BRIEF OF APPELLEE, ADMINISTRATOR, BUREAU OF WORKERS' COMPENSATION

Transcription

1 !>' 'S Yr 3Yt top oupreme Court of OYjt.o STATE OF OHIO, ex rel. WFAL CONSTRUCTION, vs. Appellant, ADMINISTRATOR, BUREAU OF WORKERS COMPENSATION, et al., CASE NO On Appeal from the Franklin County Court of Appeals, Tenth Appellate District, Case No. 12AP-996 Appellees. BRIEF OF APPELLEE, ADMINISTRATOR, BUREAU OF WORKERS' COMPENSATION WILLIAM W. JOHNSTON ( ) 94 North Woods Boulevard, Suite Bl Columbus, Ohio (614) Tel. (614) Fax Counsel for Appellant, WFAL Construction MICHAEL DEWINE ( ) OHIO ATTORNEY GENERAL JOHN SMART ( ) Assistant Attorney General *CounseZ ofrecord 150 East Gay Street, 22nd Floor Columbus, Ohio (614) Tel. (866) Fax John. Counsel for Appellee, Administrator, Ohio Bureau of Workers' Compensation f...,^... ;i :7jr 't-f'1 y',+.,c : _ $'f% A ^,t, -,.x,.,.,^.,-,>...-m,.,,.":;._..---;-^---. zi s! f c.3'

2 TABLE OF CONTENTS TABLE OF AUTHORITIES... ii INTRODUCTION... 1 STATEMENT OF FACTS... 1 LAW AND ARGUMENT... 5 BWC's First Proposition of Law: Persons who perform construction work are "employees" under Ohio workers' compensation law if the evidence in the record supports the finding that they meet at least ten of the twenty statutory criteria set forth in R.C (A)(1)(c)... 5 BWC's Second Proposition of Law: Collateral estoppel does not apply where there is no evidence in the record that the facts or issues in controversy were directly litigated and adjudicated in a prior action involving the same parties CONCLUSION CERTIFICATE OF SERVICE i

3 TABLE OF AUTHORITIES Cases Coviello v. Indus. Comm. 129 Ohio St. 589 (1953)... 1 State ex rel. Bell v. Indus. Comm. 72 Ohio St.3d 575 (1995) State ex rel. Bryant v. Indus. Comm. 74 Ohio St.3d 458 (1996) State ex rel. Burley v. Coil Packing, Inc. 31 Ohio St.3d 18 (1987) State ex rel. LTV Steel Co. v. Indus. Comm. 88 Ohio St.3d 284 (2000)... 5, 10 State ex rel. Marshall v. Keller 15 Ohio St.2d 203 (1968) State ex rel. Mitchell v. Robbins & Myers, Inc. 6 Ohio St.3d 481(1983) State ex Yel. Noll v. Indus. Comm. 57 Ohio St.3d 203 (1991) State ex rel. Pass v. C. S. T. Extraction Co. 74 Ohio St.3d 373 (1996)... 5, 10 Thompson v. Wing 70 Ohio St.3d 176 (1994) Other Authorities R.C (A)(1)(c)... passim ii

4 INTRODUCTION In Ohio, the workers' compensation system is funded by the payment of premiugn dollars to the Bureau of Workers' Compensation ("BWC") by employers based upon the payroll of employees. A true independent contractor is not deemed to be an "employee" and, thus, those paying compensation to true independent contractors for the work they perform do not contribute into the workers' coznpensation system for payments made to such workers. Coviello v. Indus. Comm., 129 Ohio St. 589 (1953). To ensure the workers' compensation system receives sufficient contributions to fund the compensation and benefits it must pay injured workers, it is essential that employers be held responsible for paying contributions for their employees. Employers cannot be permitted to avoid making these contributions by claiming their workers are independent contractors. Here, WFAL Construction ("WFAL"), challenges the administrative determinations which held it was responsible to pay a workers' compensation premium to the BWC based upon the compensation it paid workers for services they performed associated with WFAL's construction business. WFAL's request for relief in mandamus asks nothing more than the court adjudicate the issue anew and substitute its decision for that of the BWC. As explained herein, WFAL fails to establish entitlement to the extraordinary relief provided by mandamus. STATEMENT OF FACTS In 2009, WFAL contracted with Ohio Fresh Eggs ("OFE") to rebuild barns that had been storm-dainaged. WFAL provided the labor and OFE provided the material. (Second Supplement, page 27; hereafter, "Sec. Supp. _"). No individual worker had a contract or agreement directly with OFE. OFE would give WFAL a work order, which WFAL's owner, Gary Buyer ("Buyer"), or someone at Buyer's direction, would then direct the workers to follow. 1

5 These workers' services were integrated into the functioning of WFAL's contract with OFE. Workers were required to perform the work personally, and were hired, supervised and paid by WFAL. These individuals worked for WFAL regularly, and were required to perform their work at the location identified by WFAL. (Sec. Supp. 57). WFAL paid the majority of its workers weekly, based on an hourly rate. The workers did not submit an invoice to WFAL for a whole job; they each submitted timesheets to WFAL. The workers did not realize a profit or loss from their work, and could quit without incurring liability for work they did not complete. WFAL had the right to hire and fire the workers. Id. In addition, on two occasions, WFAL workers were injured while performing repairs at OFE and both workers were granted the right to participate in the workers' compensation system as a WFAL employee. In the first claim, the BWC determined WFAL was the employer, and WFAL did not appeal this decision. In the second claim, the Industrial Commission fully adjudicated the claim, and found WFAL to be the employer. (Sec. Supp. 30, 33). WFAL did not submit to the BWC any payroll reports that included these workers, or pay to the BWC any premiums for these workers. In 2009, the BWC conducted an audit of WFAL's records and determined WFAL was required to have reported the wages of these workers as employees. (Sec. Supp ). Contrary to WFAL's statement of facts in its brief, the documents it provided to the auditor were largely irrelevant to the audit period. For example, most of the "independent contractor agreements" it submitted are dated in the final weeks of the audit period, at the same time the Internal Revenue Service was investigating WFAL's owner, and several are not identified in the payroll report submitted by WFAL in response to the audit. (Sec. Supp , 60). WFAL submitted fourteen BWC certificates of coverage to demonstrate its workers carried their own BWC coverage. One of the certificates was for Cimino 2

6 Construction, a company that WFAL told the auditor was a customer for which it planned to perform some work in (Sec. Supp. 58). One certificate belonged to another company, Creative Masonry, and one was an application, not a certificate, belonging to Susan Powell. These were the only certificates indicating coverage during the audit period. The remaining eleven certificates were for coverage in 2011 and 2012, more than two years after the audit period. When, in 2012, Buyer was asked if he made his workers get their own certificates of coverage he replied, "Now, I do." (Sec. Supp. 25). In July 2010, the BWC notified WFAL of its findings. (Sec. Supp ). WFAL contested this audit finding. (Sec..Supp. 1). At the Adjudicating Committee hearing, WFAL and the BWC each argued that the facts in this case, when applied to the "twenty factor test" set forth in R.C (A)(1)(c), supported their respective positions on whether the workers were WFAL employees or independent contractors. Under the twenty factor test, if at least ten of the twenty factors listed in (A)(1)(c) were met, the worker is deemed an employee under Ohio workers' compensation law. The Adjudicating Committee identified at least ten of these factors that demonstrated the workers were WFAL employees, and explained why each factor applied: FACTOR 1: The workers were required to comply with instruction from either the owner or an on-site lead carpenter. (R.C (A)(1)(c)(i)). FACTOR 2: The workers' services are integrated into the regular function of WFAL's operation, as these employees do all the work on this OFE project. (R.C (A)(1)(c)(iii)). FACTOR 3: The workers named on the records provided by WFAL performed the work personally. (R,C (A)(1)(c)(iv)). FACTOR 4: The workers were paid by WFAL. (R.C (A)(1)(c)(v)). FACTOR 5: Records that were available to the auditor showed that the same workers performed work repeatedly for WFAL. (R.C (A)(1)(c)(vi)). 3

7 FACTOR 6: Workers were paid for the specific number of hours worked on a weekly basis. (R.C (A)(1)(c)(xii)). FACTOR 7: The order of work was determined by WFAL. (R.C (A)(1)(c)(x)). FACTOR 8: Workers would not realize a profit or loss resulting from the services they provided. (R.C (A)(1)(c)(xvi)). FACTOR 9: WFAL had the right to discharge any of the workers. (R.C (A)(1)(c)(xix)). FACTOR 10: There was no indication that any of the workers would incur a liability if their relationship with WFAL ended. (R.C (A)(1)(c)(xx)). (Sec. Supp. 3). The Adjudicating Committee also noted the two allowed claims that had found WFAL was the employer of those injured workers. The Adjudicating Committee accepted the auditor's findings, concluded the BWC had demonstrated at least ten of the twenty factors had been met, that the workers were WFAL's employees, and denied WFAL's protest of the audit findings. Id. The order did not, as WFAL asserts, reject any of the auditor's findings, and did not specifically find in WFAL's favor on any item. WFAL appealed this decision, and the Administrator's Designee held a hearing on September 18, (Sec. Supp. 6-50). Following the hearing, the Administrator's Designee affirmed the Adjudicating Committee's decision, findings and rationale, and denied WFAL's appeal. (Sec. Supp. 5). This action in mandamus ensued. In mandamus, WFAL presented the same arguments that it had before the BWC. The Court of Appeals considered the record and, following a detailed analysis, concluded the BWC appropriately found ten of the statutory criteria support a finding that the workers were employees of WFAL. It denied WFAL's requested writ and WFAL filed its appeal in this court. 4

8 BWC's First Proposition of Law: LAW AND ARGUMENT Persons who perform construction work are "employees" under Ohio workers' compensation law when the evidence in the record supports the fmding that they meet at least ten of the twenty statutory criteria set forth in R.C (A) (1) (c). The question of whether a construction worker is an employee or independent contractor for workers' compensation purposes is defined by R.C (A)(1)(c). That statute replaces the generally applicable common law test to determine whether, in a workers' compensation claim, an employment or independent contractor relationship exists. It is limited to workers' compensations cases involving construction work, and if ten of the twenty factors listed in the statute are found to apply, then the worker is to be deemed an employee. The BWC heard evidence on the R.C (A)(l)(c) construction employee factors as to those workers obtained by WFAL to work on the OFE construction project. Its order identified the evidence on which it relied in finding these workers were WFAL employees. WFAL does not dispute the BWC heard and considered relevant evidence or issued a complete order. WFAL simply disagrees with how the BWC weighed and evaluated the evidence. However, the BWC, through the Adjudicating Cominittee and Administrator's Designee, is the exclusive evaluator of weight and credibility of evidence. State ex rel. LTV Steel Co. v. Indus. Comm., 88 Ohio St.3d 284, 287 (2000); State ex rel. Pass v. C.S.T. Extraction. Co., 74 Ohio St.3d 373, 376 (1996). The BWC's finding on each factor is supported by evidence in the record. The BWC concluded that ten of the criteria of R.C. 4123(A)(1)(c) were met in this case. First, the BWC found that the workers must comply with WFAL's instructions [R.C (A)(1)(c)(i)]. The audit found workers received their instruction from WFAL (Sec. Supp. 57) and the auditor testified workers were required to follow those instructions. (Sec. 5

9 Supp. 27). Buyer, the owner of WFAL, testified that, if there was a crisis requiring immediate attention and he was not present, he permitted an OFE supervisor, Paul Hendershot to "pull my ^?ys off and go fix that." (Sec. Supp ) (emphasis added). Buyer also testified that when Hendershot spoke to his workers it was "as if they worked for him." (Sec. Supp. 38). Contrary to WFAL's assertion that Buyer never testified that he provided direction, at the hearing Buyer stated that Hendershot would call him "and I would have to direct." Id. When Buyer's counsel inquired whether Hendershot was involved with the workers, Buyers testified, "As much as I was, yes." Id. The Court of Appeals properly found the evidence supported a finding that the workers were instructed on the manner or method of performing services, and that Buyer or someone he authorized would be the person providing that direction. Decision 40. Second, the BWC held that worker services are integrated into the regular functioning of WFAL's business [R.C (A)(1)(c)(iii)]. The BWC reached this conclusion based on the fact that the workers "do all of the work." (Sec. Supp. 3). Thus, the workers performed all of the tasks required under WFAL's contract with OFE, and the work performed was integral to the work WFAL had been hired to do by OFE. At hearing, no evidence was offered to the contrary because Buyer's counsel misunderstood the meaning of whether the requirement, "the person's services are integrated into the regular functioning" of WFAL's business. The requirement asks whether the workers performed all the employer's tasks, but Buyer's counsel asked Buyer whether a single worker performed all WFAL's tasks: "[F]or example, if you hire somebody who does insulation and the insulation work is done, then do you move them over to a painter or carpenter?" (Sec. Supp ). Because Buyer and his counsel misunderstood this requirement, the Court of Appeals properly found Buyer's testimony to be nonresponsive, and agreed with the 6

10 BWC's position. Decision 45. In its brief, WFAL continues to misunderstand this requirement, and so continues to assert a nonresponsive position on this issue. WFAL Brief, pp Third, the BWC held that workers must perform the work personally [R.C (A)(1)(c)(iv)]. The audit found individuals cannot sublet their job to others, but are paid hourly to do labor themselves. (Sec. Supp. 57 at 4). WFAL reported a worker may be able to substitute "with approval from WFAL."' (Sec. Supp. 67). The Court of Appeals found that, given that a substitution required WFAL's approval, the BWC could hold that the work has to be done personally by the workers hired by Buyer. Decision 51. Fourth, the BWC found that workers are hired, supervised or paid by WFAL [R.C (A)(1)(c)(v)]. WFAL concedes it hires and pays the workers. (Sec. Supp , 20, 38, 40-41, 46, 67). WFAL Brief p. 23. Decision 54. Fifth, the BWC concluded that a continuing or recurring relationship is contemplated [R.C (A)(1)(c)(vi)]. The audit found the timesheets submitted from workers were the same workers repeatedly. (Sec. Supp. 35). Buyer testified "A lot of them did work for me because I paid every week and I had a lot of work at the time." (Sec. Supp. 23). As the Court of Appeals noted, Buyers also testified that the workers he hired did not have workers' compensation coverage during the period of the audit. Decision 59. (Sec. Supp. 25). Sixth, the BWC held that workers were paid by WFAL on a regular basis [R.C (A)(1)(c)(xii)]. WFAL concedes it hires and pays the workers weekly, based on hourly wages and based on timesheets, not invoices. (Sec. Supp. 20, 27-28, 35, 40-41, 46, 84). The Court of Appeals addressed WFAL's assertion that the BWC ruled everyone was paid by hours worked and so did not consider flat fee contracts or flat weekly payments. The Court first noted the BWC's response to this argument: WFAL concedes it hires and pays the workers weekly, 7

11 based on hourly wages and based on time sheets, not invoices submitted to WFAL. The Court then found that assuming "some" of the workers hired by WFAL "were contracted" as Buyer testified, nevertheless, WFAL does concede that, other than the contract workers, the hired workers were paid weekly based on hours worked, as they submitted their hours on time sheets, rather than not invoices. There was clearly some evidence to support the BWC's finding that individuals were paid for the specific number of hours worked on a weekly basis. Decision 66. Seventh, the BWC held that the worker must follow WFAL's order of work [R.C (A)(l)(c)(x)]. The audit found workers must follow the work order that Buyer provided (Sec. Supp. 57) and the auditor testified WFAL was given a work order which the workers were to follow. (Sec. Supp. 27). Buyer testified that OFE's on-site supervisor, Paul Hendershot, provided him with the order of work. (Sec. Supp. 18). During the hearing, the BWC's legal advisor challenged Buyer's interpretation of this factor, arguing that the workers took their direction from him, not OFE, and at no time did Buyer contest the legal advisor's explanation. (See. Supp ). Instead, Buyer testified that any direction from Hendershot required his approval, explaining if there was a crisis requiring im.mediate attention and he was not present he permitted Hendershot to "pull my guys off and go fix that." (Sec. Supp ). The Court of Appeals agreed, acknowledging that the BWC weighs the evidence in the record, and commenting that even if it can be argued that the evidence was subject to interpretation, there was some evidence supporting the BWC's finding on this factor. Decision 72. WFAL incorrectly interpreted the court's reference to the BWC's legal advisor's questions as testimony from counsel when, in fact, the court identified the legal advisor's statement as argument, not testimony, and did not include it as evidence in support of the BWC's finding. Decision 70. 8

12 Eighth, the BWC found that workers did not realize a profit or loss [R.C (A)(1)(c)(xvi)]. WFAL pays the workers weekly, based on hourly wages and based on timesheets, not invoices. (Sec. Supp. 20, 35, 40-41, 46). This is corroborated by Buyer's response to the audit. (Sec. Supp. 67), as well as the payroll submitted by WFAL in response to the audit. (Sec. Supp. 60). WFAL attempts to show an independent contractor relationship through the testimony of Osman Rodriguez, but that testimony was limited to Mr. Rodriguez's relationship with WFAL--and not any other worker's relationship with WFAL--and the evidence does not indicate the arrangement Mr. Rodriguez describes was the arrangement in place in (Sec. Supp ). In fact, the payroll records of WFAL do not show any payments to Osman Rodriguez in 2009 (Sec. Supp. 60). The court of appeals agreed. Even if WFAL proved it had an independent contractor relationship with Osman Rodriguez, that alone does not flaw the cammittee's finding. Decision T78. Ninth, the BWC held that WFAL had the right to discharge the worker [R.C (A)(1)(c)(xix)]. Buyer concedes WFAL had the right to hire and fire the workers. (Sec. Supp , 24, 28, 30, 66; WFAL Brief p. 23). Finally, the BWC held that WFAL met a tenth criteria, in that workers could end the relationship without incurring liability [R.C (A)(1)(c)(xx)]. Individuals had the right to end the relationship at their will, without incurring any liability for jobs that are not complete. (Sec. Supp. 57). WFAL reported, in one of the questionnaires it completed, that workers could end the relationship without incurring liability. (Sec. Supp. 66). The court of appeals agreed, rejecting WFAL's assertion that R.C (A)(1)(c) requires a written contract in order to be applicable. DecisionT85. WFAL failed to address this factor in its brief in this court. 9

13 Because there is evidence in the record to support each of the factors cited by the BWC, the BWC did not abuse its discretion in concluding that workers who performed the repairs for its project at OFE were WFAL employees, for whom WFAL is responsible for the payment of premiums for workers' compensation coverage. Re-weighing the evidence, as WFAL seeks, cannot be the function or responsibility of the court in these proceedings. The fact-finder is the Adjudicating Committee and the Administrator's Designee on appeal. Like the courts' findings relative to mandamus actions involving an order of the Industrial Commission of Ohio, the administrative agency - here the BWC - is the exclusive evaluator of weight and credibility of evidence. LTV Steel Co., at 287; Pass, at 376. Likewise, the order of the fact-finder need not be in great detail, nor need it "explainaway" evidence which was not used to support the decision. Rather, the order need only "briefly explain" the reasoning for the decision. State ex t el. Noll v. Indus. Comm., 57 Ohio St.3d 203 (1991). See also, State ex rel. Mitchell v. Robbins & Myers, Inc., 6 Ohio St.3d 481 (1983); State ex rel. Bell v. Indus. Comm., 72 Ohio St.3d 575 (1995). Here, the totality of the evidence suggests that, for purposes of workers' compensation premium responsibility, the BWC did not abuse its discretion in holding that WFAL's workers should be deemed to be employees. It is important to recall that mandamus does not afford a relator a de novo review of the evidence, with the hope that the court will come to a decision contrary to that of the state administrative agency that is entrusted with making such determinations. Pass, at 276; State ex rel. Bryant v. Indus. Comm., 74 Ohio St.3d 458, 460 (1996) ("we will not review the commission's findings de novo"). "Mandamus is not a substitute for an appeal, nor can it be used to create an appeal in cases where an appeal is not provided by law." State ex rel. Marshall 10

14 v. Keller, 15 Ohio St.2d 203 (1968). For obvious reasons, WFAL merely sees things differently than the Adjudicating Committee. The fact-finding body, however, is the Adjudicating Committee, and not WFAL or Buyer. BWC's Second Proposition of Law: Collateral estoppel does not apply where there is no evidence in the record that the facts or issues in controversy were directly litigated and adjudicated in a prior action involving the same parties. WFAL asserts the BWC "is barred from pursuing the conclusions reached by the Adjudicating Committee that workers were all "employees" because that issue was previously resolved by the BWC in WFAL's favor in 1999." WFAL Brief p By this WFAL means there was a similar audit ten years prior, the result of which it argues has some bearing on the 2009 audit> Unfortunately, WFAL submitted just five pages from a 1999 audit, none of which provide a clear idea of what was examined or concluded. (Sec. Supp ). (There are no documents at all in the record that support WFAL's claim of a 2006 IRS audit finding WFAL had no employees). The hearing transcript shows WFAL did not present or elicit any testimony regarding an earlier audit before the Administrator's Designee. (Sec. Supp. 6-50). WFAL devoted two sentences of his brief in the Court of Appeals to an earlier audit, does not mention it in his reply and inserted one sentence in his objections to the magistrate's decision. Although WFAL included four sentences in its Reply to BWC's Memorandum Contra WFAL's Objections, the Court of Appeals granted the BWC"s motion to strike WFAL's filing, finding the arguinents in the filing were not contained in the original filing, and a reply to a memorandum contra objections is not permitted under the court's rules. Decision p. 2 fn

15 There is no evidence in the record that a 1999 audit has any bearing on this case. Collateral estoppel (issue preclusion) prevents parties or their privies from relitigating facts and issues in a subsequent suit. Collateral estoppel applies when the fact or issue: (1) was actually and directly litigated in the prior action, (2) was passed upon and determined by a court of competent jurisdiction, and (3) when the party against whom collateral estoppel is asserted was a party in privity with a party to the prior action. Thoinpson v. Wing, 70 Ohio St.3d 176, 637 N.E.2d 917 (1994). The few documents WFAL introduced into the record from the 1999 audit show WFAL engaged in rough carpentry framing for residential new construction, and report "all employees work in manual 5645." (Sec. Supp. 64). By contrast, the 2009 audit reported, "There is no residential building reportable to manual 5645 at this time" and "Gary used to do framing in the Columbus area for residential builders." (Sec. Supp. 51, 58). The 2009 audit report reveals the rnajority of work WFAL currently performs is roofing, and also identifies repairs to barns, demolition, and sheet metal siding, work which is not identified in the few pages of the 1999 audit. (Sec. Supp. 58). There is no evidence demonstrating any similarity between the 1999 and 2009 ownership, management structure, or the size or type of the business in which WFAL was engaged. With no evidence that a 1999 audit of WFAL adjudicated the sanie facts or issues as the 2009 audit, WFAL's collateral estoppel claim lacks merit. CONCLUSION As long as some evidence exists supportive of the administrative decision, it cannot be said that the agency grossly abused its discretion. State ex rel. Burley v. Coil Packing, Inc., 31 Ohio St.3d 18 (1987). Here, there was such evidence and WFAL has failed to establish an 12

16 entitlement to issuance of a writ of mandamus. Accordingly, the extraordinary writ of mandamus he seeks must be denied. Respectfully submitted, MICHAEL OHIO A TOI^NEYE ( ERAL JOHN SMART (0 2357) Assistant Attorney eneral *Counsel of Reco d 150 East Gay Stree 22nd F or Columbus, Ohio (614) Tel. (866) Fax John. Smart@OhioAttomeyGeneral.gov Counsel for Appellee, Administrator, Ohio Bureau of Workers' Compensation 13

17 CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing was served on this 27th day of May, 2014, to: Via U.S. Mail William W. Johnston 94 North Woods Boulevard, Suite B 1 Columbus, Ohio Counsel for Appellant, WFAL Construction 14