Olds-Carter v. Lakeshore Farms, Inc.

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No. 104,047

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

MARGARET LEANN OLDS-CARTER,
Appellee,

v.

LAKESHORE FARMS, INC.,

and

THE KANSAS WORKERS COMPENSATION FUND,
Appellants.


SYLLABUS BY THE COURT

1.
Determining whether a workers compensation claimant is involved in an
agricultural pursuit is a question of fact which must be decided on a case-by-case basis.

2.
To determine whether a workers compensation claimant was engaged in an
agricultural pursuit when injured requires a two-step analysis. The first step is to
determine whether the employer was engaged in an agricultural pursuit. If the answer to
this question is no, then the court may find that there is coverage. If the answer is yes,
then the court proceeds to the second step, which is to determine if the injury occurred
while the employee was engaged in an employment incident to an agricultural pursuit. If
the answer to that question is also yes, then the employee is not covered by the Workers
Compensation Act. If the answer to that question is no, then there is coverage.

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3.
There are three considerations for determining whether a specific pursuit or
business is an agricultural pursuit within the meaning of K.S.A. 44-505(a)(1): (1) the
general nature of the employer's business; (2) the traditional meaning of agriculture as the
term is commonly understood; and (3) each business will be judged on its own unique
characteristics.

4.
Under the facts in this case involving an injured worker's claim for workers
compensation benefits, after applying the proper analysis under K.S.A. 44-505(a)(1), it is
held that when the claimant was injured, the respondent's business did not constitute an
agricultural pursuit as the term is commonly understood. As a result, respondent's
business was not exempt from the Worker's Compensation Act.

5.
Kansas courts have consistently defined an independent contractor as one who, in
exercising an independent employment, contracts to do certain work according to his or
her own methods, without being subject to the control of the party he or she contracts
with, except as to the results or product of his or her own work.

6.
There is no absolute rule for determining whether one is an independent contractor
or an employee. Generally, each case must be determined on its own facts.

7.
The principal test of whether one is an independent contractor or an employee is
based upon the control exercised: Who has the right to direct what work will be done and
when and how the work will be performed?

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8.
The primary test in determining whether the relationship of employer and
employee exists is whether the alleged employer has the right of control and supervision
over the work of the alleged employee and the right to direct the manner in which the
work is to be performed, as well as the result which is to be accomplished. It is not the
actual interference or exercise of control by the employer but the existence of the right or
authority to interfere or control which renders one an employee rather than an
independent contractor.

9.
Under the facts of this case, evidence supported findings that the respondent
exercised or had the right to exercise as much control over the claimant-driver as the
respondent desired, so that the claimant-driver was an employee and not an independent
contractor and was covered by the Workers Compensation Act.

10.
K.S.A. 44-532a(a) clearly states that if an employer of an injured employee is
insolvent and uninsured, the State pays compensation benefits to the employee out of the
Kansas Workers Compensation Fund (Fund). Moreover, the Kansas Insurance
Commissioner can then sue the employer under K.S.A. 44-532a(b). It follows that by
satisfying the claim of the employee, the Insurance Commissioner steps into the shoes of
the employee and is subrogated to the rights of the employee. This is a proper
interpretation of K.S.A. 44-532a(a) because the policy and purpose behind the Workers
Compensation Act is to furnish a remedy which is both expeditious and free from proof
of fault. As a result, the burden is properly placed on the Fund to pursue a subrogation
action against an insolvent and uninsured employer under K.S.A. 44-532a(b).

Appeal from Workers Compensation Board. Opinion filed February 18, 2011. Affirmed.

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Matthew R. Bergmann, of Frieden, Unrein, Forbes & Biggs, L.L.P., of Topeka, for appellant
Kansas Workers Compensation Fund.

John D. Jurcyk and Brent M. Johnston, of Roeland Park, for appellant Lakeshore Farms, Inc.

Timothy J. Pringle, of Eschmann & Pringle, P.A., of Topeka, for appellee Margaret Leann Olds-
Carter.

Before GREENE, P.J., GREEN and STANDRIDGE, JJ.

GREEN, J.: Margaret LeAnn Olds-Carter was injured in an accident while driving
a semi truck that she leased from Lakeshore Farms, Inc. (Lakeshore). Olds-Carter was
granted workers compensation benefits from the administrative law judge (ALJ). The
ALJ's decision was affirmed by the Appeals Board for the Kansas Division of Workers
Compensation (Board). Lakeshore and the Kansas Workers Compensation Fund (the
Fund) appeal the Board's decision, contending that the present claim is not subject to the
Kansas Workers Compensation Act because Olds-Carter was engaged in an agricultural
pursuit when she was injured, because Lakeshore's payroll is insufficient to trigger
coverage under the Act, and because Olds-Carter was an independent contractor, not an
employee of Lakeshore. The Fund also appeals the Board's decision that it is obligated to
pay the award because Lakeshore is insolvent. Finding no reversible error, we affirm.

Lakeshore is a company owned by Jonathan Russell, who is the company's sole
officer, director, and shareholder. Lakeshore owns certain equipment, including vehicles,
semi-trucks, combines, tractors, planters, and sprayers. Russell owns farmland and pays
Lakeshore for the use of its equipment. Lakeshore also leases its semi-trucks to
individuals who haul loads of grain and other items for Russell and for various brokers.
Lakeshore pays for the trucks' insurance, licensing, permits, fuel, repairs, and
maintenance, and keeps 75 percent of the compensation the drivers earn from hauling.
After the brokers make payments directly to Lakeshore, the drivers earn the remaining 25
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percent of each haul. The drivers are required to gross $2,400 per month in order to cover
their obligations under the lease.

On March 5, 2007, Olds-Carter began driving a semi-truck for Lakeshore under an
oral lease agreement. Her duties included loading and hauling grain or sand in a grain
wagon. On July 18, 2007, Olds-Carter was driving her truck to pick up a load of corn at
an elevator for a broker. En route, Olds-Carter was injured after she lost control of her
truck. She was ultimately diagnosed with a 20 percent compression fracture to her L2
vertebra.

Olds-Carter filed a workers compensation claim, alleging that the accident
occurred during the course of her employment with Lakeshore. In attempting to avoid
liability, Lakeshore argued that Olds-Carter was an independent contractor, not an
employee. Following a hearing, the ALJ found that although the evidence presented
contained elements both of an independent contractor relationship and an employer and
employee relationship, the totality of the evidence indicated that Olds-Carter was an
employee of Lakeshore. The ALJ also found that there was coverage under the Act
because Olds-Carter was not engaged in an agricultural pursuit when she was injured and
because Lakeshore had a payroll of over $20,000. The ALJ determined that Olds-Carter
sustained a 38.5 percent work disability based upon a 38 percent task loss and a 39
percent wage loss, entitling her to 159.78 weeks of permanent partial disability
compensation and a total award of $50,230.04, assessed against both Lakeshore and the
Fund.

Lakeshore and the Fund petitioned the Board for review. After reviewing the
evidence, the Board entered an order affirming in part and modifying in part the ALJ's
award. The Board concluded that Lakeshore's trucking operation did not constitute an
agricultural pursuit, that Lakeshore had a sufficient payroll to bring it under the
jurisdiction of the Act, and that the evidence more heavily weighed towards a finding that
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Olds-Carter was an employee of Lakeshore, rather than an independent contractor. The
Board also held that there was sufficient evidence in the record to establish that
Lakeshore was unable to pay Olds-Carter's workers compensation benefits; thus, the
Fund was responsible for paying the benefits. Finally, the Board modified the ALJ's
award to reflect that Olds-Carter suffered a 60 percent permanent partial disability, for a
total award of $84,125.41.

Standard of Review

Under the Workers Compensation Act (Act), K.S.A. 44-501 et seq., an appellate
court's standard of review is statutorily controlled by the Kansas Judicial Review Act
(KJRA), K.S.A. 2009 Supp. 77-601 et seq. See 2009 Supp. K.S.A. 44-556; L. 2009, ch.
109, secs. 23-30. A recent decision of our Supreme Court held that the 2009 changes to
the standard of review are to be given prospective application only because the KJRA
contains a savings clause; thus, the 2009 changes are to be applied to agency decisions
issued on or after July 1, 2009. Redd v. Kansas Truck Center, 291 Kan. 176, Syl. ¶ 1, 239
P.3d 66 (2010). The Board's decision here was issued on February 26, 2010. Therefore,
the 2009 KJRA changes apply to the present case.

The KJRA provides that appellate courts review the Board's factual determinations
to verify that they are supported by substantial competent evidence "in light of the record
as a whole." K.S.A. 2009 Supp. 77-621(c)(7); Herrera-Gallegos v. H & H Delivery
Service, Inc., 42 Kan. App. 2d 360, 362, 212 P.3d 239 (2009). The language "in light of
the record as a whole" is statutorily defined to mean

"that the adequacy of the evidence in the record before the court to support a particular
finding of fact shall be judged in light of all the relevant evidence in the record cited by
any party that detracts from such finding as well as all of the relevant evidence in the
record, compiled pursuant to K.S.A. 77-620, and amendments thereto, cited by any party
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that supports such finding, including any determinations of veracity by the presiding
officer who personally observed the demeanor of the witness and the agency's
explanation of why the relevant evidence in the record supports its material findings of
fact. In reviewing the evidence in light of the record as a whole, the court shall not
reweigh the evidence or engage in de novo review." K.S.A. 2009 Supp. 77-621(d).

Substantial evidence in a workers compensation case is evidence that possesses
something of substance and relevant consequence that induces the conclusion that the
award is proper; it furnishes a basis of fact from which the issue raised can reasonably be
resolved. Redd, 291 Kan. at 183-84. Stated another way, substantial evidence is "such
evidence as a reasonable person might accept as being sufficient to support a conclusion."
Herrera-Gallegos, 42 Kan. App. 2d at 363.

This court has interpreted the 2009 legislative changes to require appellate courts
to examine whether the evidence supporting the Board's decision has been so undermined
by other evidence that it is insufficient to support the Board's conclusion. 42 Kan. App.
2d at 363. The 2009 legislative changes also abrogated the negative findings standard in
workers compensation cases. See K.S.A. 2009 Supp. 77-621(c)(7). In the present case,
the Board made several negative findings: that Lakeshore failed to show that Olds-Carter
was engaged in an agricultural pursuit, that Lakeshore failed to show that its payroll was
insufficient to invoke the Act, and that Lakeshore failed to show that Olds-Carter was an
independent contractor. Nevertheless, instead of using the negative findings standard, we
must apply the substantial competent evidence standard described earlier.

Does the Kansas Workers Compensation Act Apply to the Present Case?

Lakeshore and the Fund contend that the present claim is not governed by the Act
because (1) Olds-Carter was engaged in an agricultural pursuit when she was injured, and
(2) Lakeshore does not maintain an annual payroll threshold of $20,000.
K.S.A. 44-505 provides, in relevant part:
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"(a) Subject to the provisions of K.S.A. 44-506 and amendments thereto, the
workers compensation act shall apply to all employments wherein employers employ
employees within this state except that such act shall not apply to:
"(1) Agricultural pursuits and employments incident thereto, other than those
employments in which the employer is the state, or any department, agency or authority
of the state;
"(2) any employment, other than those employments in which the employer is the
state, or any department, agency or authority of the state, wherein the employer had a
total gross annual payroll for the preceding calendar year of not more than $20,000 for all
employees and wherein the employer reasonably estimates that such employer will not
have a total gross annual payroll for the current calendar year of more than $20,000 for
all employees, except that no wages paid to an employee who is a member of the
employer's family by marriage or consanguinity shall be included as part of the total
gross annual payroll of such employer for purposes of this subsection . . . ."

Is the Board's Finding that Olds-Carter Was Not Engaged in an Agricultural Pursuit
When She Was Injured Supported by Substantial Competent Evidence?

Lakeshore and the Fund first contend that the Act is not applicable to the present
case because Lakeshore is an essential part of Russell's farming operation and was
established for the sole purpose of making his agricultural pursuits more effective and
efficient. They maintain that the service furnished by Olds-Carter on the date of her
alleged injury was 100% agriculturally related because transporting harvested crops is
clearly incident to an agricultural pursuit.

Determining whether a workers compensation claimant is involved in an
agricultural pursuit is a question of fact which must be decided on a case-by-case basis.
Frost v. Builders Service, Inc., 13 Kan. App. 2d 5, 7, 760 P.2d 43, rev. denied 243 Kan.
778 (1988). The Frost case sets out a two-step analysis for determining whether a
workers compensation claimant was engaged in an agricultural pursuit when injured:

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"To determine whether a workers' compensation claimant was engaged in an
agricultural pursuit at the time of injury requires a two-step analysis. The first step is to
determine whether the employer was engaged in an agricultural pursuit. If the answer to
this question is no, then the court may find that there is coverage. If the answer is yes,
then the court proceeds to the second step, which is to determine if the injury occurred
while the employee was engaged in an employment incident to an agricultural pursuit. If
the answer to that question is also yes, then the employee is not covered by the Act. If the
answer to that question is no, then there is coverage." 13 Kan. App. 2d 5, Syl. ¶ 2.

In addition, there are three considerations for determining whether a specific
pursuit or business is an agricultural pursuit within the meaning of K.S.A. 44-505(a)(1):
"(1) the general nature of the employer's business; (2) the traditional meaning of
agriculture as the term is commonly understood; and (3) each business will be judged on
its own unique characteristics." Whitham v. Parris, 11 Kan. App. 2d 303, Syl. ¶ 3, 720
P.2d 1125 (1986).

In applying the Frost analysis to the facts in this case, the Board held that
Lakeshore's business should not be considered an agricultural pursuit:

"Here, respondent's business was leasing equipment to Mr. Russell for use in his
farming operation. In addition, respondent conducted a commercial trucking enterprise.
Neither a leasing company nor a commercial trucking company should be considered
agricultural pursuits as that term is commonly understood. Respondent argues that it was
engaged in agriculture because it leased farm equipment and its truckers hauled grain.
The Board disagrees. Moreover, respondent hauled more than grain as at least one of
respondent's numerous drivers, Mr. Hutton, pulled a flat bed trailer."

1. The general nature of Lakeshore's business

The general nature of Lakeshore's business is to purchase or lease equipment to
Russell for use in his farming operation. Lakeshore also leases semi-trucks to drivers who
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transport grain and other items for Russell and various brokers. Lakeshore does not own
any farm land.

2. The traditional meaning of "agriculture"

Webster's Third New International Dictionary 44 (1993) defines agriculture as
"the science or art of cultivating the soil, harvesting crops, and raising livestock" or "the
science or art of the production of plants and animals useful to man and in varying
degrees the preparation of these products for man's use and their disposal (as by
marketing)."

3. Lakeshore's unique characteristics

Lakeshore takes issue with the Board's characterization that it runs a "commercial
trucking enterprise." Rather, Lakeshore and the Fund argue that Lakeshore is an essential
part of Russell's farming operation, established for the sole purpose of making Russell's
agricultural pursuits more effective and efficient.

Although Lakeshore may be essential to Russell's farming operation, the United
States Supreme Court has recognized a distinction between agriculture and related, but
separate and independent, business activities:

"[F]unctions which are necessary to the total economic process of supplying an
agricultural product become, in the process of economic development and specialization,
separate and independent productive functions operated in conjunction with the
agricultural function but no longer a part of it. Thus, the question as to whether a
particular type of activity is agricultural is not determined by the necessity of the activity
to agriculture nor by the physical similarity of the activity to that done by farmers in other
situations. The question is whether the activity in the particular case is carried on as part
of the agricultural function or is separately organized as an independent productive
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activity." Farmers Irrigation Co. v. McComb, 337 U.S. 755, 761, 69 S. Ct. 1274, 93 L.
Ed. 2d 1672 (1949).

Lakeshore's trucking operation, while necessary to the process of transporting and
delivering grain, is separately organized and independent from Russell's farming
operation. The present facts are similar to those found in Kuhn v. Box Canyon Livestock,
Inc., 102 Idaho 658, 637 P.2d 1154 (1981), where an employee of a dairy sought workers
compensation benefits for injuries sustained when the dairy's loaded milk truck
overturned while the employee was hauling milk from the dairy to a processing plant. In
finding that the employee was eligible for benefits, the Idaho Supreme Court held that
hauling milk constituted an activity of a sufficiently separate nature so as to supplant the
dairy's principal business. In so holding, the court noted that the activities performed by
the employee when the injury occurred were not in the nature of creating an agricultural
commodity; rather, the employee's activities were confined to transporting a completed
agricultural commodity. 102 Idaho at 660-62; see also Backsen v. Blauser, 95 Idaho 811,
813, 520 P.2d 858 (1974) (claimant truck driver covered by workers compensation statute
where employer's business consisted of transporting finished agricultural products and
did not relate to "'raising or harvesting'" agricultural products within meaning of
exemption statute).

Lakeshore does not plant, cultivate, or harvest any crops. Lakeshore leases
equipment to Russell for use in his farming operation and leases semi-trucks for
transporting grain and other items. As noted by the Board, the trucks are not used solely
to transport grain. One driver testified that he regularly hauls a flatbed trailer, and on at
least one occasion, transported a boat for Russell. Clearly, Lakeshore is not engaged in
agricultural pursuits as that term is commonly understood.

It stands to reason, then, that Olds-Carter's act of driving Lakeshore's truck to pick
up a load of corn for a broker constituted an activity of a sufficiently separate nature from
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Russell's farm operation. Moreover, the load of corn that Olds-Carter was to pick up at
the elevator for the broker was a finished product. Nothing else needed to be done to the
corn before it was marketed.

The case of Mulanix v. Falen, 64 Idaho 293, 296, 130 P.2d 866 (1942), states that
the "line of demarcation between employment that is agricultural or not is extremely
attenuated. The same work done under certain conditions and under certain circumstances
may be agricultural and under other conditions and circumstances not." It would be
incorrect to say that when Olds-Carter was injured, Lakeshore's business constituted an
agricultural pursuit: the cultivating and harvesting of agricultural products. As a result,
viewing Lakeshore's business as a whole, the Board's finding that Olds-Carter was not
engaged in an agricultural pursuit when she was injured is supported by substantial
competent evidence.

Is the Board's Finding that Lakeshore's Payroll Was Sufficient to Bring It under the
Jurisdiction of the Act Supported by Substantial Competent Evidence?

Lakeshore and the Fund also contend the Board erred in finding that Lakeshore's
annual payroll exceeded $20,000, as required for workers compensation coverage under
K.S.A. 44-505(a)(2).

In holding that Lakeshore's payroll exceeded $20,000, the Board stated:

"The greater weight of the evidence establishes that at the time of claimant's
accident respondent should have reasonably estimated that it would have a payroll greater
than $20,000 for the calendar year. As of the date of accident claimant had earned more
than $8,900. Moreover, one of respondent's other truck drivers, Gary Wheeler, testified
that he received approximately $38,000 to $40,000 driving for respondent in 2006 and
approximately $50,000 from respondent in 2007. In addition, respondent had several
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other drivers operating its trucks in 2007. In short, respondent had sufficient payroll to
bring it under the jurisdiction of the Act."

The record supports the Board's findings as to the earnings of Olds-Carter and
Wheeler. Neither Lakeshore nor the Fund disputes these figures. Instead, they argue that
although Lakeshore's drivers may have earned more than $20,000 a year for the work
they performed for various brokers, this amount does not represent Lakeshore's annual
payroll. Inherent in this argument is the notion that Lakeshore actually has no wage-
earning employees because its drivers are independent contractors.

Although the issue of whether Lakeshore's drivers are employees or independent
contractors will be later addressed, its resolution is not relevant with respect to the
applicability of the Act.

In enacting K.S.A. 44-503, the legislature extended the Act to employees of
subcontractors in order to prevent employers from evading liability under the Act by
contracting with outsiders to do work which the employers have undertaken to do as a
part of their trade or business. Rodriquez v. John Russell Constr., 16 Kan. App. 2d 269,
Syl. ¶ 3, 826 P.2d 515 (1991). In Olivares v. Mid-Continent Specialists, Inc., No. 90,576,
unpublished opinion filed December 24, 2003, this court affirmed the Board's holding
that a contractor's payments for leased employees were properly considered in
determining whether the contractor's payroll met the Fund's threshold requirement:

"'The phrase "all employees" in K.S.A. 44-505 must be construed to include
leased employees otherwise a contractor could avoid liability to statutory employees by
leasing employees and arguing, as Mid-Con does in this case, that it is not subject to the
Act because it does not have a sufficient payroll. Such an arrangement would subvert the
provisions of K.S.A. 44-503 which is to prevent employers from evading liability under
the act by the device of contracting with outsiders to do work which they have
undertaken to do as part of their trade or business." Slip op. at 9.
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The Act, K.S.A. 44-501 et seq., is to be "liberally construed for the purpose of
bringing employers and employees within the provisions of the act to provide the
protections of the workers compensation act to both." K.S.A. 2009 Supp. 44-501(g).
Olds-Carter and Lakeshore's other drivers performed work that was "inherent in and an
integral part of" Lakeshore's business. See Rodriguez, 16 Kan. App. 2d 269, Syl. ¶ 4.
There is uncontroverted evidence that Lakeshore's drivers met the required payroll
threshold. Therefore, there is substantial competent evidence to support the Board's
finding that Lakeshore had sufficient payroll to bring it under the jurisdiction of the Act.

Is the Board's Finding that Olds-Carter Was an Employee of Lakeshore, Rather than an
Independent Contractor, Supported by Substantial Competent Evidence?

Next, Lakeshore and the Fund maintain that the Board's finding that Olds-Carter
was an employee of Lakeshore, rather than an independent contractor, is not supported by
substantial competent evidence in light of the record as a whole.

Although not defined in the Act, our courts have consistently defined an
independent contractor as one who, in exercising an independent employment, contracts
to do certain work according to his or her own methods, without being subject to the
control of the party he or she contracts with, except as to the results or product of his or
her own work. Falls v. Scott, 249 Kan. 54, 64, 815 P.2d 1104 (1991); Krug v. Sutton, 189
Kan. 96, 98, 366 P.2d 798 (1961).

There is no absolute rule for determining whether one is an independent contractor
or an employee. Generally, each case must be determined on its own facts. See Hartford
Underwriters, Ins. Co. v. Kansas Dept. of Human Resources, 272 Kan. 265, 270, 32 P.3d
1146 (2001); Schroeder v. American Nat'l Bank, 154 Kan. 721, 724, 121 P.2d 186
(1942).

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Nevertheless, there are some well-recognized tests which courts have used in
determining whether one is an independent contractor or an employee. Our Supreme
Court has held that the principal test is based upon the control exercised: Who has the
right to direct what work will be done and when and how the work will be performed?
This test is commonly referred to as the "right of control" test. Danes v. St. David's
Episcopal Church, 242 Kan. 822, 831-32, 752 P.2d 653 (1988).

Kansas courts continue to use this right of control test in determining the
relationship of the party rendering the service:

"[The test is] whether the employer has the right of control and supervision over the work
of the alleged employee, and the right to direct the manner in which the work is to be
performed, as well as the result which is to be accomplished. It is not the actual
interference or exercise of the control by the employer, but the existence of the right or
authority to interfere or control, which renders one a servant rather than an independent
contractor." Falls, 249 Kan. at 64.

Nevertheless, the right of control test has not proved satisfactory as an exclusive
determinant of the employment relationship. Other factors which Kansas courts have
used in various ways to determine the employment relationship include the following:

"(1) [t]he existence of the right of the employer to require compliance with instructions;
"(2) the extent of any training provided by the employer;
"(3) the degree of integration of the worker's services into the business of the employer;
"(4) the requirement that the services be provided personally by the worker;
"(5) the existence of hiring, supervision, and paying of assistants by the worker;
"(6) the existence of a continuing relationship between the worker and the employer;
"(7) the degree of establishment of set work hours;
"(8) the requirement of full-time work;
"(9) the degree of performance of work on the employer's premises;
"(10) the degree to which the employer sets the order and sequence of work;
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"(11) the necessity of oral or written reports;
"(12) whether payment is by the hour, day or job;
"(13) the extent to which the employer pays business or travel expenses of the worker;
"(14) the degree to which the employer furnishes tools, equipment, and material;
"(15) the incurrence of significant investment by the worker;
"(16) the ability of the worker to incur a profit or loss;
"(17) whether the worker can work for more than one firm at a time;
"(18) whether the services of the worker are made available to the general public;
"(19) whether the employer has the right to discharge the worker; and
"(20) whether the employer has the right to terminate the worker." (Emphasis added.)
Crawford v. Kansas Dept. of Human Resources, 17 Kan. App. 2d 707, 710, 845 P.2d 703
(1989), rev. denied 246 Kan. 766 (1990).

See Hartford, 272 Kan. at 271.

Our court has considered the factors set out in the Restatement (Second) of
Agency § 220(2) (1957):

"'(a) the extent of control which, by the agreement, the master may exercise over
the details of the work;
"'(b) whether or not the one employed is engaged in a distinct occupation or
business;
"'(c) the kind of occupation, with reference to whether, in the locality, the work is
usually done under the direction of the employer or by a specialist without supervision;
"'(d) the skill required in the particular occupation;
"'(e) whether the employer or the workman supplies the instrumentalities, tools,
and the place of work for the person doing the work;
"'(f) the length of time for which the person is employed;
"'(g) the method of payment, whether by the time or by the job;
"'(h) whether or not the work is a part of the regular business of the employer;
"'(i) whether or not the parties believe they are creating the relation of master and
servant; and
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"'(j) whether the principal is or is not in business.'" (Emphasis added.) Knorp v.
Albert, 29 Kan. App. 2d 509, 514, 28 P.3d 1024, rev. denied 272 Kan. 1418 (2001)
(quoting Restatement [Second] of Agency § 220[2]).

In holding that Olds-Carter was an employee of Lakeshore, rather than an
independent contractor, the Board found that although the record contained evidence
suggesting both employee and independent contractor relationships, the evidence was
more heavily weighted in finding that Olds-Carter was an employee. The Board primarily
relied upon the following evidence: (1) Lakeshore provided the truck that Olds-Carter
drove, and paid for all its related expenses; (2) although the right of control was not
frequently exercised, Lakeshore could control the loads hauled by Olds-Carter; (3)
Lakeshore had the right to discharge Olds-Carter if she did not generate at least $2400
per month; and (4) the work Olds-Carter performed was an integral part of Lakeshore's
commercial trucking operations. Other factors relied on by the Board were as follows:
Lakeshore and Olds-Carter had an ongoing relationship similar to that of employer and
employee; the absence of a contract to perform a certain piece of work at a fixed price;
Olds-Carter did not hold herself out as a separate business entity or trucking company or
conduct business separate and apart from driving Lakeshore's truck; and Olds-Carter was
not obliged to provide repairs to the truck she drove or provide any tools, materials, or
supplies.

Our Supreme Court has applied the "right of control test" as the primary factor in
determining the employment status of a claimant in several trucking cases. See, e.g.,
Anderson v. Kinsley Sand & Gravel, Inc., 221 Kan. 191, 198-99, 558 P.2d 146 (1976),
superseded on other grounds Hughes v. Inland Container Corp., 247 Kan. 407, 799 P.2d
1011 (1990); Knoble v. National Carriers, Inc., 212 Kan. 331, 333-37, 510 P.2d 1274
(1973); Watson v. Dickey Clay Mfg. Co., 202 Kan. 366, 376-77, 450 P.2d 10 (1969);
Wilbeck v. Grain Belt Transportation Co., 181 Kan. 512, 512-15, 313 P.2d 725 (1957);
Shay v. Hill, 133 Kan. 157, 159-64, 299 P. 263 (1931). Because we are required to
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consider whether the Board's factual determinations are supported by substantial
competent evidence in light of the record as a whole, it is necessary to review both the
evidence supporting and the evidence rebutting the Board's conclusion. See K.S.A. 2009
Supp. 77-621(c)(7); Herrera-Gallegos, 42 Kan. App. 2d at 362-63.

Facts Supporting the Board's Decision

Olds-Carter maintained that before entering into the oral lease agreement with
Lakeshore, there was no discussion about workers compensation and she was never told
that she would be considered an independent contractor. Lakeshore owned the truck
leased by Olds-Carter. Lakeshore paid for the truck's insurance, licensing, permits, fuel,
repairs, and maintenance. Olds-Carter was not required to provide any tools, materials, or
supplies. As her lease payment, Olds-Carter paid Lakeshore 75 percent of the
compensation she earned from hauling loads for Russell and various brokers. When
Russell did not have a haul for her, Olds-Carter was expected to contact brokers to
arrange a haul, but Olds-Carter and other drivers indicated that Russell's hauling requests
took precedence over a broker's haul. Russell occasionally directed the drivers to take a
specific haul or drive to a certain location. Russell admitted that he sometimes attempted
to assist the drivers in obtaining loads. Olds-Carter submitted a weekly record of her
hauls to Lakeshore. Her earnings from brokers were sent directly to Lakeshore's offices;
her lease payment was taken out of this amount; and Lakeshore prepared a check with the
remaining amount for her to pick up. Lakeshore's drivers were expected to earn a certain
income per week or they would be discharged from their lease.

Consequently, the right was reserved by Lakeshore to discharge any hauler who
failed to earn sufficient moneys to cover his or her lease. It is the right to interfere that
establishes the difference between a mere servant and an independent contractor. Falls,
249 Kan. at 64. In addition, Lakeshore's drivers were each listed as an "employee" on a
form filled out by Lakeshore. Olds-Carter's truck listed "Lakeshore Farms, Inc., Forest
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City, Missouri" on the door panel. Olds-Carter did not conduct business separate and
apart from driving Lakeshore's truck.

Facts Rebutting the Board's Conclusion

According to Russell, the terms of his oral lease agreement with Olds-Carter
contemplated that she would be considered an independent contractor and that workers
compensation coverage would not be provided. Lakeshore did not control the day-to-day
operations of the drivers, including what brokers they hauled for, how many loads they
hauled, how many days or hours they worked per week, or what route they took. One of
Lakeshore's drivers referred to himself as an independent contractor. Some drivers
disputed the testimony that Russell's hauls took precedence over broker hauls and
maintained that they had actually turned down Russell's hauling requests on occasion.

Substantial Evidence Supports the Board's Finding that Olds-Carter Was an Employee of
Lakeshore

Despite Lakeshore's attempts to separate its business (leasing farm equipment)
from Olds-Carter's business (hauling grain and other items for "various companies and
individuals") by referring to them as independent contractors and alleging that it asserted
no control over its drivers, the record supports a finding that Olds-Carter was an
employee of Lakeshore. "The relationship of contracting parties depends on all the
operative facts; the label which they choose to employ is only one of those facts."
Hartford, 272 Kan. at 275.

Additionally, as stated earlier, "[i]t is not the actual interference or exercise of the
control by the employer, but the existence of the right or authority to interfere or control,
which renders one a servant rather than an independent contractor." Falls, 249 Kan. at 64.
Here, Lakeshore retained the right or authority to interfere or control. As a result, under
20

the right to control test, Lakeshore retained sufficient control over Olds-Carter's conduct
to support the Board's finding that she was an employee.

In addition, the other factors, which we have previously highlighted, that Kansas
courts have used for determining whether a worker is an independent contractor or an
employee show that Olds-Carter was an employee and not an independent contractor
when she was injured. For example, Olds-Carter did not have a distinct business because
Lakeshore owned and supplied the truck that she used for her hauling business. If
Lakeshore decided not to supply Olds-Carter with a truck, her business would end.
Consequently, Olds-Carter did not have a business distinct from her relationship with
Lakeshore, who furnished the truck for her hauling business. See Howard Sheppard, Inc.
v. McGowan, 137 Ga. App. 408, 224 S.E.2d 65 (1976) (Driver who did not supply his
own truck was treated as an employee.); Workmen's Compensation Appeal Bd. v. Navajo
Freight Lines, Inc., 19 Pa. Commw. 25, 338 A.2d 766 (Hauler who did not supply his
own truck was an employee.).

Given the substantial evidence in the record as a whole supporting the Board's
finding, and our inability to reweigh the evidence or engage in de novo review, the
evidence that Lakeshore and the Fund contend rebuts the Board's finding is insufficient to
support reversal of the Board's finding. See K.S.A. 2009 Supp. 77-621(c)(7), (d); Redd,
291 Kan. at 182-83.

Is the Board's Finding that the Fund Is Obligated to Pay the Award, Due to Lakeshore's
Insolvency, Supported by Substantial Competent Evidence?

Finally, the Fund challenges the Board's determination that Lakeshore was
insolvent. K.S.A. 44-532a(a) obligates the Fund to pay the award if Lakeshore has no
insurance to cover the award and is financially unable to pay the award. The Fund admits
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that Lakeshore did not have workers compensation insurance on the date of Olds-Carter's
accident. Thus, the issue turns on Lakeshore's ability to pay.

In considering the Fund's liability, the Board stated:

"[T]here is sufficient evidence in this record to establish a prima facie case that
respondent is financially unable to pay claimant's workers compensation benefits. Mr.
Russell's testimony is uncontradicted that all but one of respondent's semi-trucks is
encumbered. Likewise, the evidence establishes that respondent's combine is encumbered
and the trailers that respondent possesses are leased. There is no evidence of respondent's
equity. Mr. Russell's testimony is also uncontradicted that the payments he makes to
respondent [are] primarily used to pay the notes on respondent's equipment."

The Fund contends that Lakeshore is not insolvent, maintaining that Lakeshore
previously paid medical expenses and temporary total disability payments to Olds-Carter
exceeding $10,000, and Lakeshore has assets of considerable value. Olds-Carter does not
bear the burden of proving Lakeshore's inability to pay the award. See Helms v.
Pendergast, 21 Kan. App. 2d 303, 313, 899 P.2d 501 (1995). The question is whether this
evidence is sufficient to support reversal of the Board's decision.

The Fund's argument is not supported by the record. The Fund furnishes no
citation to the record to support its assertion that Lakeshore previously paid Olds-Carter's
medical expenses. Moreover, although the Fund refers to Lakeshore's tax returns which
list "numerous assets of considerable financial value," no such tax returns are included in
the record. "An appellant has the burden to designate a record sufficient to establish the
claimed error; without such a record, the claim of error fails. [Citation omitted.]" Kelly v.
VinZant, 287 Kan. 509, 526, 197 P.3d 803 (2008).

Nevertheless, during oral argument, the Fund maintained that K.S.A. 44-532a(a)
places the burden on Olds-Carter to pierce the corporate veil of Lakeshore to impose the
22

liability for Lakeshore's corporate activity (an uninsured employer) on Russell or some
other entity that Russell controlled. Although, under K.S.A. 44-512a(b), an employee can
sue his or her employer to collect an administrative award of disability and medical
compensation civil penalties and attorney fees, the employee will not sue his or her
insolvent employer when there is a solvent State fund from which the award may be
obtained. See K.S.A. 44-532a. K.S.A. 44-532a states in relevant part:

"(a) If an employer has no insurance to secure the payment of compensation, as
provided in subsection (b)(1) of K.S.a. 44-532 and amendments thereto, and such
employer is financially unable to pay compensation to an injured worker as required by
the workers compensation act, or such employer cannot be located and required to pay
such compensation, the injured worker may apply to the director for an award of the
compensation benefits, including medical compensation, to which such injured worker is
entitled, to be paid from the workers compensation fund."

K.S.A. 44-532a(a) clearly states that if an employer is insolvent and uninsured, the
State pays the employee's compensation benefits to the employee out of the Fund.
Moreover, the Insurance Commissioner can then sue the employer under K.S.A. 44-
532a(b). It follows that by satisfying the claim of the employee, the Insurance
Commissioner "steps into the shoes" of the employee and is subrogated to the rights of
the employee. This is a proper interpretation of K.S.A. 44-532a(a) because the policy and
purpose behind the Act is to furnish a remedy which is both expeditious and free from
proof of fault. Society benefits from such a policy because it is relieved "of the burden of
supporting those injured or the dependents of those killed in industry." Green v. Burch,
164 Kan. 348, 356, 189 P.2d 892 (1948). If we adopted the Fund's interpretation of
K.S.A. 44-532a(a), it would frustrate the policy and the purpose of the Act. As a result,
the burden is properly placed on the Fund to pursue a subrogation action against an
insolvent and uninsured employer under K.S.A. 44-532a(b).

23

Finally, the Board's findings are supported by the record. Olds-Carter testified, and
the record reflects, that she has medical bills that remained unpaid as of the date of the
hearing before the ALJ. Russell testified that he has loans on all of his trucks except for
one and that his trailers and combines are also encumbered. Lakeshore owns no stocks,
bonds, or real property. Finally, Russell testified that he did not draw a salary or a
dividend from Lakeshore and that all funds generated by Lakeshore are used to pay off
notes on its equipment. There is substantial competent evidence to support the Board's
finding that owing to Lakeshore's insolvency, the Fund is obligated to pay Olds-Carter's
award.

Affirmed.