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Michigan Supreme Court Lansing, Michigan

Opinion
RICKY REED, v LINDA SUSAN YACKELL, Defendant and Cross-Defendant. and BUDDY LEE HADLEY, GERALD MICHAEL HERSKOVITZ and MR. FOOD, INC., Defendants, Counter-Plaintiffs, Cross-Plaintiffs-Appellants. _______________________________ BEFORE THE ENTIRE BENCH TAYLOR, C.J.

Chief Justice:

Justices:

Clifford W. Taylor

Michael F. Cavanagh Elizabeth A. Weaver Marilyn Kelly Maura D. Corrigan Robert P. Young, Jr. Stephen J. Markman

FILED JULY 28, 2005

Plaintiff-Counter-Defendant-Appellee, No. 126534

We granted leave in this case to determine whether plaintiff, Ricky Reed, who was fired from defendant Mr. Food, Inc., but continued to assist with deliveries on a periodic basis, was an employee of Mr. Food within the meaning of MCL 418.161(1)(l) and (n) of the Worker's

Disability Compensation Act (WDCA)1 and, thus, prohibited from maintaining a tort action for employment-related

personal injury in the circuit court against Mr. Food, its owner, and its delivery supervisor. We determine that Reed

was an employee of Mr. Food under MCL 418.161(1)(l) at the time he was injured because he was in the service of Mr. Food under a contract for hire. We therefore affirm the However, we

decision of the Court of Appeals in part.

further determine that Reed was an employee of Mr. Food under MCL 418.161(1)(n) at the time he was injured because he was performing a service as a deliveryman for Mr. Food in the course of its business and did not maintain a

separate business offering that service, hold himself out to and render that service to the public, or qualify as an employer subject to the WDCA. We therefore reverse the

decision of the Court of Appeals in part and remand this case to the circuit court for entry of a directed verdict in defendants' to favor. the Jurisdiction Bureau of is thereafter Disability

transferred Compensation.

Worker's

FACTS AND PROCEDURAL HISTORY Defendant Gerald Michael Herskovitz is the owner of defendant Mr. Food, Inc., which is a retail marketer of

1

MCL 418.101 et seq. 2


meat products.

Defendant Buddy Lee Hadley is an employee In whom and

of Mr. Food and is in charge of its meat deliveries. 1997, Hadley Hadley had suggested known for that Herskovitz hire ten Reed, years,

approximately

Herskovitz did so.

Herskovitz was not pleased with Reed's

performance, however, and fired Reed after a period of only five or six months in December 1997. After being fired by Herskovitz, Reed primarily But,

supported himself by painting his relatives' homes.

Reed's association with Mr. Food did not end completely after he was fired, and he supplemented his income by

occasionally helping Hadley with deliveries. Hadley testified that, on approximately

Specifically, three to five

occasions after Reed was fired near the end of 1997, he would hire Reed to help with his deliveries for the day, for which Reed would be paid between $35 and $40 in cash. Although Herskovitz authorized Hadley to obtain help with his deliveries on these days, he testified that he did not know that it was Reed that Hadley actually hired. On May 7, 1998, during one of these days that

deliveries were being made, Reed was riding in a cargo van owned by Mr. Food that was being driven by Hadley. van approached an intersection, a car driven by As the Linda

Yackell did not stop at a red light because her brakes malfunctioned. Hadley, who was looking down at paperwork, 3

did not see Yackell's car in time and hit her car.

Reed

suffered a closed head injury as a result of the accident. On December 10, 1998, Reed filed a complaint in the circuit court, alleging negligence by the drivers, Hadley and Yackell, liability by Herskovitz pursuant to the

owner's liability statute, MCL 257.401, and liability by Mr. Food under the theory of respondeat superior. Hadley,

Herskovitz, and Mr. Food (defendants)2 as relevant to this appeal, because defended Reed was by asserting employee that of the Mr. suit Food was barred MCL

an

under

418.161(1)(l) and (n)3 and, thus, his exclusive remedy was

Yackell is not a party to the proceedings in this Court. Therefore, we will hereinafter use the term "defendants" in reference to Herskovitz, Hadley, and Mr. Food collectively.
3

2

MCL 418.161 provides: (1)  As used in this act, "employee" means:

* * * (l) Every person in the service of another, under any contract of hire, express or implied, including aliens . . . . * * * (n) Every person performing service in the course of the trade, business, profession, or occupation of an employer at the time of the injury, if the person in relation to this service does not maintain a separate business, does not hold himself or herself out to and render service to the public, and is not an employer subject to this act.

4


under

the

WDCA.4

During

trial,

defendants

moved

for

a

directed verdict on this basis. Reed countered that he was not an employee, but was rather an independent contractor of day labor. The trial court denied defendants' motion.

At the end of trial, the jury returned a unanimous verdict in Reed's favor and awarded him $1,256,320, allocating

sixty percent of the fault for the accident to Yackell and forty percent to Herskovitz, Hadley, and Mr. Food

collectively.

A judgment in the amount of $502,528 was

subsequently entered against Hadley, Herskovitz, and Mr. Food. Defendants thereafter moved for judgment notwith-

standing the verdict (JNOV), again asserting that Reed was an employee at the time of the accident. The trial court

again denied defendants' motion, stating that Reed was not an employee of Mr. Food at the time of the accident but was instead an independent contractor that held himself out to the public to perform general labor.

MCL 418.131(1) provides that "[t]he right to the recovery of benefits as provided in this act shall be the employee's exclusive remedy against the employer for a personal injury or occupational disease . . . ."

4

5


Defendants affirmed in an

appealed

to

the

Court

of

Appeals, Defendants

which then

unpublished

decision.5

sought leave to appeal in this Court. 7.302(G)(1), in lieu of granting leave

Pursuant to MCR to appeal, we

vacated the decision of the Court of Appeals and remanded this case to the circuit court with instructions that it determine, additional either on the existing record Reed or after was an The

evidentiary

hearings,

whether

employee of Mr. Food at the time of the accident.

trial court was also to submit findings of fact to this Court regarding whether Reed was in the service of Mr. Food under either an express or implied contract for hire as set forth in MCL 418.161(1)(l) and explained in our then-recent decision in Hoste v Shanty Creek Mgt, Inc, 459 Mich 561; 592 NW2d 360 (1999). Further, in order to determine if he

was outside the definition of employee in MCL 418.161(1) (n), the trial court was to determine whether Reed both maintained a separate business and held himself out to the public as having such a business.6 On remand, the circuit court issued a written order and findings of fact, based on the existing record, stating

Reed v Yackell, unpublished opinion per curiam of the Court of Appeals, issued February 14, 2003 (Docket No. 236588), vacated 469 Mich 960 (2003).
6

5

469 Mich 960 (2003). 6


that Reed was not an employee of Mr. Food at the time of the accident. With respect to MCL 418.161(1)(l) and Hoste,

the trial court determined that Reed was not performing a service for Mr. Food under either an express or implied contract for hire. In reaching this conclusion, the trial

court focused on the fact that Herskovitz had fired Reed before the accident, that Herskovitz had testified at trial that he did not know that Reed was helping Hadley at the time of the accident, and that no evidence had been

introduced that income taxes had been withheld from Reed or that he had ever claimed employee status. reasoned that these facts negated the The trial court possibility that

either an express or implied contract for hire had been formed because both parties were not aware of its existence and had not agreed to its terms. Finally, the trial court

determined that Reed was not an employee under a contract "for hire," reasoning that he did not receive a regular income from Mr. Food but, instead, received only $35 to $40 on three to five occasions. did not equate to "real, The court concluded that this palpable, and substantial

consideration" that was intended as wages7 because, spread over the entire period of about five or six months when the

7

Hoste, supra at 576. 7


occasional employment took place, it $1 per day.

amounted to less than

In considering the questions under MCL 418.161(1)(n), the trial court held that Reed did have a qualifying

separate business because he was a house painter performing day labor. The court apparently concluded that there was a

sufficient holding of himself out for this service to meet the requirements of MCL 418.161(1)(n). But, the court did

not elaborate on the evidence it found to establish that. After receiving the trial court's findings of fact, we remanded this case to the Court of Appeals for

reconsideration of whether Reed was an employee within the meaning of MCL 418.161(1)(l) and (n) and, if necessary, of additional issues the Court of Appeals had addressed in its earlier decision.8 On remand, in an unpublished decision that echoed the previously vacated one, the Court of Appeals affirmed the trial court's determination that Reed was not an employee of Mr. Food at the time of the accident.9 Unlike the

circuit court, the Court of Appeals determined that Reed was an employee under MCL 418.161(1)(l) because he was

8

469 Mich 1051 (2004).

Reed v Yackell, unpublished opinion per curiam of the Court of Appeals, issued June 8, 2004 (Docket No. 236588).

9

8


under a contract for hire.

Yet, because he had, in the

view of the Court of Appeals, a separate business in which he held himself out for the performance of the same service he was performing for Mr. Food, he was removed from the definition of employee by virtue of MCL 418.161(1)(n).

Interestingly, while expressly acknowledging that in Hoste we held that the common-law "economic realities test" for determining whether a worker is an employee or an

independent contractor was superseded to the extent that it was inconsistent with MCL 418.161(1)(n),10 the Court then expressly focused on those same superseded common-law

factors (such as how Reed was paid, whether taxes were withheld, whether Mr. Food, Herskovitz, and Hadley had

control of Reed's duties, and whether the services Reed performed were an integral part of Mr. Food's business) in making its holding regarding whether Reed was an employee. At no point was an effort undertaken to reconcile this approach with of the holding no in longer Hoste precluding the

consideration

these

recognized

common-law

"economic realities" factors. Unsurprisingly, defendants again filed an application with this Court for leave to appeal, and we granted

defendants' application limited to the issue whether Reed
10

Hoste, supra at 572.

9


was an employee within the meaning of MCL 418.161(1)(l) and (n) at the time of the accident.11 STANDARD OF REVIEW Defendants' contention is that the trial court

erroneously denied their motions for a directed verdict and JNOV. novo. We review a trial court's denial of both motions de Sniecinski v Blue Cross & Blue Shield of Michigan, In doing so, we

469 Mich 124, 131; 666 NW2d 186 (2003).

"`review the evidence and all legitimate inferences in the light most favorable to the nonmoving party.'" Id.,

quoting Wilkinson v Lee, 463 Mich 388, 391; 617 NW2d 305 (2000). Only if the evidence, when viewed in this light,

fails to establish a claim as a matter of law should a motion for a directed verdict or JNOV be granted. This case also involves the Id. of

interpretation

statutes, which is a question of law that is also reviewed de novo by this Court. Hoste, supra at 569. Our

fundamental obligation when interpreting statutes is "to ascertain the legislative intent that may reasonably be

inferred from the words expressed in the statute."

Koontz

v Ameritech Services, Inc, 466 Mich 304, 312; 645 NW2d 34 (2002). If the statute is unambiguous, judicial In other

construction is neither required nor permitted.

11

471 Mich 957 (2005). 10


words, "[b]ecause the proper role of the judiciary is to interpret authority statute." and to Id. DISCUSSION A. As we have Principles of the WDCA frequently in the past, by not write the law, courts simply text lack of a

venture

beyond

the

unambiguous

discussed

enacting Michigan's Worker's Disability Compensation Act, the Legislature replaced common-law liability for

negligence in the workplace, and its related defenses, with a comprehensive, statutory compensation scheme that

requires employers to provide compensation to employees for injuries arising out of and in the course of employment without regard to fault. MCL 418.301; Hoste, supra at 570;

Clark v United Technologies Automotive, Inc, 459 Mich 681, 686-687; 594 NW2d 447 (1999); Farrell v Dearborn Mfg Co, 416 Mich 267, 274-275; 330 NW2d 397 (1982). In exchange

for this almost automatic entitlement to compensation, the WDCA limits the amount of compensation that an employee may collect and, moreover, prohibits the employee from bringing a tort action against This the employer is except in limited in MCL

circumstances.12

principle

expressed

418.131(1), which provides, "The right to the recovery of
12

Hoste, supra; Clark, supra; Farrell, supra.

11


benefits as provided in this act shall be the employee's exclusive remedy against the employer for a personal injury or occupational disease." As we have explained:

Th[is] language expresses a fundamental tenet of workers' compensation statutes that if an injury falls within the coverage of the compensation law, such compensation shall be the employee's only remedy against the employer or the employer's insurance carrier. The underlying rationale is that the employer, by agreeing to assume automatic responsibility for all such injuries, protects itself from potentially excessive damage awards rendered against it and that the employee is assured of receiving payment for his injuries. [Farrell, supra at 274.] Accordingly, the threshold question in this case is whether Reed is an "employee" under any of the definitions in MCL 418.161 of the WDCA and, therefore, has traded his right to bring a tort action for the assured payment of benefits without regard to fault. Hoste, supra at 570-571.

As in Hoste, several of the definitions set forth in MCL 418.161 do not of apply this in this case and, us to therefore, focus only the on

resolution

issue

requires

subsections 161(1)(l) and 161(1)(n).13

As we explained in

Hoste, these subsections "must be read together as separate and necessary qualifications in establishing employee

status."

Hoste, supra at 573.

In other words, our first

At the time of the plaintiff's injuries in Hoste, the definitions now found in subsections 161(1)(l) and 161(1)(n) were found in former subsections 161(1)(b) and 161(1)(d), respectively. Hoste, supra at 566 n 2. 12


13

task is to determine whether Reed was an employee under the definition set forth in subsection 161(1)(l). If he was,

we must then determine whether he meets the requirements of subsection 161(1)(n). B. Id.

Analysis of MCL 418.161(1)(l)

Subsection 161(1)(l) requires us to determine whether Reed was in the service of Mr. Food under any express or implied "contract of hire." Because it is undisputed that

Reed was in the service of Mr. Food at the time of the accident, our determination of this issue requires a twopronged analysis focusing first on whether Reed was in that service pursuant to an express or implied contractual

relationship and, second, as explained in Hoste, supra at 573-577, whether that contractual relationship was one "of hire." With regard to the first inquiry, we agree with the Court of Appeals conclusion that the facts in this case are at least sufficient of Mr. Food to establish pursuant "`A to that an Reed was in in in the fact fact

service

implied implied

contractual

relationship.

contract

arises when services are performed by one who at the time expects compensation from another who expects at the time to pay therefor.'" In re Spenger Estate, 341 Mich 491,

493; 67 NW2d 730 (1954), quoting In re Pierson's Estate, 282 Mich 411, 415; 276 NW 498 (1937). 13 As the Court of

Appeals noted, Reed was expecting to be compensated for the services that he performed that day, just as he had been several times before. Moreover, Herskovitz, having told

Hadley to obtain the help he needed to make his deliveries that day, expected to compensate whomever Hadley recruited, just as he had done in the past. The defendants argue that

the failure of Herskovitz to know exactly who Hadley would hire is relevant to whether there was an implied in fact contract with Reed. This is not the case. All that is

required to establish a contract with Reed is that Hadley had authority to hire.14 Hadley incontestably had that

authority. Accordingly, having determined that the services Reed was performing for Mr. Food were pursuant to an express or implied contractual relationship, our next inquiry is

whether that contractual relationship was "of hire." explained in Hoste, supra at 576, the

As we to

linchpin

determining whether a contract is "of hire" is whether the See Central Wholesale Co v Sefa, 351 Mich 17, 25; 87 NW2d 94 (1957), quoting 2 CJS, Agency,

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