In re Walls Unlimited, Inc. (July 10, 1996)
STATE OF VERMONT
DEPARTMENT OF LABOR AND INDUSTRY
In re:
By: Barbara H. Alsop
Hearing Officer
Walls Unlimited, Inc. For: Mary S. Hooper
Commissioner
Opinion #: 14-96WCPen
Hearing held at Montpelier, Vermont, on June 20, 1996.
Record closed on July 2, 1996.
APPEARANCES
Carl H. Lisman, Esq., for the Respondent
J. Stephen Monahan, Esq., for the Workers' Compensation Division
ISSUE
Respondent was ordered to show cause why it is not responsible for providing workers' compensation insurance pursuant to the Workers' Compensation Act.
EXHIBITS
1. Respondent's Exhibit 1 Certificate of Incorporation for Walls Unlimited, Inc.
2. Respondent's Exhibit 2 "Broker Agreement" form
3. Respondent's Exhibit 3 "Agreement" form
4. WCD A Letter of Charles D. Bond to Carl Lisman, Esq., dated April 29, 1996.
5. WCD B Letter of Charles D. Bond to Carl Lisman, Registered Agent, dated May 7, 1996.
6. WCD C Job documents (10 pages)
7. WCD D Proofs of Commercial Insurance (4 pages)
8. WCD E 3 Forms 1099-MISC for 1995
Judicial notice is taken of the Respondent's advertisements in the Yellow Pages of the NYNEX Telephone Book for 1994-95 and 1995-96.
FINDINGS OF FACT
1. Pierre Dufresne, the president, director and claimed sole employee of the Respondent, testified as to the history and practices of the Respondent.
2. Prior to July of 1994, Mr. Dufresne installed drywall under the name of Walls Unlimited Drywall. He used to work for other contractors or for homeowners, and would be responsible for all facets of drywall installation. He found that the business was highly competitive, particularly in light of the cost of doing business, and determined that it would be better to incorporate and act as a "broker."
3. When Mr. Dufresne was a sole proprietor, he engaged the services of other drywallers, whom he characterized as subcontractors. He was contacted by the Workers' Compensation Division, and told that these workers would be considered employees. Thereafter, he incorporated and began his "broker" business.
4. Mr. Dufresne testified that he intended to broker all phases of construction. He indicated that he first brokered any worker other than a drywaller in the early part of 1995 for Neagley Construction, when he supplied insulators. According to him, the bulk of his work at present involves drywalling, and prior to the Neagley job, all of his work involved
drywallers.
5. Mr. Dufresne indicated that his current practice entails matching workers and jobs. If a particular tradesman is required by a job, he will locate the tradesman and assist him in figuring out a price for the work. He will function as an interface between the two parties. Sometimes he will supply the materials for the construction, and will be paid directly by the general contractor, although on other occasions, one or the other of the parties will supply the materials.
6. Mr. Dufresne claims to place drywallers, electricians, plumbers, insulators, and excavators. However, he has produced no evidence as to these claims. In fact, the only evidence produced by either party shows that the workers retained and paid by the Respondent are drywallers. No similar documentation has been produced for any of the other trades. Mr. Dufresne is not a licensed electrician or plumber, trades that require licensure in this state.
7. The Respondent produced into evidence the templates for agreements to be entered into among the parties of one of Mr. Dufresne's deals. Each of those agreements is drafted for use in a project involving drywallers. Mr. Dufresne testified that the agreement would be amended in the event that another trade was involved. He added that he did not prepare the agreements for every deal in which he was involved because it creates too much
paperwork.
8. By the terms of the Broker Agreement, the Respondent supplies the general contractor with an estimate of the amount of material needed for the job, and also orders all of the supplies for the job. He also provides the worker for the job.
9. There is no evidence produced by the Respondent of an actual signed agreement. There is no evidence, other than the testimony of Mr. Dufresne, that these agreements are in actual use in his business.
10. Mr. Dufresne testified that he did not set the hours for the tradesmen, nor did he supply the tools. He had no control over the number of people doing the job, and he had no supervisory role at all. The extent of his input was that he required evidence of insurance. In the event the tradesman was a sole proprietor, he required evidence of general liability insurance, and in the case of those with employees, he required evidence of workers' compensation insurance coverage. Exhibit WCD D is an example of the insurance forms he received.
11. Rosemary Peters supplies bookkeeping and secretarial services to the Respondent. She has a key to the office. She is also treated as a subcontractor, not an employee, and produces invoices for the work she performs.
12. Testimony was also received from Richard Benard, the investigator for the Workers' Compensation Division. He went to a job site in February of 1996, and spoke with two sheet rockers he found there. The two individuals were Timothy Bair and Ronald Irish, both individuals whose Forms 1099 and insurance papers were parts of Exhibits WCD C & D. Each indicated that he worked for Mr. Dufresne and that he was an independent contractor. Each indicated that Mr. Dufresne asked him for bids, and that he would perform the job as he saw fit without interference from Mr. Dufresne.
13. On the next day, Mr. Benard returned and spoke with Steven Mason and Keith Winters, who were taping the sheetrock installed the day before. They confirmed the reports of Mr. Bair and Mr. Irish. The two tapers worked as "Procoats Drywall." All four men indicated that they were free not to accept jobs proposed by the Respondent.
13. Mr. Benard also spoke with Mr. Dufresne. Mr. Benard indicated that Mr. Dufresne never indicated in any of their conversations that he was involved in any trade other than drywalling. Mr. Benard in his investigation never found evidence of any other trade in relationship to the Respondent.
14. Mr. Benard spoke briefly with Ms. Peters, who told him that she was a secretary, bookkeeper and general office person.
15. The Respondent has placed advertisements in the Burlington area telephone book for at least the last two years. In both books, the Respondent is listed under the heading of Dry Wall Contractors. There is no listing for the Respondent under headings involving general contractors, electricians or plumbers. In the earlier advertisement, placed prior to the incorporation of the Respondent, there is a picture of a man placing sheet rock against studs, a picture that is repeated in the later advertisement. The second advertisement shows that the Respondent is incorporated and indicates "Quality Work/Reasonable Rates." Both of these terms were in the earlier advertisement, which also included a list of services supplied. The later advertisement includes the notation "Free Estimates." The telephone numbers in the two advertisements are the same. There is no reference in the second advertisement to services other than dry wall installation, such as plumbing, electrical work or the installation of insulation.
16. In 1995, according to the 1099s filed, the Respondent paid "Pro Coat" the sum of $50,345.99. Ronald Irish was paid $34,363.25, and Timothy Bair was paid $34,545,75, again by the Respondent and not by a general contractor or homeowner.
CONCLUSIONS
1. An employer, for purposes of the Workers' Compensation Act, "includes any body of persons, corporate or unincorporated,...and includes the owner or lessee of premises or other person who is virtually the proprietor or operator of the business there carried on, but who, by reason of there being an independent contractor or for any other reason, is not the direct employer of the workers there employed." 21 V.S.A §601(3).
2. 21 V.S.A. §625 provides that "[a]n employer shall not be relieved in whole or in part from liability created by the provisions of this chapter by a contract, rule, regulation or device whatsoever."
3. Prior to the incorporation of his business, Mr. Dufresne was clearly an employer. The question raised in this hearing is whether, by the act of incorporation and the claimed change in his method of operation, Mr. Dufresne, or Walls Unlimited, Inc., has removed himself from the purview of the Workers' Compensation Act.
4. The only evidence that Walls Unlimited, Inc., is any different from Mr. Dufresne's prior business comes from Mr. Dufresne himself. No supporting evidence has been produced, with the exception of the blank contracts, to suggest that there has been any change in Mr. Dufresne's method of business. Specifically, the Respondent has failed to call any witnesses to confirm its position that a positive change has occurred in its operation.
5. The evidence weighing against the Respondent's position is strong. The minimal change in the telephone book advertisement, with the failure to mention any of the other services allegedly offered by the Respondent, suggests that the corporation has merely continued Mr. Dufresne's prior practices. The Respondent's practice of providing the materials for its tradesmen suggests that the Forms 1099 reflect "wages" paid to the workers for jobs that are an integral part of Mr. Dufresne's business. The sums of money reflected in those forms is confirmatory of this concept. Had the Respondent produced evidence that such forms were provided by the general contractors, the persons allegedly responsible for paying the workers, then its position would be confirmed. Rather the forms show that the payments ere made to the Respondent, who passed on payment to the workers. This suggests more than a role as a broker, but rather that of an active participant in the transaction. Specifically, where the "broker's" entitlement to payment is dependent upon completion of work by the worker, there is an inference that the "broker" has some interest in or motive for following and assessing the work performed.
6. The Respondent, in its proposed findings and rulings, has conceded as much. Its attorney wrote that "[t]here are times when a contractor will contact Walls regarding the progress of a subcontractor or the quality of the subcontractor's work. Neither are within the scope of Walls' brokerage arrangements but, in order to ensure good will with the contractor, Walls will sometimes help the contractor in its relationship with the subcontractor." While the only evidence of this procedure comes from the admission of counsel, I find that the Respondent has a vested interest in the performance of its "subcontractors" as their good work will ensure its ability to remain in business.
7. Next, there is the evidence involving the office assistant. The description of her duties suggests that she is in fact a part time employee, one who engages in traditional office work that is required in any business. By her admissions to Mr. Benard, she made it clear that she was not an outside accountant, but rather an office worker/bookkeeper, roles that are not amenable to contracting out. At the very least, workers' compensation insurance should be in place for this employee.
8. If I find, as I must based on the evidence before me, that the Respondent is only "brokering" dry wall work, then the Respondent is the statutory employer of the subcontractors named in this case. It provides the jobs and the materials for the workers, establishes the manner or time of their completing of their tasks, acts as a go-between between the workers and the general contractors, and pays them (and incidently itself) from the proceeds of the deal. When difficulties arise, it acts as an interested party in resolving the dispute. In fact, it is in the business of providing drywalling services, and has devised a "contract... or device" for so doing, in contravention of the statute. Insurance therefore is required for these subcontractors also.
ORDER
THEREFORE, based on finding that the secretary and the drywallers are statutory employees, Walls Unlimited, Inc., is ordered to provide workers' compensation insurance for these employees and all others similarly situated, and is ordered to provide proof of such insurance within fifteen (15) days of the date of this opinion.
DATED at Montpelier, Vermont this 10th day of July 1996.
________________________________
Mary S. Hooper
Commissioner