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C. Loney Concrete Construction Inc. v. Employment Relations Division/ Uninsured Employers' Fund

Court of Workers Compensation of Montana

August 15, 1997

C. LONEY CONCRETE CONSTRUCTION, INCORPORATED (CLAY LONEY) Appellant
v.
EMPLOYMENT RELATIONS DIVISION/ UNINSURED EMPLOYERS' FUND Respondent.

          Submitted Date: February 12, 1997

          ORDER ON APPEAL

          Mike McCarter Judge.

         Summary: In this second appeal of this case, a concrete contractor challenges the second determination of the Department of Labor that none of the contractor's workers meet the definition of "temporary worker" in section 39-71-116(24), MCA (1991). Among other things, the putative employer argues that the DOL hearing officer again applied an erroneous standard of proof and that substantial evidence does not support the hearing officer's determination that no employees were temporary.

         Held: Careful reading of the hearing officer's decision indicates that he found the evidence as to some employees inconclusive and resolved the status of those workers based on the contractor's failure to prove they were temporary workers. This analysis improperly shifted the burden of proof to the contractor. As to other workers, the record supports the hearing officer's conclusion they were baseline and not temporary workers. As held in the prior appeal, the phrase "emergency or short-term" within section 39-71-116(24), MCA (1991) means as follows: emergency contemplates something unforseen and unexpected, requiring immediate action; short-term contemplates a workload which is greater than a normal workload and exists for a matter of weeks or at most a few months. The hearing officer erroneously concluded that the contractor must include an expected need for short-term employees in his overall volume of business and insure an average number of such employees. As held previously, workers furnished for short-term overloads, either for a specific time, or to work on a specific short-term project until completion, may be considered temporary employees so long as they are not furnished on an indefinite basis. The hearing officer's affirmation of the DOL cease and desist order was proper because the contractor was operating with some non-temporary employees, but the DOL findings are reversed with regard to specific employees.

         Topics:

Constitutions, Statutes, Regulations and Rules: Montana Code Annotated: section 39-71-116(24), MCA (1991). In this second appeal of this case, a concrete contractor challenges the second determination of the Department of Labor that none of the contractor's workers meet the definition of "temporary worker" in section 39-71-116(24), MCA (1991). Careful reading of the hearing officer's decision indicates that he found the evidence as to some employees inconclusive and resolved the status of those workers based on the contractor's failure to prove they were temporary workers. This analysis improperly shifted the burden of proof to the contractor. As to other workers, the record supports the hearing officer's conclusion they were baseline and not temporary workers. As held in the prior appeal, the phrase "emergency or short-term" within section 39-71-116(24), MCA (1991) means as follows: emergency contemplates something unforseen and unexpected, requiring immediate action; short-term contemplates a workload which is greater than a normal workload and exists for a matter of weeks or at most a few months. The hearing officer erroneously concluded that the contractor must include an expected need for short-term employees in his overall volume of business and insure an average number of such employees. As held previously, workers furnished for short-term overloads, either for a specific time, or to work on a specific short-term project until completion, may be considered temporary employees so long as they are not furnished on an indefinite basis. The hearing officer's affirmation of the DOL cease and desist order was proper because the contractor was operating with some non-temporary employees, but the DOL findings are reversed with regard to specific employees.
Employment: Temporary Employees. In this second appeal of this case, a concrete contractor challenges the second determination of the Department of Labor that none of the contractor's workers meet the definition of "temporary worker" in section 39-71-116(24), MCA (1991). Careful reading of the hearing officer's decision indicates that he found the evidence as to some employees inconclusive and resolved the status of those workers based on the contractor's failure to prove they were temporary workers. This analysis improperly shifted the burden of proof to the contractor. As to other workers, the record supports the hearing officer's conclusion they were baseline and not temporary workers. As held in the prior appeal, the phrase "emergency or short-term" within section 39-71-116(24), MCA (1991) means as follows: emergency contemplates something unforseen and unexpected, requiring immediate action; short-term contemplates a workload which is greater than a normal workload and exists for a matter of weeks or at most a few months. The hearing officer erroneously concluded that the contractor must include an expected need for short-term employees in his overall volume of business and insure an average number of such employees. As held previously, workers furnished for short-term overloads, either for a specific time, or to work on a specific short-term project until completion, may be considered temporary employees so long as they are not furnished on an indefinite basis. The hearing officer's affirmation of the DOL cease and desist order was proper because the contractor was operating with some non-temporary employees, but the DOL findings are reversed with regard to specific employees.

         This is the second time this case has been before this Court on judicial review. The crux of the controversy is whether workers used by appellant in its concrete business, but supplied by a temporary services agency, were in fact temporary employees as defined by section 39-71-116(24), MCA (1991).[1] Appellant (hereinafter referred to as "Loney") was not required to provide workers' compensation insurance coverage for temporary employees. Id. and section 39-71-117(2), MCA (1991). The Department Of Labor and Industry (Department), however, determined that the workers were not temporary employees and issued an order under section 39-71-507, MCA (1991), directing Loney to cease and desist from operating an uninsured business. Loney requested a hearing and after hearing the Department upheld the Order. In the first appeal (Loney I)[2], this Court affirmed the Department's cease and desist Order, finding that there was substantial evidence to support the conclusion that some workers were employees of Loney and not temporary employees. However, based on the hearing officer's use of an erroneous legal standard in determining which employees were allocable to Loney, I reversed the Department's finding that none of the workers were temporary employees and remanded the case to the Department with directions that, using the correct standard, it make specific findings concerning which workers should have been insured by Loney. In the alternative, I directed the Department to excise its finding that none of the employees were temporary workers. Neither party appealed my determination to the Supreme Court, thus my decision became final.

         Thereafter, the Department chose to hold another hearing and make additional findings. It issued a new decision on June 27, 1996, entitled, as its first decision, "Findings of Fact; Conclusions of Law; and Final Order." The new decision again determined that none of the workers furnished to Loney by Olsten Temporary Services (Olsten) met the statutory definition of a "temporary worker."

         This second appeal followed on July 29, 1996. Briefing was completed on February 12, 1997, at which time the matter was deemed submitted for decision.

         Record on Appeal

         The record on appeal consists of the transcripts of the original hearing conducted on February 4, 1993 (tr. I) and the hearing held after remand on September 28, 1995 (tr. II). The Court also has the Department's file, including the exhibits submitted at the two hearings.

         Factual Background

         The facts pertaining to this matter are found in this Court's prior decision of December 28, 1993, and the record developed following remand.

         Appellant is a close corporation. Its sole shareholders are Clay Loney and his wife. (Tr. II at 33.) The Court shall hereinafter refer to both the corporation and its shareholders as "Loney."

         Loney is a concrete contractor. It began business in 1983 and incorporated in 1988. (Tr. II at 33.) Its business is affected by weather and by fluctuations in construction demand. Over the years, the number of Loney's construction jobs at any given time have varied, as have the number of workers it employed. Loney's jobs also varied in size. Some jobs required as few as two workers, others as many as seventeen.

         During 1991, Loney employed a total of 33 individuals. In 1992, it employed 26 individuals. Some employees were full-time, others worked only a few hours.

         In June of 1992, Loney determined that it could no longer afford a permanent work force and entered into an arrangement with Olsten to provide temporary workers for the business. Olsten paid the temporary employees and provided workers' compensation coverage for them; however, Loney fixed the hourly wages of the workers. He reimbursed Olsten for those wages and paid an additional percentage fee to cover Olsten's overhead costs and, presumably, to provide it with a profit.

         In July 1992, Loney began obtaining workers exclusively through Olsten. He notified employees who had been working for him that they should sign up with Olsten. Those workers submitted employment applications to Olsten and were interviewed by Darlene Schulke (Schulke), who was the Great Falls manager for Olsten. They were put on Olsten's list of available workers.

         Thereafter, when Loney needed concrete workers, including supervisors, he called Schulke. He told her the type of workers he needed and in some cases asked that specific individuals be sent. In most cases, the workers sent by Olsten were the same individuals Loney had previously employed. Some of the workers sent to Loney were also referred to jobs with other employers. After referral, Olsten's only follow-up was telephone contact with Loney to determine if a referred worker was working out.

         Beginning in 1990, Veronica Hall (Hall) performed bookkeeping services for Loney on an as needed, part-time basis. She had registered with Olsten in 1988 and, in addition to her work for Loney, she worked part time for other employers. After Loney entered into the arrangement with Olsten, Hall continued to do Loney's bookkeeping. The amount of her work, however, diminished because she no longer did payroll. With regard to Hall, there was a continuity in her services. There was no testimony indicating that Loney called Olsten every time he had bookkeeping needs. Other than her workload, the working relationship and arrangement was unaffected by the Olsten arrangement.

         Additional Facts from September 1995 Hearing

         At the hearing in September of 1995, the Uninsured Employers' Fund (UEF) presented additional testimony and exhibits.

         Exhibits 11 and 14 consisted of Loney's quarterly reports and established the number of Loney's employees and the size of his payroll prior to its contract with Olsten in July 1992. The Quarterly Reports show the number of employees working during each month from July 1990 through December 1991. Beginning in January of 1992, Loney was no longer required to report the number of workers employed; thus he did not report the number of employees for the first half of 1992. However, payroll and unemployment insurance reports collected by James Watts (Watts), a field investigator for the Department, provides similar information for 1992. Exhibit 22 at page 4 summarizes wage information by named employee for the January 1 to June 30, 1992 period. (See Tr. II at 72-75.) Comparative information for workers supplied by Olsten's subsequent to June 30, 1992, was supplied to the hearing officer in Exhibit 20.

         The following chart shows the total number of workers for each of the months beginning in July 1990 and ending December 1992.

First Quarter Second Quarter Third Quarter Fourth Quarter

Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
1990





15 14 16 13 12 10
1991 4 9 12 9 13 12 15 13 13 12 11 11
1992 *11 *10 *13 *12 *15 *14 **14 **17 **15 **14 **13 **14

(Exhibits 11, 14, and 23. *Exhibit 22-4. **Exhibits 20 and 21.) On a quarterly basis, the total wages ...


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