Opinion Information Sheet

			

       IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

XENITH GROUP, INC.,                         )       NO. 66013-6-I
                                            )
                      Respondent,           )       DIVISION ONE
                                            )
       v.                                   )
                                            )       ORDER CHANGING AND 
DEPARTMENT OF LABOR AND                     )       REPLACING OPINION
INDUSTRIES,                                 )
                                            )
                      Appellant.            ) 
                                            )

       The appellant, Department of Labor & Industries, having filed a motion for 

reconsideration of the court's opinion filed February 13, 2012, and the panel 

having determined that the motion should be granted, now, therefore, it is hereby

       ORDERED that the opinion be changed as follows:

       The first three sentences of the second paragraph on page 4 shall read 

as follows:

       We   review the agency's findings of fact under a substantial 
       evidence standard.1  Substantial evidence supports the agency's 
       findings when the record contains "evidence sufficient to persuade 
       a fair-minded, rational person of the truth of the matter."        2   We 
       review an agency's interpretation of a statute or regulation as a 
       question of law de novo. 3

       1 RCW 34.05.570 (3)(e).
       2 R&G Probst v. Dep't of Labor & Indus., 121 Wn. App. 288, 293, 88 P.3d 
413 (2004).
       3 D.W. Close Co., 143 Wn. App. at 126.   

NO. 66013-6-I / 2

       It is further ORDERED that the first sentence of the first paragraph on 

page 14 shall read as follows:

       Xenith also assigns error to L&I's assessment for the first quarter of 
       2007 because it stopped doing business on January 31, 2007.  

       It is further ORDERED that the amended opinion shall replace the 

original opinion filed herein.

       DATED this _____ day of _______________, 2012.

       IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

XENITH GROUP, INC.,                         )       NO. 66013-6-I
                                            )
                                           -2- 

NO. 66013-6-I / 3

                      Respondent,           )       DIVISION ONE
                                            )
       v.                                   )
                                            )       AMENDED PUBLISHED 
DEPARTMENT OF LABOR AND                     )       OPINION
INDUSTRIES,                                 )
                                            )
                      Appellant.            )       FILED:  March 26, 2012
                                            )

       Leach, A.C.J.  --  In Washington, every employer must secure workers'

compensation for its workers by insuring with the State or qualifying as a self- 

insurer.4 The Department of Labor and Industries (L&I) appeals a superior court 

judgment reversing an employer premium assessment against Xenith Group Inc.  

The trial court found that Xenith, a home health care referral service, and its 

approximately 80 affiliated home care providers           did not have the employer-

employee relationship required for imposition of this obligation.  Because Xenith 

and the care providers fall within the plain language of the applicable statutory 

definitions for "employer"5 and "worker,"6 respectively, we reverse the trial court 

and remand for entry of judgment in favor of L&I.

                                        FACTS

       Xenith Group was a home health care referral agency that contracted with 

the Department of Social and Health Services (DSHS) to provide home care 

services to developmentally disabled adults.7      DSHS identified qualified patients 

       4 RCW 51.14.010.
       5 RCW 51.08.070.
       6 RCW 51.08.180.
                                           -3- 

NO. 66013-6-I / 4

to Xenith who then referred patients to one of approximately 80 home care 

providers affiliated with Xenith.  Each of Xenith's care providers signed forms 

that stated, "I am not an employee of Xenith Group Inc."               The documents 

described  the providers as independent contractors and informed them they 

were responsible for maintaining their own tax and business records.  Care 

providers reported their hours worked to Xenith, which then submitted time 

sheets to DSHS.  DSHS paid Xenith a rate of $15 for each hour reported.  Xenith 

paid its care providers $10 per hour and retained the remainder of the DSHS 

payment as payment for its services.

       In 2006, L&I  received a workers' compensation claim from an injured 

home care provider who identified Xenith as her employer.          L&I discovered that 

Xenith did not have a workers'          compensation account        and had paid no 

premiums. It audited Xenith.  Based on that audit, L&I  assessed premiums, 

interest, and penalties against Xenith for the last quarter of 2005, all four 

quarters of 2006, and the first quarter of 2007.  Xenith appealed the assessment 

to the Board of Industrial Insurance Appeals (Board).  

       7 In January 2007, DSHS decided to no longer contract with providers or 
referral companies using an independent contractor model.  In response to this 
change, Xenith Group owner, Brad Petersen, closed Xenith and formed Zenith 
Services Inc., hiring affiliated care providers as employees.  While Zenith 
Services continued to provide home care to DSHS-qualified developmentally 
disabled adults, the practices of that separate corporate entity are not relevant to 
the L&I assessment against Xenith Group.
                                           -4- 

NO. 66013-6-I / 5

       At a hearing before an  industrial appeals judge (IAJ), Xenith's owner, 

Brad Petersen, testified that the care providers were responsible for maintaining 

their own books and records and for paying their own taxes and that he had no 

control over their work performance.  Petersen also testified that he had no 

ability to discipline or fire providers for misconduct.  All Xenith providers signed 

paperwork that clearly stated they were independent contractors, not employees.  

       The IAJ recommended reversing the assessment.           The Board rejected the 

recommendation and  instead  determined that the care providers qualified as 

workers under RCW        51.08.180 because they were independent contractors 

engaged in contracts whose essence was their personal labor.  The Board 

further found that Xenith failed to prove the care providers met the six-part 

exception to the statutory definition.8  Xenith appealed the Board's order and 

assessment  to the superior court, which found no covered relationship and 

reversed the assessment.  L & I appeals the superior court's decision.

                              STANDARD OF REVIEW

       When reviewing an agency's decision, we sit in the same position as the 

superior court9 and apply the review  standards set forth in  the Washington 

Administrative Procedures Act, chapter 34.05 RCW.10         We limit our review to the 

       8 See RCW 51.08.195.
       9 D.W. Close Co. v. Dep't of Labor & Indus., 143 Wn. App. 118, 125, 177 
P.3d 143 (2008).
       10 See Postema v. Pollution Control Hearings Bd., 142 Wn.2d 68, 77, 11 
                                           -5- 

NO. 66013-6-I / 6

record of the administrative tribunal, not that of the trial court.11 This act requires 

relief from  an agency order  when the administrative agency erroneously

interprets  or applies   the  law,12  the order is not supported by substantial 

evidence,13 or the order is arbitrary or capricious.14  

       We review the agency's findings of fact under a substantial evidence 

standard.15    Substantial evidence supports the agency's findings when the 

record contains "evidence sufficient to persuade a fair-minded, rational person of 

the truth of the matter."16  We review an agency's interpretation of a statute or 

regulation as a question of law de novo.17     When reviewing questions of law, we

may substitute     our   determination for that of the agency.18             When an 

administrative decision involves a mixed question of law and fact, "the court 

does not try the facts de novo but it determines the law independently of the 

agency's decision and applies it to facts as found by the agency."19

P.3d 726 (2000).
       11 Renton Educ. Ass'n v. Pub. Emp't Relations Comm'n, 101 Wn.2d 435, 
440, 680 P.2d 40 (1984).
       12 RCW 34.05.570(3)(d).
       13 RCW 34.05.570(3)(e).
       14 RCW 34.05.570(3)(i).
       15 RCW 34.05.570 (3)(e).
       16 R&G Probst v. Dep't of Labor & Indus., 121 Wn. App. 288, 293, 88 P.3d 
413 (2004).
       17D.W. Close Co., 143 Wn. App. at 126.  
       18 Postema, 142 Wn.2d at 77 (citing R.D. Merrill Co. v. Pollution Control 
Hearings Bd., 137 Wn.2d 118, 142-43, 969 P.2d 458 (1999)).
       19 Renton Educ. Ass'n, 101 Wn.2d at 441.
                                           -6- 

NO. 66013-6-I / 7

                                      ANALYSIS

       Xenith primarily contends that the Industrial Insurance Act (IIA)20

definitions of "employer" and "worker," as applicable to independent contractors, 

"do not come into play unless and until the existence of a work relationship 

involving control by    an employer and clear consent to employment by an 

individual has been demonstrated."            Xenith relies upon Bennerstrom v. 

Department of Labor & Industries21 to support this contention.  Based upon the 

plain language of the applicable statutes, we disagree.

       The   common law       developed    a  distinction between employees and 

independent contractors that       limits a  "principal's vicarious liability for the 

misconduct of a person rendering service to the principal."22   To effect the 

sweeping purpose of the state's workers' compensation scheme,23 the legislature 

       20 Title 51 RCW.
       21 120 Wn. App. 853, 86 P.3d 826 (2004).
       22.Massey v. Tube Art Display, Inc., 15 Wn. App. 782, 785-88, 551 P.2d 
1387 (1976).
       23 RCW 51.04.010 states, 
          The common law system governing the remedy of workers 
          against employers for injuries received in employment is 
          inconsistent with modern industrial conditions.  In practice it 
          proves to be economically unwise and unfair.  Its administration 
          has produced the result that little of the cost of the employer has 
          reached the worker and that little only at large expense to the 
          public.  The remedy of the worker has been uncertain, slow and 
          inadequate. Injuries in such works, formerly occasional, have 
          become frequent and inevitable.  The welfare of the state 
          depends upon its industries, and even more upon the welfare of 
          its wage worker.  The state of Washington, therefore, exercising 
                                           -7- 

NO. 66013-6-I / 8

modified this common law for purposes of workers' compensation by specifically 

and broadly defining the terms "worker" and "employer."24 A "worker" includes

       every person in this state who is engaged in the employment of an 
       employer under this title, whether by way of manual labor or 
       otherwise in the course of his or her employment; also every 
       person in this state who is engaged in the employment of or who is 
       working under an independent contract, the essence of which is his 
       or her personal labor for an employer under this title, whether by 
       way of manual labor or otherwise, in the course of his or her 
       employment. [25]  

(Emphasis added.)  Similarly, an "employer" includes

       any person, body of persons, corporate or otherwise, and the legal 
       representatives of a deceased employer, all while engaged in this 
       state in any work covered by the provisions of this title, by way of 
       trade or business, or who contracts with one or more workers, the 
       essence of which is the personal labor of such worker or 
       workers.[26]  

(Emphasis added.)

       The legislature also adopted a six-part test for excluding certain 

          herein its police and sovereign power, declares that all phases 
          of the premises are withdrawn from private controversy, and 
          sure and certain relief for workers, injured in their work, and their 
          families and dependents is hereby provided regardless of 
          questions of fault and to the exclusion of every other remedy, 
          proceeding or compensation, except as otherwise provided in 
          this title; and to that end all civil actions and civil causes of 
          action for such personal injuries and all jurisdiction of the courts 
          of the state over such causes are hereby abolished, except as in 
          this title provided.
       24 Malang v. Dep't of Labor & Indus., 139 Wn. App. 677, 687, 162 P.3d 
450 (2007).
       25 RCW 51.08.180.
       26 RCW 51.08.070.
                                           -8- 

NO. 66013-6-I / 9

independent contractors from these two definitions:

       As an exception to the definition of "employer"             under RCW 
       51.08.070 and the definition of "worker" under RCW 51.08.180, 
       services performed by an individual for remuneration shall not 
       constitute employment subject to this title if it is shown that:

              (1) The individual has been and will continue to be free from 
       control or direction over the performance of the service, both under 
       the contract of service and in fact; and

              (2) The service is either outside the usual course of 
       business for which the service is performed, or the service is 
       performed outside all of the places of business of the enterprise for 
       which the service is performed, or the individual is responsible, 
       both under the contract and in fact, for the costs of the principal 
       place of business from which the service is performed; and

              (3) The individual is customarily engaged in an 
       independently established trade, occupation, profession, or 
       business, of the same nature as that involved in the contract of 
       service, or the individual has a principal place of business for the 
       business the individual is conducting that is eligible for a business 
       deduction for federal income tax purposes; and

              (4) On the effective date of the contract of service, the 
       individual is responsible for filing at the next applicable filing 
       period, both under the contract of service and in fact, a schedule of 
       expenses with the internal revenue service for the type of business 
       the individual is conducting; and

              (5) On the effective date of the contract of service, or within 
       a reasonable period after the effective date of the contract, the 
       individual has established an account with the department of 
       revenue, and other state agencies as required by the particular 
       case, for the business the individual is conducting for the payment 
       of all state taxes normally paid by employers and businesses and 
       has registered for and received a unified business identifier 
       number from the state of Washington; and

                                           -9- 

NO. 66013-6-I / 10

              (6) On the effective date of the contract of service, the 
       individual is maintaining a separate set of books or records that 
       reflect all items of income and expenses of the business which the 
       individual is conducting.[27]

       These statutes reflect a legislative intent to provide                   workers'

compensation coverage for an independent contractor whose personal labors 

are the essence of that individual's contract.  In addition, the legislature has 

directed  that these statutes "shall be liberally construed for the purpose of 

reducing to a minimum the suffering and economic loss arising from injuries 

and/or death occurring in the course of employment."28

       The Board applied these statutes in this case.  It found that the essence 

of the home care providers' contracts was their personal services.  It also 

determined Xenith failed to establish several of the six elements of the test for 

excluding coverage for certain independent contractors.  Based on these factual 

determinations, the Board found Xenith owed premiums, interest, and penalties. 

Xenith presents no persuasive argument challenging the sufficiency of the 

evidence to support these findings.  Xenith  also  presents no argument 

challenging the Board's analysis of the IIA's independent contractor coverage. 

Xenith claims this is not necessary because the Board failed to apply a claimed

"Title 51 RCW gatekeeper."

       Xenith contends the Board failed to use a mandatory threshold analysis 

       27 RCW 51.08.195.
       28 RCW 51.12.010, cl. 2.
                                          -10- 

NO. 66013-6-I / 11

required before any application of the statutory definitions of employer and 

worker.  This asserted threshold test involves two determinations:           (1) did the 

employer exercise the requisite control over the worker, and (2) did the worker 

consent to be an employee.  According to Xenith, the Board must answer each 

of these inquiries in the affirmative before the IIA and its definitions apply.  For 

this argument, Xenith relies almost exclusively upon Bennerstrom.

       Bennerstrom     does not support Xenith's  position        because it did not 

address mandatory coverage for independent contractors.  The plaintiff, Mr. 

Bennerstrom, provided home care services to his mother through DSHS.  One 

day, while Mr. Bennerstrom was riding his bicycle on DSHS-related errands, a 

car struck him.  He argued that both DSHS and his mother (the patient) were his 

employers and that DSHS was responsible for workers'                     compensation 

payments.29    This court rejected his  argument and referred to Bennerstrom's 

contract with DSHS, which stated twice that Bennerstrom was not a DSHS 

employee.30  We upheld summary judgment because we found Bennerstrom did 

not demonstrate any issue of material fact about the parties' lack of consent to 

an employment relationship.  

       Xenith relies upon the following statement in Bennerstrom:  "An 

employment relationship for purposes of the workers' compensation laws does 

       29 Bennerstrom, 120 Wn. App. at 858-59.
       30 Bennerstrom, 120 Wn. App. at 860.
                                          -11- 

NO. 66013-6-I / 12

not exist absent (a) the employer having a right to control the employee's 

physical conduct in the performance of the employee's duties and (b) the 

employee's consent to the employment             relationship."31    However, as our 

Supreme Court noted in Wilber v. Department of Labor & Industries,32

              "In considering such statements made in the course of 
       judicial reasoning, one must remember that general expressions in 
       every opinion are to be confined to the facts then before the court 
       and are to be limited in their relation to the case then decided and 
       to the points actually involved."

Although Bennerstrom and this case both involve coverage for DSHS home care 

providers, Bennerstrom provides no guidance here.  We decided Bennerstrom

based on the complete absence of any evidence to establish consent to the 

alleged employer-employee relationship.           We    also questioned the control 

evidence.  But,     because Bennerstrom  provided no citation to authority, 

persuasive argument, or analysis to support his independent contractor claim,

we expressly declined to consider it.33     Therefore, the case provides no support 

to Xenith.

       At the trial court, Xenith also relied upon Novenson v. Spokane Culvert & 

Fabricating Co.34      In  Novenson, the plaintiff signed a written employment 

       31 Bennerstrom, 120 Wn. App. at 856.
       32 61 Wn.2d 439, 445-46, 378 P.2d 684 (1963) (quoting  Peterson v. 
Hagan, 56 Wn.2d 48, 53, 351 P.2d 127 (1960)).
       33 Bennerstrom, 120 Wn. App. at 866-67.
       34 91 Wn.2d 550, 588 P.2d 1174 (1979).
                                          -12- 

NO. 66013-6-I / 13

agreement with Kelly Labor, a temporary staffing agency that sent employees on 

daily work assignments to client companies, including Spokane Culvert.  Kelly 

contracted with Spokane Culvert, but the plaintiff did not.  Kelly dispatched the 

plaintiff to Spokane Culvert.  While working on site, the plaintiff suffered a 

serious injury and sued       Spokane Culvert for negligence.  The trial court 

dismissed the claim, holding that because Spokane Culvert                employed the 

plaintiff, the IIA barred his claim.35  The Supreme Court reversed, holding that a 

material issue of fact existed about the plaintiff's consent to an employment 

relationship with Spokane Culvert.  The court expressly distinguished between 

the situations where establishing an employment relationship would provide a 

worker with "moderate statutory benefits" and where it would destroy valuable 

common law rights.36    "'To thrust upon a worker an employee status to which he 

has never consented . . . might well deprive him of . . . the right to sue his own 

employer for common-law damages.'"37  

       Notably,  Novenson did not involve any claim that the plaintiff was an 

independent contractor.       It does not address the IIA's inclusion of certain 

independent contractors as covered "workers."  Thus, Novenson's application of 

control and consent tests to protect an injured worker's right to sue provides no 

       35 Novenson, 91 Wn.2d at 552.
       36 Novenson, 91 Wn.2d at 552-55.
       37 Novenson, 91 Wn.2d at 554 (internal quotation marks omitted) (quoting 
Fisher v. Seattle, 62 Wn.2d 800, 805, 384 P.2d 852 (1963)).
                                          -13- 

NO. 66013-6-I / 14

support for Xenith's claim that these tests supplant the legislature's definitions of 

"employer" and "worker" in the IIA.

       The  IIA  clearly states that in the context of workers'          compensation, 

"'[e]mployee'" shall have the same meaning as 'worker' when the context would 

so indicate."38  Thus, Xenith's argument ignores the plain language of the IIA and 

conflates the common law and statutory meanings of "employee."   Given the 

legislature's modification of the definitions of "employer" and "worker" to include 

certain independent contractors and the legislature's direction for liberal 

construction of the IIA,    the circumstances of this case present exactly the 

situation where the legislature intended that the Board consider the six-part test 

contained in RCW 51.08.195.  

       Additionally, Xenith ignores the rule of statutory construction that requires

us to derive the meaning of an unambiguous statute from the statute's plain 

language.39  "When the words in a statute are 'clear and unequivocal,' we must 

assume the legislative body meant exactly what it said and apply the statute as 

written."40  Here, the legislature expressed a clear intent to provide workers'

compensation coverage, not only to employees but also to anyone (1) working 

       38 RCW 51.08.185.
       39 Sprint Spectrum, L.P./Sprint PCS v. City of Seattle, 131 Wn. App. 339, 
346, 127 P.3d 755 (2006).
       40 Sprint Spectrum, 131 Wn. App. at 346 (citing Duke v. Boyd, 133 Wn.2d 
80, 87, 942 P.2d 351 (1997)).
                                          -14- 

NO. 66013-6-I / 15

under an independent contract, (2) the essence of which is personal labor, (3) 

for an employer.41

       Finally, Xenith's proposed threshold test would frustrate the very purpose 

behind the legislature's broad definitions of "employer" and "worker" -- to provide 

workers' compensation coverage to certain individuals not meeting the common 

law definition of an employee.  As we have previously recognized, analyzing 

whether an individual works under an independent contract, the essence of 

which is that individual's personal labor, involves a different analysis than 

whether the individual is an employee.  

       Xenith also assigns error to L&I's assessment for the first quarter of 2007 

because it stopped doing business on January 31, 2007.  Because it presents 

no argument to support this claim, we decline to review it.

       Because Xenith has not prevailed, we deny Xenith's request for attorney 

fees.

                                    CONCLUSION

       Sufficient evidence supports the Board's factual findings, and it correctly 

applied the law.  Therefore, we reverse the superior court and remand for entry 

of a judgment affirming the Board's order.

       41 RCW 51.08.180.
                                          -15- 

NO. 66013-6-I / 16

WE CONCUR:

                                          -16-