State News : Alabama

On March 14, 2014, the Alabama Court of Civil Appeals released its opinion in the case ofMichael Brown v. Dixie Contracting Company and Salter’s Exterminating Company, Inc. In that case, Brown sued Dixie and Salter’s for injuries he allegedly suffered in an automobile accident while working for them. The vehicle that Brown was driving at the time of the accident was owned by the owner of Dixie. Dixie and Salter’s are related companies, as the owner of Dixie was a majority shareholder in Salter’s. The two companies operated out of the same building, and they shared a secretary and receptionist. Salter’s performed termite inspection and extermination services, and Dixie would often repair termite damage discovered through Salter’s inspections. Brown alleged Dixie and Salter’s were essentially the same company, and that his injuries occurred in and arose out of his employment with both defendants. Dixie contended that Brown did not work for Dixie, and Salter’s contended that Brown was an independent contractor.

Brown testified that at the time he was hired, the owner of Dixie never specified whether Brown was being hired as an employee or independent contractor. He also testified that he did not sign a contract with Salter’s or Dixie. Brown testified that he considered himself to be an employee and that his supervisor told what time to be at work and when he could leave. Brown testified that his supervisor would tell him on any given day whether he was to sell pest control services or was to work construction. Brown testified that on some days he would sell pest control services for Salter’s, and on other days, he would perform construction work for Dixie. Brown further testified that when performing inspections for Salter’s, he was instructed to call Dixie if any termite damage was located so that Dixie could quote the repairs. Salter’s payroll records listed Brown as a 1099 "employee" who was to be paid a "draw" against commissions and sales. However, those same records indicated that Brown was actually paid at a flat rate of $80.00 per day for sales work, while he was paid at an hourly rate for construction work he performed for Dixie. Brown’s supervisor testified that he had hired Brown to work for Salter’s as a subcontractor in sales, but that Brown was also an "at will employee" that could be terminated for any reason. He testified that Brown was required to report to work by 8:00 a.m. each day. The defendants produced evidence that Brown was always paid by Salter’s and never by Dixie, and that Brown only performed construction work after the accident. However, Brown’s evidence also established that several other employees performed work for Dixie but were paid by Salter’s.

The trial court found that Brown was an independent contractor of Salter’s and that Brown did not perform any work for Dixie until after the alleged accident occurred. Based on this, the trial court denied workers’ compensation benefits. Brown appealed on the grounds that the trial court’s order did not include adequate findings of fact and conclusions of law, and was not supported by substantial evidence. The Alabama Court of Appeals agreed that the findings of fact and conclusions of law set out by the trial court were insufficient, which allowed them to look to the record in order to determine whether substantial evidence supported the trial court’s determination. The Court of Appeals noted that the primary factor in determining whether a worker is an employee or an independent contractor is whether the purported employer has reserved the right to control the manner in which the worker performs the duties of the work. In order for a worker to be considered an employee, the prospective employer must retain the right to direct not only what shall be done but also how it shall be done. The Court further pointed out that the four factors to be considered in determining whether an "employer" has retained the right of control include: (1) direct evidence demonstrating a right or an exercise of control; (2) the method of payment for services; (3) whether equipment is furnished; and (4) whether the other party has the right to terminate the employment. However, the Court also pointed out that no one fact by itself can create an employer/employee relationship, and that the retention of control necessary to establish such a relationship is determined on a case-by-case basis considering the totality of the evidence.

Based on the evidence, the Court of appeals found that Salter’s controlled nearly every aspect of Brown’s employment. Salter’s controlled whether Brown would perform tasks in pest control sales or construction as Salter’s or Dixie needed. Salter’s controlled the manner in which Brown would be paid for the different jobs he did and capped his weekly pay at $400.00. Salter’s provided the very equipment he was driving at the time of the accident. There was no contract between Brown and his employers that would prevent Brown from quitting his job at any time. Based on the totality of the evidence, the Court found that the trial court’s Order was not supported by substantial evidence, and that Brown was an employee. The case was then remanded to the trial court to determine the amount of workers’ compensation benefits Salter’s owes to Brown.

MY TWO CENTS

Employers need to be aware that paying a contractor via a 1099 as opposed to a W-2 does not necessarily preclude the contractor from recovering workers’ compensation benefits in the event of an injury. As this case demonstrates, if an employer retains the right to set the employee’s schedule, dictates which tasks he is to perform on any given day, provides his equipment, and pays him like a salaried or hourly employee, the contractor will be considered an employee.

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ABOUT THE AUTHOR

This article was written by Charley M. Drummond, Esq. of Fish Nelson, LLC. Fish Nelson is a law firm located in Birmingham, Alabama dedicated to representing employers, self-insured employers, and insurance carriers in workers’ compensation cases and related liability matters. Drummond and his firm are members of The National Workers’ Compensation Defense Network (NWCDN). The NWCDN is a national and Canadian network of reputable law firms organized to provide employers and insurers access to the highest quality representation in workers’ compensation and related employer liability fields. If you have questions about this article or Alabama workers’ compensation issues in general, please feel free to contact the author at cdrummond@fishnelson.com or (205) 332-3414.