Carter v. Frank Shelton, Inc.

303 S.E.2d 184 (1983)

James E. CARTER, Employee Plaintiff, v. FRANK SHELTON, INC., t/d/b/a Utility Service Company, Employer, Aetna Life & Casualty Insurance Co., Carrier, and/or J.E. Carter Company, Employer, American Insurance Company, Carrier, Defendants.

No. 8210IC777.

Court of Appeals of North Carolina.

June 7, 1983.

*187 Egerton, Fowler & Marshall by Darl L. Fowler, Greensboro, and Smith, Patterson, Follin, Curtis, James & Harkavy by Jonathan R. Harkavy and Henry N. Patterson, Jr., Raleigh, for plaintiff-appellant.

Smith, Moore, Smith, Schell & Hunter by Jeri L. Whitfield and J. Donald Cowan, Greensboro, for defendants-appellees J.E. Carter Co. and American Ins. Co.

No brief filed for defendants-appellees Frank Shelton, Inc., t/d/b/a Utility Service Co. and Aetna Life & Cas. Ins. Co.

ARNOLD, Judge.

Under G.S. 97-86 and our case law, it is axiomatic that an opinion and award entered by the Industrial Commission will not be disturbed on appeal unless a patent error of law exists therein. See, e.g., Hoffman v. Ryder Truck Lines, Inc., 306 N.C. 502, 505, 293 S.E.2d 807, 809 (1982). The Commission's findings of fact are conclusive on appeal if they are supported by competent evidence even though there is evidence to the contrary. Click v. Freight Carriers, 300 N.C. 164, 166, 265 S.E.2d 389, 390 (1980).

We consider the liability of the two insurers separately because of the different issues involved in each situation.

UTILITY SERVICE-AETNA LIFE & CASUALTY APPEAL

If the plaintiff was an employee of Utility Service on the date of the accident, then he can collect workers' compensation insurance from Aetna. The opinion of the Commission concluded that the plaintiff was not an employee, but instead was an independent contractor. It also held that the plaintiff was not covered under an Aetna individual workers' compensation policy on the accident date. From those conclusions, the plaintiff appealed.

Because the Act only applies where the employer-employee relationship exists, the question of whether it existed at the time of the accident is jurisdictional. As a result, the Commission's finding on jurisdiction is reviewable on appeal. Vaughn v. N.C. Dep't of Human Resources, 296 N.C. 683, 692, 252 S.E.2d 792, 798 (1979). The rule that the Act is to be liberally construed does not apply to determine if the Act is applicable. Hicks v. Guilford County, 267 N.C. 364, 366, 148 S.E.2d 240, 242 (1966).

G.S. 97-2(2) defines "employee" as "every person engaged in an employment under any appointment or contract of hire or apprenticeship, express or implied, oral or written ... but excluding persons whose employment is both casual and not in the course of the trade, business, profession or occupation of his employer...."

This statutory definition, however, adds nothing to the common law meaning of the term. As a result, whether the employer-employee relationship existed at the time of the accident is to be determined by ordinary common law tests. The plaintiff has the burden of proof on this issue. Lucas v. Li'l General Stores, 289 N.C. 212, 218, 221 S.E.2d 257, 261-62 (1976).

The law in North Carolina on the relationship between master and servant was outlined in Hayes v. Elon College, 224 N.C. 11, 29 S.E.2d 137 (1944). The Supreme Court found the vital test to be if "the employer has or has not retained the right of control or superintendence over the contractor or employee as to details." Id. at 15, 29 S.E.2d at 140. Right of control, not whether it was actually utilized, is determinative. Scott v. Lumber Co., 232 N.C. 162, 165, 59 S.E.2d 425, 427 (1950). See also 1C *188 A. Larson, The Law of Workmen's Compensation § 43.10 n. 2 (1980) (North Carolina sees the amount of control exercised by the alleged employer as determinative on this question).

In summarizing the case law, Hayes enunciated a number of elements to consider in the determination.

The person employed (a) is engaged in an independent business, calling, or occupation; (b) is to have the independent use of his special skill, knowledge, or training in the execution of the work; (c) is doing a specified piece of work at a fixed price or for a lump sum or upon a quantitative basis; (d) is not subject to discharge because he adopts one method of doing the work rather than another; (e) is not in the regular employ of the other contracting party; (f) is free to use such assistants as he may think proper; (g) has full control over such assistants; and (h) selects his own time. (Citations omitted). The presence of no particular one of these indicia is controlling. Nor is the presence of all required. They are considered along with all other circumstances to determine whether in fact there exists in the one employed that degree of independence necessary to require his classification as independent contractor rather than employee.

Id., 224 N.C. at 16, 29 S.E.2d at 140. A number of cases have relied on the Hayes factors in answering this question. See, e.g., Morse v. Curtis, 276 N.C. 371, 378, 172 S.E.2d 495, 500 (1970).

The facts here lead us to conclude that the plaintiff was an employee of Utility Service for purposes of workers' compensation insurance and that Aetna is liable as Utility Service's insurer.

First, all of the plaintiff's work after 1973 was for Utility Service except for one job. He was in regular employ of the company. Utility Service procured business for the plaintiff and then notified him about the job opportunity.

Second, the plaintiff was subject to discharge under the terms of the contract if Utility Service was not satisfied with the work. The company was given "general jurisdiction over the contractor with regard to the quality of the work" in the contract. Examination of contract terms is a factor to be considered in determining if an employer-employee relationship exists. See Askew v. Tire Co., 264 N.C. 168, 172, 141 S.E.2d 280, 283 (1965).

Third, Utility Service examined the plaintiff's work periodically during any project and at its completion. Reserved rights in the contract of on-the-job inspection and stopping work for corrections are further indications of the company's control. The contract also allowed Utility Service to stop work to prevent incompetent persons from working on a job, which limited the plaintiff's ability to choose his assistants.

Finally, even though the contract provided for payment only upon successful completion of a project, the record shows that the plaintiff drew a set amount each week out of his bank account. That account was replenished each week by Utility Service in an amount suggested by the plaintiff's accountant.

Because we find that Utility Service and the plaintiff were in an employer-employee relationship so as to make Aetna liable for the plaintiff's accident, it is unnecessary to discuss whether Aetna is estopped from denying that the plaintiff is covered.

CARTER CO.-AMERICAN INSURANCE APPEAL

The plaintiff first argues that a part of G.S. 97-2(2) that was added in 1979, see 1979 N.C.Sess.Laws ch. 86, allows him to recover from the insurer of his sole proprietorship. That amendment became effective on 1 July 1979, the day before the plaintiff's injury.

The relevant portion of the statute states:

Any sole proprietor or partner of a business whose employees are eligible for benefits under this Article may elect to be included as an employee under the workers' compensation coverage of such business if he is actively engaged in the *189 operation of the business and if the insurer is notified of his election to be so included. Any such sole proprietor or partner shall, upon such election, be entitled to employee benefits and be subject to employee responsibilities prescribed in this Article.

This statute does not help the plaintiff because he did not notify American of his election to be included. We also reject his contention that sole proprietors were included before the 1979 amendment. That change is an indication that a specific statutory authorization was necessary to include them. The plaintiff was on notice of this fact since his accountant Dobson informed him prior to the amendment that one advantage of corporate status would be to obtain workers' compensation insurance on himself.

The plaintiff next contends that he can recover from American because he advised Dobson that he wanted workers' compensation insurance for his sole proprietorship. He argues that Dobson and the Van Noppen Agency, from whom Dobson obtained insurance for the plaintiff, were American's agents and bound American as principal. We disagree.

The Restatement (Second) of Agency § 1(1) (1958) defines agency as "the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act."

There is insufficient evidence here to show that Dobson and Van Noppen were American's agents. It has not been shown that they acted on American's behalf or subject to its control.

The fact that the plaintiff authorized Dobson to talk to insurance companies on his behalf does not make Dobson the agent of American. If anything, Dobson was the plaintiff's agent.

Finally, the plaintiff argues that American is estopped to deny that the plaintiff was covered on the date of his injury because it accepted premiums and was silent when he made requests for coverage to Dobson.

Equitable estoppel arises "when an individual by his acts, representations, admissions, or by his silence when he has a duty to speak, intentionally or through culpable negligence induces another to believe that certain facts exist, and such other person rightfully relies and acts upon that belief to his detriment." Thompson v. Soles, 299 N.C. 484, 487, 263 S.E.2d 599, 602 (1980).

This is not an appropriate case for equitable estoppel. First, American did no act to make the plaintiff think that he was covered under the workers' compensation policy issued for his proprietorship.

Second, knowledge that the plaintiff wanted to be covered cannot be attributed to American. The plaintiff only notified Dobson of his desire. As the plaintiff stated in his testimony, "I never talked with anyone at the Van Noppen Agency or American Insurance Company about workmens' compensation insurance, but I authorized Mr. Dobson to talk to the insurance companies on my behalf." Dobson was not American's agent, as discussed above, and his acts cannot bind the insurer.

Third, there was no duty on American to notify the plaintiff of the 1979 amendment to G.S. 97-2(2). That statute makes it the claimant's responsibility to notify the insurer of his desire to be covered as a sole proprietor.

Finally, the plaintiff contends that the mistaken designation on his application for workers' compensation insurance that his business was a corporation should estop American from denying coverage. He argues that the mistake led all parties to believe that he was covered.

Before the plaintiff can use this mistake as a basis for estoppel, he must show that he relied on it to his detriment. See Matthieu v. Piedmont Natural Gas Co., 269 N.C. 212, 216, 152 S.E.2d 336, 340 (1967). The requisite facts are not present here.

The plaintiff testified that he never told anyone that he was doing business as a *190 corporation and has shown no reliance on any act or silence of American to his detriment. Dobson was the person the plaintiff informed about his desire to be covered. American is not bound by that statement.

For these reasons, we affirm the dismissal of the plaintiff's complaint against J.E. Carter Company and its insurer, American Insurance Company.

Reversed in part; affirmed in part.

WEBB and BRASWELL, JJ., concur.