Elms v. Renewal by Anderson

GREENE, J. This case arises out of an appeal on the record from the Workers’ Compensation Commission pursuant to Maryland Code (1991, 2008 Repl.Vol., 2013 Cum.Supp.), § 9-745 of the Labor and Employment Article. 1 Petitioner Richard A. Elms (“Elms”) presents two issues for our review. The first is whether the Workers’ Compensation Commission miscon ³⁸⁷ strued the law as applied to the facts when it concluded that Elms was an independent contractor and not an employee of Respondent Renewal by Andersen (“Renewal”). The second issue is whether the Court of Special Appeals erred when it held that a statutory employment analysis under § 9-508 of the Workers’ Compensation Act must precede a common law employment analysis. We shall answer both questions in the affirmative and vacate the judgment of the Court of Special Appeals.

FACTUAL AND PROCEDURAL HISTORY The facts of this case are undisputed as Elms was the only witness to appear before the Workers’ Compensation Commission (“Commission”), and, on appeal, both Elms and Renewal submitted to the Circuit Court for Carroll County a Joint Exhibit List that contained the same evidence presented to the Commission. At the time of the accident giving rise to the instant case, Elms was a licensed home improvement contractor, who owned and operated an unincorporated home improvement business. The business traded as Elms Construction Company (“Elms Construction”). Elms, trading as Elms Construction, provided general construction services such as window and door installations, roofing, and carpentry.

Some years prior to entering into a relationship with Renewal, Elms secured workers’ compensation insurance as a sole proprietor. 2 Elms, however, did not elect to include himself on the policy. 3 ³⁸⁸ Although it appears that Elms Construction had additional unidentified employees, the only named employee on Elms Construction’s insurance policy was Richard W. Elms, Elms’s son. Renewal is a business that sells and installs windows and doors. In 2006, Elms began installing windows and doors for Renewal. Elms certified to Renewal that Elms Construction carried workers’ compensation insurance.

Renewal provided Elms with a document entitled “Installation Job Expectations,” which included sections for “Code of Conduct,” “Workmanship,” “Performance,” “Appearance,” “General Expectations,” and “Procedural Expectations,” as well as a list of job site procedures and standards. Among other things, the instructions contained in the document required Elms and his workers to wear shirts bearing Renewal’s logo, to place Renewal signs in customers’ yards, to maintain neat physical appearances, and to be respectful and courteous while completing jobs for Renewal’s customers. On the first two installation jobs that Elms Construction performed for Renewal, Renewal’s employees trained Elms Construction’s employees in the methods and materials to be used. Subsequently, Renewal spot-checked installations completed by Elms Construction and occasionally required Elms to make corrections.

Renewal also gave report cards to homeowners to rate Elms Construction installations, and Renewal then gave feedback to Elms. Elms believed that he was required to maintain a score of at least ninety percent from customer ratings. Elms testified that by 2008 Elms Construction received eighty to eighty-five percent of its income from Renewal. At the same time, Elms Construction performed similar work for another home improvement business, Chandler Remodeling. ³⁸⁹ Elms testified that, on average, he worked for Renewal four days per week.

Renewal scheduled all installations and provided Elms with a monthly calendar that listed the customers’ names and addresses, the number of windows and doors to be installed at each location, and a time frame for each installation. Elms had no input as to the days scheduled or time allotted for each job. While working on Renewal installations, Elms Construction used its own trucks and, usually, its own tools, but Elms always obtained the supplies and materials for installations from Renewal’s warehouse. He also occasionally used Renewal’s tools such as a table saw and scaffolding.

Renewal paid Elms Construction directly and did not withhold taxes. Renewal also did not subsidize or reimburse Elms for travel expenses, including gas. Elms Construction then paid its employees, including Elms. On August 6, 2008, while installing a window at a Renewal customer’s home, Elms fell from a ladder and injured his right foot.

Following his injury, Elms filed a workers’ compensation claim with the Commission, alleging that he was Renewal’s common law employee and was working for Renewal at the time of the injury. Before the Commission, Renewal argued that Elms was an independent contractor and not a covered employee for purposes of workers’ compensation benefits. After a hearing on October 19, 2010, the Commission concluded that Elms was an independent contractor, rather than a common law employee of Renewal, and, therefore, not entitled to collect workers’ compensation benefits under Renewal’s ■ insurance policy. Elms filed a petition for judicial review in the Circuit Court for Carroll County pursuant to § 9-737. 4 The Circuit Court heard the appeal on the record of the Commission pursuant to ³⁹⁰ § 9-745(c). 5 In a Memorandum Opinion and Order dated March 20, 2012, the Circuit Court reversed the decision of the Commission, concluding that Elms was Renewal’s common law employee and, therefore, entitled to collect workers’ compensation benefits through Renewal.

Thereafter, pursuant to § 9-750, Renewal appealed to the Court of Special Appeals, which vacated the judgment of the Circuit Court. The Court of Special Appeals issued its first opinion on April 5, 2013, and then, after granting a Motion for Reconsideration, issued a second opinion dated May 16, 2013. In both opinions, which are unreported, the intermediate appellate court held that the statutory employer provision of the Workers’ Compensation Act, § 9-508, “abrogates the common law definitions of employer and employee ‘when certain conditions are met’ ” and remanded the case to the Commission to determine “whether Renewal was a ‘principal contractor,’ whether [Elms Construction] was a ‘subcontractor,’ and whether [ ] Elms was [Elms Construction]^ sole proprietor under § 9-508(f).” We granted Elms’s petition for certiorari, Elms v. Renewal by Anderson, 434 Md. 311 , 75 A.3d 317 (2013), to answer the following questions: 1. Whether the Workers’ Compensation Commission misconstrued the law as it applied to the facts under § 9-745 when it determined that Elms was an independent contractor; and 2.

Whether the Court of Special Appeals erred by holding that a § 9-508 analysis must precede a common law employment analysis. ³⁹¹ We shall vacate the judgment of the Court of Special Appeals and remand this case to that Court with directions to affirm the judgment of the Circuit Court for Carroll County. As a matter of law, by application of the common law to the undisputed facts established before the Commission, Elms was an employee of Renewal at the time of the accident. That relationship qualified Elms as a covered employee under the Workers’ Compensation Act, and, therefore, entitled him to workers’ compensation benefits under Renewal’s insurance policy. Further, we shall hold that the Court of Special Appeals erred in concluding that § 9-508 “abrogates” the common law employment analysis.

DISCUSSION Before beginning our analysis, we note that the procedural posture of this case is that of an “unadorned administrative appeal,” also known as an appeal “on the record of the Commission.” Board of Educ. v. Spradlin, 161 Md. App. 155, 167-71 , 867 A.2d 370, 377-80 (2005). Accordingly, we “look[ ] through the circuit court’s and intermediate appellate court’s decisions, although applying the same standards of review, and evaluate[ ] the decision of the agency.” People’s Counsel for Baltimore Cnty. v. Surina, 400 Md. 662, 681 , 929 A.2d 899, 910 (2007). In reviewing appeals from the Commission, § 9-745(b) generally governs and provides that “the decision of the Commission is presumed to be prima facie correct[.]” “We have explained, though, that this presumption does not extend to questions of law, which we review independently.” Montgomery Cnty. v. Deibler, 423 Md. 54, 60 , 31 A.3d 191, 194 (2011) (citing Wal Mart Stores, Inc. v. Holmes, 416 Md. 346, 357 , 7 A.3d 13, 19 (2010)). As we shall explain further below, we review the decision of the Commission to determine whether it acted within its powers or whether it “misconstrued the law and facts applicable in the case decided.” § 9-745.

A. This Court aptly summarized the history and purpose of the Maryland Workers’ Compensation Act in Rodrigues-Novo v. ³⁹² Recchi America, Inc., 381 Md. 49 , 846 A.2d 1048 (2004), stating: The Maryland Workers’ Compensation Act (hereinafter the “Act”), which is currently codified under Maryland Code, Sections 9-101 to 9-1201 of the Labor and Employment Article (1991, 1999 Repl.Vol.), was first enacted in 1914, as its title suggests, to compensate employees who were injured on the job. Harris v. Board of Education of Howard County, 375 Md. 21, 28-29 , 825 A.2d 365, 370 (2003); Honaker v. W.C. & A.N. Miller Dev. Co., 278 Md. 453, 454 , 365 A.2d 287, 288 (1976) (hereinafter “Honaker I”); see also Brady v. Ralph Parsons Co., 308 Md. 486, 496 , 520 A.2d 717, 723 (1987); Honaker v. W.C. & A.N. Miller Dev. Co., 285 Md. 216, 222-23 , 401 A.2d 1013, 1016-17 (1979) (hereinafter “Honaker II ”).

The Act was designed as a delicate balance: on one hand, the Act took away employees’ rights to sue employers for negligence, yet, on the other hand, it ensured employees the “right to quick and certain compensation for injuries sustained during the course of their employment, regardless of fault.” Brady, 308 Md. at 496 , 520 A.2d at 723 (quoting Johnson v. Mountaire Farms, 305 Md. 246, 250 , 503 A.2d 708, 710 (1986)). 381 Md. at 56 , 846 A.2d at 1052 . The Workers’ Compensation Act applies to “covered employers and employees.” 6 Accordingly, the first inquiry in a workers’ compensation case is whether there exists an employment relationship that qualifies under the Act. See W.M. Schlosser Co. v. Uninsured Employers’ Fund, 414 Md. 195, 206 , 994 A.2d 956, 963 (2010) (stating that in a workers’ compensation case, “the first question to be resolved is whether [the claimant] is a ‘covered employee’ ”). Under the statute, there is a “presumption” that an individual is a covered employee.

Specifically, § 9-202 provides that: ³⁹³ (a) An individual, including a minor, is presumed to be a covered employee while in the service of an employer under an express or implied contract of apprenticeship or hire. (c) To overcome the presumption of covered employment, an employer shall establish that the individual performing services is an independent contractor in accordance with the common law or is specifically exempted from covered employment under this subtitle. Stated differently, a worker will be deemed a “covered employee” unless it is established that he or she is an “independent contractor” under the common law rules. Accordingly, we look to the common law “master” and “servant” relationship to determine whether an individual is a “covered employee.” See Sun Cab Co. v. Powell, 196 Md. 572, 577 , 77 A.2d 783, 785 (1951) (“[T]he words ‘employer’ and ‘employee’ in the Workmen’s Compensation Act are synonymous with the words ‘master’ and ‘servant,’ and the rules for determining the existence of the relation of employer and employee under the Act are the same as the rules at common law for determining the relation of master and servant.”).

In undertaking this analysis, we typically consider five factors: “(1) the power to select and hire the employee, (2) the payment of wages, (3) the power to discharge, (4) the power to control the employee’s conduct, and (5) whether the work is part of the regular business of the employer.” Whitehead v. Safway Steel Products, Inc., 304 Md. 67, 77-78 , 497 A.2d 803, 808-09 (1985). Although all five factors are relevant in determining whether there is an employer/employee relationship, we held in Whitehead that the power to control the employee’s conduct is the most important factor. 304 Md. at 78 , 497 A.2d at 809 (stating that the employer’s “ ‘right to control and direct the employee in the performance of the work and in the manner in which the work is to be done’ is the ‘decisive’ or ‘controlling’ test”). In other words, the one exercising control is the employer. In this context, “control” is demonstrated in a number of ways.

For example, in the Whitehead case, the respondent, ³⁹⁴ Safway Steel Products, Inc. (“Safway”), contacted a temporary services agency to retain temporary workers to perform work in its facility. The agency assigned the petitioner, Whitehead, to perform work for Safway. Whitehead, 304 Md. at 71 , 497 A.2d at 805 . While Whitehead was assigned to Safway’s facility, Safway instructed Whitehead on his tasks, could assign him to other duties, and “supervised and directed his actions and rate of work.” Whitehead, 304 Md. at 81-82 , 497 A.2d at 811 .

As a result of the level of control over Whitehead’s actions, we concluded that Safway was Whitehead’s employer. Whitehead, 304 Md. at 79 , 497 A.2d at 809 . In addition, the level of control necessary to be deemed an employer may be evidenced by the amount and type of employee rules and regulations that are imposed upon an individual. For example, in Mackall v. Zayre Corp., 293 Md. 221, 225-26 , 443 A.2d 98, 100 (1982), an employer subjected a worker to all the same rules and regulations that were applicable to a regular employee of the company, including the requirement to wear a “Zayre” logo smock.

In that case, we held that the evidence clearly demonstrated that the company exercised adequate control over the worker for the worker to be considered an employee of the company. 293 Md. at 231 , 443 A.2d at 103 . With that foundation in mind, we turn to the case at bar to determine whether Elms was a “covered employee” of Renewal, or whether he was an “independent contractor” as the Commission concluded. In “reviewing a decision by the Workers’ Compensation Commission, ‘the standard to be employed by ... the appellate court, is limited to determining whether the Commission exceeded the powers granted to it by [the Maryland Code], and whether it misconstrued the law and facts applicable to the case decided.’ ” Uninsured Employers’ Fund v. Pennel, 133 Md.App. 279, 288 , 754 A.2d 1120, 1125 (2000) (quoting Workers’ Comp. Comm’n v. May, 88 Md.App. 408, 416, 594 A.2d 1232, 1236 (1991)).

It is well established that “where the essential terms and manner of employment are undisputed, the issue as ³⁹⁵ to the relation between the parties and the nature of the employment is one of law for the [c]ourt.” McElroy Truck Lines, Inc. v. Pohopek, 375 Md. 574 , 585 n. 6, 826 A.2d 474 , 480 n. 6 (2003) (citing Criminal Injuries Comp. Bd. v. Gould, 273 Md. 486, 519 , 331 A.2d 55, 75 (1975); Clayburn v. Soueid, 239 Md. 331, 337 , 211 A.2d 728, 731 (1965); Charles Freeland & Sons v. Couplin, 211 Md. 160, 168 , 126 A.2d 606, 611 (1956)). “[A]s we recognized in Mackall, supra, the correct test for determining questions of law is whether there [are] conflicting inferences, from the evidence, on the issue of control ‘in the performance of a given function.’ ” Whitehead, 304 Md. at 82 , 497 A.2d at 811 . Because the essential terms and manner of employment in this case are undisputed, we review the Commission’s conclusion that Elms was an independent contractor for legal correctness. In this case, the facts, as established before the Commission, demonstrated Renewal’s exercise of control over Elms.

It is clear that Renewal “controlled] and directed]” Elms “in the performance of the work and in the manner in which the work [was] to be done.” Whitehead, 304 Md. at 78 , 497 A.2d at 809 . Renewal provided detailed training and instructions to Elms regarding how to complete the installations, including how to install the insulation and the types of shims, screws, caulking, and molding to use around the windows. In addition, although Renewal did not directly supervise Elms in the performance of the work, Renewal did engage in “spot checking” of Elms’s work. Renewal also required Elms to wear clothing bearing the “Renewal” logo and place a Renewal sign in the customer’s yard at job sites.

Renewal expected Elms to adhere to the policies and instructions contained in the “Installation Job Expectations” manual. Renewal also required customers to rate Elms’s performance on report cards at the end of each installation. Further, Renewal provided Elms with a schedule of jobs that included the address of the sites, the names of the residents, and the time frame for each job. Elms had no control over the dates and times the jobs were scheduled.

Accordingly, based on these facts as established before the Commission, we conclude, as a matter of law, ³⁹⁶ that the Commission misconstrued the law as applied to the facts when it determined that Elms was an independent contractor. We agree with the Circuit Court and therefore hold that Elms, as a common law employee of Renewal, is entitled to recover workers’ compensation benefits under Renewal’s policy. B. We next review the Court of Special Appeals’s conclusion that § 9-508 “abrogates the common law definitions of employer and employee.” As we stated in Rodrigues-Novo , “[w]hen certain conditions are met ... [§ 9-508] broadens the definition of employer to cover principal contractors that ordinarily would not be considered the worker’s employer under the common law rules of ‘master’ and ‘servant.’ ” 381 Md. at 57 , 846 A.2d at 1052 . In particular, § 9-508 provides that, in certain instances, a principal contractor will be liable to an employee of a subcontractor for injuries sustained during the course of the work undertaken by the principal contractor and subcontractor(s).

Section 9-508 provides in pertinent part: (a) In general. A principal contractor is liable to pay to a covered employee or the dependents of the covered employee any compensation that the principal contractor would have been liable to pay had the covered employee been employed directly by the principal contractor if: (1) the principal contractor undertakes to perform any work that is part of the business, occupation, or trade of the principal contractor; (2) the principal contractor contracts with a subcontractor for the execution by or under the subcontractor of all or part of the work undertaken by the principal contractor; and (3) the covered employee is employed in the execution of that work. ³⁹⁷ (f) Exemptions from liability. (1) A principal contractor is not liable to pay compensation to an individual under this title if the individual: (i) is a corporate officer, or a member of a limited liability company, who elects to be exempt from coverage under § 9-206 of this title; (ii) is a partner in a partnership and the partnership does not elect to make the individual a covered employee under § 9-219 of this title; or (iii) is a sole proprietor who: 1. does not notify the principal contractor, on a form approved by the Commission, of the individual’s status as a covered employee; and 2. does not elect to be a covered employee under § 9-227 of this title. We have explained that for § 9-508 to apply, there must be: “(1) a principal contractor[;] (2) who has contracted to perform work[;] (3) which is a part of his trade, business or occupation; and (4) who has contracted with any other party as a subcontractor for the execution by or under the subcontractor of the whole or any part of such work.” Honaker v. W.C. & A.N. Miller Dev.

Co., 278 Md. 453, 460 , 365 A.2d 287, 291 (1976) (Honaker I). Accord Honaker v. W.C. & A.N. Miller Dev. Co., 285 Md. 216, 225 , 401 A.2d 1013, 1017-18 (1979) (Honaker II); Brady v. Ralph Parsons Co., 308 Md. 486, 503 , 520 A.2d 717, 723 (1987). Accordingly, we further explained that there must be “two contracts.” Honaker I, 278 Md. at 460 , 365 A.2d at 291 .

Those contracts must comprise “one