DAVID WHITTINGHAM, Applicant

CARR BUILDERS INC, Employer

ACUITY INSURANCE COMPANY, Insurer

The applicant, Carr Builders, Inc., and Acuity Insurance Company have each submitted separate petitions for commission review alleging error in the administrative law judge's Findings and Order issued in this matter on October 17, 2005. Briefs were submitted by the applicant and by Acuity Insurance.

It is conceded that the applicant sustained serious injury while performing services for Carr Builders on December 17, 2003, when Acuity was on the risk. At issue before the administrative law judge were: (1) whether pursuant to Wis. Stat. § 102.07(8)(d), the applicant was performing services for Carr Builders as an independent contractor; (2) whether pursuant to Wis. Stat. § 102. 01(2)(f), the applicant was acting as a temporary help agency when performing his services for Carr Builders; and (3) whether pursuant to Wis. Stat. § 102.07(8m), the applicant could not be considered an employee of Carr Builders, because he was an employer under Wis. Stat. § 102.04(1)(d)2.

The applicant and Carr Builders have petitioned the administrative law judge's dismissal of the applicant's claim, which the administrative law judge ordered after she accepted Acuity's arguments concerning the third of the above-stated issues. Carr Builders also petitioned the administrative law judge's statement made in her decision that Carr Builders had asserted the applicant was an independent contractor under Wis. Stat. § 102.07(8)(b). Acuity supports the administrative law judge's dismissal of the applicant's claim, but has petitioned the finding that Ronald Donahue did not receive wages of $500 or more in a calendar quarter from the applicant (such receipt would merely provide additional support for the finding that the applicant was an employer under Wis. Stat. § 102.04(1)(d)2.).

The commission has carefully reviewed the entire record in this matter and hereby affirms in part and reverses in part the administrative law judge's decision. The commission makes the following:

At the outset, it is noted that Carr Builders has consistently asserted that the applicant was not performing his services as an independent contractor under Wis. Stat. § 102.07(8)(d), and therefore the administrative law judge did misstate Carr Builders' position in this respect.

In its petition, Acuity did not make any argument against the administrative law judge's finding that the applicant did not perform services for Carr Builders as an independent contractor, pursuant to Wis. Stat. § 102.07(8)(b). Additionally, Acuity did not dispute the administrative law judge's finding that the applicant did not perform his services as a temporary help agency, pursuant to Wis. Stat. § 102.01(2)(f). The commission adopts as its own the administrative law judge's findings regarding these two issues.

Respondents' Exhibit 12, together with the applicant's and Ronald Donahue's testimonies, provide credible evidence that the applicant paid Ronald Donahue over $500 in the third calendar quarter of 2003, for Donahue's work for Woodland Builders. This fact would make the applicant, d/b/a Woodland Builders, a statutory employer effective October 10, 2003, pursuant to Wis. Stat. § 102.04(1)(b)2. However, it was stipulated that the applicant paid Richard Loppnow over $500 in wages for work performed for Woodland Builders in the second calendar quarter of 2003. Accordingly, the applicant, d/b/a Woodland Builders, became a statutory employer effective July 10, 2003.

The focus of the remaining issue before the commission is the proper interpretation of Wis. Stat. § 102.07(8m), which provides:

An employer who is subject to this chapter is not an employee of another employer for whom the first employer performs work or service in the course of the other employer's trade, business, profession, or occupation.

Acuity and the administrative law judge read this statute to mean that once an individual forms a business that hires one or more employees, and becomes subject to the Act by paying those one or more employees calendar quarter wages of $500 or more (Wis. Stat. § 102.04(1)(b)2.), that individual cannot thereafter be an employee of another employer for whom the individual performs services in the other employer's trade, business, profession, or occupation (Wis. Stat. § 102.07(8m)). The applicant argues that Wis. Stat. § 102.07(8m) is intended only to provide a coverage exception for individuals who are acting as employers in the work or service they perform for the other employer in that other employer's trade, business, profession, or occupation. The commission finds that the applicant has interpreted the statute correctly.

Wisconsin Stat. § 102.07(8)(a) provides that every independent contractor is an employee of any employer for whom he or she is performing service in the course of that employer's trade, business, profession, or occupation at the time of an injury. This reflects the Act's emphasis on providing worker's compensation coverage to all workers.

Wisconsin Stat. § 102.07(8m) was created to address the circumstance in which two entities that are both employers under the Act, each perform work or service in the course of the trade, business, profession, or occupation of one of those entities. When Employer A, in its capacity as a business, contracts with Employer B to perform work or service in Employer B's enterprise, the statute provides that Employer A functions as an employer and does not become Employer B's employee. Application of the statute may become confused in a circumstance such as the one at hand, wherein Employer A's business is a sole proprietorship, in which the owner performs the same type of work for his sole proprietorship that at other times he performs as an individual employee unrelated to his sole proprietorship. Wis. Stat. § 102.07(8m), is applicable when Employer B contracts with the individual in his capacity as the owner of the sole proprietorship to perform the services. In such case, the sole proprietor of Employer A is functioning as an employer and not as an employee. Wis. Stat. § 102.07(8m), is not applicable when Employer B hires the individual to perform services as an employee, unrelated to his status as sole proprietor.

Wisconsin Stat. § 102.07(8m), was never intended to open a coverage loophole applicable to individuals such as the applicant, who although he functions as a statutory employer when performing services as a sole proprietor, did not contract his proprietorship to perform services for Carr Builders. On the contrary, the evidence reveals that Richard Carr hired the applicant as an individual carpenter to perform carpenter's work on an as-needed basis. Carr paid the applicant on an hourly basis and did not ask him to assume any business-type responsibilities. The only thread that could theoretically tie the applicant's services for Carr Builders to the applicant's construction business (Woodland Builders), was the fact that Carr sometimes made out paychecks directly to the applicant, and sometimes made them out to the applicant in his business name of Woodland Builders. However, Carr explained that the mode of payment simply depended on what paper form the applicant used to submit his time, not because there was ever any difference in the type of services he performed for Carr Builders. The applicant individually performed carpentry services as an employee for Carr Builders. Neither he nor Richard Carr engaged Woodland Builders, contractually or otherwise, to perform services for Carr Builders.

As noted by the applicant, unintended coverage lapses would arise if every individual who had a side business that qualified him to be a covered employer under Wis. Stat. § 102.04(1)(b)2., would thereafter always be considered an employer under the Act, regardless of the capacity in which his services were performed, i.e., as a business or as an employee. Acuity's reading of the statute would make such an individual a perennial employer, no matter what services he might perform in any capacity for any other employer. Acuity responds that these coverage lapses could be addressed if the individual brought his own worker's compensation coverage along with him to the other employment services performed. However, Acuity's response begs the question of who is the employer in these instances. Whose responsibility is it to obtain worker's compensation insurance coverage in instances when, for example, a construction contractor undertakes a construction project and hires several individual carpenters to help complete it? The answer is obvious. The construction contractor and its insurer cannot elude their coverage responsibility when the contractor hires an individual such as the applicant, who may have his own business on the side, but who is hired as an employee to perform employee services unconnected to his side business. No insurance carrier could accurately reflect the risk that might accrue for an individual, who by virtue of his sole proprietorship became a covered employer under Wis. Stat. § 102.04(1)(b)2., if that individual would thereafter have to be considered covered under the policy for virtually any service he performed for any other employer. The risk must be applied to employers (and their insurers) who hire employees, not to employees who happen to be employers in a completely separate business undertaking.

Acuity points to two prior commission decisions: Charles Healy v. Lloyd Frank Logging, WC Claim No. 2002-045949 (LIRC July 28, 2005); and Terrence Robran v. Lifetime Associates, Inc., WC Claim No. 94045457 (LIRC May 30, 1997). Acuity incorrectly asserts that these decisions support its position. The Robran decision involved an individual who worked as an employee in Lifetime Associate's (the employer's) warehouse during the winter, and was paid by the hour for that work. However, the rest of the year Robran operated his sole proprietorship to build garages on site for Lifetime, and was paid by the job. That is what he was doing when he was injured. The credible evidence showed that Robran's sole proprietorship hired an employee or employees to help him build the garages, and that Robran filed a federal Schedule C, demonstrating that he ran his own construction business. Robran's circumstances are distinguishable from those of the applicant, who during the period in question worked only as an employee for Carr Builders. Robran contracted his construction business, including his own employee or employees, to perform the garage building services for Lifetime. The applicant did not involve his erstwhile construction business, Woodland Builders, in the services he performed for Carr Builders in 2003. The Robran decision found that Robran was acting as an employer when injured, and that pursuant to Wis. Stat. § 102.07(8m), he therefore was not a covered employee of Lifetime. This finding is consistent with the commission's finding that because the applicant was acting as an employee when injured, Wis. Stat. § 102.07(8m) is inapplicable.

Healy operated a sole proprietorship as a logger. He purchased a worker's compensation insurance policy for this business, but had no employees, and did not even include himself on the policy. The commission found that even though Healy purchased the insurance policy, he never had any employees in his business, and therefore he was not an employer under any provision of the Act. Accordingly, when he was injured while performing logging services for Lloyd Frank Logging, he was performing those services as an employee and not as an employer. Wis. Stat. § 102.07(8m) did not apply.

The applicant has claimed permanent total disability, and asserted that the parties stipulated to same. However, the discussions recorded prior to testimony being taken at the hearing held on May 2, 2005, indicate that there was no stipulation to the nature and extent of disability. Neither was that issue properly addressed at hearing, since the coverage issues occupied the proceedings. Accordingly, the matter shall remain open with respect to the issue of nature and extent of disability.

The applicant submitted several different summaries of treatment expense, the last one being a post-hearing submission that includes substantial additional claims without decipherable support. Additionally, the treatment summaries all list large amounts as having been paid by "Insurance," without explanation of whether this refers to a third-party insurer who is due reimbursement, and if so, who that third-party insurer is. The commission will order immediate payment of the unpaid balances to the providers listed in Hearing Exhibt A. The applicant should reconstruct his claim for any additional medical expenses/reimbursements due, and present this new claim to Acuity, who should thereafter make immediate payment subject to any reasonable dispute. Jurisdiction will also be reserved with respect to any such dispute that should arise concerning these additional treatment expense/reimbursement claims and with regard to future medical treatment.

Now, therefore, this:

The Findings and Order of the administrative law judge are affirmed in part and reversed in part. Within 30 days from this date, Carr Builders, Inc. and Acuity Insurance shall pay to Aspirus Wausau Hospital the sum of Two thousand two hundred fifty-seven dollars and thirty cents ($2,257.30); to Surgical Associates, S.C. the sum of One hundred forty-seven dollars and seventy-nine cents ($147.79); to Dr. Thomas N. Rengel the sum of One hundred five dollars and fourteen cents ($105.14); to Central Wisconsin Anesthesiology, S.C. the sum of Four hundred sixty dollars ($460.00); to North Central Wisconsin Rehabilitation Associates, S.C. the sum of Two hundred eighty-one dollars and seventy-nine cents ($281.79); to Radiology Associates of Wausau, S.C. the sum of Five hundred four dollars and twenty-three cents ($504.23); to Spine Care Specialists of Wisconsin, S.C. the sum of Five hundred forty-eight dollars and eighty-four cents ($548.84); to W.H. Pulmonary and Critical Care the sum of Three hundred seventy-two dollars and seventy-nine cents ($372.79); to VA Medical Center the sum of Two hundred forty-six thousand three hundred seventy-nine dollars and sixty-eight cents ($246,379.68); and to Walkabout Orthotics and Prosthetics the sum of One hundred ninety-four dollars and seventeen cents ($194.17).

Jurisdiction is reserved for such further findings and orders as may be warranted.

Dated and mailed March 15, 2006
whittda . wrr : 185 : 4 ND § 2.2

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

NOTE: The commission's reversal of the administrative law judge's finding regarding the applicability of Wis. Stat. § 102.07(8m), did not involve any credibility determinations.

cc:
Attorney Robert T. Ward
Attorney Timothy L. Vocke
Attorney Richard T. Mueller

Appealed to Circuit Court. Affitmed August 23, 2006.  Appealed to the Court of Appeals.  Affirmed, Acuity Ins. v. Carr Builders, David Whittingham & LIRC, 2007 WI App 210, 305 Wis. 2d 613, 740 N.W.2d 154.  Petition for review denied.

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