KIDDER v. MILLER-DAVIS COMPANY; WOLTHUIS v. MILLER-DAVIS COMPANY
Case Details
- Citation
- 455 Mich. 25
- Judge(s)
- Brickley, Riley, and Weaver, JJ., concurred with Mallett, C.J.; Cavanagh and Boyle, JJ., concurred with Kelly, J.
- Procedural Posture — the stage the case had reached
- appeal
- State
- Michigan
- Circuit
- 6th Circuit
Related Laws
No specific laws identified for this ruling.
Outcome
Michigan Supreme Court affirmed that Miller-Davis Company was a coemployer under the Worker's Disability Compensation Act's economic-reality test and therefore immune from tort liability under the exclusive remedy provision, despite contractual language disclaiming employer status.
Excerpt
KIDDER v MILLER-DAVIS COMPANY WOLTHUIS v MILLER-DAVIS COMPANY Docket Nos. 103024, 105498. Argued January 15, 1997 (Calendar Nos. 8-9). Decided July 8, 1997. Rehearings denied 456 Mich 1201. Donald L. Kidder, an iron worker, was leased to Miller-Davis Company, a general construction contractor, by Construction Labor Services, a labor broker. After suffering injuries while working on a Miller-Davis renovation project, he and his wife, Dawn M. Kidder, brought a negligence action in the Kalamazoo Circuit Court against Miller-Davis. The court, John F. Foley, J., granted summary disposition for the defendant. The Court of Appeals, Hoekstra and 6. Schnelz, JJ. (Neff, P.J., dissenting), affirmed in an unpublished opinion per curiam, holding both Construction Labor Services and Miller-Davis to be coemployers within the meaning of the Worker’s Disability Compensation Act, and that Miller-Davis thus was entitled to enforcement of the act’s exclusive remedy provision (Docket No. 166059). The plaintiffs appeal. David L. Wolthuis also was leased to Miller-Davis Company through Construction Labor Services and was injured while performing demolition work for Miller-Davis. He and his wife, Esther Wolthuis, brought a negligence action in the Kalamazoo Circuit Court against Miller-Davis. The court, William G. Schma, J., granted summary disposition for the defendant, holding that Miller-Davis was a coemployer and immune from liability under the exclusive remedy provision of the wdca. The Court of Appeals, Sawyer and J. P. Jodrdan, JJ. (Neff, P.J., dissenting), affirmed in an unpublished opinion per curiam (Docket No. 168754). The plaintiffs appeal. hi an opinion by Chief Justice Mallett, joined by Justices Brickley, Riley, and Weaver, the Supreme Court held: A labor broker and its customer both are subject to, and protected by, the exclusive remedy provision of the worker’s compensation act. A labor broker relationship existed between Construction Labor Services and its customer, Miller-Davis, to an extent that each was a coemployer for purposes of the act and is protected by, and entitled to, the exclusive remedy provision of the act. Further, under the economic-reality test, Miller-Davis was the plaintiffs’ employer for purposes of the exclusive remedy provision and, thus, immune from tort liability. 1. In determining who is an employer for purposes of the exclusive remedy provision of the wdca, Michigan case law rejected the rigid, common-law control test and adopted the economic reality test, which examines the totality of the circumstances surrounding the employment relationship and the work performed. Control is only one factor to be considered, and no one factor is controlling. A court must examine the work performed, whether it was a part of a common objective integral to the employer’s business, and whether it normally would follow the usual path of an employee. 2. In these cases, Construction Labor Services was a labor broker that provided workers pursuant to job description requests furnished by Miller-Davis. It billed Miller-Davis weekly, dollar for dollar for the workers’ wages, fringe benefits, payroll taxes, worker’s compensation and liability insurance premiums, state corporate tax, trade travel pay, fica, and, additionally, for the cost of administering the contract and handling of all other employment matters. Constructive Labor Services was a payment conduit for Miller-Davis, which unequivocally assumed the responsibility for these payments. Clearly, the trades construction personnel worked for both Constructive Labor Services and Miller-Davis. 3. Under the economic-reality test, both Construction Labor Services and Miller-Davis must be considered coemployers for purposes of the exclusive remedy provision of the worker’s compensation act. The totality of the circumstances surrounding the employment relationship and the work performed reveals that the two were so integrally related that their common objectives were only realized by a combined business effort. Their agreement to the contrary is neither dispositive nor controlling. Kidder, affirmed. Wolthuis, affirmed. Justice Kelly, joined by Justices Cavanagh and Boyle, dissenting, stated that where the terms of a contract are clear and unambiguous, they should be enforced as written. The defendant entered into an agreement that, by its clear and unambiguous terms, denied that the defendant was the plaintiffs’ employer, specifically spelling out that Construction Labor Services was the sole employer. Under the circumstances, the defendant should be bound by the terms of its contract. Because it is not plaintiffs’ employer, the defendant is liable in tort for any negligence to the plaintiffs. Coemployer status cannot be found solely because two parties enter into a labor broker relationship. The contract that the defendant and Construction Labor Services signed makes theirs an atypical labor broker relationship. Its language renders it so clear and unambiguous that defendant is not plaintiffs’ employer, that it alone must control. There is no reason to apply the economic realities test. The contract also explicitly sets forth the duties of Miller-Davis and Construction Labor Services. Because Miller-Davis contracted to avoid an employer’s responsibilities, it should not be allowed to assert the exclusive remedy provision as an affirmative defense. Schenk, Boncher & Prasher (by Frederick J. Boncher and Curtis D. Rypma) for plaintiffs Kidder. Ford, Kriekard, Domeny & Byrne, P.C. (by Thomas H. Rosenhagen and David W. McMorrow), for plaintiffs Wolthuis. Straub, Seaman & Allen, P.C. (by John M. Donahue), for the defendant. Mallett, C.J. We granted leave in these consolidated labor broker cases to determine whether defendant Miller-Davis is a coemployer of the plaintiffs and thus immune from tort liability under the exclusive remedy provision of the Worker’s Disability Compensation Act. In both cases the Court of Appeals affirmed grants of summary disposition in favor of the defendants, holding that the defendant was a customer of Construction Labor Services (cls), a labor broker, and as such was protected from suit under the exclusive remedy provision of the wdca. We affirm and hold further that under the economic-reality test defendant was also the plaintiffs’ employer for purposes of the exclusive remedy provision of the WDCA. I The two cases are almost factually indistinguishable. Both Mr. Kidder and Mr. Wolthuis, plaintiffs in their respective cases, were injured on construction sites at which the defendant was the general contractor. Both men were employees of cls. Cls is a labor broker in the business of providing “leased services of construction trades personnel on an independent contractor basis” to construction contractors. Both Mr. Kidder and Mr. Wolthuis were leased construction trades personnel furnished to Miller-Davis by CLS. The lease agreements between CLS and Miller-Davis, covering both employees, are identical. A Plaintiff Wolthuis, leased to Miller-Davis through CLS, was performing demolition work on a multimillion dollar construction project in Kalamazoo when he was impaled through the neck by a piece of jagged reinforcement steel protruding from a block of concrete being hoisted by defendant’s crane at the work site. He was subsequently burned by an acetylene torch that fell on him after he was impaled. Plaintiff alleged in his complaint that defendant was negligent in failing to provide a safe workplace and negligent in the operation of the crane. Just before trial, the court entertained and granted the defendant’s motion for summary disposition, holding that Miller-Davis was a coemployer and immune from liability under the exclusive remedy provision of the WDCA. In the Court of Appeals, plaintiff argued that Miller-Davis was not a coemployer, that, in the alternative, the court erred in granting the motion because more than a single inference could be drawn from the facts, and that the issue should have been decided by a jury. In addition the plaintiff asserted that Miller-Davis was estopped from asserting that it was an employer by virtue of the express language in the contract. The Court of Appeals rejected these arguments. The majority held that only one conclusion could be drawn from the facts: defendant was a customer of cls, a labor broker, and as such was entitled to the exclusive remedy of the wdca. Unpublished opinion per curiam, issued February 23, 1995 (Docket No. 168754), citing Howard v Dundee Mfg Co, 196 Mich App 38, 40; 492 NW2d 478 (1992); Farrell v Dearborn Mfg Co, 416 Mich 267; 330 NW2d 397 (1982); Renfroe v Higgins Rack Coating & Mfg Co, Inc, 17 Mich App 259; 169 NW2d 326 (1969). With regard to the contract between CLS and Miller-Davis, the Court stated, “[w]e also find no merit to plaintiffs’ estoppel argument on these facts because courts will look beyond the labels placed on relationships in applying the wdca.” Id., citing Fitzgerald v Mobil Oil Corp, 827 F Supp 1301 (ED Mich, 1993). The statute provides in pertinent part: “The right to the recovery of benefits as provided in this act shall be the employee’s exclusive remedy against the employer . . . .” MCL 418.131(1); MSA 17.237(131)(1). The only exception to the exclusive remedy provision is an intentional tort, which has not been alleged in these cases. Id. Judge Neff dissented, stating that under the terms of the agreement the only inevitable conclusion was that defendant was not plaintiff’s employer and was not entitled to the exclusive remedy provision of the wdca. Judge Neff distinguished this case from Farrell and its progeny on the basis of explicit language of the contract, which she noted was never repudiated by either party. Because the majority’s opinion “turns the agreement between defendant and CLS on its head and effectively nullifies an otherwise valid contractual agreement between the parties,” Judge Neff would have reversed and remanded this case for trial on the liability issue. Id. B Plaintiff Kidder, an iron worker also leased to Miller-Davis through cls, was working on the renovation of the Kalamazoo Center when he plummeted ten feet from some roof decking through an open skylight, shattering both his elbows. Plaintiff Kidder filed suit against Miller-Davis for negligently failing to place covers on or guardrails around the open skylights, negligently failing to supervise subcontractors, and negligently failing to provide a safe workplace. Miller-Davis moved for summary disposition, claiming that the plaintiff was an employee of both cls and Miller-Davis and therefore his only remedy was under the WDCA. MCL 418.131; MSA 17.237(131). The trial court agreed in spite of express language in the CLS-Miller-Davis contract, stating “[s]uch leased personnel shall be employees of cls for all purposes. Such leased personnel shall not be employees of [Miller-Davis] for any reason.” The Court of Appeals affirmed, relying on Farrell v Dearborn Mfg Co, supra, and held that a labor broker relationship existed between cls and Miller-Davis. The Court stated: “Accordingly, the economic reality being that both CLS and defendant were employers within the meaning of the WDCA, defendant was entitled to the enforcement of the wdca exclusive remedy provision.” Unpublished opinion per curiam, issued January 12, 1996 (Docket No. 166059). Judge Neff again dissented, reiterating her dissent in Wolthuis. n A The determination of who is an employer for purposes of the exclusive remedy provision of the wdca, as well as other statutory schemes, has had a rich and voluminous history. Early cases that addressed this question, first in the arena of unemployment compensation, evaluated the existence of the relationship under a “control” test. The control theory is the traditional common-law test used to delineate the master-servant relationship. The theoiy, in its delineation of the servant concept, has for its purpose the definition and delimitation of the scope of the master’s liability under the doctrine of respondeat superior. Because most compensation acts contain no specific definition of the term “employee,” it was generally taken for granted that the common-law definition of employee, or servant, used for purposes of vicarious tort liability was to be used for purposes of workmen’s compensation laws. [Nichol v Billot, 406 Mich 284, 293-294; 279 NW2d 761 (1979).] This test attempted to separate those persons who were employees from those who were independent contractors. This assessment examined who controlled the work, the horns, the process, and the methods of the work involved. The initial rule was “where the person employed is in the exercise of an independent and distinct employment, and not under the immediate control, direction, or supervision of the employer, the latter is not responsible for the negligence or misdoings of the former.” Powell v Employment Security Comm, 345 Mich 455, 469; 75 NW2d 874 (1956) (Smith, J., dissenting) (citations omitted). “The control test is also used to determine when an independent contractor has become an employee for purposes of respondeat superior liability on the part of his employer who has exercised a degree of control inconsistent with independent contractor status.” Nichol v Billot, supra at 296 citing Powell at 471. Justice Talbot Smith’s thoughtful dissent in Powell, which later became the prevailing law, strongly criticized the rigid control test and the absurd, chaotic decisions that resulted from it. He noted that the control test failed to achieve any uniformity or certainty and that this tort concept should be inapplicable to the administration of social legislation. Id. at 471. Justice Smith noted that accepting this rigid control test could lead to much mischief, in that employers would start hiring independent contractors to do everything to avoid their “statutory obligations under the national labor relations act, under the social security, unemployment compensation, and fair labor standards acts, and, in addition, many of the other Federal and State laws . . . .” Id. at 473. Justice Smith was influenced by federal case law administering the National Labor Relations Act. In United States v Silk, 331 US 704, 713; 67 S Ct 1463; 91 L Ed 1757 (1947), the United States Supreme Court first articulated an economic-reality test for assessing the employer-employee relationship. The problem of differentiating between employee and an independent contractor or between an agent and an independent contractor has given difficulty through 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. [Id. (Citations omitted.)] Persuaded by the reasoning in Silk, Justice Smith adopted the economic-reality test in his frequently cited dissent in Powell. He determined that a court must examine the work performed, whether it is part of a common objective integral to the employer’s business, and whether this work would normally follow the usual path of an employee. Powell at 479, citing Rutherford Food Corp v McComb, 331 US 722; 67 S Ct 1473; 91 L Ed 1772 (1947). Accordingly, control is only one factor to be considered. In Tata v Muskovitz, 354 Mich 695; 94 NW2d 71 (1959), this Court overwhelmingly abandoned the control test in favor of the economic-reality test to determine who is an employer for purposes of the Worker’s Disability Compensation Act. In Schulte v American Box Board Co, 358 Mich 21; 99 NW2d 367 (1959), Justice Smith defined more fully the parameters of the economic-reality test: The earlier cases tested this relationship through application of the “control” factor, originally a test for tortious liability, having its roots in the relationship of the apprentice to his master in early English industrial society. As applied to today’s complex economy of the assembly line, of dispersed industrial operations, of concentrated operations but with semi-autonomous “departments” or branches, and of general contractors who, in turn, employ subcontractors and sub-subcontractors, the “control” test is often meaningless, usually ambiguous, and always susceptible of paper-writing evasions. Consequently we have abandoned it. The test is now one of economic reality. This is not a matter of terminology, oral or written, but of the realities of the work performed. Control is a factor, as is payment of wages, hiring and firing, and the responsibility for the maintenance of discipline, but the test of economic reality views these elements as a whole, assigning primacy to no single one. [Id. at 32-33 (Smith, J., concurring) (citations omitted).] The economic-reality test was embraced by this Court as a more realistic attempt to define the employer-employee relationship through a “balancing of all the relevant factors in each case,” than the rigid control test. Renfroe, supra at 265. Given the increasingly complicated relationships developing in today’s business and economic marketplaces anything other than a totality of the circumstances test would be an insufficient guide by which to evaluate the employee-employer relationship. B A labor broker-customer arrangement presents a unique employment relationship and adds a further dimension to the analysis of who is an employer for purposes of the wdca. Renfroe, supra, was one of the first cases to examine the labor broker relationship within the context of the Worker’s Disability Compensation Act. The issue in Renfroe was whether the defendant, Higgins Co., a customer of a labor broker, was an employer, for purposes of the exclusive remedy provision of the worker’s compensation act, thus precluding separate recovery. Id. at 261. The plaintiff in Renfroe was employed by Employers Temporary Service (ETS) whose sole business was supplying temporary labor to industrial and commercial customers. Customers would contact ETS on a daily basis, and ETS would dispatch the required numbers of workers. Ets paid the workers and withheld their taxes. The customer, however, instructed the workers and had the authority to dismiss them. Higgins Co. frequently used ETS to supply it with temporary help. The plaintiff, supplied by ets to Higgins, injured his right hand in a punch press and received medical and disability compensation for his injury from ets’s worker’s compensation insurer. He then sought additional recovery from Higgins, arguing that a restrictive definition should be used to define “employer” because it was in his best interests to be able to sue Higgins as a third-party tortfeasor. The Court rejected the plaintiff’s argument, acknowledging the preference for a more liberal approach to defining the term “employer,” which necessarily followed the purposes behind “providing social remedial legislation in an attempt to provide benefits for injured employees under the workmen’s compensation act.” Id. at 263. That approach favors the economic-re
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