The state Supreme Court, in a July 28 ruling, concluded that the state's Workers' Compensation Agency (WCA) and not the court system has jurisdiction over the case. The Supreme Court's ruling reverses a unanimous jury verdict in trial court that awarded $1.26 million to Ricky Reed, a former employee of a meat market called Mr. Food, who was injured in a 1998 auto accident while riding along on a delivery.
The issue being argued in the case was whether Reed, who was fired from Mr. Food in 1997 but periodically helped with deliveries after being fired unbeknownst to Mr. Food's owner was technically a Mr. Food employee at the time of the accident under Michigan law.
The Michigan Court of Appeals and the trial court agreed that Reed did not meet the necessary criteria to be considered an employee at the time of the accident, meaning WCA had no jurisdiction over the case and Reed was entitled to seek damages for his injury through the court system.
The state Supreme Court, however, concluded that Reed was an employee of Mr. Food at the time of the accident based on two subsections in the Michigan Workers' Disability Compensation Act of 1969: He was performing a service "pursuant to an express or implied contract of hire and the compensation was real and substantial, " according to the court (MCL 418.161[1][l]), and his separate work as a house painter did not qualify him as an independent contractor (MCL 418.161[1][n]).
As a result of the Supreme Court ruling, Reed is not entitled to the $1.26 million in damages, but the court pointed out that Reed could file a claim for workers' compensation benefits with WCA no later than 30 days from the date the court's opinion was issued.
Mr. Food Fired Reed After 6 Months
Gerald Herskovitz, the owner of Mr. Food, hired Reed in 1997 at the suggestion of Buddy Hadley, a Mr. Food employee who is in charge of meat deliveries, according to background information in the Supreme Court majority's opinion, which was written by Chief Justice Clifford Taylor.
However, "Herskovitz was not pleased with Reed's performance" and fired Reed, after 5 or 6 months of employment, in December 1997, Taylor wrote.
After being fired, Reed supported himself by painting his relatives' homes and supplemented his income by occasionally helping Hadley with deliveries. Reed was paid between $35 and $40, in cash, for his help with the deliveries.
On May 7, 1998, during a delivery, Reed was riding in a Mr. Food cargo van being driven by Hadley when the van was involved in an accident with Linda Yackell. According to the court, Yackell did not stop at a red light because her brakes malfunctioned and Hadley, who was looking at paperwork, did not see Yackell's car in time and hit her car.
As a result of the accident, Reed suffered a closed head injury.
Reed on Dec. 10, 1998, filed a lawsuit alleging negligence by the two drivers Hadley and Yackell and liability by Herskovitz and Mr. Food.
The defendants argued that since Reed, under Michigan law, was an employee of Mr. Food at the time of the accident, he was barred from seeking damages in the courts and instead must seek workers' compensation benefits.
A jury unanimously ruled in Reed's favor and awarded him $1.26 million. The jury ruled that Yackell shouldered 60 percent of the blame for the accident and Herskovitz, Hadley and Mr. Food shouldered 40 percent, ordering the latter parties to pay $502,528 in damages to Reed.
Supreme Court: Lower Court's Approach 'Puzzling and Arbitrary'
Reed's lawsuit, which later was affirmed by the appeals court, bounced back and forth between the Supreme Court and the lower courts as judges wrestled with the question of whether Michigan law considers Reed a Mr. Food employee at the time of the accident.
In MCL 418.161(1)(l), one definition of an employee is "every person in the service of another, under any contract of hire, express or implied, including aliens ... " Taylor noted in the Supreme Court's July 28 ruling.
The trial court concluded that Reed was not an employee of Mr. Food at the time of the accident because Reed had been fired by Herskovitz and because Herskovitz testified he did not know Reed was helping Hadley with deliveries after Reed was fired thus eliminating the possibility of an express or implied contract for hire "because both parties were not aware of its existence and had not agreed to its terms," Taylor summarized.
The Supreme Court, however, concluded that it doesn't matter if Herskovitz knew who Hadley hired to help with deliveries. Herskovitz, according to the court, gave Hadley permission to obtain help to make his deliveries and Herskovitz expected to pay whomever Hadley recruited - an arrangement that had been made in the past.
"All that is required to establish a contract with Reed is that Hadley had authority to hire," Taylor wrote in the high court's opinion. "Hadley incontestably had that authority."
The Supreme Court majority also took issue with the lower court's assertion that Reed did not fit the definition of an employee because he received only $35 to $40 on three to five occasions - which, the lower court calculated, amounted to less than $1 a day when spread out over the entire 5- or 6-month period when Reed periodically helped Hadley with deliveries and this amount did not constitute a real wage.
The Supreme Court's July 28 opinion blasted the lower court's math as "a puzzling and even arbitrary approach to this issue of calculation" and concluded, "this compensation was indeed real, palpable and substantial when measured against the services performed."
"Here, Reed provided approximately 8 hours of unskilled, manual labor helping Hadley deliver meat products," Taylor wrote. " … Indeed, the testimony at trial concerning Reed's duties showed only that they consisted of carrying and moving boxes, while even such minimal tasks as handling paperwork, arranging the delivery schedule and driving the delivery truck were handled by Hadley."
The Supreme Court majority estimated that $35 to $40 per 8 hours of unskilled, manual labor roughly equated to the minimum wage at the time. The court added that the lower court's math averaging hourly wages over an entire period of employment would make most part-time workers ineligible for workers' compensation benefits.
Reed Was Not an Independent Contractor
The Supreme Court majority disagreed with the opinion of the trial court and the appeals court that Reed was not an employee of Mr. Food because, the lower courts argued, his painting business qualified him as an independent contractor.
MCL 418.161(1)(n) excludes independent contractors from the definition of "employee," making them ineligible for workers' compensation coverage. But, the Supreme Court majority pointed out, to qualify for this exclusion under Michigan law, the worker's separate business or service must be the same as the service he is performing in his day job. Reed argued he was an independent contractor because he maintained a separate business as a "day laborer."
"Thus, for example, if the service that the person performs for the employer is roofing, to be an independent contractor and, thus, ineligible for workers' compensation, the person must maintain a separate roofing business, which roofing business he holds himself or herself out to the public as performing," Taylor wrote. "Accordingly, in this case where the most Reed can point to is that he was a house painter at times, the tests to take him out of the workers' compensation system are not met."
Taylor added that the lower courts' interpretation of MCL 418.161(1)(n) could be a bit of a slippery slope, as that "would inescapably mean that any moonlighting worker, say an industrial workers at General Motors, Ford or DaimlerChrysler, who has a janitorial service, lawn care business, a Mary Kay distributorship or even serves as a compensated choir director at her church, would be without workers' compensation when injured at her day job."
Justices Maura Corrigan and Elizabeth Weaver dissented with the Supreme Court majority's July 28 opinion.