no published Michigan worker's compensation cases involving a ski patrol member. Review of case law from other states reveals mixed results. In Cardello v. Mt. Hermon Ski Area, 372 A.2d 579 (Me.1977), the Maine Supreme Court found that a volunteer ski patroller was not entitled to worker's compensation benefits as an employee, while in Aspen Highlands Skiing Corp. v. Apostolou, 866 P.2d 1384 (Colo.1994), the Colorado Supreme Court concluded that a ski patroller was an employee of the ski resort for worker's compensation purposes.

Statutory provisions of other states are more enlightening. A number of states have specific statutes that exclude ski patrol members from the statutory definition of employee. See, e.g., Colorado, Colo.Rev.Stat. 8-40-301(4) (1993 Supp); Nevada, Nev.Rev.Stat. 616A.110(5); Idaho, Idaho Code 72-212; and Montana, Mont.Code Ann. 39-71-118. These statutes suggest that but for the specific exclusion, volunteer ski patrollers would otherwise be considered employees eligible for worker's compensation benefits. Michigan has no such legislative exclusion. This factor is inconclusive. Although most states that have specifically considered ski patrollers have excluded them from worker's compensation coverage, this may also indicate that but for the specific exclusion, ski patrollers would be considered employees rather than independent contractors. The Legislature retains the option to specifically exclude ski patrollers from the statutory definition of employee.

The seventh factor, control, maintenance of discipline, and right to engage or discharge employees, is also inconclusive. Although the commission characterized the ski patrol as a self-governing operation independent of the ski resort, this fails to account for the evidence presented. The ski patrol director testified that although the members elected the director, the nominations for director must be approved by ski area management. The resort had the final say concerning whether a person could serve as a patroller. The director acknowledged that the management would dictate the patrol's activities. There is no showing that the resort exercised any less control over members of the National Ski Patrol than that it used over its own paid weekday ski patroller, who is also a member of the National Ski Patrol.

Under the eighth factor, weight should be given to those factors that will most favorably effectuate the objectives of the statute. The commission did not err in failing to give weight to any one factor, but it did err in finding that none of the factors support plaintiff's claim. Plaintiff's satisfaction of the statutory requirements of § 161(1)(d), along with the application of the economic reality test, mandates that he be found an employee of defendant resort under the statute. The majority of the test factors indicate that plaintiff was not an independent contractor. Contrary to the commission's conclusion, plaintiff was more than a volunteer engaged in an undefined accommodation relationship with the ski resort. There is no support in the statute or the case law for creating a new category of employment relationship short of employee-employer. Plaintiff received significant benefits for himself and his family in rendering service as an integral part of the resort's operation.

In light of its conclusion concerning plaintiff's employment status, the commission did not reach defendants' arguments regarding the proportion of liability. Therefore, this matter is remanded to the commission to reinstate benefits awarded by the magistrate and to address the remaining issues that were not decided in its initial opinion.

NOTES

[*] Circuit judge, sitting on the Court of Appeals by assignment.