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BAILEY v. SIMMONS
Factual and Procedural Background
Richard D. Bailey was injured while working as a carpenter for Henry Wright in the construction of a dwelling on land owned by Doug Simmons and Brooks Griffin. Bailey contended Wright was an uninsured subcontractor of the appellees and that the appellees were therefore liable under Ark. Stat. Ann. 81-1306 (Repl. 1976). The Administrative Law Judge made findings (not detailed in the opinion) which were reversed by the Full Commission. The Full Commission found Wright to be an independent contractor and not a subcontractor and therefore solely liable under the Act. Bailey and Wright appealed the Commission's determination. The Court of Appeals affirmed the Commission's decision.
Legal Issues Presented
- Whether Henry Wright was a subcontractor of Doug Simmons and Brooks Griffin for purposes of Ark. Stat. Ann. 81-1306, or whether he was an independent contractor.
- Whether Simmons and Griffin, as owners who contracted with Wright to build houses for sale, could be treated as "prime contractors" liable for compensation where a claimed subcontractor failed to secure workers' compensation.
- Whether the Commission applied the correct legal rule in requiring that a person sought to be charged as "prime contractor" be contractually obligated to a third person for the work being performed at the time of the injury.
Arguments of the Parties
Appellants' Arguments
- Appellants Bailey and Wright did not seriously contest that Wright was an independent contractor but argued the Commission applied an erroneous rule in determining he was not also a "subcontractor" under Ark. Stat. Ann. 81-1306.
- The main thrust of their appeal was that the Commission should have classified Wright as a subcontractor, thereby making the appellees liable under the statute for failure to secure compensation.
The opinion does not contain a detailed account of the appellees' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Hollingsworth Rockwood Ins. v. Evans, 255 Ark. 387, 500 S.W.2d 382 (1973) | Recognizing the distinction between a subcontractor and an independent contractor; provides dictionary and case-based definitions of "subcontractor". | The court relied on the distinction articulated in Hollingsworth to frame the inquiry whether Wright was a subcontractor or an independent contractor. |
| Gaydos v. Packanack Wood Dev. Co., 166 A.2d 182, at page 184 | Definition of "subcontractor" in a workmen's compensation context: one who enters into a contract with a person for the performance of work which such person has already contracted to perform. | The court quoted this definition to support the proposition that subcontracting involves "farming out" work that the alleged prime contractor is already contractually obligated to perform. |
| Clendening v. London Assurance Co., 206 Tenn. 601, 336 S.W.2d 535 (1960) | Illustrative authority where a developer-vendor contract to erect specific houses would affect whether a party is a prime contractor. | Cited to show that if appellees had been contractually bound to a third person to erect a specific house, the classification issue could differ; used as an example distinguishing the present facts. |
| Lofton v. Bryan, 237 Ark. 376, 373 S.W.2d 145 (1963) (Supplemental Opinion on rehearing in 237 Ark. 642, 375 S.W.2d 221) | Holds that where the alleged prime contractor had no contract with a third person regarding the work, the worker's employer is an independent contractor, not a subcontractor. | The court relied on Lofton and its supplemental opinion to emphasize that absence of a contractual obligation by the owner/prime contractor to a third person militates against treating the worker's employer as a subcontractor. |
| Huffstettler v. Lion Oil Company, 208 F.2d 549 | Example where an operator distributing products to retailers who had contracted with Lion was not an independent contractor but a subcontractor because the principal was contractually bound to third parties. | Discussed as a contrasting case; the court noted Lofton distinguished Huffstettler on the ground that in Huffstettler the prime contractor had contractual obligations to third parties. |
| Hobbs-Western Co. v. Craig, 209 Ark. 630, 192 S.W.2d 116 (1946) | Earlier decision on which Huffstettler was based; involved a prime contractor contractually bound to perform the work in question. | Cited to show precedent where the prime contractor was contractually bound, supporting the distinction between subcontractor and independent contractor. |
| Brothers v. Dierks, 217 Ark. 632, 232 S.W.2d 646 (1950) | Earlier decision on which Huffstettler was based; involved a prime contractor contractually bound to perform the work in question. | Cited along with Hobbs-Western to illustrate prior cases finding a prime contractor contractually bound, which informed the court's analysis in distinguishing subcontractor situations. |
Court's Reasoning and Analysis
The court began by noting that whether a worker's employer is an independent contractor is a question of fact for the trier of fact, and that substantial evidence must support the Commission's findings. The opinion summarizes uncontroverted evidence: Simmons and Griffin jointly owned and developed the land, decided to build two houses for sale, contracted with Wright to build and paint the houses, Wright supplied labor and tools, selected materials (which were paid for by appellees), was paid a fixed price by square footage, set his own hours, hired and paid his employees, collected weekly draws, supplied tools, and was free to leave the job and take other work. Bailey and other employees testified they were hired and paid by Wright and received no instructions from Simmons or Griffin.
The Commission applied a legal rule—derived from statute and prior decisions—that to characterize an independent contractor as a "subcontractor" within the meaning of Ark. Stat. Ann. 81-1306, the person sought to be charged as the "prime contractor" must have been contractually obligated to a third person for the work being performed at the time of the injury. The court reviewed Ark. Stat. Ann. 81-1306 and multiple cases (including Hollingsworth, Gaydos, Lofton, Huffstettler, Hobbs-Western, and Brothers) that distinguish subcontractors from independent contractors and emphasize the presence or absence of an obligation by the prime contractor to a third party.
Applying that rule to the facts, the court noted the Commission's findings that Simmons and Griffin were constructing the houses to offer for sale and were under no contractual obligation to deliver to a buyer a home conforming to plans and specifications at the time they contracted with Wright. Because appellees were not "farming out" work they were contractually bound to perform, the court concluded Wright was not a subcontractor under 81-1306. The court found the Commission's factual findings supported by substantial evidence and that the law was properly applied to those facts.
Holding and Implications
Affirmed.
Holding: The Court of Appeals affirmed the Full Commission's determination that Henry Wright was an independent contractor and not a subcontractor of Doug Simmons and Brooks Griffin; accordingly, Simmons and Griffin were not liable under Ark. Stat. Ann. 81-1306 for compensation to Bailey.
Implications: The direct effect of the decision is that, on these facts, owners who contracted with an independent contractor to build houses for sale but who were under no contractual obligation to a third person at the time of contracting are not "prime contractors" liable under the subcontractor-liability provision. The opinion applies established distinctions from prior cases and does not announce a new legal rule beyond the application of those precedents to the facts of this case.
1. WORKERS' COMPENSATION — INDEPENDENT CONTRACTOR OR SUBCONTRACTOR — QUESTION OF FACT. — Whether or not one is an independent contractor or a subcontractor is a question of fact to be determined by the trier of fact. 2. WORKERS' COMPENSATION — SUBCONTRACTOR DEFINED. — In order to have a subcontractor arrangement, the person sought to be charged as "prime contractor" must have been contractually obligated to another for the work being done at the time of the injury. 3. WORKERS' COMPENSATION — UNINSURED SUBCONTRACTORS — PRIME CONTRACTOR LIABLE. — Where a subcontractor fails to secure compensation required by the Workers' Compensation Act the prime contractor shall be liable for compensation to the employees of the subcontractor. [Ark. Stat. Ann. 81-1306 (Repl. 1976).] 4. WORKERS' COMPENSATION — UNDER CIRCUMSTANCES OWNERS WERE NOT PRIME CONTRACTORS. — Owners of a tract of land who were having two houses built on the land and who had plans to sell the houses in the future were not "prime contractors" since they were under no contractual obligation to have the houses built, although had they been having the houses built pursuant to a developer-vendor contract to erect specific houses the issue would have been quite different.
GEORGE K. CRACRAFT, Judge.
Richard D. Bailey received a compensable injury while working as a carpenter for Henry Wright in the construction of a dwelling on lands owned by Doug Simmons and Brooks Griffin. He contended that at the time of his injury Wright was an uninsured subcontractor of the appellees and that the appellees were therefore liable to him under the provisions of Ark. Stat. Ann. 81-1306 (Repl. 1976). The Full Commission, reversing the findings of the Administrative Law Judge, found that Wright was not a subcontractor of the appellees but was an independent contractor and solely liable to the appellant under the Act. In reaching this conclusion the Commission ruled that before an independent contractor could be found a "subcontractor" within the meaning of 81-1306, it must first be established that the one sought to be held liable as "prime contractor" was contractually obligated to a third person for the work being performed by the independent contractor. Appellants Bailey and Wright do not seriously contend that Wright was not an independent contractor. The main thrust of their argument is that the Commission did not apply the correct rule in determining that he was not also a "subcontractor." We do not agree.
In determining whether one is an independent contractor there are many factors to be considered. Whether or not one stands in that status is a question of fact to be determined by the trier of fact. We cannot say that the findings of the Commission are not supported by substantial evidence or that reasonable minds could not have reached that same conclusion.
The evidence was not seriously disputed. The appellee Simmons is a banker and Griffin is a farmer. They jointly purchased a tract of open land and developed it into a subdivision known as Brookwood in the City of West Helena. All of the lots but two had been sold to other individuals. Houses were built on some lots by their owners and other lots were still vacant. Appellees then determined to build houses on the two remaining lots for sale. They contracted with Henry Wright to build and paint the houses. Appellant Bailey was working for Wright on one of the houses when he was injured. The house had not been sold when the injury was sustained.
Under the contract Wright was to supply the labor and, although he selected the materials to be used, they were paid for by appellees. Wright was to be paid an agreed price based on square footage. The price was fixed in the contract and the time taken in completion would not affect it. Wright determined the hours and days that he and his employees would work and he hired and paid all of his employees. Each week he would collect a draw on his contract in order to pay his workers. He and his employees supplied all of their own tools. Wright was free to leave the job at any time and was permitted to have other jobs in progress. He testified that Griffin would come to the site on occasion and could have made recommendations to changes in the plans but there was no evidence that Griffin attempted to supervise Wright or his employees in any manner.
Bailey testified that he was employed and paid by Wright who also furnished his tools. He had seen Simmons and Griffin at the site but they never gave him any instructions. The testimony of Bailey's father, also an employee of Wright, was substantially the same.
These facts would amply support the finding of the Commission that Wright was an independent contractor rather than a subcontractor unless, as appellant contends, the Commission applied an erroneous rule of law. In reaching its conclusion the Commission stated that under our decisions, in order to have a subcontractor arrangement, the person sought to be charged as "prime contractor" must have been contractually obligated to another for the work being done at the time of the injury.
Ark. Stat. Ann. 81-1306 (Repl. 1976) in pertinent part is as follows:
Subcontractor. — Where a subcontractor fails to secure compensation required by this Act . . . the prime contractor shall be liable for compensation to the employees of the subcontractor.
The Supreme Court in Hollingsworth Rockwood Ins. v. Evans, 255 Ark. 387, 500 S.W.2d 382 (1973) recognized the distinction between a subcontractor and an independent contractor:
There is, of course, a considerable difference between a subcontractor and an independent contractor. In Black's Law Dictionary a subcontractor is defined as:
"One who takes portion of a contract from principal contractor or another subcontractor. * * * One who has entered into a contract, express or implied, for the performance of an act with the person who has already contracted for its performance."
In Gaydos v. Packanack Wood Dev. Co., 166 A.2d 182, at page 184, the New Jersey Court defined a subcontractor in a workmen's compensation case as follows:
"A subcontractor is one who enters into a contract with a person for the performance of work which such person has already contracted to perform. In other words, subcontracting is merely `farming out' to others all or part of work contracted to be performed by the original contractor."
In the case now under review the Commission found that the appellees were constructing these houses to offer them for sale. It also found that at the time appellees contracted with Wright they were under no contractual obligation to deliver to a buyer a home which conformed to agreed plans and specifications. They were not farming out to Wright any part of work they were contractually obligated to perform. Had they contracted with Wright pursuant to a developer vendor contract with a third person to erect a specific house the issue would be quite different. Clendening v. London Assurance Co., 206 Tenn. 601, 336 S.W.2d 535 (1960).
We conclude that this is the distinction made by the Supreme Court in its supplemental opinion on rehearing in Lofton v. Bryan, 237 Ark. 376, 373 S.W.2d 145 (1963) (Supplemental Opinion on rehearing in 237 Ark. 642, 375 S.W.2d 221). In the Lofton case Dierks Forrest, Inc. contracted with Bryan to cut and deliver pulpwood from certain lands owned by Dierks. Bryan was paid a stipulated price per cord, was expected to furnish his own labor and equipment and was permitted to perform the contract without any supervision or control by Dierks. Lofton, an employee of Bryan, was injured while cutting the pulpwood. The Supreme Court affirmed the decision of the Commission, finding that Bryan was an independent contractor and not a subcontractor of Dierks. On motion for rehearing it was contended that the case was controlled by Huffstettler v. Lion Oil Company, 208 F.2d 549. The court in its opinion on rehearing made the following distinction between the two cases:
There it was held that the operator of a bulk plant who distributed Lion products to retailers who had contracted with Lion to sell the company's products was not an independent contractor but a subcontractor . . .
In the case at bar it is not shown that Dierks had any contract with a third person in connection with the timber, and therefore, it cannot be said that one who is getting out the timber for Dierks is a subcontractor.
In its discussion of Huffstettler the court referred to its earlier decisions of Hobbs-Western Co. v. Craig, 209 Ark. 630, 192 S.W.2d 116 (1946) and Brothers v. Dierks, 217 Ark. 632, 232 S.W.2d 646 (1950), pointing out that in both those cases on which Huffstettler was based the court had found the "prime contractor" to be contractually bound to perform the work in which the subcontractor's employee was engaged at the time of the injury.
The Commission found that Simmons and Griffin were not contractually bound to any third person in connection with the work being done by Wright and his injured employee and exercised no control over either of them. We conclude that both findings are supported by substantial evidence and that the Commission properly applied the law as previously declared by our Supreme Court to those facts.
Affirmed.
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