W.C. No. 4-445-162Industrial Claim Appeals Office.
June 27, 2001
FINAL ORDER
Western Slope Refining Company (Western) and its insurer, Zurich U.S. (collectively the Zurich respondents) and the claimant separately petitioned for review of an order of Administrative Law Judge Martinez (ALJ) which determined Western was the claimant’s statutory employer when he suffered a work related injury. We affirm.
Western owned a site which was formerly a refinery. For purposes of making the site more marketable, Western conducted cleanup activities. Western had no employees of its own and therefore, it contracted with Scott E. Davis doing business as Westco Consultants Inc. (Westco) to dismantle, demolish, and remove certain assets, property and equipment from the site and leave the site in such condition that only the excluded property, foundation and dirt remained. Westco was also hired to perform asbestos abatement.
The claimant was an employee of Westco. While working on the site the claimant suffered a crushing injury to his foot. Westco did not have workers’ compensation insurance. Consequently, the claimant filed a claim for workers’ compensation against the Zurich respondents which alleged Western is the statutory employer.
The ALJ determined Western met the definition of a statutory employer under § 8-41-401 C.R.S. 2000 and, therefore, held the Zurich respondents solely liable for the injury. The ALJ awarded temporary disability benefits based on an average weekly wage of $575, medical benefits and disfigurement benefits. This appeal followed.
I.
The respondents contend that the work contracted out was not part of Western’s “regular business” as defined in Finlay v. Storage Technology Corp., 764 P.2d 62 (Colo. 1988). Therefore, they contend the ALJ erroneous found Western was the claimant’s statutory employer. We disagree.
Under § 8-41-401(1)(a), C.R.S. 2000, a company which contracts out part or all of its work to any subcontractor is the statutory employer of the subcontractor and the subcontractor’s employees. The purpose of the statute is to prevent employers from “avoiding responsibility under the workers’ compensation act by contracting out their regular business to uninsured independent contractors.” Finlay v. Storage Technology Corp. supra.
The test for determining whether a contractor has subcontracted out its regular business is set forth in Finlay v. Storage Technology Corp., supra. The Finlay court noted that earlier decisions narrowly limited the definition the contractor’s “regular business” to the “primary business” of the contractor. However, the Finlay court significantly expanded that standard. Shumiloff v. Frey, W.C. No. 4-005-377 (April 24, 1992), aff’d, Trinity Lutheran Church v. Shumiloff (Colo.App. No. 92CA0794, April 29, 1993) (not selected for publication). Under Finlay, the “regular business test” is satisfied if the contracted services are part of the employer’s regular business as defined by its “total business operation,” considering the elements of routineness, regularity, and the importance of the contracted services to the contractor’s business operations. Id. at 65.
There is no particular formula which defines “regularity” and “routineness” in terms of frequency. Shumiloff v. Frey, supra. Rather, a service is regular and routine if it is an “integral part of the contractor’s total business operation.” Furthermore, the importance of the contracted services can be demonstrated by showing that, in the absence of the subcontractor’s services, the contractor would find it necessary to accomplish the work by use of his own employees rather than forego the performance of the work. Id. at 67; see also Campbell v. Black Mountain Spruce, Inc., 677 P.2d 379, 381 (Colo.App. 1983).
Application of the “regular business test” is dependent on the facts of each individual case. See Virginia Heritage Square Co. v. Smith, 808 P.2d 366 (Colo.App. 1991). Consequently, we are obliged to uphold the ALJ’s findings if supported by substantial evidence. Section 8-43-301(8), C.R.S. 2000.
With record support, the ALJ found Western’s primary business objective was to attract developers to the refinery by improving the condition and appearance of the property. To accomplish this objective it was necessary for Western to remove hazardous waste and all unwanted buildings and equipment remaining on the property. The cleanup work was contracted out because Western had no employees. It follows that in the absence of the contract with Westco, Western would have had to hire employees to perform the cleanup. Consequently, the record amply supports the ALJ’s finding that Western contracted out its regular business.
Nevertheless, the respondents point out that a company is not the statutory employer of a supplier who delivers materials to the company See Haas v. Cheyenne Mountain Zoo, W.C. No. 4-131-518 (March 22, 1993). Conversely, they argue that a company is not the statutory employer of a business which picks up material in the sale of goods. Relying o Colorado Carpet Installers v. Palermo, 668 P.2d 1384 (1983), the respondents contend that the contract between Western and Westco was primarily a contract for the sale of goods. Therefore, they contend that the claimant’s injury while removing goods purchased by Westco from the work site was not part of the Western’s regular business. The ALJ considered and rejected this argument. We agree with the ALJ’s reasoning and adopt it as our own.
The general rules of contract interpretation provide that contracts be construed to effect the intent of the parties. If the language used in the written instrument is plain, clear and no absurdity is involved, the contract must be enforced as written and extrinsic evidence may not be considered to ascertain the parties’ intent. Cary v. Chevron U.S.A., Inc., 867 P.2d 117 (Colo.App. 1993). Furthermore, the mere fact that the parties purport to interpret the agreement differently does not, in itself, create an ambiguity. See Burns v. Burns, 169 Colo. 79, 454 P.2d 814
(Colo. 1969); Brunton v. International Trust Co., 114 Colo. 298, 164 P.2d 472 (1945).
Where the contract has mixed purposes the primary purpose of the contract controls. Colorado Carpet Installation Inc. v. Palermo, supra. The facts in Colorado Carpet Installation Inc. v. Palermo, supra,
involved an oral contract for the sale and installation of carpet and other flooring. There was a written proposal which referred to Colorado Carpet as the “seller” and the Palermos as the “customer,” but there was no written acceptance. A dispute arose concerning whether the Palermos accepted the carpet proposal. Colorado Carpet sought damages for lost profits, labor, storage and shipping costs. The issue before the court was whether the contract violated the statute of frauds under the Uniform Commercial Code, which applies to the sale of goods (defined as movable items) for the price of $550 or more. The court concluded that the subject matter involved a mixed contract where some services were contemplated. However, based upon the particularities of the case, the court concluded the contract was primarily a sale of goods. In reaching this conclusion the court considered the following factors: the contract language, whether the goods and services were provided at one overall price or separate billings, the ratio the cost of goods bore to the overall contract price, and the nature and reasonableness of the purchaser’s contractual expectations of acquiring a property interest in goods.
In this case, the contract was titled a “Service Agreement,” and Westco was defined as a “Contractor” not a “Buyer.” The actual language of the contract referred to “work” and “services” to be performed by the contractor, which included asbestos abatement services, cleaning, demolishing, dismantling and removal of equipment.
The ALJ expressly recognized that the Service Agreement required Westco to pay Western $6,000 for salvage rights of the equipment to be removed from the property, and that an amendment sold additional equipment to Westco. However, the ALJ reasonably inferred that Westco agreed to pay for the equipment it removed because it had a value which far exceeded the cost of the services to be provided. See Magnetic Engineering, Inc. v. Industrial Claim Appeals Office, 5 P.3d 385
(Colo.App. 2000) (we may consider findings which are necessarily implied by the ALJ’s order). Furthermore, the ALJ expressly found that if the value of the salvage purchased by Westco was less than the amount paid by Westco it was simply a bad deal for Westco. (Conclusions of Law 3).
The predominance of the service components of the Agreement is further illustrated by the amendment to the Agreement which provided for a $5,000 performance bonus if Westco timely completed the work to Western’s satisfaction. Under these circumstances, we agree with the ALJ’s determination that the agreement was unambiguous and was primarily a service contract. Because the contract was not primarily an agreement for the sale of goods, Western is not excluded from being a statutory employer for injuries sustained while the claimant dismantled and removed goods purchased by Westco.
Moreover, because we agree with the ALJ that the contract was unambiguous, the ALJ properly ignored extrinsic evidence of the parties intent. However, even if the contract was ambiguous, we are not persuaded the extrinsic evidence is inconsistent with the ALJ’s determinations.
Paul Rosswork (Rosswork), an attorney for Western stated that the primary purpose of the agreement was a sale of equipment. (Tr. p. 59). However, Rosswork testified that the agreement was put in the form a “service agreement” because it was not really a sale of assets. Instead Westco was buyer for scrap, and he was basically tearing down equipment and machinery out there and then scraping it out. (Tr. p. 48).
Rosswork also stated Western wanted to get rid of the site because while it was not being used it was just an expense and added that the property couldn’t be sold until it was cleaned up because of the prior environmental problems. (Tr. p. 40). He admitted the property was more marketable if it was cleaned up and that removing the hazardous material furthered that goal. (Tr. pp. 42, 54).
Further, Rosswork testified that Westco was proceeding slowly and was not doing what Western wanted and, therefore, Western decided to amend the agreement to sell Westco some conveyors for $5,000 and offered Westco a $5,000 performance bonus if they finished timely. (Tr. p. 46). Rosswork testified that the intent of the amendment was to make sure Westco didn’t remove things they were not supposed to have and that the asbestos abatement was finished. (Tr. pp. 46-47). Similarly, Western’s witness, Richard Means testified that Western was concerned about Westco completing the asbestos abatement work because Western knew it was going to an expense for Westco. He stated that Western offered the completion bonus because they wanted to be sure the asbestos abatement was completed before Westco “took the good parts and left, which is what they ended up doing.” (Tr. p. 36).
II.
Next, the Zurich respondents contend that Western is exempt from liability under § 8-41-401(1)(a), C.R.S. 2000. The respondents construe § 8-41-401(1)(a)(I) as creating an exception to statutory employer liability where the subcontractor meets the definition of an independent contractor.
Under the rules of statutory construction, statutes must be construed in such matter as to further the legislative intent with which they were enacted. To discern the intent of the General Assembly, we must first examine the language of the statute. Words and phrases must be given their plain and ordinary meaning. Arkansas Valley Seeds, Inc., v. Industrial Claim Appeals Office, 972 P.2d 695 (Colo.App. 1998).
A statute is ambiguous if it is susceptible to more than one meaning. Mountain City Meat Co, v. Industrial Claim Appeals Office, 904 P.2d 1333 (Colo.App. 1995). If the statute is ambiguous but part of a comprehensive statutory scheme it must be construed as a whole, harmonized with all parts. Gonzales v. Advanced Components, 949 P.2d 569
(Colo. 1997).
Section 8-41-401(1)(a) provides that no person, company, or corporation shall be construed to be a statutory employer
“(I) If such lessee, sublessee, contractor, or subcontractor has complied with § 8-40-202(2)(b) relative to such work;
(II) If the person working for such lessee, sublessee, contractor, or subcontractor is a working general partner or the sole proprietor of such lessee, contractor, or subcontractor and is not covered under a policy of worker’s compensation insurance; or
(III) If the corporate officer as defined in § 8-41-202(4)(a) or a member as defined in section 8-41-202(4)(b) working for such lessee, sublessee, contractor, or subcontractor has executed and filed an election to reject coverage under § 8-41-202(1)”
We conclude that § 8-41-401(1)(a)(I) is ambiguous. As argued by the Zurich respondents, the statute could mean that the general contractor is exempt from being a statutory employer if the subcontractor meets the definition of an independent contractor under § 8-40-202(2)(b). The statute could also mean that the general contractor is exempt from liability if the subcontractor’s employees meet the definition of an independent contractors.
Section § 8-40-202(2)(b) C.R.S. 2000 sets forth the pertinent factors for determining whether the “individual” performing services for another is an employee or an independent contractor. Furthermore, §8-41-401(1)(a)(II) (III) unambiguously create exemptions depending on the status of the claimant, not the subcontractor. Therefore, we agree with the ALJ that § 8-41-401(1)(a) applies if the subcontractor has complied with § 8-40-202(2)(b) concerning the work of the claimant, not where the subcontractor meets the definition of an independent contractor. More importantly, we agree with the ALJ that it would contravene the intent of § 8-41-401(1)(a) to read § 8-41-401(1)(a)(I) as relieving the general contractor from liability for injuries to the subcontractor’s employees as long as the subcontractor was hired as an “independent contractor.”
There is no dispute the claimant was Westco’s employee at the time of the injury. Therefore, we agree with the ALJ that subsection 8-41-401(1)(a)(I) is not applicable and does not bar the claimant’s recovery against the Zurich respondents. See Brawner-Ahlstrom v. Husson, 969 P.2d 738 (Colo.App. 1998) (we may affirm ALJ’s order where the correct result is reached even if an incorrect’ reasoning was employed).
III.
For his part, the claimant contends the ALJ erroneously failed to determine whether Western was the statutory employer under § 8-41-402
C.R.S. 2000. Because we conclude the ALJ did not err in finding Western was the statutory employer under § 8-41-401, we do not address the claimant’s alternative theory of compensability. See Brown v. Colorado Department of Corrections, 915 P.2d 1312 (Colo. 1996).
IV.
The respondents also contend the ALJ abused his discretion in calculating the average weekly wage. We disagree.
Section 8-42-102(2)(d), C.R.S. 2000, provides that where the claimant is paid by the hour, the average weekly wage shall be determined by multiplying the daily wage by the number of days and fractions of days in the week during which the claimant was working at the time of the injury or would have worked if the injury had not intervened. We may not disturb the ALJ’s calculation of average weekly wage if supported by substantial evidence in the record. Section 8-43-301(8). Furthermore, insofar as the evidence is subject to conflicting inferences, it is the ALJ’s sole prerogative as the fact finder to resolve the conflicts. See Dover Elevator Co. v. Industrial Claim Appeals Office, 961 P.2d 1141
(Colo.App. 1998).
The evidence is subject to conflicting inferences. The claimant testified he earned $10 per hour and worked at least 50 hours a week. (Tr. p. 27). However, he stated he “usually” worked 55-60 but sometimes worked 65 hours per week. (Tr. pp. 7, 27). The respondents point out that on the Claim for Workers’ Compensation the claimant listed his average weekly wage “at time of injury” to be $500. However, the claimant also listed his work schedule as 9 to 10 hours a day for six days a week. Furthermore, the claimant testified that the weekly wage listed on the claim was probably “a good average week,” but added that other times the average was 55 or 60 hours a week. (Tr. pp. 22, 27).
The ALJ resolved the conflict in favor of the claimant and found the claimant worked an average of 57.5 hours a week which produced an average weekly wage of $575. (Finding of Fact 9). Because the ALJ’s determination is a plausible inference from the record, it is binding on review.
To the extent the respondents have further arguments, they are not persuasive.
IT IS THEREFORE ORDERED that the ALJ’s order dated December 12, 2000, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ Kathy E. Dean
____________________________________ Robert M. Socolofsky
NOTICE
This Order is final unless an action to modify or vacate this Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, CO 80203, by filing a petition for review with the Court, within twenty (20) days after the date this Order is mailed, pursuant to §8-43-301(10) and § 8-43-307, C.R.S. 2000. The appealing party must serve a copy of the petition upon all other parties, including the Industrial Claim Appeals Office, which may be served by mail at 1515 Arapahoe, Tower 3, Suite 350, Denver, CO 80202.
Copies of this decision were mailed June 27, 2001 to the following parties:
Delbert Presley, P. O. Box 614, Basin, WY 82410
Scott E. Davis d/b/a Westco Consultants, Inc., 202 North Ave., #153, Grand Junction, CO 81501
Paul Rosswork, Western Slope Refining Company, 370 17th St., #5300, Denver, CO 80202
Gayle Trottnow, Zurich U.S. P. O. Box 370308, Denver, CO 80237
Arthur S. O’Farrell, Esq., 326 Main St., #103, Grand Junction, CO 81501 (For Claimant)
Daniel F. O’Neil, Esq., 1801 Broadway, #1500, Denver, CO 80202 (For Respondents Western Slope Refining Company and Zurich U.S.)
BY: A. Pendroy