                    NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.




                                   IN THE
            ARIZONA COURT OF APPEALS
                               DIVISION ONE


      HARTE'S CONTRACTING SERVICES, Petitioner Employer,

  TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA,
                Petitioner Insurance Carrier,

                                       v.

    THE INDUSTRIAL COMMISSION OF ARIZONA, Respondent,

               TEODULO RAFAEL VASQUEZ, Respondent
                           Employer,

SPECIAL FUND DIVISION/NO INSURANCE SECTION, Respondent
                     Party in Interest,

         ROBERTO ZARATE-RAMIREZ, Respondent Employee,
              _________________________________

                CARLOS BERNAL,* Respondent Employee,
                 _________________________________

      DAGOBERTO ALDAMA CHAVEZ,** Respondent Employee,
             _________________________________

           EDGAR LOYA SOLANO,*** Respondent Employee,
               _________________________________

               JULIO SANCHEZ,**** Respondent Employee,
                 _________________________________
                                and

            JESUS LOPEZ-CORAL,***** Respondent Employee.
            No. 1 CA-IC 18-0013
            No. 1 CA-IC 18-0014*
            No. 1 CA-IC 18-0015**
            No. 1 CA-IC 18-0016***
            No. 1 CA-IC 18-0017****
            No. 1 CA-IC 18-0018*****
             (Consolidated)
              FILED 2-7-2019



  Special Action - Industrial Commission

            No. 20162-850173
            No. 20162-850101*
            No. 20170-120285*
             (Consolidated)*
            No. 20162-850104**
            No. 20163-540216**
             (Consolidated)**
            No. 20162-850107***
            No. 20162-860300****
            No. 20162-850112*****
            No. 20163-540218*****
             (Consolidated)*****

            Carrier Claim
            No. 127-CB-E1U9351-T
            No. 127-CB-E1U9256-E*
            No. 127-CB-E1U9352-E**
            No. 127-CB-E1U9258-K***
            No. 127-CB-E1U9264-E****
            No. 127-CB-E1U9354-K*****


Gaetano J. Testini, Administrative Law Judge


           AWARD SET ASIDE




                     2
                                 COUNSEL

Lundmark, Barberich, La Mont & Slavin, P.C., Phoenix
By R. Todd Lundmark
Co-Counsel for Petitioner Employer

Janet S. Weinstein, P.C., Phoenix
By Janet S. Weinstein
Co-Counsel for Petitioner Employer

Industrial Commission of Arizona, Phoenix
By Stacey Ann Rogan
Counsel for Respondent

Norton & Brozina, P.C., Phoenix
By Christopher S. Norton, Kevin E. Karges
Counsel for Respondent Party in Interest




                      MEMORANDUM DECISION

Judge Jon W. Thompson delivered the decision of the Court, in which
Presiding Judge Jennifer M. Perkins and Judge Lawrence F. Winthrop
joined.


T H O M P S O N, Judge:

¶1           This is a statutory special action review of an Industrial
Commission of Arizona (“ICA”) consolidated award and decision upon
review for compensable claims. Three issues are presented on review:

       (1) whether the administrative law judge (“ALJ”) erroneously
       concluded that the petitioner employer, Harte’s Contracting
       Services (“Harte’s”), was the statutory employer of Teodulo
       Rafael Vasquez’s (“Rafael’s”) injured workers;

       (2) whether the ALJ erroneously found that Harte’s retained
       the right to exercise control over Rafael’s work; and



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    HARTE/TRAVELERS v. VASQUEZ/SPECIAL FUND/RAMIREZ
                   Decision of the Court

      (3) whether the ALJ erroneously found that framing work is a
      “part or process in the trade or business” of Harte’s general
      contracting business.

Because we find that the ALJ committed legal error by finding that Harte’s
was a special employer, we set aside the award.

I. JURISDICTION AND STANDARD OF REVIEW

¶2              This court has jurisdiction pursuant to Arizona Revised
Statutes (A.R.S.) sections 12-120.21(A)(2) (2016), 23-951(A) (2012), and
Arizona Rule of Procedure for Special Actions 10 (2014). We consider the
evidence in the light most favorable to upholding the award. Lovitch v.
Indus. Comm’n, 202 Ariz. 102, 105 (App. 2002). In reviewing findings and
awards of the ICA, we defer to the ALJ’s factual findings, Young v. Indus.
Comm’n, 204 Ariz. 267, 270 (App. 2003), but review the ALJ’s ruling
concerning a claimant’s employment status de novo as an issue of law.
Vance Int’l v. Indus. Comm’n, 191 Ariz. 98, 100 (App. 1998).


II. PROCEDURAL AND FACTUAL HISTORY

¶3            On July 14, 2016, Harte’s, a general contractor, entered a
building contract with Heart Cry Church (“HCC”) for a new church. Due
to unique circumstances, the construction contract contained several
unusual provisions. The church pastor owned a concrete business, so the
church provided its own concrete work for the new building. The church
also purchased the lumber and trusses for the building to avoid paying a
markup on materials to the framing contractor. Lastly, Justin Harte, the
president of Harte’s, was a member of HCC and agreed to build the church
for cost.

¶4            Justin, on behalf of Harte’s, performed the regular work of a
general contractor. He hired subcontractors, scheduled their work, and
performed safety and quality control. Harte’s hired approximately twenty
subcontractors to build the church, and these included mechanical,
plumbing, roofing, fire, electrical, HVAC, framing, and flooring. For the
framing work, Harte’s hired Rafael’s company, Vasquez Construction, and
the parties signed a standard subcontractor agreement. This subcontract
was for labor only since the church provided the lumber and trusses.

¶5            Rafael’s crew began framing on September 16, 2016, and
anticipated that the work would take four to six weeks. By October 3, 2016,


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    HARTE/TRAVELERS v. VASQUEZ/SPECIAL FUND/RAMIREZ
                   Decision of the Court

the building walls were up, and the framing crew began putting on roof
trusses. That same day, a truss collapsed, and six crew members fell to the
ground sustaining non-life-threatening injuries. Prior to the accident, there
was no indication of any problem with the framing or materials. Justin
performed daily walk throughs, and the City of Queen Creek performed
“professional inspections.”

¶6            After the October 3, 2016 accident, Harte’s first became aware
that Rafael was unlicensed and uninsured. Harte’s business practice was
to check the licensing and insurance for each of its subcontractors. In
Rafael’s case, this did not occur due to a family emergency for the
administrative assistant at Harte’s responsible for checking credentials
when a subcontract was signed. All other HCC project subcontractors were
licensed and insured.

¶7            On the date of the accident, Harte’s also became aware that
Rafael owed his framing crew wages. Together, Harte’s and HCC provided
the injured workers with food and wages. They also asked the workers to
sign a release of liability in exchange for their assistance and at least three
did.

¶8           All six injured workers filed workers’ compensation claims
against Harte’s, Rafael, or both. All claims were denied for benefits, and all
denials were timely protested.

¶9             The ALJ held one consolidated hearing for testimony from
HCC’s pastor, William L. VanCamp, Jr.; Harte’s administrative assistant,
Lori Sigrist; Justin Harte; Justin’s friend, Diego Rascon; and the six injured
workers: Roberto Zarate-Ramirez, Carlos Bernal Ramos, Dagoberto
Aldama Chavez, Edgar Loya-Solano, Julio Sanchez, and Jesus Lopez-
Corales. After the accident, Rafael disappeared, and he did not participate
in the ICA proceedings.

¶10           After the parties filed post-hearing memoranda, the ALJ
entered an award for compensable claims. He found that Rafael was the
injured claimants’ direct employer, and that Harte’s was the injured
claimants’ statutory, or special, employer. Regarding Harte’s, the ALJ
found:

       Harte’s Contracting Services entered into a contract with
       Teodulo Rafael Vasquez for framing work on the project. Per
       the testimony of Mr. Harte, part of the contract… precluded



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    HARTE/TRAVELERS v. VASQUEZ/SPECIAL FUND/RAMIREZ
                   Decision of the Court

       Mr. Vasquez from hiring subcontractors to complete the
       work. Mr. Harte intervened between Mr. Vasquez and his
       employees to resolve a compensation dispute. While Mr.
       Harte testified that he did not necessarily exercise control
       over the framers and Mr. Vasquez, I find there is sufficient
       evidence that Mr. Harte had the right to exercise control over the
       work of Mr. Vasquez. I also find the framing work is a part or
       process in the trade or business of Harte’s Contracting Services.

Harte’s requested administrative review, and the ALJ supplemented and
affirmed the award. Harte’s next brought this appeal.

III. DISCUSSION

¶11            Harte’s first argues that the ALJ committed legal error when
he concluded that Harte’s was the claimants’ statutory employer. To be a
statutory employer, the courts have found that two conditions must be met:
(1) the employer procuring the work to be done for him by a subcontractor
must retain supervision or control over the work; and (2) the work
entrusted to the subcontractor must be a part or process in the employer’s
regular trade or business. Hunt Bldg. Corp. v. Indus. Comm’n, 148 Ariz. 102,
105 (1986); A.R.S. § 23-902(B). The focus of the statutory employer analysis
is on the relationship between the party employing the injured worker and
the party that contracted with the injured worker’s employer. See Blasdell v.
Indus. Comm’n, 65 Ariz. 373, 376 (1947).

¶12            In determining whether the first condition of the statutory
employer relationship exists, courts have applied the traditional right to
control test that is used to determine whether an individual is an employee
or an independent contractor. Hunt, 148 Ariz. at 106. This test examines the
totality of the circumstances of the work and the various indicia of control
between the parties. See Reed v. Indus. Comm’n, 23 Ariz. App. 591, 593 (1975).
These include “the duration of the employment; the method of payment;
who furnishes necessary equipment; the right to hire and fire; who bears
responsibility for workman’s compensation insurance; the extent to which
the employer may exercise control over the details of the work; and whether
the work was performed in the usual and regular course of the employer’s
business.” Home Ins. Co. v. Indus. Comm’n, 123 Ariz. 348, 350 (1979).

¶13           In this case, we apply the “right to control” test to the
relationship between Harte’s and Rafael to determine whether Harte’s had
the right to exercise control over Rafael’s work. Pursuant to the framing
subcontract between Harte’s and Rafael, the duration of the framing work


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    HARTE/TRAVELERS v. VASQUEZ/SPECIAL FUND/RAMIREZ
                   Decision of the Court

was finite, and it was for an agreed upon lump sum without any
withholding. HCC provided the raw materials for the framing work.
Harte’s provided large equipment such as a generator and an office trailer
for all subcontractors at the site. Harte’s subcontract with Rafael provided:


SECTION 121 SPECIAL PROVISIONS (Including unit pricing if
applicable) Dumpster, Forklift, Crane for trusses and materials will be
provided by the Contractor. Other tools necessary to completion of the
contract are the sole responsibility of the Subcontractor.Rafael’s crew
provided their own safety equipment and hand tools.

¶14             Regarding the right to hire and fire, Harte’s hired Rafael for
the framing work and it fired him after the truss collapse. The
subcontractor agreement did not explicitly discuss the responsibility for
providing workers’ compensation insurance, but Ms. Sigrist testified that
all of Harte’s subcontractors were required to have workers’ compensation
insurance.

¶15            Arizona courts recognize that in the context of construction
contracts, the general contractor necessarily retains the right to exercise
general supervision over the entire building project including scheduling
the sequence of the work, ensuring safety of the job site and obtaining a
satisfactory end result. Pruett v. Precision Plumbing, 27 Ariz. App. 288, 291
(1976) (a general contractor’s “right to order the work stopped or resumed,
to inspect its progress or to receive reports, to make suggestions or
recommendations . . . or to prescribe alterations and deviations” does not
constitute control over the subcontractor’s work); see also Chesin Const. Co.
v. Epstein, 8 Ariz. App. 312, 315 (1968) (provisions in construction contracts
reserving the right to the general contractor to direct, order, instruct, or
supervise a subcontractor is not the type of control that negates a
subcontractor’s status as an independent contractor).

¶16              In their workers’ compensation treatise, Professors Larson
note that realities of the modern workplace have resulted in employers
subcontracting out portions of their businesses, causing the control test to
also take into consideration a relative-nature-of-the-work-test. See 5 Arthur
Larson & Lex K. Larson, Larson’s Workers’ Compensation Law § 62.01 at 62-2
to -4 (2018). For example, “realistically . . . plasterers, painters, [and]
electricians . . . almost invariably, by the inherent nature of their crafts, must
and do work with . . . [some] degree of independence.” Id. § 62.06[1][b] at
62-24 to -25.



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    HARTE/TRAVELERS v. VASQUEZ/SPECIAL FUND/RAMIREZ
                   Decision of the Court

¶17             In this case, Justin testified that he was not a framer, could not
perform framing work, and Harte’s did not have employees to do framing.
For that reason, he stated that his control over Rafael’s work was limited to
ensuring the work was “up to code,” the job site was safe, and the work
progressed in a timely manner. Justin’s testimony was consistent with that
of the injured workers testimony, i.e., Rafael was the framers’ boss, Justin
was Rafael’s boss, Justin did not tell the framers what to do, Justin walked
the job site, and Justin stayed in the office trailer. After examining the Home
Insurance Company indicia of control and considering the evidence in the
appellate record, that evidence does not demonstrate that Harte’s retained
any more control over Rafael’s work than was necessary to keep the work
moving safely forward and to obtain a satisfactory end result for HCC.

¶18           The second element of the statutory employer test is whether
framing work is a part or process in Harte’s regular trade or business. The
Arizona Supreme Court discussed this element in Young v. Environmental
Air Products, 136 Ariz. 158 (1983). The Young court recognized that an
activity must be “regular, ordinary or routine in the operation” of the
general contractor’s business. Id. at 164.

¶19         The court quoted with approval from Larson’s workers’
compensation treatise:

        When is the subcontracted work part of the regular business
       of the statutory employer? The statutory language lying
       behind this question varies somewhat. Some acts [including
       Arizona’s] speak of work which is “part of or process in” the
       employer’s trade or business …. But, with a surprising degree
       of harmony, the cases applying these assorted phrases agree
       upon the general rule of thumb that the statute covers all the
       situations in which work is accomplished which this
       employer, or employers in a similar business, would ordinarily
       do through employees….

                                    * * * *
       In addition to the test based on regularity or predictability of
       the activity, and on its relation to the way this employer got
       this kind of job done in the past, a helpful additional test is
       that which asks whether this employer is equipped normally
       to handle this task, both as to skilled manpower and as to
       tools.



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    HARTE/TRAVELERS v. VASQUEZ/SPECIAL FUND/RAMIREZ
                   Decision of the Court

Id. at 165 quoting 1C A. Larson, Workmen’s Compensation Law § 49.12 (1982)
(emphasis added).1

¶20            While framing is a necessary part of constructing a new
building, there is no evidence that Harte’s ever performed framing work
with its own employees or that it had the necessary expertise or equipment
to perform that work. Justin did testify that his crews “jumped in where we
could help, meaning . . . build a little reception desk for the kids, where the
kids check in - - things that we wanted to do for the church . . . .” The
evidence established that Harte’s subcontracted out all “craft” work.
Although the ALJ made a bare finding that framing was “a part or process
in the trade or business of Harte’s Contracting Services,” he did not make
specific findings that Harte’s maintained more than a general contractor’s
ordinary control over a project. Indeed, the appellate record does not
contain evidence to support such a finding.

¶21           For the foregoing reasons, we set aside the award and hold
that Harte’s was not the claimants’ statutory employer.




                       AMY M. WOOD • Clerk of the Court
                        FILED: AA




1The current citation for this section is 7 Arthur Larson & Lex K. Larson,
Larson’s Workers’ Compensation Law Ch. 70 at 70-1 (2018).


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