Wis.LIRC WC Decision: Wodicka - June 9, 1999 - ND � 2.15 - Employes of Contractors Under, � 8.40

STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

DONALD WODICKA, Applicant

BEEGLES WELDING & SMALL ENGINE, Employer

TRANSPORTATION INSURANCE CO, Insurer

WORKER'S COMPENSATION DECISION
Claim No. 1993028596

An administrative law judge (ALJ) for the Worker's Compensation Division of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The applicant here claims a work injury due to occupational exposure to chemicals while working for Beegle's Welding & Small Engine (Beegle's). The sole issue in this case is threshold question of whether Wisconsin Magneto, Inc. (Wisconsin Magneto) is a contractor over with respect to Beegle's. If Wisconsin Magneto is a "contractor over," it may potentially be held jointly liable with Beegle's under Wis. Stat. � 102.06, in the event the applicant establishes a compensable injury arising from work performed under Beegle's contract with Wisconsin Magneto. Whether the applicant has in fact established such an injury is not now at issue.

Beegle's employed the applicant from 1988 to 1991 as a service technician. He worked in the backroom fixing small engines, primarily for consumer lawn and garden equipment. The applicant did mostly lawnmower repair in the spring and summer, and snow-blower repair in the fall and winter.

During the spring and summer season, the applicant testified, he did 80 percent lawnmower repair work. Of these jobs, 60 to 65 percent were Briggs & Stratton (Briggs) engines. May 1996 transcript, page 15. During the fall and winter, he did 65 to 75 percent snow-blower repair; of these 65 percent at least were made by Tecumseh. May 1996 transcript, page 16.

The applicant testified also that he did warranty work for both Tecumseh and Briggs, attended training seminars for both brands, and that Beegle's was an authorized dealer for both brands. He also testified that in order to repair Briggs' engines at times it was necessary to use special tools and parts supplied by Briggs. May 1996 transcript, page 25.

Beegle's became an authorized service dealer of Briggs' engines through the auspices of Wisconsin Magneto, a Briggs-authorized central service distributor, though Briggs itself had to approve Beegle's. At the time the applicant worked for Beegle's (1988-1991), Wisconsin Magneto distributed only for Briggs; it had no relationship with Tecumseh or any other manufacturer. November 1997 transcript, pages 75-77.

The contract between Briggs and Wisconsin Magneto is at Exhibit 2. It is entitled "Authorized Central Service Distributor Agreement." Under it, Wisconsin Magneto promises to provide readily available and competent service of Briggs' products in its territory. To that end, Wisconsin Magneto promises to appoint (subject to Briggs' approval) "authorized registered service dealers" (referred to in the contract as "subdistributors"). Wisconsin Magneto also agreed to maintain an adequate store of Briggs' parts to accomplish repairs, and to train service personnel of the service dealers.

Beegle's agreement to fulfill its duties as a Briggs' service dealer is at Exhibit 4. Officers of Beegle's and Wisconsin Magneto signed that document. The contract specifies it is between Beegle's and Wisconsin Magneto, and lists all the duties expected of Beegle's which in some respects parallel the duties that Wisconsin Magneto owes to Briggs.

Beegle's, of course, does not service only Briggs engines. Indeed, it has 97 dealership agreements (some for sales and some for service.) The record demonstrates, however, that Briggs is the main manufacturer of lawnmower engines serviced by Beegle's, and that the applicant spent about 25 percent of his time on Briggs' engines.

The applicant's theory is that exposure to various chemicals while working as a small engine mechanic is at least a material contributory factor in the onset or progression of his disabling neurological condition. Beegle's has no worker's compensation coverage. As a result, the applicant is pursuing Wisconsin Magneto under the contractor under statute.

The version of the statute in effect on the alleged date of injury, Wis. Stat. � 102.06, 1991 Stats., provides:

"102.06 Joint liability of employer and contractor. An employer shall be liable for compensation to an employe of a contractor or subcontractor under the employer who is not subject to this chapter, or who has not complied with the conditions of s. 102.28 (2) in any case where such employer would have been liable for compensation if such employe had been working directly for the employer, including also work in the erection, alteration, repair or demolition of improvements or of fixtures upon premises of such employer which are used or to be used in the operations of such employer. The contractor or subcontractor, if subject to this chapter, shall also be liable for such compensation, but the employe shall not recover compensation for the same injury from more than one party. The employer who becomes liable for and pays such compensation may recover the same from such contractor, subcontractor or other employer for whom the employe was working at the time of the injury if such contractor, subcontractor or other employer was an employer as defined in s. 102.04. This section does not apply to injuries occurring on or after the first day of the calendar quarter beginning after the day that the secretary files the certificate under s. 102.80(3)(a)."

To summarize, Wis. Stat. � 102.06 applies in situations where a subcontractor fails to procure worker's compensation insurance, leaving its employes unprotected. The statute imposes joint liability on the principal contractor for injuries to the subcontractor's employes. The principal contractor's liability ultimately depends, of course, on the injured worker proving he was injured while providing services under the subcontract. The rationale for the "contractor under" provision is simple:

"To protect employees of irresponsible and uninsured subcontractors by imposing ultimate liability on the presumably responsible principal contractor, who has it within his power, in choosing subcontractors, to pass upon their responsibility and insist upon appropriate compensation for their workers. [Emphasis in original.]"

Green Bay Packaging, Inc., v. DILHR, 72 Wis. 2d 26, 37 (1976).

The supreme court has also defined a "contractor under" for the purposes of the statute to be

"One who regularly furnishes to a principal employer materials or services which are integrally related to the finished product or service provided by that principal employer."

Green Bay Packaging, at 72 Wis. 2d 36. The court of appeals has divided the definition for analytical purposes, making it clear that the injured worker must show that (1) the "contractor under" provided materials or services to the primary contractor, (2) that the services or materials were provided regularly, and (3) that the activities of the "contractor under" were integrally related to the services of the primary contractor. Chapman v. LIRC, 156 Wis. 2d 286, 291-93 (1990).

Although Wis. Stat. � 102.06 begins by referring to the primary contractor as an "employer" the statute does not make the primary contractor the employer of the injured worker. The supreme court held that the primary contractor is more analogous to an insurer. Culbertson v. Kieckhefer Container Co., 197 Wis. 349, 352 (1928); Neal & Danas, Workers Compensation Handbook, � 8.40 (4th ed., 1997). Thus, Professor Larson noted in his treatise that it is inaccurate to refer to the primary contractor as a "statutory employer;" its status in Wisconsin is more like a guarantor or insurer. 4 Larson, Workers Compensation Law � 49.13 (MB 1998).

Similarly, Wisconsin case law is subtly different from that in other states which seem to limit the "contractor under" doctrine to cases where the primary contractor contracts out work to the subcontractor that would normally go to the primary contractor's own employes. For example, applying the Green Bay Packaging test, the Wisconsin supreme court found the franchiser of a "Weight Losers" program to be a "contractor over" vis-�-vis an individual Weight Losers franchisee, as the franchisee regularly furnished services integral to the services provided by the franchiser. Maryland Cas. Co. v. ILHR Department, 77 Wis. 2d 472 (1977). Thus, the court held that the franchiser was liable for a work injury sustained by an instructor of an uninsured franchisee.

The ALJ concluded that Wisconsin Magneto was not a "contractor over" with respect to Beegle's. In his decision, the ALJ notes the 97 other dealerships that Beegle's contracted for. The ALJ believed so many "contractors over" would pose problems under an occupational disease claim, and noted that no prior "contractor under" case has involved an occupational disease claim. (1 )

However, the "contractor under" law does not distinguish between occupational and accidental injuries. Indeed, Wis. Stat. � 102.06 suggests that both accidental injuries and occupational disease are covered by its terms, as the statute makes the contractor over liable "in any case where [the contractor over] would have been liable for compensation if such employe had been working directly for the [the contractor over]." The commission concludes that "any case" of disability includes cases of disability caused by occupational disease.

Further, the commission does not believe that the number of other products that Beegle's services is dispositive. The statute does not require the "contractor under" to perform services for the "contractor over" exclusively. Nor does the statute require that the injured worker claiming compensation establish that he or she performed work solely under contract between the "contractor over" and "contractor under." (2 )

The commission acknowledges that this case is unusual because it involves a potential claim for occupational disease under Wis. Stat. � 102.06, and because there is more than one "potential contractor" over. However, the only decision made herein is that under Wis. Stat. � 102.06, Wisconsin Magneto was a "contractor over" of Beegle's between 1988 and 1991. The applicant must still demonstrate that while servicing Briggs' products in the performance of services under Beegl's contract with Wisconsin Magneto, he sustained an appreciable period of workplace exposure that constituted a materially contributive causative factor in the onset or progression of his medical condition. Assuming the applicant can prove this, it also remains his burden to demonstrate that the service under the Wisconsin Magneto contract was the last service prior to his date of disability. (3 )

In sum, under the facts set out above, the commission concludes that Beegle's is a subcontractor which regularly furnishes to Wisconsin Magneto services which are integrally related to the service provided by Wisconsin Magneto. Under the Green Bay Packaging test, then, Wisconsin Magneto is a contractor over within the meaning of Wis. Stat. � 102.06, and may be liable if the applicant is able to prove he suffered a compensable injury while servicing Briggs' products in the performance of his duties for Wisconsin Magneto. Accordingly, this case is remanded to the department for further appropriate action.

INTERLOCUTORY ORDER

The findings and order of the administrative law judge are reversed. Wisconsin Magneto, Inc, is a "contractor over" with respect to Beegle's Welding & Small Engine Service within the meaning of Wis. Stat. � 102.16(1). This case is remanded to the department for further appropriate action.

Dated and mailes June 9, 1999
wodicdo.wrr : 101 : 7 ND� 2.15 � 8.40

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

MEMORANDUM OPINION

Because the commission does not dispute the facts found by the ALJ, or base its decision on witness credibility or demeanor, the commission did not confer with the administrative law judge who presided at the hearing. Transamerica Ins. Co. v. ILHR Department, 54 Wis. 2d 272, 283-84 (1972).

Pamela I. Anderson, Commissioner (Dissenting):

I am unable to agree with the result reached by the majority herein and I dissent. I do not automatically reject the possibility that an occupational disease could be contributed to in a contractor over case. My objection in this case is that Wisconsin Magneto is an indirect link to Briggs and Stratton. Wisconsin Magneto provided parts and trained Beegle's on how to repair the Briggs and Stratton engines. This is entirely different than the typical case where a general contractor provides the subcontractor with supplies to build the subcontractor's portion of the building. If the subcontractor did not exist, the general contractor would have employes who did the work that the subcontractor did.

Maryland Casualty Co. v. ILHR Department, 77 Wis. 2d 472 (1977), is also a different case. It seems obvious that Weight Losers needed the local franchisee in order to run its business. The services were integrally related to the services provided by Weight Losers International.

In this case, people other than Beegle's could repair the Briggs and Stratton engines. Wisconsin Magneto was not the only group who supplied Beegle's with Briggs and Stratton parts. Beegle's did work for 97 other dealerships. A customer was not required to go to a repair place that had an agreement with Wisconsin Magneto. If the majority's decision stands, businesses like Wisconsin Magneto will be required to check to see if the company that they contract with has worker's compensation coverage. I believe that is not the kind of case that Wis. Stat. � 102.06 was intended to cover.

For these reasons, I would affirm the result of the administrative law judge.

______________________________________________
Pamela I. Anderson, Commissioner

cc: ATTORNEY RICHARD A FORTUNE
SCHOONE FORTUNE LEUCK KELLEY & PITTS SC

ATTORNEY WILLIAM D WHITNALL
WHITNALL LAW OFFICES

ATTORNEY MARK H MILLER
LAW OFFICES OF MARK H MILLER

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Footnotes:

(1)( Back ) The commission's research also disclosed no prior Wis. Stat. � 102.06 case involving occupational disease.

(2)( Back ) It may be that Wisconsin Magneto can show that the applicant did not have sufficient occupational exposure under its contract with Beegle's to cause the applicant's injury. However, that is a medical question separate from the legal question of the relationship between Beegle's and Wisconsin Magneto.

(3)( Back ) See Universal Foundry Co. v. DILHR, 82 Wis. 2d 479, 487 note 5 (1978); Wis. Stat. � 102.01(2)(g): Again, under Wis. Stat. � 102.06, a "contractor over" is only liable where it would have been liable if the employe had been working directly for the contractor over.