Foster v. Commissioner of Labor & Industry Ex Rel. McShane

No. 86-415
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
LOYD FOSTER and JIM GEODDERTZ,
d/b/a L & L TELEPHONE,
Petitioners and Respondents,
COMMISSIONER OF LABOR AND INDUSTRY,
STATE OF MONTANA, ex rel., KELLY McSHANE,
Respondents and Appellants.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Leif B. Erickson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
James W. Zion, Dept. of Labor & Industry, Helena,
Montana
For Respondent:
Warden, Christiansen, Johnson & Berg; Kent P. Saxby,
Kalispell, Montana
Submitted on Briefs: Nov. 25, 1986
Decided: February 3, 1987
Filed: FEB 3 - 1987
Clerk
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.
This is an appeal from the District Court of the
Eleventh Judicial District in and for Flathead County,
Montana. The court vacated an order of the Commissioner of
Labor and Industry granting Kelly McShane certain claimed
back wages. We affirm.
Respondents opened a new business, L & L Telephone, in
Kalispell, Montana, in January, 1983, to repair, sell and
install telephone systems. Appellant (McShane) inquired
about the possibility of working for the new company and was
advised that periodically a limited amount of telephone
repair work might be available for him. There was no
representation made as to the amount of work which might be
available, and it was agreed McShane would be paid on a
piece-rate basis for each piece of repair work actually
completed. He was free to accept or reject any work offered
to him for repair. McShane was free to perform repairs at a
location away from L & L Telephone and free to use his own
tools and method of repair. He was not required to be at
respondents' place of business during any specific hours.
In April respondents agreed to hire McShane and another
repairman for a fixed number of hours every two week period.
They received a fixed salary each period and signed a W-4
form. Respondents argue it was not until April that an
employer/employee relationship was established. We agree.
In October, 1984, McShane filed a wage claim with the
Commissioner of Labor and Industry for back wages he claimed
were owed him by respondents for the period between January
and April, 1983. Following an administrative hearing, the
hearing examiner ordered respondents to pay McShane $2,304 in
unpaid wages and penalty. Respondents appealed to the
District Court which dismissed the claim and ordered that
McShane take nothing by way of his wage claim. The
Commissioner of Labor and Industry appeals.
Appellant argues the District Court erred by not
applying the proper standard when reviewing the
administrative order, and by applying the wrong law to the
facts.
The standard of review is set forth in g 2-4-704, MCA,
which reads in pertinent part:
(1) ...
(2) The court may not substitute its
judgment for that of the agency as to the
weight of the evidence on questions of
fact. The court may affirm the decision
of the agency or remand the case for
further proceedings. The court may
reverse or modify the decision if
substantial rights of the appellant have
been prejudiced because the
administrative findings, inferences,
conclusions, or decisions are:
(e) clearly erroneous in view of the
reliable, probative, and substantial
evidence on the whole record;
(f) arbitrary or capricious or
characterized by abuse of discretion or
clearly unwarranted exercise of
discretion;
This statute is exceedingly clear and we have consistently
reaffirmed its meaning. See Chagnon v. Hardy Construction
Co. (Mont. 1984), 680 P.2d 932, 41 St.Rep. 441; State ex rel.
Montana Wilderness Association (Mont. 1982), 648 P.2d 734, 39
St.Rep. 1238; Martinez v. Yellowstone County 'Welfare Dept.
(Mont. 1981), 626 P.2d 242, 38 St.Rep. 474; Northern Plains
Resource Council v. Board of Natural Resources and
Conservation (19791, 181 Mont. 500, 594 P.2d 297.
The hearing examiner determined that McShane was an
employee of L & L Telephone. The District Court reversed,
applying the clearly erroneous standard because the court
found the hearing examiner's findings were not supported by
reliable, probative and substantial evidence on the record.
We are confronted with the task of determining whether the
District Court abused its discretion.
Both employee and independent contractor are
statutorily defined. Section 39-71-118 1 a , MCA, defines
employee as "each person in this state, including a
contractor other than an independent contractor, who is in
the service of an employer, as defined by 39-71-117 ... "
(L & L Telephone meets the statutory requirement of
S 39-71-117, MCA.) An independent contractor "is one who
renders service in the course of an occupation and: (1) has
been and will continue to be free from control or direction
over the performance of the services, both under his contract
and in fact; and (2) is engaged in an independently
established trade, occupation, profession, or business."
Section 39-71-120, MCA.
Respondents argue the District Court applied the wrong
law to determine whether McShane was an employee. They
contend the so-called ABC test should have been used, citing
S 39-51-203(4), MCA, and various decisions of this Court.
The ABC test is not applicable in this case, however. It is
used when determining whether a worker is an employee for
purposes of imposition of unemployment compensation tax on
the employer. "The test to determine whether or not an
employer/employee relationship exists within the meaning of
[ S 39-71-118, MCA] is the so-called control test." State ex
rel. Ferguson v. District Court (1974), 164 Mont. 84, 88, 519
P.2d 151, 153.
The vital test in determining whether a
person employed to do a certain piece of
work is a contractor or a mere servant,
is the control over the work which is
reserved by the employer. Stated as a
general proposition, if the contractor is
under the control of the employer he is a
servant; if not under such control, he is
an independent contractor. (Citation
omitted. )
One who contracts to do a certain piece
of work according to his own methods and
without subjection to the control of his
employer, is, while so engaged, an
independent contractor. (Citations
omitted. )
As to control, it is necessarily implied
in every contract that the employer may
insist that the contract shall be
performed according to its
specifications. (Citation omitted. )
Shope v. City of Billings (1929), 85 Mont. 302, 307-308, 278
P. 826, 827.
The issue of control goes beyond actual control and
focuses on the right to control. We have set out four
factors to be considered when analyzing the right to
control: (1) direct evidence of right or exercise of
control ; (2) method of payment; (3) furnishing of
equipment; (4) right to fire. Sharp v. Hoerner Waldorf
Corporation (1978), 178 Mont. 419, 425, 584 P.2d 1298, 1301.
McShane was told by respondents that periodically a limited
amount of telephone repair work might be available for him.
No representation was made as to the amount of work. McShane
and respondents agreed McShane would be paid on a piece-rate
basis, which was 100% of what was paid respondents. McShane
was free to accept or reject any and all work. He was not
required to do his work at any certain time or in any certain
place. Respondents did not provide McShane with tools.
Clearly respondents did not control or have the riqht to
control McShane.
The hearing examiner found it to be "abundantly clear
that respondent intended for McShane to be an independent
contractor prior to April 1 ... " However, the hearing
examiner's conclusion that McShane was an employee of L & L
Telephone between January 10 and March 25, and thus entitled
to back wages for that period is not supported by the record,
and is contradicted by other findings. It is clearly
erroneous and must be set aside. Rule 52 (a), M.R.Civ.P.
McShane was "free from control or direction" when
repairing telephones. The District Court's conclusion that
by law "[tlhe respondent McShane was an independent
contractor at all times prior to March 31, 1983," is
supported by the record. We do not find the District Court
abused its discretion in reaching this conclusion and
therefore, we affirm.
Justices