ASCHWANDEN v. WORKERS COMPENSATION APPEALS BD

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Court of Appeal, Third District, California.

Harry ASCHWANDEN, Petitioner, v. WORKERS' COMPENSATION APPEALS BD. and Rose Marie Realty Company Inc., Respondents.

C009568.

Decided: May 15, 1991

Mastagni, Holstedt & Chiurazzi, Barbara M. Jacobson, Craig Kingscott, Sacramento, for petitioner. Barrett, Penney & Byrd, Douglas Sparks, Sacramento, for respondent Rose Marie Realty Co. No appearance for respondent W.C.A.B.

Petitioner Harry Aschwanden, who was injured in a collision with a train, seeks by way of a writ of review to set aside an order and decision of the Workers' Compensation Appeals Board (WCAB) wherein the WCAB found Aschwanden to be an independent contractor and not an employee for workers' compensation purposes.   We shall affirm the WCAB's decision that Aschwanden was not an employee.

BACKGROUND

On February 23, 1983, Aschwanden, a real estate salesperson, and Rose Marie Mendonca, a real estate broker with Rose Marie Realty, Inc., in Lodi, entered into a contract entitled “Broker–Salesperson Contract.”   The contract provided in part:  “This agreement does not constitute a hiring by either party.   It is the parties' intention that so far as shall be in conformity with law the Salesperson be an independent contractor and not Broker's employee, and in conformity therewith that Salesperson retains sole and absolute discretion and judgment in the manner and means of carrying out Salesperson's selling and soliciting activities.”   Aschwanden believed he was an independent contractor only for tax purposes.   The contract further provided that except to the extent required by law, the broker would have no authority or right to direct or control the salesperson's actions or to direct or limit the salesperson's activities as to hours, leads, open houses, floor time, production, prospects, reports, sales meetings, schedule, training, vacation and other similar activities.   Under the terms of the contract, Aschwanden agreed to perform his activities in accordance with the law and ethical and professional standards.

Sales meetings were held every Monday so the real estate agents could keep abreast of new listings and properties that had been sold.   Mendonca expected thesalespeople to attend the meetings but attendance was not required.   She also expected the salespeople to cover their scheduled “floor days” but did not think this was mandatory.   During a “floor day,” the assigned salesperson was expected to answer customer inquiries and be available to show properties.   Assigning “floor days” was a way to make sure that all of the agents got their fair share of new leads and customers and was beneficial to the agents.   If a salesperson was scheduled for a “floor day,” he was expected to cover the office that day or arrange for another salesperson to take his place.   The salespeople could tell Mendonca what days they did not want to work.   Other than during “floor days,” the salespeople had no set work schedule and could come and go as they pleased.

Aschwanden was compensated solely on a commission basis.   The commission on real estate transactions was usually six percent and Mendonca liked her agents to tell her if they deviated from this percentage.   As required by law, all commissions were paid directly to the broker (see Bus. & Prof.Code, § 10138) and Aschwanden was entitled to 65 percent of the commissions received by the office for real estate transactions negotiated by him.   Aschwanden did not receive health benefits or a pension plan and income taxes were not withheld from his earnings.   He provided his own automobile and did not receive an automobile allowance.   According to the contract, except for office help expenses and office facilities, Aschwanden was responsible for all of his own expenses.   However, Mendonca paid a portion of the salespeoples' errors and omissions insurance because she wanted to increase the amount of coverage which in turn increased the premiums.   In addition, she paid for workers' compensation coverage as she was told she had to “by her agent.”   Mendonca had intended to charge the insurance premiums to thesalespeople but determined it would take up too much of her secretary's time.

The contract provided that Aschwanden could terminate the agreement at any time upon completion of work in process.   Mendonca could terminate the agreement only for specific reasons delineated in the contract or upon 30 days notice to Aschwanden.

The workers' compensation judge determined Aschwanden was an employee.   Thereafter, the WCAB determined Aschwanden was an independent contractor and not an employee for workers' compensation purposes.

DISCUSSION

For an injured person to receive benefits under the Workers' Compensation Act (Act), the person must be an employee and have been injured in the course and scope of his employment.  (S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 349, 256 Cal.Rptr. 543, 769 P.2d 399;  Lab.Code, §§ 3600, 3700;  hereafter all undesignated section references are to the Labor Code.)   For the purposes of the Act, an “employer” is defined as “․ (c) every person including any public service corporation, which has any natural person in service.”  (§ 3300).   An “employee” is defined as “․ every person in the service of an employer under any appointment or contract of hire or apprenticeship, express or implied, oral or written, whether lawfully or unlawfully employed․”  (§ 3351.)   An “independent contractor” is defined as “any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result only and not as to the means by which such result is accomplished.”  (§ 3353.)

 The Act establishes a presumption in favor of finding an employer-employee relationship unless the alleged employer meets his burden of establishing the injured worker was an independent contractor. (§§ 3357, 5705.)   The presumption may also be overcome if the essential contract of hire is not present.  (Spradlin v. Cox (1988) 201 Cal.App.3d 799, 807, 247 Cal.Rptr. 347.)   The traditional features of a contract of hire are (1) consent of the parties, (2) consideration for the services rendered, and (3) control by the employer over the employee.  (Ibid.)

 The determination of whether an injured person is an employee or independent contractor is a question of fact if dependent upon the resolution of disputed evidence or conflicting inferences, and in such circumstances the WCAB's decision must be upheld if supported by substantial evidence.  (S.G. Borello & Sons, Inc. v. Department of Industrial Relations, supra, 48 Cal.3d at p. 349, 256 Cal.Rptr. 543, 769 P.2d 399;  Mission Ins. Co. v. Workers' Comp. Appeals Bd. (1981) 123 Cal.App.3d 211, 219, 176 Cal.Rptr. 439.)   Where the evidence is undisputed and only one reasonable inference can reasonably drawn therefrom, the question is one of law.  (Ibid.;  Spradlin v. Cox, supra, 201 Cal.App.3d at p. 806, 247 Cal.Rptr. 347.)

 Factors to be considered in determining whether an employment relationship exists include:  (1) the right of control over the mode and manner in which the work is done as opposed to merely over the result;  (2) the employer's right to terminate the employee's services, and the employee's right to quit when he or she wishes, without either party incurring liability for failure to complete the job;  (3) whether the person performing the service is engaged in a distinct occupation or business;  (4) the nature of the occupation, with reference to whether, in that particular locality, the work is usually done under the direction of the principal or by a specialist without supervision;  (5) the skill required in the particular occupation;  (6) who supplies the instrumentalities, tools and place of work;  (7) the length of time for which the services are to be performed;  (8) whether the method of payment is per time worked or per job completed;  (9) whether or not the work is part of the employer's regular business;  and (10) whether or not the parties believe they are creating the relationship of employer-employee.   (S.G. Borello & Sons, Inc. v. Department of Industrial Relations, supra, 48 Cal.3d at pp. 350–351, 256 Cal.Rptr. 543, 769 P.2d 399;  2 Hanna, Cal. Law of Employee Injuries and Workman's Compensation (2d ed.1990) § 4.02(2), p. 4–5.)

The right to control the manner and means of accomplishing the result, the details of the work, is the most significant test of the employment relationship and the other factors constitute merely secondary elements.   (Tieberg v. Unemployment Ins. App. Bd. (1970) 2 Cal.3d 943, 950, 88 Cal.Rptr. 175, 471 P.2d 975.)  “If the employer has the authority to exercise complete control, whether or not that right is exercised with respect to all details, an employer-employee relationship exists.”  (Empire Star Mines Co. v. Cal. Emp. Com. (1946) 28 Cal.2d 33, 43, 168 P.2d 686, disapproved on another point in People v. Sims (1982) 32 Cal.3d 468, 479–480, fn. 8, 186 Cal.Rptr. 77, 651 P.2d 321.)

 In addition, the Act's definition of the employment relationship must be construed in light of the remedial purpose of the statute, the class of persons intended to be protected, and the relative bargaining positions of the parties.  (S.G. Borello & Sons, Inc. v. Department of Industrial Relations, supra, 48 Cal.3d at pp. 351, 353, 256 Cal.Rptr. 543, 769 P.2d 399;  Germann v. Workers' Comp. Appeals Bd. (1981) 123 Cal.App.3d 776, 784, 176 Cal.Rptr. 868.)  “The purposes of the Act are several.   It seeks (1) to ensure that the cost of industrial injuries will be part of the cost of goods rather than a burden on society, (2) to guarantee prompt, limited compensation for an employee's work injuries, regardless of fault, as an inevitable cost of production, (3) to spur increased industrial safety and (4) in return, to insulate the employer from tort liability for his employees' injuries.  [Citations.]”  (S.G. Borello & Sons, Inc., supra, 48 Cal.3d at p. 354, 256 Cal.Rptr. 543, 769 P.2d 399.)

In the present case we must also consider the provisions of the Real Estate Law.  (Bus. & Prof.Code, §§ 10000 et seq.)   A real estate salespersons cannot contract in his own name and can only be employed by and accept compensation from a licensed real estate broker.  (Bus. & Prof.Code, §§ 10132, 10137;  Grand v. Griesinger (1958) 160 Cal.App.2d 397, 406, 325 P.2d 475.)   The salesperson's real estate license must remain in the possession of the broker employer who risks suspension of his own license if he fails to exercise reasonable supervision over his salespersons.  (Bus. & Prof.Code, §§ 10160, 10177, subd. (h).)  Generally, the broker is required to review all real estate transaction documents that may have a material effect upon the rights or obligations of a party to the transaction.  (Bus. & Prof.Code, § 10080;  Cal.Code Regs., tit. 10, § 2725.)

Prior to the enactment of Business and Professions Code section 10177, subdivision (h) regarding a broker's duty of supervision (Stats.1955, ch. 1467, § 2, pp. 2676–2677), our Supreme Court determined the provisions of the Real Estate Law, including the requirement that a salesperson must work for a broker, did not establish as a matter of law that every real estate salesperson was “in employment” within the meaning of the Unemployment Insurance Act.   (California Emp. Stab. Com. v. Morris (1946) 28 Cal.2d 812, 817, 172 P.2d 497.)   The court stated, “The licensing statute was not promulgated for that purpose;  it was designed for the protection of the public, the primary function being to allow only those persons to operate as real estate brokers and salesmen who are honest, truthful, and of good reputation.  [Citations.]   The Act operates in a comparatively narrow field and the legislation should not be interpreted so as to give a meaning beyond its realm and scope.”  (Id. at pp. 817–818, 172 P.2d 497.)   The court also noted the Real Estate Law did not expressly give the employer the right to control the manner and means of accomplishing the result desired and whether a real estate salesman could be classified as an employee or an independent contractor for purposes of the Unemployment Insurance Act depended upon the facts of the particular case.   (Id. at p. 818, 172 P.2d 497.)

 Several cases decided after the enactment of Business and Professions Code section 10177, subdivision (h), have determined that a real estate salesperson is an agent of his broker as a matter of law (Payne v. White House Properties, Inc. (1980) 112 Cal.App.3d 465, 471, 169 Cal.Rptr. 373;  Resnik v. Anderson & Miles (1980) 109 Cal.App.3d 569, 572–573, 167 Cal.Rptr. 340;  Gipson v. Davis Realty Co. (1963) 215 Cal.App.2d 190, 206, 30 Cal.Rptr. 253), cannot be an independent contractor (ibid.), and, for purposes of administration of the Real Estate Law, is an employee of the broker.  (Grubb & Ellis Co. v. Spengler (1983) 143 Cal.App.3d 890, 895, 192 Cal.Rptr. 637.)   This does not mean that a real estate salesperson is necessarily an employee of his broker for all purposes as the salesperson's status may change according to the statutory context in which the employment relationship is examined.  (Sacramento County Employees Organization v. County of Sacramento (1988) 201 Cal.App.3d 845, 855, 247 Cal.Rptr. 333;  Grubb & Ellis Co., supra, 143 Cal.App.3d at pp. 895–898, 192 Cal.Rptr. 637;  59 Ops.Cal.Atty.Gen. 369 (1976);  2 Miller & Starr, California Real Estate (2d ed.1989) § 3.11, pp. 71–79.) 1

 The cases that state a salesperson may not be an independent contractor do not articulate the rationale in support of this determination.   Presumably, it is that the minimum degree of supervision that a broker is required to exercise over the salesperson under the Real Estate Law gives the broker the right to exercise control over at least some of the means used by a salesperson in the performance of the job and this is inconsistent with the definition of an independent contractor.  (See § 3353.)   Although a real estate salesperson cannot be an independent contractor, the facts of a particular case may demonstrate that the salesperson is not an employee either within the statutory context in which the relationship is examined.  (Payne v. White House Properties, Inc., supra, 112 Cal.App.3d at pp. 470–471, 169 Cal.Rptr. 373.)   For example, the broker-salesperson agreement (see Cal.Code Regs., tit. 10, § 2726) may establish that the broker has relinquished, to the extent legally permissible, much of the broker's right to control the methods and means used by the salesperson and the right to control that is retained by the broker is less than that ordinarily involved in an employer-employee relationship.   In such a case, assuming other factors also indicate a non-employee status, the salesperson will be an agent of the broker but will not be either an employee or an independent contractor.   Accordingly, whether a salesperson is an employee of the broker for workers' compensation purposes remains a question of fact depending upon the circumstances of each case.  (Grubb & Ellis Co. v. Spengler, supra, 143 Cal.App.3d at pp. 895–898, 192 Cal.Rptr. 637;  Payne, supra, 112 Cal.App.3d at pp. 470–471, 169 Cal.Rptr. 373;  Gipson, supra, 215 Cal.App.2d at p. 207, 30 Cal.Rptr. 253;  59 Ops.Cal.Atty.Gen., supra, 373–375;  2 Hanna, supra, § 4.02, p. 4–6;  2 Miller & Starr, supra, § 3.11, pp. 71–72, 75–76.)

The present case is not one where only one inference may be drawn from the evidence as a matter of law.   Substantial evidence supports the WCAB's determination that Aschwanden is not an employee for workers' compensation purposes.   Because there is substantial evidence that Aschwanden is not an employee, the WCAB's erroneous legal conclusion that Aschwanden is an independent contractor does not require reversal of its decision.  (Cf. Payne v. White House Properties, Inc., supra, 112 Cal.App.3d at pp. 470–471, 169 Cal.Rptr. 373.)

 The record discloses Mendonca contractually relinquished the right to control totally Aschwanden's activities and could only control Aschwanden to the extent required under the Real Estate Law.   In other words, Mendonca had the right to supervise Aschwanden only to the extent necessary to ensure the public was protected and that Aschwanden's conduct was ethical and did not violate the provisions of the Real Estate Law or pertinent administrative regulations.  (California Emp. Stab. Com. v. Morris, supra, 28 Cal.2d at p. 817, 172 P.2d 497;  Montoya v. McLeod (1985) 176 Cal.App.3d 57, 63, 221 Cal.Rptr. 353;  Norman v. Department of Real Estate (1979) 93 Cal.App.3d 768, 776–777, 155 Cal.Rptr. 715;  Bus. & Prof.Code, §§ 10000 et seq.;  Cal.Code Regs., tit. 10, § 2700 et seq.)   Under the terms of the contract, so long as Aschwanden acted in an ethical fashion and did not violate the Real Estate Law, something he was already required to do or risk revocation of his license (see Bus. & Prof.Code, § 10177, subd. (d)), he had absolute discretion and control over the method and means used in performing his job.   This is a strong indication that Aschwanden was not an employee as ordinarily an employer has the right to exercise complete control over the manner in which the employee's job is to be performed.  (Tieberg v. Unemployment Ins. App. Bd., supra, 2 Cal.3d at p. 949, 88 Cal.Rptr. 175, 471 P.2d 975;  Mission Ins. Co. v. Workers' Comp. Appeals Bd., supra, 123 Cal.App.3d at p. 221, 176 Cal.Rptr. 439.)

 The broker-salesperson contract expressly states it is the parties' intention that Aschwanden not be an employee of Mendonca.   Absent a showing that the parties, by their actual conduct, acted like employer and employee, or that this contract term is contrary to law and violates public policy, this term is a significant factor which cannot be ignored.   (Tieberg, supra, 2 Cal.3d at pp. 951–952, 88 Cal.Rptr. 175, 471 P.2d 975;  Toyota Motor Sales U.S.A., Inc. v. Superior Court (1990) 220 Cal.App.3d 864, 877, 269 Cal.Rptr. 647;  Mission Ins. Co., supra, 123 Cal.App.3d at p. 226, 176 Cal.Rptr. 439.)   As pointed out by the WCAB, Aschwanden had been trained in negotiating, reading and writing sophisticated sales contracts, which in turn reflected on Aschwanden's relative bargaining position and ability to negotiate this broker-salesperson contract.

In addition, Aschwanden engaged in a skilled, licensed occupation, one which involved a “peculiar skill beyond that expected of any employee.”  (S.G. Borello & Sons, Inc. v. Department of Industrial Relations, supra, 48 Cal.3d at p. 356, 256 Cal.Rptr. 543, 769 P.2d 399.)   He was paid a commission per job completed and was not paid by the number of hours he worked.   Consequently, his remuneration depended upon his initiative and judgment.

Mendonca did not have a totally unlimited right to terminate Aschwanden at will nor did Aschwanden have an unlimited right to quit without incurring liability for failing to complete the job.   Although Aschwanden could terminate the agreement at any time, he had to complete work in progress.   Mendonca could terminate Aschwanden immediately only for cause, otherwise she was required to give Aschwanden 30 days notice prior to terminating him.  (But see Truesdale v. Workers' Comp. Appeals Bd. (1987) 190 Cal.App.3d 608, 616, 235 Cal.Rptr. 754.)

Although Mendonca provided Aschwanden with office facilities, he was responsible for all of his other expenses.   Moreover, the factor of who supplies the instrumentalities and place of work does not appear to be a significant one in the real estate profession.  (Cf. Tieberg, supra, 2 Cal.3d at pp. 953–954, 88 Cal.Rptr. 175, 471 P.2d 975.)

Although Aschwanden was not engaged in a distinct business and his work was performed as part of the broker's regular business, which indicates he was an employee, these facts merely create a conflict in the evidence and do not outweigh, as a matter of law, the other factors which support the WCAB's determination that Aschwanden is not an employee for workers' compensation purposes.

Consequently, the WCAB's decision that Aschwanden is not an employee for workers' compensation purposes must be upheld.

DISPOSITION

The decision is affirmed.

FOOTNOTES

1.   It should be noted that in Resnik, supra, the court indicated that real estate salespersons are employees of their brokers as a matter of law.  (109 Cal.App.3d at p. 572, 167 Cal.Rptr. 340.)   Resnik cites Gipson for this proposition but Gipson does not so hold.  (215 Cal.App.2d at p. 206, 30 Cal.Rptr. 253.)

MARLER, Associate Justice.

SPARKS, Acting P.J., and SCOTLAND, J., concur.