Case Law Update – Fall 2022

Respondent Penalized for Frivolous Defense

McDonald’s v. IWCC, 2022 IL App (1st) 210928WC

Facts

In an unwitnessed accident, the Petitioner alleges injuries to right shoulder and low back as a result of catching a falling box. Form 45 accident report was filled out on date of accident and Petitioner was seen at the emergency room the same day. The accident was reported to the insurance carrier the following day. The owner of the employer testified as to his knowledge of the accident on the day it happened.

At trial, the Respondent placed accident and notice as issues in dispute, despite the Form 45 being filled out on the date of accident and the owner testifying as to his knowledge of the accident.

The arbitrator awarded permanency and medical bills, as well as penalties pursuant to Section 19(k) and attorneys fees pursuant to Section 16. The arbitrator specifically found the Respondent did not act reasonably when it disputed accident and notice, despite the evidence to the contrary. The arbitrator found there was no real controversy on those issues and awarded penalties as a result. The arbitrator’s decision was affirmed and adopted by the Commission.

Appellate Court Holding

The appellate court found the Commission’s findings on accident, notice, causal connection, medical and permanency were not against the manifest weight of the evidence.

On the question of penalties and fees, the court applied an abuse of discretion standard.  Using this standard, the court stated “an employer must have a reasonable basis to take a position…there must be some legitimate purpose served by an employer’s litigation tactics.” The court focused on the language in Sections 16 and 19(k) which refers to positions which do not present “a real controversy” and are “frivolous.” The court upheld the Commission’s award of penalties and fees.

Takeaway

A vigorous defense of a claim does not include asserting defenses at trial which are not supported by the evidence and in fact are contrary to the evidence presented. In this case, while the accident was unwitnessed, the court found it relevant that:

  • Petitioner’s testimony was unrebutted
  • Accident was reported immediately
  • Emergency treatment the same day
  • Consistent reporting to treaters
  • Franchise owner acknowledged the accident
  • Court noted McDonald’s offered “no material evidence to rebut her testimony

On these facts, the court found the Respondent’s disputing of accident and notice to be frivolous and worthy of the imposition of penalties.

 

Appellate Court Rules on Existence of Employment Relationship

Tile Roofs, Inc. v. IWCC, 2022 IL App (1st) 210819WC-U

Facts

Petitioner was a roofer for Mortensen Roofing Co. for many years and retired in 2015. He thereafter began working on roofing jobs for Tile Roofs, Inc. The two companies were owned by same husband/wife team and operated out of the same building.

At the request of one of the owners of Tile Roofs, Inc., the Petitioner formed an LLC to receive payment for the work performed for Tile Roofs, Inc. The Petitioner only worked for Tile Roofs, Inc. and that company was only customer of the Petitioner’s LLC. The payments made by Tile Roofs, Inc. were for the gross amount owed for his work, without any tax withholding.

The Petitioner was injured in 2017 while working on a Tile Roofs, Inc. project in Wisconsin. Specialized training for this project was paid for by Mortensen Roofing Co. Petitioner testified that he was a “consultant” who performed layout work  and that his status was “mostly as an employee” of Tile Roofs, Inc.

The arbitrator denied benefits on the basis the Petitioner was not an employee of Tile Roofs, Inc., at the time of the accident. The Commission unanimously reversed this decision on the basis Petitioner had proven and employment relationship with Respondent.

Appellate Court Holding

In upholding the decision of the Commission, the court held: “…the determination of the existence of an employee-employer relationship is based on the totality of the circumstances and not a strict application of any specified factors.” No one factor controls the outcome and the weight of each varies depending on the work involved. Such factors include:

  • “whether the employer may control the manner in which the person performs the work;
  • whether the employer dictates the person’s schedule:
  • whether the employer pays the person hourly;
  • whether the employer withholds income and social security taxes from the person’s compensation;
  • whether the employer may discharge the person at will;
  • and whether the employer supplies the person with materials and equipment.”

Given this list is not exclusive of the factors to be considered, and is intended to assist, but not control, the analysis of the existence of the employer-employee relationship, the court found no error in the Commission’s analysis. Significantly, the court noted how the parties describe their relationship is a factor of “lesser weight.”

Takeaway

The court found the Petitioner to be a “de facto” employee and the LLC to be a corporate formality which only existed on paper, essentially created at the direction of the Respondent in order to allow payment to Petitioner. In fact, there was testimony to the effect Respondent withheld 10 weeks of pay to the Petitioner until after he set up the LLC, at the direction of the Respondent.

Simply calling someone an independent contractor will not pass muster under such circumstances. The Commission (and courts) will analyze all relevant factors and decide whether a Petitioner is controlled by Respondent to such an extent that he or she is essentially an employee, in contrast to running an independent of their own.