R. O. GILES ENTERPRISES, INC. () VS. COMPENSATIO ROGER L. MILLS (DECEASED)/LINDA S. N MILLS (WIDOW) , ET AL.Annotate this Case
RENDERED: SEPTEMBER 26, 2008; 2:00 P.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
R. O. GILES ENTERPRISES, INC.
PETITION FOR REVIEW OF A DECISION
OF THE WORKERS’ COMPENSATION BOARD
ACTION NO. WC-06-00434
ROGER L. MILLS (DECEASED); LINDA S.
MILLS (WIDOW); LINDA S. MILLS, EXECUTRIX
OF THE ESTATE OF ROGER L. MILLS; LARRY
MILLS D/B/A LARRY MILLS LOGGING; HON.
DONNA TERRY, ADMINISTRATIVE LAW
JUDGE; UNINSURED EMPLOYERS’ FUND;
AND WORKERS’ COMPENSATION BOARD
** ** ** ** **
BEFORE: NICKELL, MOORE, AND STUMBO, JUDGES.
MOORE, JUDGE: R.O. Giles Enterprises, Incorporated, appeals from an opinion
of the Workers’ Compensation Board affirming a decision of the Administrative
Law Judge (ALJ) that R.O. Giles was an up-the-ladder contractor pursuant to
Kentucky Revised Statute (KRS) 342.610(2)(a). Concluding that there is
substantial evidence in the record to support a finding that the arrangement
between R.O. Giles and Larry Mills, d/b/a, Larry Mills Logging fits the description
of KRS 342.610(2)(a), we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
R.O. Giles Enterprises, Incorporated, located in Tennessee, is engaged
in a number of business operations involving rental properties, commercial rental
properties and industrial parks. It also owns a number of undeveloped parcels of
real property, including the property at issue in this case. Ricky Giles is the
president of R.O. Giles.
Relevant to this case is R.O. Giles’s status as a holding company for a
parcel of unimproved real property in Knox County, Kentucky. Larry Mills, d/b/a
Larry Mills Logging (L. Mills), along with Barry Stopher, traveled to Tennessee to
approach Ricky regarding the property.1 L. Mills wanted to enter into an
agreement with R.O. Giles to purchase the timber, and Stopher wanted to enter into
a lease to mine coal on the property.
Later, on behalf of R.O. Giles, Ricky entered into a coal lease with
Sandhill Energy, LLC, to mine the coal on the property. Thereafter, L. Mills and
Ricky, on behalf of R.O. Giles, entered into a Timber Sale Agreement prepared by
L. Mills testified in his deposition that he did not know of a mining operation that was going to
take place on the property. This testimony was before the ALJ, who relied upon Ricky’s
description of the meeting leading to R.O. Giles’s entering into a contract with L. Mills and
an attorney hired by L. Mills. Relevant to this case, the Timber Sale Agreement
R.O. Giles sold all merchantable trees on the property to
The parties agreed that L. Mills would pay R.O. Giles 35
percent on all saw logs and peelers and $5.00 per ton on
soft chip and $3.00 per ton on all hardwood chip.
All timber was to be removed by L. Mills on or before
May 15, 2007; thereafter, all timber rights reverted back
to R.O. Giles.
L. Mills agreed that he and his agents and contractors
would conduct the operation in a “professional workman
like manner and in accordance with ‘Best Management
Practices’ and sound Forestry Practices.”
It is undisputed that R.O. Giles is not in the business of selling
timber.2 Ricky testified that he agreed to the percentage method of payment
because he did not know how to properly value the timber.
According to Ricky’s deposition, “the coal company was going to do
mountaintop removal, which was strip mining, and [L.] Mills . . . offered to buy the
timber instead of just pushing it over the hollow, but the main reason we were just
going to . . . . (sic) we were going to mine it.” Later in his deposition, Ricky was
asked, in regard to the strip mining operation, “[i]n order to [strip mine], the
standing timber would have to be dealt with in some manner?” Ricky answered,
“[y]es, sir.” Thereafter, he was asked: “It would either have to be pushed to the
side as you’ve indicated or it could be cut and harvested and removed and sold for
Liability under KRS 342.610(2)(b) is not at issue in this matter.
revenue, for income?” Ricky answered, “[y]es.” Ricky was asked an additional
question: “[T]o remove this timber ultimately for the purpose of removing the coal,
you entered this agreement which is styled Timber Sale Agreement with Mr. Larry
Mills. Is that right?” To this, Ricky again responded, “[y]es.”
It is undisputed that R.O. Giles did not retain any control of how,
where, to whom or how often logs would be sold. R.O. Giles had no input into the
price for the harvested logs, nor which trees were removed from the property.
Once the agreement was signed, L. Mills did not have to seek any direction or
permission from R.O. Giles regarding the removal of the timber in any respect.
R.O. Giles did not provide any equipment or money for the timber removal
operation. Moreover, R.O. Giles had no control nor input regarding who L. Mills
hired to work on the timber removal venture.
After L. Mills began logging the property and selling the logs, the
sawmill forwarded a check to R.O. Giles for 35 percent of the profits from the logs
about every two weeks. Ricky never had contact with any of the sawmills where
the timber was sold, and he never visited the timber cutting operation on the
Roger Mills3 (R. Mills) worked for L. Mills on the R.O. Giles
property, operating L. Mills’s dozer. R. Mills was paid $100 per day for each day
he worked for L. Mills.4
Roger Mills and Larry Mills were not related.
Depending on whose testimony is believed, R. Mills worked anywhere from two to four days
per week for L. Mills.
R. Mills was killed while on the job for L. Mills in a tragic accident
involving the dozer. We need not review the details of the accident as they are not
relevant to the disposition of this matter.
Linda Mills, R. Mills’s widow, was qualified as the executrix of R.
Mills’s estate and was substituted as a party in the petition seeking workers’
compensation benefits from L. Mills, d/b/a Larry Mills Logging. R.O. Giles was
joined as a party defendant based upon potential liability pursuant to KRS
342.610(2)(a). The Uninsured Employers’ Fund was joined as a party because L.
Mills did not have workers’ compensation insurance coverage.
Several issues were presented before the ALJ, including, in relevant
part, whether R. Mills was an employee of L. Mills and whether R.O. Giles was an
up-the-ladder contractor, subject to liability under KRS 342.610(2)(a). The ALJ
concluded that, at the time of his death, R. Mills was an employee of L. Mills and
R.O. Giles was an up-the-ladder contractor. Consequently, in the event that L.
Mills failed to timely pay the compensation the ALJ awarded R. Mills’s estate,
R.O. Giles was liable for the payments to the estate.
R.O. Giles and L. Mills appealed the ALJ’s conclusions to the
Workers’ Compensation Board. The Board affirmed the ALJ’s opinion. R.O.
Giles has now appealed the Board’s opinion. Concluding that substantial evidence
exists to support the legal conclusion of up-the-ladder contractor liability under
KRS 342.610(2)(a) in this case, we affirm.
Kentucky Revised Statute 342.610(2)(a) provides, in pertinent part:
(2) A contractor who subcontracts all or any part of a
contract and his carrier shall be liable for the payment of
compensation to the employees of the subcontractor
unless the subcontractor primarily liable for the payment
of such compensation has secured the payment of
compensation as provided for in this chapter. Any
contractor or his carrier who shall become liable for such
compensation may recover the amount of such
compensation paid and necessary expenses from the
subcontractor primarily liable therefor. A person who
contracts with another:
(a) To have work performed consisting of the
removal, excavation, or drilling of soil, rock, or
mineral, or the cutting or removal of timber from
shall for the purposes of this section be deemed a
contractor, and such other person a subcontractor.
This subsection shall not apply to the owner or
lessee of land principally used for agriculture.
R.O. Giles appeals, arguing that the ALJ and Board erred in
concluding that R.O. Giles’s transaction with L. Mills fits the criteria of KRS
342.610(2)(a). Both parties argue in their briefs their respective views of the
ALJ’s and Board’s interpretation of up-the-ladder contractor liability as analyzed
Elkhorn-Hazard Coal Land Corporation v. Taylor, 539 S.W.2d 101
(Ky. 1976). Upon review, we need not look to Elkhorn-Hazard to resolve the issue
at hand. Rather, the unambiguous statute, when analyzed with the facts, compel us
to determine that substantial evidence exists to satisfy the legal elements of up-theladder contractor status in this case, without reference to Elkhorn-Hazard.
R.O. Giles argues that the percentage type of contract it entered into
with L. Mills is typical in the timber industry, and this is supported by the expert
testimony of Richard Brantigan, a consulting forester. Based on this, R.O. Giles
urges this Court to decide that the arrangement at hand was a simple agreement for
the sale of timber, and not for work or services performed for it as the landowner.
In theory, we might agree with this argument, but for Ricky Giles’s
deposition testimony. He testified multiple times that the purpose of the removal
of timber was ultimately to advance the removal of the coal. In her findings of fact
and conclusions of law, the ALJ determined “Giles is a landowner which made a
commercial decision to have timber removed from its 200 acre tract in Knox
County for the purpose of generating revenue and to facilitate the subsequent
removal of coal through the mountaintop removal method.” The Board, agreeing
with the ALJ, ruled that “Giles verified he entered into the timber sales agreement
with Larry Mills in order to remove the timber for the purposes of removing the
coal.” These determinations were based on Ricky’s own deposition testimony.
Thus, R.O. Giles and L. Mills entered into a contract for L. Mills to provide the
service of removal of timber from R.O. Giles’s property. Consequently, this
arrangement unquestionably fits within the description of a contractor set forth in
KRS 342.610(2)(a), i.e., “[t]o have work performed consisting of . . . the cutting or
removal of timber from land . . . .” Accordingly, substantial evidence supports the
ALJ’s and Board’s determination that R.O. Giles was an up-the-ladder contractor,
and the legal application of these facts to KRS 342.610(2)(a) is not in error.
Therefore, we affirm.
BRIEF AND ORAL ARGUMENT
BRIEF FOR APPELLEE, THE
UNINSURED EMPLOYERS’ FUND:
James R. Golden
Attorney General of Kentucky
Patrick M. Roth
ORAL ARGUMENT FOR
APPELLEE, THE UNINSURED
Patrick M. Roth