R. ZIMMERMAN, INOCO INCORPORATED/ BIG Z TRUCKING/ZIMMERMAN TRADING COMPANY Appellants
UNINSURED EMPLOYERS' FUND/ STATE COMPENSATION INSURANCE FUND Respondents.
Submitted: June 4, 1997
ORDER ON APPEAL
Trucking company appealed decision of the Department of Labor
and Industry finding it did not have workers'
compensation insurance for a specific period and assessing a
penalty of $14, 659.86. In addition to arguing that it should
not have been governed by the Montana Workers'
Compensation Act, the trucking company argued it did in fact
have a workers' compensation policy through the Montana
State Compensation Insurance Fund, which was issued in
another name, but allegedly for the same company.
To the extent the Department of Labor's order assessed a
penalty against the individual owner, the decision below is
reversed. The hearing officer's decision did not find
reasons to ignore the protections against individual
liability afforded through incorporation under Montana law.
While evidence indicated several associated companies, one of
which may have had a policy with State Fund, there was only
one company employing the individuals in question during the
time period at issue. The "new" policy with State
Fund had not been purchased to cover those individuals, who
had been employed previously. Under 39-71-118, MCA (1993),
the individuals in question were employees for whom the
employer should have purchased Montana workers'
compensation insurance where they were residents of Montana
and their work was controlled from Montana. The penalty
assessment against the corporate entities is upheld.
Employment: Montana employment. Under
39-71-118, MCA (1993), truck drivers were employees for whom
the employer should have purchased Montana workers'
compensation insurance where they were residents of Montana
and their work was controlled from Montana. A penalty
assessment issued the Department of Labor is upheld against
specific corporate entities.
Penalties: Uninsured Employers. To the
extent the Department of Labor's order assessed a penalty
against the individual owner of a corporate uninsured
employer, the hearing officer's decision affirming the
order is reversed. The hearing officer's decision did not
find reasons to ignore the protections against individual
liability afforded through incorporation under Montana law,
but merely appeared to find liability against the individual
as well as corporate entities.
an appeal from a decision of the Montana Department of Labor
and Industry (Department) determining that the appellants did
not have workers' compensation insurance, as required by
law, for the period December 21, 1992 to May 2, 1994. Based
on that determination, the Department assessed a penalty
against appellants in the amount of $14, 659.86. Appellants
disagreed with the determination and sought judicial review
by this Court. After carefully reviewing the record below,
this Court affirms the decision of the
Department with respect to the Montana corporation known as
Inoco, Inc., which was formerly known as Big Z, Inc. Insofar
as the decision below may purport to impose joint or several
liability for the penalty upon Robert Zimmerman and Zimmerman
Trading Company, it is reversed.
Zimmerman operates a number of businesses. As pertains to
this case, the evidence shows that he is the principal
shareholder of a Montana corporation incorporated in 1982 as
Roosevelt Disposal, Inc. (Tr. at 16.) In 1986 the corporate
name was changed to Big Z, Inc. (id.) which shall
hereafter be referred to as "Montana Big Z." In
October 1993 the Montana corporation again changed its name,
this time to Inoco, Inc., by which name it continues to be
known. While there was some initial confusion of names during
the hearing below, it is clear that Montana Big Z and Inoco
are the same corporation. The different names were used
during different time periods. For convenience, the Court
will refer to the corporation as "Montana Big Z."
(Id. at 16, 22.)
Big Z is a trucking company. In 1991 the company employed 68
truck drivers and had a payroll in excess of $250, 000.
(Uninsured Employers Fund [UEF] Ex. B at 15.)
early 1992 Zimmerman incorporated a second, separate
corporation in the State of Utah using the name "Big Z,
Inc." (Tr. at 17.) To avoid confusing the two
corporations, the Utah company will be referred to as
"Utah Big Z."
Big Z listed its office in Salt Lake City. (See UEF Ex. G at
1-3.) Like Montana Big Z, it was a trucking company. (Tr. at
18; UEF Ex. G.) It operated refrigerated
trucks. (Tr. at 21.) The operation was short-lived
and Utah Big Z was sold in August 1992. (Id. at 18.)
Utah Big Z's cessation of business in August 1992,
Montana Big Z did business in Utah. That business primarily
involved trucking oil from refinery sites in Utah to
construction projects in Utah, although a handful of loads
were hauled in Montana and Wyoming. Montana Big Z conducted
trucking operations in Utah throughout 1993.
Montana Policies Covering Montana Big Z.
Big Z obtained workers' compensation insurance through
the Montana State Compensation Insurance Fund on January 24,
1987. (State Fund [SF] Ex. 4.) That policy was
canceled on December 21, 1992, for non-payment of premium.
(SF Ex. 7.) Montana Big Z was thereafter uninsured until May
3, 1994, when it reinsured with the State Fund under its new
name, Inoco, Inc. (UEF Ex. F at 10.) Thus, between December
21, 1992 and May 3, 1994, Montana Big Z lacked Montana
workers' compensation insurance coverage.
Z, Inc." was covered by the Utah State Compensation Fund
for the period March 28, 1992 to September 16, 1994. (UEF Ex.
C at 5; Inoco Ex. 1 at 1-2.) Which Big Z was covered --
Montana Big Z or Utah Big Z -- is debatable. The initial
application to the Utah Fund listed a Salt Lake City office
for the corporation, which suggests that Utah Big Z was to be
the insured. The office address was changed in April 1993 at
the request of the bookkeeper for Zimmerman's various
businesses. She wrote on the April Utah Fund billing,
"Please change my address." (UEF Ex. G at 4.) She
then wrote in the Billings address used by various Zimmerman
businesses, including Montana Big Z. (Id.) Later on,
at least by November 1993, the Utah Fund was notified that
the name of the corporation had been changed to Inoco, Inc.
Aaberg was hired as Big Z's bookkeeper in February 1992.
(Tr. at 41-42) In April 1992 she was transferred to the
payroll of Zimmerman Trading Company but continued to do the
bookkeeping for Big Z. She also dispatched Montana Big Z
truckers in 1993 (id. at 22-23) and prepared
workers' compensation information submitted to the Utah
Fund. (Id. at 31; Inoco Ex. 2.)
1992 and 1993, Aaberg was unaware of the fact that there were
two Big Z corporations. (Tr. at 59.) Aaberg testified:
I didn't know there was a separate corporation with
articles and the whole shebang set up in the state of Utah. I
thought it was the Montana corporation at that time. I mean,
I am aware now that there is a Utah corporation but I
wasn't [then]. I thought it was all one corporation
because it all had the same name.
Utah policy was intended to, and in fact, covered Utah Big Z,
then Montana Big Z had no coverage either in Utah or Montana
between December 21, 1992 to May 3, 1994. The record contains
no information indicating that the Utah Fund ever addressed
the matter, or was ever even aware there were two different
corporations. (UEF Ex. C at 5-6). Neither the UEF nor the
State Fund has contended that Montana Big Z was uninsured in
Utah, so the matter is academic.
Wesley Long's Accident and Workers' Compensation
September 1, 1993, Wesley Long (Long) was injured in a truck
accident in Utah. At the time of the accident he was driving
a truck for Montana Big Z. (Utah Big Z had ceased to exist
more than a year prior to the accident.) Long was being paid
by Montana Big Z and his wages were being reported for
unemployment and workers' compensation purposes by
Montana Big Z. (UEF Ex. G at 19.)
submitted a claim for compensation to the Utah Fund. The Utah
Fund initiated benefits pending further investigation. (UEF
Ex. C at 1.) After investigation, the Utah Fund denied
liability for the claim, finding that Long was not a Utah
employee. (Id. at 5-6.) In a January 6, 1995 letter
to Long's attorney, the Utah Fund listed its reasons for
determining that Long was not a Utah employee. According to
be advised that the Workers Compensation Fund has denied
further payment of Mr. Long's claim for the following
-The police report for the September 1, 1993 accident lists
Mr. Long as being a Montana resident.
-The medical bills received list Mr. Long with a Montana
-Mr. Long's driver's license is a Montana
-At the time of Mr. Long's accident, there was not a
terminal office located in Utah for quite a length of time.
-The employer's report infers that Mr. Long was
supervised controlled by the dispatcher out of Billings,
-It was determined that premium was not paid for Mr. Long.
I quote Workers Compensation Fund's attorney, Shaun
Howell's February 25, 1994 letter to Big Z Inc., "On
April 5, 1993, our office received notification to change the
insured's mailing address to a post office box in
Billings, Montana, as it appears that you were closing your
Salt Lake City operations and relocating the company back to
Billings in late 1992 or early 1993. According to the
reported payrolls that we received in our office, the payroll
dropped dramatically during that period. In July 1993, the
reported trucking payroll was $2, 025. In August 1993, the
reported trucking payroll was $1, 502 and for September 1993
the reported trucking payroll was $1, 507. On the
employer's report submitted for Wesley Long, you reported
that his payroll was approximately $800/week (a monthly wage
of $3, 467). Our office also verified wages of this amount
with you over the phone. The employer's report indicated
that Wesley Long was employed by the insured for at least 2
1/2 years. Given the low payrolls reported in the months of
August and September, it is clear that Wesley Long's
wages were not reported to us. This is also supported by the
fact that there was no significant change in the report of
September 1993 payroll when Wesley Long was not working. That
Wesley Long's payroll was not being reported to us,
indicates to us that you, the insured, did not believe Wesley
Long to be a Utah employee or covered under the Utah Workers
Compensation Fund's policy."
As to the issue of a potential third party claim, an initial
letter was sent to Brad Ragan, Inc. the seller of the tires.
When it was determined that this claim should not have been
paid, no further investigation or follow up was done.
Please call me if you have any further questions.
WORKERS COMPENSATION FUND OF UTAH
Dianne Madsen DIANNE MADSEN Legal Adjuster (801)
(Id. at 7-8.)
Montana UEF Audit and Penalty.
denial of Long's claim by the Utah Fund, Long sought
workers' compensation benefits in Montana. Since there
was no Montana coverage, the Montana UEF accepted liability
for the claim. That acceptance triggered an audit of Big Z.
audit was conducted by both the UEF and the Unemployment
Insurance Division (UI) of the Department. During the course
of the audit, the auditors obtained wage and other
information pertaining to Big Z, as well as another Zimmerman
owned company known as Zimmerman Trading Company. The Big Z
information was not delineated as between Utah Big Z or
Montana Big Z, and indeed none of the filings submitted by
Big Z ever distinguished between the two corporations.
result of its audit, the UEF determined that between December
21, 1992 and May 2, 1994, Montana Big Z paid $29, 722.89 in
wages. (UEF Ex. A at 6.) The wages were for five employees:
Long, Joel Sparrow, Scott Johnstone, Loren Stern, and Martin
Comber. (Tr. at 94; UEF Ex. A at 6.) Based on documentary
evidence, the UEF auditor determined that all five employees
were Montana residents. She further determined that Montana
Big Z was uninsured in Montana and assessed a penalty in the
amount of $14, 659.86, which is double the amount of the
premium Montana Big Z would have paid for Montana coverage
during the audit period. (Id. at 5)
calculation of wages was based on wages Big Z reported to the
Utah Uninsurance Division for 1993, on W-2 and W-3 statements
for 1993 and the first quarter of 1994, and on payroll checks
from Big Z to its employees for the period April 1, 1994 to
May 1, 1994. (UEF Ex. B at 6-9.) Copies of payroll checks or
ledgers were not introduced at hearing. However, the wage
figures determined by the UEF are corroborated in significant
part by independent documentation from the Utah State Fund
and the Utah Unemployment Insurance Division. (UEF Exs. G;
Inoco Exs. 2 and 3.) The Utah Fund information shows that Big
Z reported wages of $21, 576.29 for the calendar year 1993.
(UEF Ex. G at 6.) The Utah unemployment insurance reports for
the fourth quarter of 1992 and the second and fourth quarters
of 1993 show wages of $18, 107.35 for the three quarters. The
appellant did not offer evidence disputing the accuracy of
the wages calculated by the auditor.
determination concerning the residency of the five Big Z
employees was based on the addresses Big Z listed for the
five drivers, unemployment insurance records, and the
determination concerning Long's residence. In her report,
the UEF auditor stated in relevant part:
I determined Wesley Long, Joel Sparrow, Scott Johnstone,
Loren Stern and Martin Comber to be Montana residents
controlled and directed from Montana. . . . My
determination was based on the Montana addresses Big Z/Inoco
listed for the employees in their employee earnings records;
information obtained from unemployment insurance records . .
.; and WCF's [Utah Fund's] determination that Long
was a Montana resident. The Utah Highway Patrol accident
report listed Long as a Montana resident with a Montana
driver's license. Long's address on the accident
report was 26 West Meadows Drive, Billings. The medical bills
received by WCF also showed Long as having a Montana
(UEF Ex. A at 2.) The Court notes that the auditor requested
other information from Zimmerman and Montana Big Z that would
have assisted her in making her residency
determination. (Id.) Zimmerman and Montana Big Z
did not comply with her request for specific information
concerning the drivers. (UEF Ex. D at 6.) Indeed, Zimmerman
and Montana Big Z did not cooperate with other requests made
by the UEF and UI's auditors during their audits.
(Id. at 5-6; H at 2.) Similarly, at hearing,
Zimmerman and Montana Big Z presented their case through a
bookkeeper who testified based on hearsay and her review of
certain company records. Zimmerman and ...