TERRRY STEINROCK AND GLEN COKE, D/B/A GLEN COKE GENERAL CONTRACTING V. HOWARD C. COOK; UNISURED EMPLOYERS FUND; HONORABLE LAWRENCE SMITH, ADMINISTRATIVE LAW JUDGE; AND WORKERS' COMPENSATION BOARDAnnotate this Case
NOT TO BE PUBLISHED OPINION
THIS OPINION IS DESIGNATED "NOT TO BE PUBLISHED."
PURSUANT TO THE RULES OF CIVIL PROCEDURE
PROMULGATED BY THE SUPREME COURT, CR 76.28(4)(C),
THIS OPINION IS NOT TO BE PUBLISHED AND SHALL NOT BE
CITED OR USED AS BINDING PRECEDENT IN ANY OTHER
CASE IN ANY COURT OF THIS STATE; HOWEVER,
UNPUBLISHED KENTUCKY APPELLATE DECISIONS,
RENDERED AFTER JANUARY 1, 2003, MAY BE CITED FOR
CONSIDERATION BY THE COURT IF THERE IS NO PUBLISHED
OPINION THAT WOULD ADEQUATELY ADDRESS THE ISSUE
BEFORE THE COURT. OPINIONS CITED FOR CONSIDERATION
BY THE COURT SHALL BE SET OUT AS AN UNPUBLISHED
DECISION IN THE FILED DOCUMENT AND A COPY OF THE
ENTIRE DECISION SHALL BE TENDERED ALONG WITH THE
DOCUMENT TO THE COURT AND ALL PARTIES TO THE
RENDERED: AUGUST 25, 2011
NOT TO BE PUBLISHED
Suprtutt Court of Ifirnfuritv
TERRY STEINROCK AND
GLEN COKE, D/B/A
GLEN COKE GENERAL
ON APPEAL FROM COURT OF APPEALS
CASE NO. 2010-CA-001136-WC
WORKERS' COMPENSATION NO. 09-00137
HOWARD C. COOK;
UNINSURED EMPLOYERS' FUND;
HONORABLE LAWRENCE SMITH,
ADMINISTRATIVE LAW JUDGE; AND
WORKERS' COMPENSATION BOARD
MEMORANDUM OPINION OF THE COURT
The Workers' Compensation Board reversed a decision to dismiss the
application for benefits filed by Howard C. Cook and remanded the claim for
further consideration. The Board based the decision on a conclusion that the
Administrative Law Judge (ALJ) erred as a matter of law by failing to determine
that Cook sustained his work-related injury when working as Terry Steinrock's
employee. The Court of Appeals affirmed the Board and Steinrock appeals.
Steinrock maintains that the ALJ's decision was not clearly erroneous
and that the Board and the Court of Appeals exceeded the scope of their
review; invaded the ALJ's province as fact-finder; and failed to analyze the
evidence properly. We affirm.
The Board and the Court of Appeals complied with KRS 342.285(2) and
KRS 342.290 respectively when reviewing the ALJ's decision. The ALJ
misapplied the law when analyzing the evidence with respect to Steinrock's
control and with respect to the nature of the work the claimant performed in
relation to Steinrock's regular business. The evidence compelled a finding in
Cook's favor when analyzed properly under either test.
The claimant was born in 1970. He completed high school, after which
he worked at various times as a volunteer firefighter, cook, or mail sorter; as a
laborer in various construction-related trades; and as a deliveryman for a
furniture store. He testified that he learned the roofing trade from his father
and had worked as a roofer off and on for 15 or 20 years, sometimes as an
employee and sometimes as an independent contractor.
The claimant testified that his relationship with Steinrock began in 1997
or 1998, when they worked together on various roofing jobs and each was paid
separately by the homeowners for whom they worked. They did not work
together again until March 2007, when the claimant left his job at a furniture
store to work full time with Steinrock. He returned to the furniture store job
after about three months and worked for Steinrock only on his days off and
holidays due to a decrease in the amount of available work. The claimant
stated that he worked from 16 to 24 hours per week for Steinrock in addition to
his full-time job at the store except for the period from October 2007 to
February 2008, when he was recovering from a broken leg. He resumed his
work for Steinrock in February 2008, working on his days off and holidays
when work was available. He continued to work until August 12, 2008, when
he fell from a roof and fractured his left heel and ankle. Steinrock drove him
back to get his truck and paid him for two days' work, after which he went to
the immediate care center.
The parties did not dispute that the claimant sustained a work-related
injury. They disputed the existence of an employer/employee relationship,
without which the defendants bore no liability under Chapter 342. 1 Thus, the
claim was bifurcated to resolve whether the claimant was working as
Steinrock's employee or as a subcontractor when it occurred.
The claimant testified that he reported to Steinrock's house at 7:00
o'clock on the mornings that he was available for work and that Steinrock
drove him and other workers to the house where they would work that day. He
brought his own hammer, tool belt, and knife to work, but Steinrock found the
sites to be roofed and provided all of the other tools and materials. The crew
worked until sunset; until the job was finished; or until Steinrock said to quit.
The claimant testified that Steinrock paid him $12.00 per hour; that both
he and Steinrock kept track of the hours he worked; that two or three times
Steinrock paid him in cash; that Steinrock did not deduct taxes from his
KRS 342.640 and KRS 342.610(2).
paycheck; and that Steinrock did not give him a Form 1099 for 2008. He
claimed that he worked for Steinrock every Monday and Tuesday from July
2007 until his injury on August 12, 2008 except during the five-month period
when his leg was broken; days when the weather precluded roofing work; and
days when Steinrock had no work available. He stated that the eight checks
Steinrock submitted as evidence, which totaled $1,056.00, represented his pay
for 10 to 13 days of work between March 15, 2008 and August 12, 2008. He
also stated that he thought he had received more than eight checks and that
sometimes Steinrock paid him in cash.
Steinrock testified that he had operated his roofing business since 1976
as a sole proprietorship, with subcontractors but no employees. He explained
that roofing is a skilled occupation, performed by subcontractors who work
side by side without the need for supervision. Steinrock testified that some
subcontractors were paid by the hour and some by the square. Coke paid him
by the square.
Steinrock testified that he and the claimant had a loose agreement under
which the claimant would work for $12.00 per hour when he was available and
Steinrock had work. He testified subsequently that he agreed to pay a roofer
by the name of Eicher by the square instead of by the hour on the day the
claimant was injured because Eicher was "hurting for money." 2 Steinrock
denied that the claimant agreed to be available every Monday and Tuesday. He
Steinrock testified elsewhere in the deposition that an individual who worked quickly
could earn more if paid by the square.
stated that he had never given a subcontractor a Form 1099 because none had
ever made enough money to need one. 3 He did not recall ever paying the
claimant in cash but stated that he did advance the claimant $20.00 in gas
money nearly every time he worked. He confirmed that the checks submitted
as evidence represented ten days' work.
The Uninsured Employers' Fund (UEF) was joined as a party because
Steinrock did not have workers' compensation insurance. Glen Coke, d/b/a/
Glen Coke General Contracting, was joined as a party at the UEF's request
because Steinrock was Coke's subcontractor for the job on which the claimant
was working when he was injured. Coke testified that he subcontracted roofing
projects to Steinrock; that roofers customarily subcontracted with other roofers
for additional help; that he paid subcontractors by the job; and that roofing
jobs were bid and paid based on the applicable number of squares. Coke, like
Steinrock, did not have workers' compensation coverage at the time of the
The ALJ dismissed the claim having concluded that the claimant failed to
prove the existence of an employment relationship between himself and
Steinrock. Although finding all of the witnesses to be credible, the ALJ found
Steinrock's memory to be more consistent with the documentary evidence and
to be internally consistent. The decision rested specifically on Coke's testimony
The Internal Revenue Service requires the payment of $600.00 or more for services
performed for a trade or business by a non-employee to be reported on a Form 1099
MISC. Steinrock submitted checks indicating that he paid the claimant $1,056.00
from March 15, 2008 through August 12, 2008.
that Steinrock regularly subcontracted other roofers to work with him and on
evidence that the claimant worked only 10 to 13 days for Steinrock in the fivemonth period immediately preceding the injury; that he considered himself to
be a roofer and worked as a skilled tradesman, side by side with Steinrock and
without supervision; that he exercised independent control over himself on the
date of the injury and chose the course and conduct of his medical care; that
neither he nor Steinrock seemed to think they were creating a master and
servant relationship; that he was paid an hourly rate by the job, at the end of
each day or pair of days, rather than weekly or biweekly; that he accepted pay
without taxes being withheld; and that he stated he was awaiting a Form 1099 .
from Steinrock for 2008 tax purposes rather than a Form W-2. The ALJ also
determined that no employment relationship existed with Coke.
The claimant appealed following the denial of his petition for
reconsideration. The Board reversed, convinced that the ALJ erred by focusing
on the amount of control that Steinrock exercised rather than the right to
control. Moreover the AI,J misinterpreted the significance of the fact that the
claimant was an experienced roofer with respect to whether he was engaged in
a distinct occupation or business and to whether Steinrock controlled his work.
The Board determined that a proper analysis of the evidence compelled a legal
conclusion that the claimant worked as Steinrock's employee when he was
injured. The Court of Appeals agreed.
Steinrock asserts that substantial evidence supported the ALJ's finding
that the claimant was an independent contractor rather than his employee and
that the finding should not have been disturbed. He maintains that the Board
and the Court of Appeals exceeded the scope of their review and invaded the
ALJ's province as fact-finder rather than determining whether the ALJ
misapplied the law. Moreover, they failed to analyze the evidence properly. He
notes that a proper analysis must include all of the four predominant factors
and argues that the Board and the Court of Appeals considered only one factor,
the nature of the claimant's work in relation to his business. We disagree.
I. THE STATUTORY REQUIREMENTS.
As pertinent to this appeal KRS 342.640 includes within the term
"employees" the following individuals:
(1) Every person, whether lawfully or unlawfully employed,
in the service of an employer under any contract of hire or
apprenticeship, express or implied, and all helpers and
assistants of employees, whether paid by the employer or
employee, if employed with the knowledge, actual or
constructive, of the employer;
(4) Every person performing service in the course of
the trade, business, profession, or occupation of an
employer at the time of the injury. . . .
KRS 342.650(6) permits a worker who would otherwise be considered to be an
employee to elect not to be covered by Chapter 342. 4
KRS 342.395(1) and 803 KAR 25:130, § 1 require an employee wishing to opt out of
Chapter 342 to submit a notarized Form 4 notice of rejection to the employer. The
notice becomes effective when it is filed with the Department of Workers' Claims.
A business owner generally is not considered to be the business's
employee for the purposes of Chapter 342 even if self-employed. 5 A business
owner who performs service in the course of another business's trade,
business, profession, or occupation as an independent contractor or
subcontractor has effectively elected not to be covered as the other business's
employee. 6 KRS 342.012 does, however, permit such an individual to elect to
be considered an employee of the individual's own business and to purchase
II. THE EMPLOYER/INDEPENDENT CONTRACTOR TEST.
The court noted in Ratliff v. Redmon 7 that the approach to determining
whether a worker is an employee for the purposes of Chapter 342 is broader
than that used in the law of master and servant or principal and agent for the
purpose of imposing vicarious tort liability. Chapter 342 broadens the concept
of the employer/employee relationship and limits the scope of the independent
contractor relationship. By favoring employee status, it protects both injured
workers and society by placing the costs of an industrial injury on consumers
of the product whose production caused the injury. 5
See Hale v. Bell Aluminum, 986 S.W.2d 152, 154 (Ky. 1998).
See Hubbard v. Henry, 231 S.W.3d 124, 128-29 (Ky. 2007).
396 S.W.2d 320, 323-24 (Ky. 1965). The court relied on KRS 342.004, which
required Chapter 342 to be construed liberally. KRS 342.004 was later repealed,
but the General Assembly enacted KRS 446.080(1) to require all statutes to be
liberally construed to promote their purpose. See also Standard Gravure v.
Grabhorn, 702 S.W.2d 49, 50 (Ky. App. 1985).
Ratliff v. Redmon, 396 S.W.2d at 324-25.
Ratliff v. Redmon listed nine factors to be among those considered when
determining whether an individual is an employee or independent contractor. 9
The list included: 1.) the extent of control that the alleged employer may
exercise over the details of the work; 2.) whether the worker is engaged in a
distinct occupation or business; 3.) whether that type of work is usually done
in the locality under the supervision of an employer or by a specialist, without
supervision; 4.) the degree of skill the work requires; 5.) whether the worker or
the alleged employer supplies the instrumentalities, tools, and place of work;
6.) the length of the employment; 7.) the method of payment, whether by the
time or the job; 8.) whether the work is a part of the regular business of the
alleged employer; and 9.) the intent of the parties. The court concluded,
however, that the right to control the details of the work was the primary test. 10
Chambers v. Wooten's IGA Foodlinerll refined the Ratliff v. Redmon test to
focus primarily on four of the nine factors: 1.) the nature of the work as related
to the business generally carried on by the alleged employer; 2.) the extent of
control exercised by the alleged employer; 3.) the professional skill of the
alleged employee; and 4.) the true intentions of the parties.
Foods Co. v. Dillonu explained subsequently that workers come within the
scope of Chapter 342 if their services are a regular and continuing cost of
The court used the list from Professor Larson's treatise on workers' compensation
law, which adopted it from the RESTATEMENT (SECOND) OF AGENCY § 220.
Id. at 327.
11 436 S.W.2d 265, 266 (Ky. 1969).
591 S.W.2d 701 (Ky. App. 1979) (citing Arthur Larson, LARSON'S WORKMEN'S
COMPENSATION LAW, § 43.51 (1978)).
production and they do not actually operate an independent business that can
spread the cost of work-related accidents to consumers. The court noted that
all of the Ratliff v. Redmon factors must be considered but that Chapter 342's
risk-spreading theory is fulfilled by treating the role of the alleged employee's
work in relation to the employer's regular business as being the predominant
The court stated again in Uninsured Employers' Fund v. Garland13 that at
least the four primary factors must be considered and that a proper legal
conclusion could not be drawn from only one or two factors. The court also
reminded the bar that Ratliff v. Redmon relied upon Professor Larson's treatise
for the principle "that the control of the details of work factor can be provided
by analysis of the 'nature of the claimant's work in relation to the regular
business of the employer.' 14
To summarize, the employer/independent contractor analysis has
evolved into three major principles: 1.) that all relevant factors must be
considered, particularly the four set forth in Chambers v. Wooten's IGA
Foodliner, 2.) that the alleged employer's right to control the details of work is
the predominant factor in the analysis; and 3.) that the control factor may be
analyzed by looking to the nature of the work that the injured worker
performed in relation to the regular business of the employer. The consolidated
control and "nature of the work" analyses that the Larson treatise describes
805 S.W.2d 116 (Ky. 1991).
Id. at 118-19.
incorporate the primary Ratliff v. Redmon factors. 15 The substance of the
parties' relationship prevails over its form regardless of the test employed. 16
The Larson treatise explains that an analysis of the control factor turns
on the right to control rather than the amount of control actually exercised, 17
and it notes that the distinction has particular significance when a skilled or
experienced worker appears to work without supervision or interference.' 8
Control only to the degree necessary to ensure the bargained-for result, such
as over the quality or description of the work, does not imply an employment
relationship; whereas control over the individual performing the work signifies
such a relationship. Among the factors indicating control by the alleged
employer are payment by a unit of time rather than by the completed project;
the furnishing of equipment the size and value of which provide an incentive
for control; and the right to discharge the individual performing work. 19
An individual is generally considered to be an employee under the
"nature of the work" test when the work being performed is part of the regular
business of the alleged employer and the worker does not operate an
independent business or provide a professional service. 20 Noting the increasing
effort by employers to avoid the cost and inconvenience of social and labor
Arthur Larson and Lex K. Larson, LARSON'S WORKERS' COMPENSATION LAW § 60.05(3)
Husman Snack Foods Co. v. Dillon, 591 S.W.2d at 703. An employer cannot force an
employee to work outside Chapter 342's protection even if the employee acquiesces.
Id. at § 61.02.
Id. at §§ 61.04-61.08.
Id. at § 62.00.
legislation, Larson explains that analyzing employer control under the test
serves the remedial purpose of workers' compensation legislation and produces
greater consistency in coverage when subcontractors are used to perform
Larson notes that the closest cases involve services such as repair,
maintenance, and incidental construction. 22 The "nature of the work" test
bases whether a tradesman performing such work is an employee or
independent contractor on whether the individual operates a business rather
than simply performs skilled labor. 23 If the individual does operate a business,
the test becomes how independent, separate, and public the business is in
relation to the putative employer. Thus, a tradesman who does not hold
himself out to the public as performing an independent business service and
who regularly works most or all of his independent time for a particular
subcontractor is probably the subcontractor's employee. 24
Id. at § 62.01. Larson notes, for example, that a roofing, siding, or plastering
contractor may contract to perform the main job and then engage a tradesman to
install the material at a fixed rate per square or square foot. The tradesman may
then hire assistants, work without supervision, and serve the contractor only for a
particular job but be considered the contractor's employee rather than an
independent contractor under the test. Id. at § 63.03(3).
Id. at § 62.06.
Operating a business clearly involves more than having one's earnings reported on a
Form 1099 MISC or paid in cash.
Id. at § 62.06(1)(a). Larson cites the example of a welder who contracted with a
trucking company to repair truck tanks during his free time and who worked when
he could find time, completely without supervision, as being the company's
Contrary to Steinrock's assertion, the Board and the Court of Appeals
complied with KRS 342.285(2) and KRS 342.290 respectively when reviewing
the ALJ's decision. The evidence compelled a finding that the claimant worked
as Steinrock's employee when analyzed properly under either the control or
"nature of the work" test. 25
The ALJ misapplied the law by failing to consider the evidence of control
in terms of Steinrock's right to control rather than the amount of control
exercised. As a consequence, the analysis failed to give proper significance to
the evidence that Steinrock obtained the roofing jobs; chose workers to send to
the location of available work; could decide how the work would be performed;
could supervise the workers when working side-by-side; decided the method for
paying workers; chose to pay them without withholding income taxes or
subsequently providing a Form W-2 or 1099 MISC; 26 and could discharge a
worker. Likewise, the ALJ appeared to equate the fact that the claimant
provided his own tool belt and inexpensive hand tools with the fact that
Steinrock provided all of the major tools, equipment, and materials necessary
to perform the roofing jobs. When considered as a whole, the evidence
compelled a conclusion that Steinrock had the right to control the details of the
work and that the parties had an employer/employee relationship for the
purposes of Chapter 342.
See Special Fund v. Francis, 708 S.W.2d 641, 643 (Ky. 1986).
The fact that the claimant "consistently accepted pay without taxes withheld"
cannot reasonably be viewed as being evidence of a lack of control by Steinrock.
The ALJ also misapplied the law by failing to address the nature of the
claimant's work as a roofer in relation to Steinrock's business as a roofing
contractor. Moreover, the ALJ failed to analyze the evidence concerning the
claimant's professional skill in terms of whether he performed a skilled trade as
opposed to whether he operated an independent roofing business at the time of
his injury. When analyzed properly under the test, the evidence compelled a
conclusion that the claimant worked as Steinrock's employee at the time he
was injured rather than as an independent contractor.
The record indicates that Glenn Coke General Contracting, Inc.
negotiated roofing contracts and subcontracted some of the jobs to Steinrock,
including the job on which the claimant was injured. Steinrock operated Terry
Steinrock Roofing; had done so since 1976; and had no other source of income.
His testimony indicates clearly that installing roofing was part of his regular
business. The fact that he considered workers who helped him install roofing
to be independent contractors or that Coke thought they were independent
contractors had no impact on the legal effect of Steinrock's relationship to the
claimant. Although the claimant was skilled as a roofer, he did not operate a
business at the time of his injury. The evidence compelled a conclusion that he
worked as Steinrock's employee because he performed work that was part of
Steinrock's regular business and had no independent business of his own.
The decision of the Court of Appeals is affirmed.
All sitting. All concur.
COUNSEL FOR APPELLANTS,
TERRY STEINROCK AND
GLEN COKE, D/B/A
GLEN COKE GENERAL CONTRACTING:
Charles Thomas. Hectus
David N. Ward
Hectus 8v Strause, PLLC
804 Stone Creek Parkway
Louisville, KY 40223
COUNSEL FOR APPELLEE,
HOWARD C. COOK:
Phillipe W. Rich
Hughes & Coleman, PSC
9300 Shelbyville Road
Louisville, KY 40222
COUNSEL FOR APPELLEE,
UNINSURED EMPLOYERS' FUND:
Patrick M. Roth
Assistant Attorney General
Uninsured Employers' Fund
1024 Capital Center Drive
Frankfort, KY 40601-8204