Pella Windows & Doors, Inc. v. Industrial Claim Appeals Office of State

          Industrial Claim Appeals Office of the State of Colorado WC No. 4-950-181

          Harvey D. Flewelling, Denver, Colorado, for Petitioner

          No Appearance for Respondent Industrial Claim Appeals Office

          Burg Simpson Eldredge Hersh & Jardine, P.C., John M. Connell, Brian Matise, Nelson Boyle, Englewood, Colorado, for Respondent Christopher Pierce

          ORDER

          RICHMAN JUDGE.

         ¶ 1 In this case, we consider whether the independent contractor test adopted by the Colorado Supreme Court in Industrial Claim Appeals Office v. Softrock Geological Services, Inc., 2014 CO 30, an unemployment case, applies to workers' compensation actions. We determine that the Softrock standard applies but conclude that the Industrial Claim Appeals Office (Panel) exceeded its authority by disregarding the findings of fact made by the administrative law judge (ALJ). We therefore set aside the Panel's orders and remand with directions to reinstate the full findings of fact, conclusions of law, and order issued by the ALJ on November 25, 2015.

         I. Background Facts

         ¶ 2 Claimant, Christopher Pierce, began employment as a service technician for employer, Pella Windows & Doors, Inc., in June 2008. In March 2009, Pella laid off its entire team of seventeen service technicians. Immediately thereafter, claimant was one of nine service technicians offered a "service contract" with Pella, which he accepted. Pella signed a contract with claimant called the Master Service Subcontract Agreement.

         ¶ 3 Under the terms of the service contract, claimant was no longer Pella's employee but was described as an independent contractor. Pella could hire claimant to perform service work for its customers, but the written contract did not prohibit or prevent claimant from performing work for individuals or entities other than Pella. Claimant conceded that, if he so chose, he could advertise his business and accept other work.

         ¶ 4 Claimant testified that his daily work remained largely unchanged. However, he took several steps, many at Pella's behest, separating him from Pella's employ, including but not limited to the following:

• Claimant formed his own business and registered his business name, CP Window Service (CP), with the Colorado Secretary of State in March 2009.

• Claimant renewed the CP trade name with the Secretary of State's Office in 2010, 2011, 2012, and 2013.

• Claimant could work any day he wished. If he wanted to take a day off, he simply so advised Pella one week in advance.

• Pella issued payment checks to CP - not to claimant - for work performed by the job, rather than by the hour, regardless of how long it took to complete the work.

• Pella did not withhold taxes from the checks it wrote to CP; claimant was responsible for paying any taxes he or CP incurred.

• Claimant obtained and paid for his own liability insurance.

• Claimant also lost his health insurance when Pella "made the switch over."

• Claimant's business operations as CP were never combined in any way with Pella's business operations.

         ¶ 5 Claimant was likewise required to obtain his own workers' compensation insurance, but when he established CP in March 2009, he filed a form with the Department of Labor expressly rejecting such insurance. Four months later, he filed a second rejection of workers' compensation coverage.

         ¶ 6 By contrast, other factors evidenced claimant's dependence on Pella's business:

• CP Window Service had no employees other than claimant.

• Customers paid Pella for the service work, not CP.

• Although the written contract permitted him to work for others, in practice claimant never worked for any individual or entity other than Pella "from 2009 until 2012."

• Claimant testified that Pella work kept him busy full time, leaving him no time or opportunity to accept other work.

• He had no customers other than Pella.

• Claimant did not advertise CP.

• Claimant had no business cards for CP. He testified that Pella provided him with "blank" cards bearing Pella's phone and fax numbers, on which he could handwrite in his or CP's name.

         ¶ 7 On December 11, 2013, claimant was repairing a window pursuant to a Pella assignment when he fell from a second-floor window. The fall resulted in a compression fracture of claimant's spine at L1. Claimant now suffers from paraplegia. He told the hospital during his initial stay that he was "self employed and a contract employee for [the] job he was on, so there is NO worker[s'] comp[ensation] possibility." He also indicated on other related medical forms, in conversations with doctors, and on a social security disability benefits application that he was self-employed and had been working as an independent contractor. Nonetheless, several months after sustaining his injury, claimant filed a claim for workers' compensation coverage, which Pella and its insurer, Pinnacol Assurance, contested on the ground that claimant was an independent contractor at the time of his injury.

         II. Procedural History

         ¶ 8 The parties litigated the issue. The resulting case has had a lengthy procedural history. It went to a hearing in September 2014 conducted by ALJ Michelle Jones. In analyzing the evidence presented, ALJ Jones applied the independent contractor tests set forth in the Workers' Compensation Act (WCA), section 8-40-202(2)(b), C.R.S. 2019. That statutory section enumerates nine criteria which establish an independent contractor's independence from a prospective employer. It also mandates that, if the worker and the putative employer enter into a written contract, the document "shall create a rebuttable presumption of an independent contractor relationship between the parties." § 8-40-202(2)(b)(IV).

         ¶ 9 ALJ Jones found that the nine factors all weighed in Pella's favor, tipping the scales toward a finding that claimant was an independent contractor rather than an employee. For example, she explained that, although claimant had no employees and performed work for no one other than Pella, the "issue is whether or not claimant was required to work exclusively for the employer." She concluded claimant was not required to work exclusively for Pella. She noted that there was conflicting testimony about whether claimant's work was inspected by Pella, but concluded that the evidence did not establish that Pella oversaw claimant's work or instructed claimant on how to perform the work. Likewise, although ALJ Jones credited claimant's testimony that "he was provided with materials and equipment necessary for his repair work . . . includ[ing] . . . scaffolding, ladders, suction cups, and glass cutters," she found that "the evidence establishes that the actual tools used were" claimant's. She also found that Pella provided claimant with no more than "minimal training" and no longer provided him with tools to perform the service work, although he did obtain some materials from Pella to perform the work. She determined that the written contract between the parties created a rebuttable presumption that claimant was an independent contractor, which he failed to overcome. Based on her analysis of all nine factors, she concluded claimant was an independent contractor.

         ¶ 10 But, in May 2015, the Panel set aside ALJ's Jones' order, concluding that she had failed to follow the test adopted by the supreme court in Softrock. Although the WCA specifies that the determination "whether an individual is an employee" or an independent contractor for workers' compensation purposes "shall be based on the nine criteria found in section 8-40-202(2)(b)(II)," the Panel concluded that Softrock applied because the nine factors in the WCA are identical to the nine factors listed in the Colorado Employment Security Act (CESA), section 8-70-115(1)(c), C.R.S. 2019. Because Softrock had expanded the analysis beyond the nine factors identified in the CESA, the Panel reasoned the same expansion applied to the WCA.

         ¶ 11 Under Softrock, the Panel observed, the fact finder charged with determining whether an individual was an employee or independent contractor "was directed to conduct 'an inquiry into the nature of the working relationship'" and must consider "any other relevant factors" in reaching a decision. The Panel then listed several factors identified in Long View Systems Corp. USA v. Industrial Claim Appeals Office, 197 P.3d 295 (Colo.App. 2008), another unemployment compensation case, which Softrock had approvingly cited. Softrock suggested that the Long View factors should be considered as follows:

when evaluating a claim that the putative employee maintained an independent trade or business, the Division and the ICAO could consider whether the putative employee: maintained an independent business card, listing, address, or telephone; had a financial investment such that there was a risk of suffering a loss on the project; used his or her own equipment on the project; set the price for performing the project; employed others to complete the project; and carried liability insurance.

Softrock, ¶ 16. Based on this language, the Panel ruled that the "paucity of evidence in the record pertinent to many of the factors mentioned by the Softrock decision" required it to set aside ALJ Jones' order and "remand the matter for additional evidentiary proceedings."

         ¶ 12 On remand a few months later, ALJ Jones conducted a second hearing and admitted additional evidence. She again weighed the nine criteria set out in section 8-40-202(2)(b)(II), but also considered the Long View/Softrock factors. ALJ Jones noted that claimant had a business name, used tools he purchased, lost his benefits, ...