| IN RE: FRAMERS, INC. | ) | DOCKET NOS. 01 W0465 & 02 W0366 |
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| CITATION & NOTICE NOS. 304113996 & 305008369 | ) | DECISION AND ORDER |
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- APPEARANCES
- Employer, Framers, Inc., by
- Steven B. Wells, President
- Department of Labor and Industries, by
- The Office of the Attorney General, per
- Leslie V. Johnson, Assistant
Docket No. 01 W0465: The employer, Framers, Inc., filed an appeal with the Safety Division of the Department of Labor and Industries on April 16, 2001, from Citation and Notice No. 304113996, dated April 3, 2001. The appeal was transmitted to the Board of Industrial Insurance Appeals on June 12, 2001. In the Citation and Notice, the Department alleged three violations of WAC 296-155, and assessed a penalty of $1,860. The Citation and Notice is AFFIRMED.
Docket No. 02 W0366: The employer, Framers, Inc., filed an appeal with the Safety Division of the Department of Labor and Industries on April 9, 2002, from Corrective Notice of Redetermination No. 305008369, dated March 25, 2002. The appeal was transmitted to the Board of Industrial Insurance Appeals on April 11, 2002. In the Corrective Notice, the Department alleged four violations of WAC 296-155, and assessed a penalty of $2,000. The Corrective Notice of Redetermination is AFFIRMED.
DECISION
Pursuant to RCW 51.52.104 and RCW 51.52.106, this matter is before the Board for review and decision on a timely Petition for Review filed by the Department to a Proposed Decision and Order issued on March 19, 2003, in which Citation and Notice No. 304113996, dated April 3, 2001, and Corrective Notice of Redetermination No. 305008369, dated March 25, 2002, were vacated.
The Board has reviewed the evidentiary rulings in the record of proceedings and finds that no prejudicial error was committed. The rulings are affirmed. We have granted review because we find that Framers, Inc., was the "employer" of the "employees" exposed to hazard at the Framers, Inc., worksites, as those terms are used in Chapter 49.17 RCW, the Washington Industrial Safety and Health Act (WISHA). [2]
This appeal involves a Citation and Notice arising from a January 24, 2001 inspection at 4300 Pacific Highway, in Bellingham, Washington (Citation and Notice No. 304113996); and a Corrective Notice of Redetermination arising from a November 13, 2001 inspection at 5115 100th St. N.E., in Marysville, Washington (Citation and Notice of Redetermination No. 305008369).
As a result of the January 24, 2001 inspection, Department inspector Denise Guadamuz cited the employer for three alleged violations. She observed six workers on a roof, measured at 14 feet 6 inches above the ground, who were not wearing fall protection, in violation of WAC 296-155-24510 (Item No. 1-1). She recommended a $960 penalty for this repeat serious violation. The second alleged violation was based on a worker using powered hand tools (a portable skill saw and pneumatic nailer), without eye protection, in violation of WAC 296-155-350(3) (Item No. 1-2). A $900 penalty was recommended for this serious violation. The third alleged violation was a general violation of WAC 296-155-480(2)(d) (improper use of a ladder), without a penalty assessed (Item No. 3-1). Ms. Guadamuz identified Board Exhibit No. 5, showing a worker using a hand tool while on a ladder, with his back to the rungs. The total penalty amount, calculated with reference to the Department's penalty worksheet, was $1,860.
During the January 24, 2001 inspection, Kevin Scroggins identified himself to Ms. Guadamuz as the job's superintendent. She interviewed workers Howard Mortimer, Jay Troxel, and Randy Pheifer. Ms. Guadamuz was told that the people working on the roof owned from one to five percent shares of Framers, Inc. Jay Troxel stated that he was paid every two weeks at $16 per hour, plus 5 percent of any job bonus.
As a result of the November 13, 2001 inspection, Department inspector John Kiely cited the employer for four alleged violations. The first alleged violation was a serious violation of WAC 296-155-615(3)(h)(i), for failure to have a secure and appropriate platform for an employee working on the forks of a forklift (Item No. 1-1). He recommended a penalty assessment of $500. The second alleged violation was for a serious violation of WAC 296-155-615(3)(h)(ii), based on the use of a forklift to support a worker where there was no evidence that the lift was designed for that purpose (Item No. 1-2). Mr. Kiely recommended a penalty assessment of $500. The third alleged violation was a serious violation of WAC 296-155-615(3)(h)(iii), for failure to install a safety strap or lock the control lever to prevent the boom from tilting (Item No. 1-3). The recommended penalty assessment was $500. The fourth alleged violation was a serious violation of WAC 296-155-615(3)(h)(iv), based on his observation that the forklift operator was not at the controls of the forklift [3] while the worker was on the lift. The recommended penalty for this was $500. The total penalty assessed was $2,000.
Framers, Inc., through its pro se representative, Steven B. Wells, did not challenge the evidence of violations alleged by the Department, nor did the employer contest the penalties. 12/16/02 Tr. at 3-5. Mr. Wells relies on the contention that the workers exposed to hazard on these worksites were corporate officers exempted from coverage of health and safety rules.
Mr. Wells is President, Secretary, and Treasurer of Framer’s Inc., which was incorporated in March 1998. Most of the shareholders worked for him as employees prior to incorporation. Most served as superintendents on occasion, before and after incorporation. At least one was not a superintendent before or after incorporation. Mr. Wells testified that the value brought to the company by the shareholders was the framing work they did. All shareholders were directors. On occasion, the corporation does hire "employees," but usually the shareholders can complete the jobs themselves.
Mr. Wells testified that directors, other than him, were onsite performing framing work 95 percent of the time. Those with supervisory positions rotate the job of foreman. At the time of the January 2001 inspection, the directors were Jay Troxel, Randy Pheifer, Howard Mortimer, Roger McCombs, Roger Edmonds, Jeremiah Aven, Frimann Sigfusson, Kevin Scroggins, and Mr. Wells. By the time of the November 2001 inspection, Mr. Mortimer, Mr. Sigfusson, and Mr. Scroggins had left. Mr. Troxel stated that the decision about whom to hire and what jobs to take were made by all the shareholders. Mr. Wells testified that the job foreman is in charge of firing. The foreman on the job is designated "to call the shots on the organization." 12/16/02 Tr. at 46.
Mr. Wells is primarily responsible for contracting and for writing company checks. The evidence reveals only one instance where an officer other than Mr. Wells signed a contract. Roger McCombs, who signed that contract, was also the only shareholder (other than Mr. Wells) authorized to sign checks. Stephanie LeBlanc, Framers' contract controller since 1999, testified that Kevin Scroggins once signed a change order, but only because Mr. Wells was incapacitated due to a heart attack. In that instance, "Kevin Scroggins stepped in to take care of the corporate matters." 12/16/02 Tr. at 71.
At its inception in 1998, Mr. Wells owned 91 out of 100 shares of company stock and the other directors owned one share apiece. Later that year, the corporation reorganized. Mr. Wells' shares were reduced to 55 and the other nine shareholders were given five shares each. Mr. Wells [4] testified that, at a subsequent meeting, the by-laws were changed to give each shareholder an equal vote and to allow decision making by majority vote. There exists no documentation of these changes. Ms. LeBlanc, a credible witness, testified that the current by-laws provide for one vote per share.
The Department argues that Framers, Inc., should be paying workers' compensation premiums for its shareholders and, therefore, the WISHA regulations apply. Although we find that the WISHA rules apply to these workers, we disagree with the Department’s reasoning. As explained below, the laws governing workers' compensation coverage have little applicability to this case.
WISHA requires that employers provide employees with a work environment free from recognized hazards likely to cause physical harm. RCW 49.17.060. "Employer" and "employee" are defined in a rather circular fashion:
The term "employer" means any person, firm, corporation, partnership, business trust, legal representative, or other business entity which engages in any business, industry, profession, or activity in this state and employs one or more employees or who contracts with one or more persons, the essence of which is the personal labor of such person or persons and includes the state, counties, cities, and all municipal corporations, public corporations, political subdivisions of the state, and charitable organizations: PROVIDED, That any person, partnership, or business entity not having employees, and who is covered by the industrial insurance act shall be considered both an employer and an employee.
RCW 49.17.020(4).
The term "employee" means an employee of an employer who is employed in the business of his employer whether by way of manual labor or otherwise and every person in this state who is engaged in the employment of or who is working under an independent contract the essence of which is his personal labor for an employer under this chapter whether by way of manual labor or otherwise.
RCW 49.17.020(5).
These statutory definitions shed little light on the question of whether Framers Inc., was an "employer" for purposes of WISHA. At the urging of the alleged employer, this appeal was argued and decided, based primarily on the interpretation of subsection (8) of RCW 51.12.020. This section of the Industrial Insurance Act sets forth "the only employments which shall not be included within the mandatory coverage of [Title 51]." Subsection (8) excludes certain corporate officers. [5]
We find no basis for analogy between workers' compensation coverage and WISHA coverage because Title 51 and Title 49 effectuate two distinct programs and purposes. The intent of WISHA is clearly set forth in RCW 49.17.010:
in the public interest for the welfare of the people of the state of Washington and in order to assure, insofar as may reasonably be possible, safe and healthful working conditions for every man and woman working in the state of Washington, the legislature in the exercise of its police power, and in keeping with the mandates of Article II, section 35 of the state Constitution, declares its purpose by the provisions of this chapter to create, maintain, continue, and enhance the industrial safety and health program of the state, which program shall equal or exceed the standards prescribed by the Occupational Safety and Health Act of 1970 (Public Law 91-596, 84 Stat. 1590).
Nowhere in Chapter 49 RCW does the statute exclude shareholders of a corporation from WISHA coverage, if those shareholders should properly be considered "employees" working for a Washington "employer."
This Board previously decided, with reference to industrial insurance law, an appeal factually similar to the present appeal. In re L&K Smith Construction, Inc., Dckt. No. 01 W0112 (April 24, 2002), concerns a corporation in business as a roofing and light construction contractor. L&K Smith contended that at the time of the Department inspection, the business was not an "employer" subject to WISHA. L&K Smith did not raise the defense relied on by Framers, Inc. Instead, the alleged employer argued that the employer-employee relationship issue must be analyzed under the "economic realities test." This test was adopted by the Board in In re Skills Resources Training Center, BIIA Dec., 95 W253 (1997).
As restated in L&K Smith Construction, Inc., the "economic realities test" consists of the following factors:
(1) who the workers consider their employer; (2) who pays the workers' wages; (3) who has the responsibility to control the workers; (4) whether the alleged employer has the power to control the workers; (5) whether the alleged employer has the power to fire, hire, or modify the employment conditions of the workers; (6) whether the workers' ability to increase their income depends on efficiency rather than initiative, judgment, and foresight; and (7) how the workers wages are established.
L&K Smith Construction, Inc., at 2-3. Skills Resources Training Center set forth this test to determine the employer of particular workers on a joint employer worksite. In L&K Smith, we noted that the first three factors were irrelevant to that case because L&K Smith was the sole alleged [6] employer. In an attempt to tailor the "economics realities test" to the sole alleged employer situation, we looked to the industrial insurance laws for guidance. Factors (4) through (7) of the "economic realities test" were considered relevant, as they bear upon the "control" and "consent" elements ofNovenson v. Spokane Culvert, 91 Wn.2d 550 (1979).
Having looked more closely at Novenson, we now conclude that the "control" element is the only "economic realities" factor relevant when there is a sole alleged WISHA "employer." The court, inNovenson, determined a claimant's ability to obtain damages from Spokane Culvert, based on negligence, a cause of action unavailable to an employee covered under Title 51. The importance of consent to employment in the workers' compensation context was addressed by the Novenson court, with reference to the following section of Professor Larson’s treatise:
Compensation law [in contrast to the law of vicarious liability], is a mutual arrangement between the employer and employee under which both give up and gain certain things. Since the rights to be adjusted are reciprocal rights between employer and employee, it is not only logical but mandatory to resort to the agreement between them to discover their relationship. To thrust upon a worker an employee status to which he has never consented would not ordinarily harm him in a vicarious liability suit by a stranger against his employer, but it might well deprive him of valuable rights under the compensation act, notably the right to sue his own employer for common-law damages. . . .
1 Larson, Workmen's Compensation Law § 47.10 (1952).
The rationale behind Novenson is inapplicable to the inquiry before us. The determination of whether there is an "employer" responsible for employee safety should not rely on the element of mutual consent to an employer-employee relationship; rather, it must focus on whether the alleged employer is in control of the work environment and therefore responsible for worker safety. This "control" test was applied to find WISHA liability in an independent contractor situation in Kelley v. Howard S. Wright Construction Co., 90 Wn.2d 323 (1978). Ability to control the workplace conditions also formed the basis for a general contractor's duty in Stute v. P.B.M.C. Inc., 114 Wn.2d 454 (1990).
The purpose of WISHA is to "assure, insofar as may reasonably be possible, safe and healthful working conditions for every man and woman working in the state of Washington." RCW 49.17.010 (emphasis added.) The existence of a safe workplace is not a choice for the employees of an employer who has the power and obligation to make their workplace safe.
Based on this framework, we conclude that Framers, Inc., is a WISHA "employer." The incorporation of Framers, Inc., did little to change the balance of power within the group of framers. [7] Those who served as superintendents prior to incorporation continued in that role. The shareholders' skills as laborers and their ability to help the business turn a profit were the value they brought to the organization. Other than Mr. Wells, the directors' primary responsibility was framing work, which took up 95 percent of their time.
Mr. Wells is the only shareholder who received a salary, rather than hourly wages. He is the President, Secretary, and Treasurer of Framers, Inc., and is almost exclusively responsible for contracting, check writing, and other key corporate matters. A preponderance of credible evidence shows that Mr. Wells owns 55 percent of the company's shares and that the existing by-laws require one vote per share. Although Mr. Troxel testified that the group participated in decision-making, Mr. Wells retained the power to override all votes. This business, although incorporated, maintains a supervisory structure identical to that of a typical construction firm. Framers, Inc. cannot escape the requirements of WISHA by hiding behind a corporate identity.
Framers, Inc. maintained the power to ensure a safe workplace for the employee-directors performing the company's work on January 24, 2001 and November 13, 2001. Therefore, Framers, Inc. is an "employer" pursuant to RCW 49.17.020 and is therefore citable for the unchallenged offenses alleged in Citation and Notice No. 304113996 and Corrective Notice of Redetermination No. 305008369. Citation and Notice No. 304113996 and Corrective Notice of Redetermination No. 305008369 are affirmed.
FINDINGS OF FACT
1. In Docket No. 01 W0465, the Department of Labor and Industries conducted an inspection of a work site of Framers, Inc., on January 24, 2001, at 4300 Pacific Highway, in Bellingham, Washington. On April 3, 2001, the Department issued Citation and Notice No. 304113996, alleging three violations of WAC 296-155, and assessing a penalty of $1,860.
The employer filed a Notice of Appeal with the Department of Labor and Industries Safety Division on April 16, 2001. The Department transmitted the appeal to the Board of Industrial Insurance Appeals on June 12, 2001.
In Docket No. 02 W0366, the Department conducted an inspection of a work site of Framers, Inc., on November 13, 2001, at 5115 100th St. N.E., Marysville, Washington. On January 16, 2002, the Department issued Citation and Notice No. 305008369, alleging four violations of WAC 296-155, and assessing a penalty of $2,000. [8]
The employer filed a Notice of Appeal with the Department of Labor and Industries' Safety Division on January 28, 2002. On January 30, 2002, the Department issued a Notice of Reassumption of Jurisdiction. On February 13, 2002, the parties entered into an agreement that the reassumption period would be extended an additional 15 working days.
The Department issued Corrective Notice of Redetermination No. 305008369 on March 25, 2002. The employer filed a Notice of Appeal with the Safety Division on April 9, 2002. The Department transmitted the appeal to the Board on April 11, 2002.
2. Steven B. Wells is President, Secretary and Treasurer of Framer's Inc., which was incorporated in March 1998. At its inception, Mr. Wells owned 91 out of 100 shares of company stock and the other nine directors owned one share each. Later that year, the corporation reorganized. Mr. Wells' shares were reduced to 55 and the other nine shareholders were given five shares each. Most of the shareholders performed construction work as employees of Mr. Wells, prior to incorporation.
3. Mr. Wells received a salary and was primarily responsible for contracting, check writing, and other corporate responsibilities. The other shareholders, who are paid on an hourly basis, are on worksites performing construction work 95 percent of the time. Those with supervisory positions rotate the job of foreman. The foreman represents Framers, Inc., on the jobsite.
4. On January 24, 2001, Denise Guadamuz, a Department safety inspector, inspected the worksite of Framers, Inc., at 4300 Pacific Highway, in Bellingham, Washington. Workers were performing construction work as directed and controlled by a Framers, Inc. superintendent.
5. At the time of the January 24, 2001 inspection, six Framers, Inc., workers were on a roof, without wearing fall protection, at a height of 14 feet-6 inches above the ground. A penalty of $960 was assessed for this alleged repeat serious violation, identified as Item No. 1-1.
6. At the time of the January 24, 2001 inspection, a Framers, Inc., worker was using a portable skill saw and pneumatic nailer, without eye protection. A penalty of $900 was assessed for this alleged serious violation, identified as Item No. 1-2.
7. At the time of the January 24, 2001 inspection, a Framers, Inc., worker was using a hand tool while standing on a ladder, with his back facing the rungs of the ladder. No penalty was assessed for this alleged general violation, identified as Item No. 3-1. [9]
8. On November 13, 2001, John Kiely, a Department safety inspector, inspected the worksite of Framers, Inc. at 5115 100th St. N.E., Marysville, Washington. Workers were performing construction work as directed and controlled by a Framers, Inc., superintendent.
9. At the time of the November 13, 2001 inspection, a Framers, Inc., worker was performing work while standing on the forks of a forklift, without a secure and appropriate platform. A penalty of $500 was assessed for this alleged serious violation, identified as Item No. 1-1.
10. At the time of the November 13, 2001 inspection, a Framers, Inc., worker was performing work while standing on the forks of a forklift that was not identified as suitable for that purpose. A penalty of $500 was assessed for this alleged serious violation, identified as Item No. 1-2.
11. At the time of the November 13, 2001 inspection, a Framers, Inc., worker was performing work while standing on the forks of a forklift, without an installed safety strap or locked control level to prevent the boom from tilting. A penalty of $500 was assessed for this alleged serious violation, identified as Item No.1-3.
12. At the time of the November 13, 2001 inspection, an operator was not at the controls of the forklift while a Framers, Inc., worker was performing work while standing on the forks of the forklift. A penalty of $500 was assessed for this alleged serious violation, identified as Item No. 1-4.
CONCLUSIONS OF LAW
- The Board of Industrial Insurance Appeals has jurisdiction over the parties to and the subject matter of these appeals.
- On January 24, 2001 and November 13, 2001, the workers exposed to hazards at the Framers, Inc., worksites were employees of Framers, Inc., as defined in RCW 49.17.020(5).
- On January 24, 2001 and November 13, 2001, Framers, Inc., was the employer of the workers exposed to hazards at the Framers, Inc., worksite, as defined in RCW 49.17.020(4) .
- On January 24, 2001, Framers, Inc., did commit a repeat serious violation of WAC 296-155-24510, alleged in Item No. 1-1 of Citation and Notice No. 304113996. The penalty for this repeat serious violation is established at $960.
- On January 24, 2001, Framers, Inc., did commit a serious violation of WAC 296-155-350(3), alleged in Item No. 1-2 of Citation and Notice No. 304113996. The penalty for this serious violation is established at $900. [10]
- On January 24, 2001, Framers, Inc., did commit a general violation of WAC 296-155-482(2)(d), alleged in Item No. 3-1 of Citation and Notice No. 304113996. The penalty for this general violation is established at $0.
- On November 13, 2001, Framers, Inc., did commit a serious violation of WAC 296-155-615(3)(h)(i), as alleged in Item No. 1-1 of Corrective Notice of Redetermination No. 305008369. The penalty for this serious violation is established at $500.
- On November 13, 2001, Framers, Inc., did commit a serious violation of WAC 296-155-615(3)(h)(ii), as alleged in Item No. 1-2 of Corrective Notice of Redetermination No. 305008369. The penalty for this serious violation is established at $500.
- On November 13, 2001, Framers, Inc., did commit a serious violation of WAC 296-155-615(3)(h)(iii), as alleged in Item No. 1-3 of Corrective Notice of Redetermination No. 305008369. The penalty for this serious violation is established at $500.
- On November 13, 2001, Framers, Inc., did commit a serious violation of WAC 296-155-615(3)(h)(iv), as alleged in Item No. 1-4 of Corrective Notice of Redetermination No. 305008369. The penalty for this serious violation is established at $500.
- Citation and Notice No. 304113996, issued by the Department of Labor and Industries on April 3, 2001, is correct and is affirmed, with a total penalty of $1,860. Corrective Notice of Redetermination No. 305008369, issued by the Department on March 25, 2002, is correct and is affirmed, with a total penalty of $2,000.
It is so ORDERED.
Dated this 8th day of August, 2003.
BOARD OF INDUSTRIAL INSURANCE APPEALS
/s/
THOMAS E. EGAN Chairperson
/s/
FRANK E. FENNERTY, JR. Member