Fotinopoulos v. Dept. of Corrections

Fotinopoulos v. Department of Corrections (2001-435); 174 Vt. 510;
811 A.2d 1227

[Filed 19-Aug-2002]

                                 ENTRY ORDER

                      SUPREME COURT DOCKET NO. 2001-435

                               JUNE TERM, 2002


  George Fotinopoulos	               }	APPEALED FROM:
                                       }
                                       }
       v.	                       }	Commissioner of Labor & Industry
                                       }	
  Department of Corrections	       }
                                       }	DOCKET NO. M-17402


             In the above-entitled cause, the Clerk will enter:

       Plaintiff George Fotinopoulos appeals the Labor and Industry
  Commissioner's dismissal of his claim for Workers' Compensation.  Plaintiff
  argues on appeal that the Commissioner erred in finding that he was exempt
  from coverage under the Workers' Compensation Act ("the Act"), pursuant to
  21 V.S.A. § 601(12)(O)(iv), because he was engaged by the State of Vermont
  Department of Corrections (DOC) under a "special agreement."  We hold that
  plaintiff was an employee of the State for the purposes of the Act, and
  accordingly, reverse and remand.

       The DOC employed plaintiff under a 6-month contract to provide mental
  health services for inmates at the Northwest State Correctional Facility. 
  The DOC later extended the contract for an additional year.  In February
  1999, plaintiff, while performing regular contractual duties, sustained a
  fractured cheek bone when an inmate struck him with his fist.  Following
  this injury, plaintiff filed a Workers' Compensation claim.

       The State filed a motion to dismiss for failure to state a claim
  and/or motion for summary judgment, arguing that plaintiff was excluded
  from workers' compensation coverage by § 601(12)(O)(iv) as a person hired
  under a "special agreement."  In May 2000, the Commissioner issued an order
  denying plaintiff's coverage.  Plaintiff filed a motion to reconsider, and
  in December 2000, the Commissioner vacated its dismissal order and granted
  plaintiff's request for a hearing on the factual issues.  In March 2001,
  plaintiff filed with the Commissioner a proposed set of findings of fact,
  which the State denied but did not oppose for the purpose of reconsidering
  the State's motion to dismiss and/or motion for summary judgment.  Both
  parties then agreed that a formal hearing was not necessary.

       In September 2001, the Commissioner again granted the State's motion
  and dismissed the claim.  For the purpose of ruling on the motion, the
  Commissioner accepted the facts alleged by plaintiff in his proposed
  findings of fact.  These findings included the following: (1) the State
  supervised plaintiff's daily activities, times of work, and means and
  methods of job performance; (2) plaintiff performed activities that were
  "categorically typical of those provided by" the State;  (3) plaintiff did
  not engage in an independently established trade, occupation, profession or
  business;  (4) the State paid plaintiff an hourly wage through the State
  Payroll system and withheld state and federal taxes and FICA contributions;
  (5) the State required plaintiff to work 40 hours a week.  Following the
  Commissioner's ruling, plaintiff filed this appeal.

 
          
       Plaintiff argues that the Commissioner erred in finding that he was
  exempt from workers' compensation coverage because of the "special
  agreement" exception to Workers' Compensation  pursuant to § 601(12)(O)(iv)
  of the Act.  Plaintiff contends that, for the purpose of the Act, "special
  agreement" means "independent contractor," and, plaintiff argues, because
  the State exercised control over his activities and treated him similar to
  the way it treated regular employees, he was essentially an employee of the
  State, not an independent contractor.

       The sole issue in this appeal is the proper interpretation of "special
  agreement" in 21 V.S.A. § 601(12)(O)(iv) of the Act.  An administrative
  agency's interpretation of a statute within its area of expertise is
  presumed to be correct, valid and reasonable.  In re Prof'l Nurses Serv.
  Inc., 164 Vt. 529, 532, 671 A.2d 1289, 1291 (1996).  This presumption,
  however, does not prevent us from disturbing statutory interpretations that
  are unjust or unreasonable, lead to absurd consequences, or manifest a
  compelling indication of error.  Bedini v. Frost, 165 Vt. 167, 169, 678 A.2d 893, 894 (1996).

       The two-fold purpose of workers' compensation is to provide employees
  a remedy that is "expeditious and independent of proof of fault" and to
  provide employers "a liability which is limited and determinate." 
  Morrisseau v. Legac, 123 Vt. 70, 76, 181 A.2d 53, 57 (1962).  To effectuate
  this purpose, the language of the Workers' Compensation statute is
  "all-embracing" in defining who falls into the categories of employer and
  employee.  Id.  Section 625 of the statute, which states that "[a]n
  employer shall not be relieved in whole or in part from liability . . . by
  any contract, rule, regulation or device whatsoever," supports this
  statutory interpretation.  Moreover, we have interpreted the broad
  definition of "employer" under § 601(3) as demonstrating that the
  Legislature intended "to prevent owners of trades or businesses from
  relieving themselves of liability under the Act 'by doing through
  independent contractors what they would otherwise do through their direct
  employees.' "  Falconer v. Cameron, 151 Vt. 530, 531-32, 561 A.2d 1357,
  1358 (1989) (quoting King v. Snide, 144 Vt. 395, 401, 479 A.2d 752, 755
  (1984)).  With respect to employment in the public sector, however, the Act
  provides specific exceptions to who can be defined as an "employee,"
  including elected public officials, certain employees of the judiciary, and
  individuals hired under retainer or "special agreement."  21 V.S.A. §
  601(12)(O).

       In order to prevent employers from avoiding their responsibilities to
  provide workers' compensation, this Court has considered various factors to
  discern whether work performed under an independent contract is actually
  done under an employer/employee relationship.  See Candido v. Polymers, 166
  Vt. 15, 20, 687 A.2d 476, 480 (1996) (worker could be considered employee
  if worker submitted to employer's direction and control); King, 144 Vt. at
  401, 479 A.2d  at 755 ( independent contractor can be considered employee
  for purposes of Workers' Compensation if independent contractor's work was
  "of the type that could have been carried out by employees of the owner or
  proprietor in the course of his usual trade or business"); Blake v.
  American Fork & Hoe Co., 99 Vt. 301, 304, 131 A. 844, 845 (1926) (
  independent contractor was not employee because he carried out business of
  his own). 
        
       Determining whether a work relationship constitutes an
  employer/employee relationship must be done on a "case-by-case basis." 
  King, 144 Vt. at 401, 479 A.2d  at 755.  Here, the Commissioner's factual
  findings weigh heavily in favor of a conclusion that plaintiff was an
  employee for the purposes of Workers' Compensation.  Among the
  Commissioner's findings which support factors we have previously identified
  as significant to the establishment of an employee-employer relationship
  for Workers' Compensation purpose were findings that the State exercised
  direction and control over plaintiff and required him to work 40 hours a
  week, Candido, 166 Vt. at 21, 687 A.2d  at 480; plaintiff's 

 

  activities were typical of those provided by regular employees at the DOC,
  see King, 144 Vt. at 401, 479 A.2d  at 755; and plaintiff was not engaged in
  a business for his own pecuniary gain, Id.

       The State argues that the plain language of the contract between
  plaintiff and the State shows that the parties both intended that plaintiff
  would not be covered by workers' compensation.  While it is true that the
  parties' contract clearly and unambiguously contracted out workers'
  compensation benefits, this contract is exactly the type that § 625 was
  intended to prohibit.  "A contract whose formation or performance is
  illegal may be held void and unenforceable."  My Sister's Place v. City of
  Burlington, 139 Vt. 602, 613, 433 A.2d 275, 282 (1981); see also
  Restatement (Second) of Contracts § 178 (1981) ("[a] promise or other term
  of an agreement is unenforceable on grounds of public policy if legislation
  provides that it is unenforceable").  Given the clear prohibition expressed
  in § 625, the State cannot rely on its contract with plaintiff to avoid
  Workers' Compensation obligations. (FN1)

       Moreover, the State acknowledged that the relationship between the
  State and plaintiff was more akin to that of an employer and an employee
  when it adopted a policy of paying plaintiff through the State payroll
  system and withholding federal and state taxes, as well as FICA
  contributions.  This policy, disseminated by the State Agency of
  Administration, applied the "ABC test" to determine whether a State agency
  is liable for tax withholdings.  We need not endorse plaintiff's assertion
  that the "ABC test" customarily used to assess whether an employer is
  liable for unemployment compensation, see Burchesky v. Dep't of Employment
  & Training, 154 Vt. 355, 360, 577 A.2d 672, 674 (1989), should be applied
  to assess employer liability for Workers' Compensation in order to note the
  anomaly of the State's position in this case.  

       It is instructive to observe that the State itself in identifying an
  employer-employee relationship refers to the "contractual label" as
  "meaningless" if the State exercises supervision over daily activities of
  the individual; the services rendered are categorically typical of those
  provided by the State agency for whom the individual is working; and the
  individual "does not customarily engage in an independently established
  trade, occupation, profession, or business or does not retain the ability
  to engage other clients during the term of the contract."  At the very
  least, the State's judgment of factors it considers critical to the
  identification of an employer-employee relationship cannot be deemed
  irrelevant to our own inquiry.

        
       The State argues that the law requires a finding that "special
  agreement" under 21 V.S.A. § 601(12)(O)(iv) should be interpreted broadly,
  contending that if interpreted otherwise, this provision would be
  meaningless.  The State also argues that because the law favors more
  specific provisions of a statute over more general provisions, the "special
  agreement" exception should be applied in public sector cases, such as this
  one, over the general prohibition of contracting out of Workers'
  Compensation 

 

  obligations in § 625.  Furthermore, the State contends that because §
  601(12)(O)(iv) is a more recent addition to the statute than § 625, it
  should be favored in interpreting the statute.  While the rules of
  statutory construction invoked by the State can be helpful, "[r]ules of
  statutory construction . . . are not talismans.  We have often stated that
  they are merely aids, to be disregarded in an appropriate case."  State v.
  Desjardins, 144 Vt. 473, 475, 479 A.2d 160, 161 (1984).  "The fundamental
  rule, underlying all other rules of statutory construction, is that this
  Court must give effect to the intent of the Legislature."  Viskup v.
  Viskup, 150 Vt. 208, 210, 552 A.2d 400, 401 (1988).  We look to the "
  'subject matter, the effect and consequences, and the reason and spirit of
  the law' " in comprehending the legislative intent.  Sagar v. Warren
  Selectboard, 170 Vt. 167, 171, 744 A.2d 422, 426 (1999) (quoting In re
  P.S., 167 Vt. 63, 70, 702 A.2d 98, 102 (1997)).  We will not construe a
  provision or term in a manner that renders the overall statute ineffective
  or leads to irrational consequences.  Town of Killington v. State, 172 Vt.
  182, 189, 776 A.2d 395, 401 (2001).

       We are cognizant of the State's argument that the Legislature, in
  exempting individuals retained by special agreement from the definition of
  "public employee," sought to ensure State government flexibility in meeting
  demands that may require reliance on individuals not within regular state
  government employment.  But we do not believe the Legislature intended that
  such flexibility be predicated on the unchecked discretion to deny Workers'
  Compensation to an individual who clearly falls within the definition of an
  employee.  Here, every factor significant to identifying plaintiff as an
  employee was found by the Commissioner to be present.  That plaintiff
  entered into the employee-employer relationship by "special agreement" is
  not enough - under the facts of this case - to evade the purpose of the
  Workers' Compensation Act to provide a remedy for workers injured on the
  job.

       Reversed and Remanded.


                                       BY THE COURT:


                                       _______________________________________
                                       Jeffrey L. Amestoy, Chief Justice

                                       _______________________________________
                                       John A. Dooley, Associate Justice

                                       _______________________________________
                                       James L. Morse, Associate Justice

                                       _______________________________________
                                       Denise R. Johnson, Associate Justice

                                       _______________________________________
                                       Marilyn S. Skoglund, Associate Justice


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                                  Footnotes


FN1.  The State also relies on Fitzpatrick v. Vermont State Treasurer, 144
  Vt. 204, 475 A.2d 1074 (1984), in settling on a broad definition of
  "special agreement."  Given that Fitzpatrick addressed exceptions to
  benefits available under the Vermont Employees' Retirement System and that
  plaintiff in Fitzpatrick worked under substantially different circumstances
  than plaintiff in the instant case, the Fitzpatrick decision is not
  dispositive in this matter.  See id. (plaintiff, who worked less than a
  five-day week for first few years of his contract with State, was not
  employee for purposes of Vermont Employees' Retirement System where State
  paid plaintiff on per diem basis and did not withhold federal or state
  taxes).