                    COURT OF APPEALS OF VIRGINIA


Present: Chief Judge Moon, Judge Baker and Senior Judge Cole
Argued at Richmond, Virginia


UNINSURED EMPLOYER'S FUND

v.   Record No. 2638-95-2

GEORGE BARNETT,
 WILLIAM A. HAWTHORNE,
 W.A. HAWTHORNE LOGGING, INC.,
 UPTON TIMBER, INC. AND
 AETNA CASUALTY & SURETY COMPANY              MEMORANDUM OPINION *
                                               BY MARVIN F. COLE
WILLIAM A. HAWTHORNE AND                          JULY 9, 1996
 W.A. HAWTHORNE LOGGING, INC.

v.   Record No.   2902-95-2

GEORGE BARNETT, UPTON TIMBER, INC.,
 AETNA CASUALTY & SURETY COMPANY AND
 UNINSURED EMPLOYER'S FUND


         FROM THE VIRGINIA WORKERS' COMPENSATION COMMISSION

           Christopher D. Eib, Assistant Attorney
           General (James S. Gilmore, III, Attorney
           General; Richard L. Walton, Jr., Senior
           Assistant Attorney General; John J. Beall,
           Jr., Senior Assistant Attorney General, on
           brief), for Uninsured Employer's Fund.

           Ruth Nathanson Carter (Charles F. Midkiff;
           Midkiff & Hiner, P.C., on brief), for William
           A. Hawthorne and W.A. Hawthorne Logging, Inc.

           F. Brawner Greer (John M. Oakey, Jr.;
           McGuire, Woods, Battle & Boothe, L.L.P., on
           brief), for Upton Timber, Inc. and Aetna
           Casualty & Surety Company.

           B. Mayes Marks, Jr. (B. Mayes Marks, Jr.,
           P.C., on brief), for George Barnett.


     *
      Pursuant to Code § 17-116.010 this opinion is not
designated for publication.
        The Uninsured Employer's Fund ("the Fund"), William A.

Hawthorne ("Hawthorne") and W.A. Hawthorne Logging, Inc.

("Hawthorne Logging") appeal a decision of the Workers'

Compensation Commission awarding compensation to George Barnett

("Barnett").    The Fund contends that the commission erred in

finding that Upton Timber, Inc. ("Upton") was not Barnett's

statutory employer on the ground that Upton was not in the same

trade, business, or occupation as Hawthorne and Hawthorne

Logging.    (Record No. 2638-95-2).    Hawthorne and Hawthorne

Logging contend that the commission erred in ruling that (1)

Barnett was their employee; and (2) Upton was not Barnett's

statutory employer.    Hawthorne also contends that the commission

erred in entering the award against him.     (Record No. 2902-95-2).

For the reasons set forth herein, we affirm the commission's

decision as to all issues raised by the parties, except we vacate

the award entered against Hawthorne and W.A. Hawthorne Logging,

Inc. and remand for the commission to determine whether the award

should be given against William A. Hawthorne as an individual or

W.A. Hawthorne Logging, Inc., a corporation.
                                 Facts

        On May 13, 1994, Hawthorne, Barnett and Barnett's co-workers

were cutting timber.    Hawthorne was operating the skidder.

Barnett sustained multiple injuries when he was struck by a tree

limb.    Hawthorne believed that the tree that hit Barnett was

charcoal wood.




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        At the time of the accident, Barnett had worked for

Hawthorne Logging for approximately one year.      He worked five

days per week, eight and one-half hours per day, averaging $250

per week.      Barnett stated that Hawthorne paid him every Friday in

cash.       He was paid $50 for each load of timber hauled.   At 6:30

a.m. every day, Barnett, along with his co-workers, arrived at

Hawthorne's home and rode together in Hawthorne's truck to the

work site.      Hawthorne provided the trucks, saws, and equipment

and acted as Barnett's boss, having the power to fire him.
        On February 25, 1994, Barnett and his co-workers, Steve

Matthews and James Taylor, signed a document acknowledging that

they were independent contractors and working under contract with

W.A. Hawthorne Logging, Inc., a Virginia corporation.         Hawthorne

Logging agreed to pay them for each load of wood they hauled.

According to the testimony of Barnett, he could not read the

document and no one read or explained it to him before he signed

it.   He further testified that Hawthorne told him to sign the

document for tax purposes and never mentioned the words

"independent contractor." 1

        After Barnett signed the February 25, 1994 document, the

work and conditions of the job he performed did not change.

Barnett still worked the same days and hours, used the same

transportation and equipment, was paid in the same manner, and
        1
      On February 18, 1994, Barnett also signed a document
containing the hand-written words, "We the undersigned are
working for ourselves."



                                     3
was still subject to being fired by Hawthorne.

     Matthews testified that in February 1994, he, Barnett, and

Taylor all agreed to work for Hawthorne as independent

contractors rather than employees.      He confirmed that Hawthorne

paid them each Friday, by the load, and they divided the money.

Matthews also stated that the manner in which he and the other

workers performed work for Hawthorne and got paid by Hawthorne

did not change after they signed the February 25, 1994 document.

The only difference was that they received one check, which was

cashed and divided among the men, rather than each of them

receiving an individual check.
     Taylor testified that before February 25, 1994, he worked as

Hawthorne's employee and, after that date, he worked as an

independent contractor.   He acknowledged that he used Hawthorne's

equipment on the job at all times.

     Hawthorne, president of W.A. Hawthorne Logging, Inc.,

testified that his corporation is in the business of cutting and

hauling timber and selling charcoal wood and pulp wood.

Hawthorne contended that he explained the February 25, 1994

document to Barnett before Barnett signed it.      Hawthorne stated

that he told Barnett that, as of that date, he and the other

workers were no longer employees, because Hawthorne could not

afford to pay for workers' compensation insurance, and they would

work as independent contractors.       Hawthorne testified that after

February 25, 1994, he paid the workers $50 or $60 per load,




                                   4
depending upon who hauled the load.   After February 25, 1994,

Hawthorne gave one check to Matthews or Taylor, which they

signed.    Hawthorne would then cash the check and give the money

to the workers to divide up.   After February 25, 1994,

Hawthorne's accountants reported Barnett's wages on a 1099 form.

     Hawthorne admitted that he appeared on the work site almost

every day to check on the workers.    He also admitted that he told

them what to do and corrected their mistakes.   Hawthorne used and

insured the same trucks and equipment both before and after

Barnett, Matthews, and Taylor signed the February 25, 1994

document.   Hawthorne paid for gas and necessary repairs for the

trucks and equipment used on the jobs performed by Hawthorne

Logging.    Hawthorne also admitted that, both before and after the

workers signed the February 25, 1994 document, he was under the

same agreement to pay them $50 or $60 per load.   Both before and

after the February 25, 1994 document was signed, Hawthorne

negotiated with Richard Short, owner of Upton, for contracts to

cut timber.   Both before and after the February 25, 1994 document

was signed, the workers, including Barnett, worked on job sites

contracted by Hawthorne with Upton, using Hawthorne's vehicles

and equipment.   Barnett, Taylor, Matthews, and two others worked

for Hawthorne before the February 25, 1994 document was signed.

     On the date of Barnett's accident, Hawthorne had contracted

with Upton to cut timber for Upton on a specific tract of land.

Hawthorne believed he got paid for the charcoal wood he cut and



                                  5
hauled that day, and he then in turn paid Upton.      The May 17,

1994 receipt covering loads of logs paid for by Upton to

Hawthorne or sold directly as charcoal wood by Hawthorne

reflected that, between May 11, 1994 and May 16, 1994, Hawthorne

sold nine loads of charcoal wood to Imperial Products, which paid

Hawthorne directly.    Barnett did not know of the existence of

Upton or its relationship with Hawthorne until his January 1995

deposition.
        Richard Short, a one-third owner and employee of Upton,

testified that he purchases standing timber for Upton.      Upton's

business consists of purchasing stands of timber and employing

logging companies to cut and haul the logs to mills.      In May

1994, Upton employed one secretary and two foresters.      Upton did

not employ any workers who cut or hauled timber, nor did Upton

own any equipment to perform such work.

        There were several ways Upton generated income as of May

1994.    First, it would buy and sell a tract of timber outright.

Second, Upton would enter into a stumpage agreement with a

logging company.    Such an agreement required that the logging

company buy the timber from Upton, which the logging company then

cut and sold directly to a mill.       Third, Upton would have an

agreement with the logging company for it to cut and haul logs

owned by Upton to a mill for which the mill paid Upton, who then

took a commission and paid the logging company the remainder.

        Upton never entered into a written contract with Hawthorne.




                                   6
At various times, Upton entered into all three payment

arrangements with Hawthorne.    A May 17, 1994 receipt reflected

money paid by Upton to Hawthorne for that week.   The May 17, 1994

receipt reflected that, between May 11, 1994 and May 16, 1994,

Hawthorne bought nine loads of wood from Upton, which Hawthorne

hauled to Imperial Products, and one load of wood from Upton,

which Hawthorne hauled to Chesapeake.   The mills paid Hawthorne

for these loads, and Hawthorne paid Upton for the logs he had cut

and delivered to these mills.   Hawthorne paid Upton for these

loads through deductions from the total amount Upton owed

Hawthorne for that week.   Short stated that three receipts, dated

May 13, 1994, each represented a load of charcoal wood hauled by

Hawthorne to Imperial Products on that date, for which Imperial

Products paid Hawthorne, and Hawthorne paid Upton.   Based upon

the description of the tree that hit Barnett, Short believed it

was intended for charcoal.   Therefore, he believed that the tree

would have been one purchased by Hawthorne from Upton and hauled

and sold by Hawthorne to Imperial Products, who paid Hawthorne.

Upton had no arrangement with Imperial Products at the time of

Barnett's injury.
     The deputy commissioner ruled that Barnett was an employee

of Hawthorne and Hawthorne Logging at the time of his May 13,

1994 accident.   He did not explain how Barnett could have been

employed by both William A. Hawthorne as an individual and W.A.

Hawthorne Logging, Inc. at the same time to do the same work for




                                  7
the same pay.    The deputy commissioner found that the February

25, 1994 agreement signed by Barnett was not controlling, where,

in this case, the manner in which Hawthorne controlled the work,

the manner in which the men were paid, and the manner in which

they performed their work did not change after they signed the

agreement.    The deputy commissioner also held that Upton was not

Barnett's statutory employer under Code § 65.2-302, finding that

Upton was not in the same trade, business, or occupation as

Hawthorne Logging.    He based his decision upon the evidence that

Upton owned no trucks or cutting equipment and did not have any

employees who cut or hauled timber to the mills.      The deputy

commissioner entered an award in favor of Barnett and against

Hawthorne and Hawthorne Logging.       The full commission affirmed

the deputy commissioner's decision as to all issues.
                I. Upton's Status as Statutory Employer
             "The test [for determining whether an owner
             or contractor is a statutory employer] is not
             one of whether the subcontractor's activity
             is useful, necessary, or even absolutely
             indispensable to the statutory employer's
             business, since, after all, this could be
             said of practically any repair, construction
             or transportation service. The test (except
             in cases where the work is obviously a
             subcontracted fraction of a main contract) is
             whether this indispensable activity is, in
             that business, normally carried on through
             employees rather than independent
             contractors."


Shell Oil Co. v. Leftwich, 212 Va. 715, 722, 187 S.E.2d 162, 167

(1972) (citation omitted).    The Shell Oil test has two prongs:
the "normal-work test" and the "subcontracted fraction test."



                                   8
Cinnamon v. International Business Machines Corp., 238 Va. 471,

476, 384 S.E.2d 618, 620 (1989).       The facts of this case did not

satisfy either of these tests.

     Upton did not have any employees who normally carried out

the type of work which caused Barnett's injury, i.e., the cutting

of standing charcoal wood trees.       In fact, Upton never had

employees who cut timber.   Upton did not normally cut and haul

timber through its employees.    This work, although necessary to

Upton's business, was done by independent contractors, such as

Hawthorne Logging.    Therefore, the evidence did not satisfy the

"normal-work test."
     Furthermore, because the undisputed facts showed that Upton

was not obligated by a main contract with an owner to complete a

whole project, the "subcontracted fraction test" did not apply.

No contracts existed between Upton and Imperial Products or any

other mill requiring Upton to cut timber and haul it to a

particular mill.   Most importantly, at the time of Barnett's

accident, Hawthorne Logging was not performing work for Upton.

Hawthorne Logging bought the charcoal trees from Upton pursuant

to the stumpage agreement, cut them, and hauled them to the mill.

The mill paid Hawthorne Logging directly for the cut wood.

Upton received no money from and had no relationship with these

mills.   Selling charcoal trees, such as the one that injured

Barnett, was Hawthorne Logging's business, not Upton's.      These

undisputed facts provide credible evidence to support the



                                   9
commission's decision that Upton was not Barnett's statutory

employer.

   II.     Barnett's Status as Employee or Independent Contractor

     "What constitutes an employee is a question of law; but

whether the facts bring a person within the law's designation, is

usually a question of fact."     Baker v. Nussman, 152 Va. 293, 298,

147 S.E. 246, 247 (1929).    On appellate review, the findings of

fact made by the commission will be upheld when supported by

credible evidence.     James v. Capitol Steel Constr. Co., 8 Va.

App. 512, 515, 382 S.E.2d 487, 488 (1989).

     Generally, an individual "'is an employee if he works for

wages or a salary and the person who hires him reserves the power

to fire him and the power to exercise control over the work to be

performed.    The power of control is the most significant indicium

of the employment relationship.'"      Behrensen v. Whitaker, 10 Va.

App. 364, 367, 392 S.E.2d 508, 509-10 (1990) (quoting Richmond

Newspapers, Inc. v. Gill, 224 Va. 92, 98, 294 S.E.2d 840, 843

(1982)).    The employer-employee relationship exists if the power

to control includes not only the result to be accomplished, but

also the means and methods by which the result is to be

accomplished.     Id. at 367, 392 S.E.2d at 510.

     The testimony of Barnett, Hawthorne and the other employees

provides ample credible evidence to support the commission's

finding that, notwithstanding the February 25, 1994 agreement,

Hawthorne Logging retained the right to control not only the




                                  10
result to be accomplished, but also the means and methods by

which the result was accomplished.   Hawthorne Logging negotiated

contracts for hauling the cut timber.   Hawthorne provided and

maintained the equipment and vehicles, transported the workers,

corrected their mistakes, regulated their hours, worked on the

job sites with them, paid them according to the number of loads

they hauled, and retained the right to fire them.   Accordingly,

the commission did not err in ruling that Barnett was an employee

and not an independent contractor.
                   III.   Hawthorne's Liability

     Finally, we consider whether the commission erred in

entering the award against both William A. Hawthorne individually

and W.A. Hawthorne Logging, Inc., a Virginia corporation.

Barnett's counsel advised the commission and other parties to the

proceeding by letter dated July 29, 1994, that William A.

Hawthorne was incorporated at the time of Barnett's injury, and

requested that the corporation be added as a party defendant.

This was done as requested.

     The parties did not develop the issue of the correct

employer to any great extent before the deputy commissioner.     The

deputy commissioner made an award against William A. Hawthorne

and W.A. Hawthorne Logging, Inc. without any finding of facts as

to the actual employer and without explanation.   Throughout the

hearing before the deputy commissioner, the employer was referred

to as William A. Hawthorne or W.A. Hawthorne Logging.   During



                                11
William A. Hawthorne's testimony, he referred to his actions with

the pronoun "I," making no differentiation between William A.

Hawthorne personally and William A. Hawthorne as president of the

corporation.   Because the deputy commissioner and counsel for the

parties made no effort to determine whether Hawthorne and other

witnesses were speaking of Hawthorne as individual owner of

Hawthorne Logging or in his capacity as president of W.A.

Hawthorne Logging, Inc., we are unable to make such a

determination from the record before us.     There is credible

evidence in the record to support both positions.
     The independent legal existence of a corporation is a basic

principle of corporate law and we cannot ignore this separate

existence except in extraordinary circumstances and then "only

when necessary to promote justice."    O'Hazza v. Exceutive Credit

Corp., 246 Va. 111, 115, 431 S.E.2d 318, 320 (1993).     "[O]ne who

seeks to [ignore] the corporate entity must show that the

shareholder sought to be held personally liable has controlled or

used the corporation to evade a personal obligation, to

perpetrate fraud or a crime, to commit an injustice, or to gain

an unfair advantage."   Id.   This requires a factual examination

of the circumstances surrounding the corporation and the acts in

question.   Id. at 115, 431 S.E.2d at 321.    Accordingly, we remand

this case for the commission to make a factual determination,

hearing additional evidence if necessary, to decide whether the

claimant, George Barnett, was an employee of William A. Hawthorne




                                 12
or W.A. Hawthorne Logging, Inc. on the date of the accident, May

13, 1994, and to enter an appropriate award in accordance with

its finding.

     For these reasons, we affirm the commission's decision

except upon the issue whether the award should be entered against

William A. Hawthorne or W.A. Hawthorne Logging, Inc.
                                        Affirmed in part,
                                        vacated and remanded
                                        in part.




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