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Art v. Independent Contractor Central Unit

Court of Workers Compensation of Montana

June 23, 2000

EVE ART, Petitioner,
v.
INDEPENDENT CONTRACTOR CENTRAL UNIT, ex rel. PATRICIA MASON, Respondent.

          Date Submitted: April 19, 2000

          FINDINGS OF FACT, CONCLUSIONS OF LAW AND JUDGMENT

          MIKE MCCARTER, JUDGE

         Summary: Patricia Mason was hired as a personal care attendant for Eve Art's elderly mother. Art agreed to pay Mason an hourly wage; Mason agreed she would be responsible for her own taxes. Mason did not have an independent contractor exemption on file with the DOL. After the death of Art's mother, Mason filed for unemployment insurance benefits. Art claimed Mason was an independent contractor. The case was referred to the Independent Contractor Unit (ICCU) of the DOL, which investigated and issued an initial determination that Mason was an employee. Mason requested a hearing, which was held in the DOL under then-existing procedures. After the hearing officer agreed Mason was an employee, Art appealed to District Court. The District Court reversed the hearing officer's decisions on procedural grounds. Meanwhile, the Montana Legislature enacted House Bill 592, which amended the workers' compensation, unemployment insurance, and wage and hour statutes. In light of those amendments, the DOL transferred this case to the WCC for further proceedings.

         Held: While statements of legislative intent indicate HB 592 was intended to place jurisdiction over independent contractor issues in the WCC whether those issues arose in workers' compensation, unemployment insurance, or wage and hour disputes, the statutory enactments transferred IC jurisdiction to this Court only in workers' compensation and unemployment insurance matters. For purposes of workers' compensation, Mason is an employee, not an independent contractor, where she did not have an IC exemption on file. For purposes of unemployment insurance, the IC exemption is not required, but the AB test for determining IC status is not met where claimant was not engaged in an occupation, trade or business, but worked only for the employer at issue.

         Topics:

Constitutions, Statutes, Regulations and Rules: 39-71-120, MCA (1995) Under 39-71-120, MCA (1995), worker is employee for purposes of the Workers' Compensation Act unless all three statutory criteria are met, including existence of exemption granted under 39-71-401(3). Where worker had not obtained exemption, inquiry is over and employee status proven for purposes of the workers' compensation act. For purposes of unemployment insurance law (39-51-201(14), MCA (1995), the IC exemption is not required, but the AB test for determining IC status was not met where claimant was not engaged in an occupation, trade or business, but worked only for employer at issue.
Independent Contractor: Jurisdiction While HB 592, enacted by 1999 Montana Legislature, intended to place jurisdiction over the determination of IC status in the WCC for workers' compensation, unemployment insurance, and wage and hour matters, the actual statutory amendments failed to transfer jurisdiction over the IC issue in wage and hour claims. Thus, WCC has jurisdiction over the IC issue in WC and UI cases, but not in wage and hour disputes.
Independent Contractor: Independent Contractor Exemption Under 39-71-120, MCA (1995), worker is employee for purposes of the Workers' Compensation Act unless all three statutory criteria are met, including existence of exemption granted under 39-71-401(3). Where worker had not obtained exemption, inquiry is over and employee status proven for purposes of the workers' compensation act. For purposes of unemployment insurance law (39-51-201(14), MCA (1995), the IC exemption is not required, but the AB test for determining IC status was not met where claimant was not engaged in an occupation, trade or business, but worked only for employer at issue.
Independent Contractor: Elements Under 39-71-120, MCA (1995), worker is employee for purposes of the Workers' Compensation Act unless all three statutory criteria are met, including existence of exemption granted under 39-71-401(3). Where worker had not obtained exemption, inquiry is over and employee status proven for purposes of the workers' compensation act. For purposes of unemployment insurance law (39-51-201(14), MCA (1995), the IC exemption is not required, but the AB test for determining IC status was not met where claimant was not engaged in an occupation, trade or business, but worked only for employer at issue.
Jurisdiction: Original Jurisdiction While HB 592, enacted by 1999 Montana Legislature, intended to place jurisdiction over the determination of IC status in the WCC for workers' compensation, unemployment insurance, and wage and hour matters, the actual statutory amendments failed to transfer jurisdiction over the IC issue in wage and hour claims. Thus, WCC has jurisdiction over the IC issue in WC and UI cases, but not in wage and hour disputes.

         1 The trial in this matter was held on February 24, 2000, in Butte, Montana. Petitioner, Eve Art (Art), was present and represented by Mr. Michael J. San Souci. Respondent, which is the Independent Contractor Central Unit of the Department of Labor and Industry (Department), was represented by Ms. Julia W. Swingley. Ms. Patricia Mason, who was Art's putative employee, was also present. Post-trial briefs were submitted by the parties and the matter was deemed submitted on April 19, 2000.

         2 Exhibits: Exhibits 1 through 29, and 31 through 36 were admitted without objection. Exhibit 30 was admitted as evidence of procedural facts only.

         3 Witnesses and Depositions: Eve Art, Larry Dominick, Cynde Swandal, and Patricia Mason were sworn and testified.

         4 Issue: The Court restates the issue as follows:

         Whether Patricia Mason was an independent contractor or an employee during the time period that she worked as a personal care attendant for Irene Schmolka, the mother of Eve Art.

         Procedural History and Limits of Jurisdiction

         5 This case is before the Workers' Compensation Court following a district court decision reversing a Department decision which found that Patricia Mason (Mason) was an employee of Eve Art.

         6 The case began on January 5, 1997, when Mason filed a claim for Unemployment Insurance Benefits with the Department. (Ex. 5.) On January 21, 1997, Mason filed a second claim for overtime pay in the amount of $7, 872. (Ex. 6.) Art denied that Mason was her employee, replying that she was an independent contractor. (Ex. 8.) The case was assigned to the Independent Contractor Central Unit (ICCU) of the Department, as provided in the Department's administrative regulations, ARM 24.35.201 through 24.35.203.

         7 ARM 24.35.201(6) defines "Independent contractor central unit" or "ICCU" as "the unit located within the department which is responsible for making employment status determinations for the entire department, and any other agency which elects to participate in the ICCU." ARM 24.35.302(3) provides that "[d]eterminations regarding employment status will generally be issued by the department's independent contractor central unit (ICCU)." Those determinations are made after investigation, see ARM 24.35.302(1), and without hearing. They are final and binding on the parties unless a hearing is requested. ARM 24.35.205 to 24.35.212.

         8 The ICCU investigated the matter and issued an initial determination that Mason was an employee of Art. (Ex. 30.) Art then requested a hearing and the matter was referred to the hearings unit of the Department, which at that time had jurisdiction to hold hearings in independent contractor disputes. 39-3-216, MCA (1997) (overtime and minimum wage claims); 39-51-2403, MCA (1997) (independent contractor issues involving unemployment benefits); and 39-71-415(1), MCA (1997) (independent contractor issues involving workers' compensation insurance); ARM 24.35.207 and 24.35.210.[1]

         9 Art requested a hearing and a hearing was held before a hearing officer of the Department. The hearing officer agreed that Mason was an employee, not an independent contractor.

         10 Art then sought judicial review in the Montana Sixth District Court, Park County. On May 26, 1999, Judge Roy C. Rodeghiero reversed the Department's decision on procedural grounds, holding that the hearing process was flawed because Mason was permitted to testify by phone. Eve Art v. Montana Department of Labor & Industry ex rel. Patricia Mason, No. DV 98-58, memorandum of decision and order (attached as Exhibit A to petitioner's trial brief). The matter was remanded to the Department for further proceedings.

         11 Meanwhile, the 1999 Montana legislature enacted HB 592, which amended workers' compensation, unemployment insurance, and wage and hour statutes. 1999 Mont. Laws, ch. 442. The legislative history and title of HB 592 clearly show that the legislature intended to give the Workers' Compensation Court original jurisdiction to determine all employment status disputes arising under wage and hour, unemployment insurance, and workers' compensation statutes. A report of the committee empaneled pursuant to House Joint Resolution 10 of the 1997 legislature specifically recommended the jurisdictional change. Moreover, the title of HB 592 provides in relevant part:

AN ACT IMPLEMENTING HOUSE JOINT RESOLUTION NO. 10 TO REVISE THE PROCESSES FOR RESOLVING EMPLOYMENT-RELATED DISPUTES; . . . TRANSFERRING FROM THE DEPARTMENT OF LABOR AND INDUSTRY TO THE WORKERS' COMPENSATION COURT EXCLUSIVE JURISDICTION OVER . . . THE APPLICATION OF INDEPENDENT CONTRACTOR STATUS . . . .

         Notwithstanding the clear legislative intent, as shown by legislative history, the actual amendments failed to carry out that intent with respect to wage and hour claims.

         12 Section 39-71-415, MCA, was amended to transfer jurisdiction to the Workers' Compensation Court in independent contractor disputes arising under the Workers' Compensation Act. As amended, section 39-71-415, MCA (1999), provides:

39-71-415. Procedure for resolving disputes regarding independent contractor status. (1) If an individual, employer, or insurer has a dispute as to whether an individual is an independent contractor or an employee as defined in this chapter, any party may, after mediation pursuant to department rules, petition the workers' compensation court for resolution of the dispute.
(2) If a claimant and insurer have a dispute over benefits and the dispute involves an issue of whether the claimant is an independent contractor or employee as defined in this chapter, and after mediating pursuant to department rule, either party may petition the workers' ...

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