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Kang v. Mullins

Supreme Court of Alaska

May 11, 2018

YONG KANG, d/b/a LEE'S MASSAGE, Appellant,

          Appeal from the Alaska Workers' Compensation Appeals Commission Nos. 15-023/16-001

          J. John Franich, Franich Law Office, LLC, Fairbanks, for Appellant.

          No appearance by Appellee Alexander Mullins. Notice of nonparticipation filed by Siobhan Mclntyre, Assistant Attorney General, Anchorage, and Jahna Lindemuth, Attorney General, Juneau, for Appellee State of Alaska, Workers' Compensation Benefits Guaranty Fund.

          Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and Carney, Justices.



         A woman who runs a business in the home she rents from her son asked a neighbor for help with major home repairs in exchange for a used pickup truck. The neighbor injured his wrist while working on the house. A few days later the two had a dispute and terminated their arrangement, the woman paying her neighbor $500 for his work.

         The neighbor later sought medical treatment for his wrist; he also filed a report of injury and a workers' compensation claim with the Alaska Workers' Compensation Board. The woman denied liability on several grounds, but the Board decided, after a hearing, that the woman was her neighbor's employer for purposes of the Alaska Workers' Compensation Act. The woman appealed to the Alaska Workers' Compensation Appeals Commission, which affirmed the Board's decisions. We hold, however, that the evidence did not support a finding that the woman was her neighbor's employer, and we therefore reverse the Commission's decision.


         A. Factual Background

         Yong Kang lived in North Pole and rented a house from her son Benjamin. She once owned the house, but she sold it to Benjamin about nine months before the events underlying this dispute, because, as she explained, she was getting old and did not know how much longer she would be around. Kang lived in the house with her business partner, Chong Sik Kim. The two operated a massage business in the house called Lee's Massage, and both had business licenses under that name.

         Alexander Mullins lived nearby. He met Kang when he bought his house in 2004, and the two of them became friends. Mullins estimated that in the 10 or 11 years preceding this dispute he had helped Kang with work on the house about 15 times. He testified that she had always taken care of him, and he frequently stopped by her house to check on her on the way to or from his mailbox. In early 2015, when Mullins was retrieving his mail, Kang approached him and asked if he could help repair her roof. After some discussion, Mullins agreed.

         The repair job began in May, when Mullins arranged for several acquaintances to help tear off the old roof. Mullins himself had a full-time job as a small engine mechanic, which continued throughout the time he worked on the house. Kang paid all the workers directly. At some point it became apparent that the roof was not the only problem with the house; it also needed to be leveled, and Mullins agreed to do that work too. According to Mullins, he injured his wrist during the leveling while using a hydraulic jack, though he did not immediately tell Kang about the injury.

         Soon afterwards, the two had a dispute about a used pickup truck that, according to Mullins, Kang had promised him as part of the payment for his work. The parties ended their working relationship with an agreement signed on May 17, 2015, by which Mullins accepted $500 "for all services & work on the roof of the massage parlor." This was the end of Mullins's participation in the repair project.

         A few weeks later, on June 1, 2015, Mullins went to the emergency room complaining of pain in his wrist. He filed a report of injury with the Board the following day reporting the date of injury as May 19, 2015, and naming "Lee's Oriental Massage" as his employer. Lee's Massage controverted benefits, denying that Mullins was its "employee" as that term is defined in the Alaska Workers' Compensation Act. It also contended that it was not an "employer" as defined in the Act.

         B. Board And Commission Proceedings

         Because neither Kang nor Lee's Massage had workers' compensation coverage, [1] the Workers' Compensation Benefits Guaranty Fund became a party to the claim. The Board held a hearing in late August 2015. Mullins represented himself; Kang was represented by counsel; and the Fund's adjuster represented the Fund and cross-examined some witnesses.

         There was conflicting evidence about how the arrangement for Mullins's work came about, who controlled the work and the hiring, who provided tools, how the injury happened, and what provoked the dispute that ended Mullins's work. Mullins described the work as "doing [Kang] a favor as a friend trying to help her out."[2] When the Board chair asked him why he thought he was an employee of Lee's Massage, he answered, "Well, if... I came down and asked you to help me build a garage, ... I guess that you would be my employee." He added, "[E]ven if I only hired you for the day, I'm still your boss for the day, period." But on cross-examination he disavowed an employment relationship with Kang, saying that, both at the time of the hearing and when the parties first discussed the job, he did not "identify" himself as an employee and adding, "I never signed no paperwork from [Kang]. I never filled out an application for her. I never filled out a W-2 [sic] for her."

         The Board decided first that Yong Kang d/b/a Lee's Massage had entered into an employment contract with Mullins. It then applied its regulatory "nature of the work" test[3] to the facts and decided that Mullins was not an independent contractor but an employee of Lee's Massage, though characterizing this decision as "a relatively close call." The Board concluded that Mullins's injury arose out of and in the course of his employment with Lee's Massage.[4] In what it labeled an interlocutory order, the Board required "Yong Kang d/b/a Lee's Massage ... to pay directly to Claimant and his medical providers any and all benefits to which he is currently entitled under the Act unless and until Lee's controverts his right to benefits for reasons other than those addressed in this decision and order." It reserved jurisdiction "to resolve any disputes over specific benefits" but did not order that any specific benefits be paid.

         Lee's Massage filed an appeal with the Commission in September but did not immediately seek a stay.[5] The Commission, seeing that the Board's order purported to be interlocutory, issued a short decision determining that the Board decision was in fact final and inviting Mullins or the Fund to seek dismissal of the appeal if either wanted to. Neither did.

         The Board held a second hearing on December 3 after Mullins complained that Lee's Massage had not paid him or his medical providers. The Board issued a supplemental order declaring Lee's Massage in default of its order only with respect to temporary total disability (TTD) benefits because Mullins had not submitted his medical bills correctly. Lee's Massage filed a second notice of appeal and a second motion for a stay, and the Commission consolidated the cases and issued a partial stay. The Fund paid TTD benefits to Mullins and authorized some medical care as well. The Fund participated in the Commission appeal but only briefed issues related to the supplemental order.

         Before the Commission, Lee's Massage contended that Mullins was not working for Kang or Lee's Massage "in connection with a business or industry" as that phrase is used in the Act, [6] focusing on a distinction we have made - in reliance on Larson's treatise - between "productive" and "consumptive" activities.[7] Its argument related to the default order was that Lee's Massage was not Mullins's employer. Mullins did not file a brief.

         The Commission affirmed the Board's decision. It discussed in detail one of the cases Lee's Massage relied on, Kroll v. Reeser, [8] noting KrolFs factual similarity to this case: both involving construction work on a residence that was used to generate income. The Commission interpreted Kroll to mean that "when an individual is injured while performing work under such a contract, whether the contract should be considered to be 'in connection with a business or industry' depends on the totality of the circumstances, and not merely on the degree to which the structure is used for business purposes." The Commission looked at the way "maintenance work on business premises" is discussed in Larson's treatise and decided that "the activities at issue in this case go well beyond routine maintenance or repair." It observed that the project "might be characterized as a real estate improvement project rather than as maintenance or repair ancillary to Ms. Kang's massage parlor business." It noted the lack of evidence "that the roof leaks that were the genesis of the project affected the business portion of the premises at all, much less that Ms. Kang had a business purpose for undertaking a major renovation of the structure."

         The Commission nonetheless concluded that the Board was correct in determining that Mullins was an employee of Kang and Lee's Massage. The Commission noted Lee's Massage's argument that "[i]f anyone employed Mullins in connection with a business or industry (rental property), it was Benjamin Kang, not Yong Kang." But the Commission did not consider this relevant to the question on appeal, because it was not being asked to choose between Kang and her son as Mullins's employer. The Commission characterized "the issue [as] whether the employment was in connection with a business or industry." The Commission recognized the anomaly in this case that "the putative employer, Yong Kang, hired an individual to perform major construction work on a structure she did not own and which she apparently had no legal obligation to maintain." It construed the evidence as showing that Kang was acting in some type of agency relationship on behalf of her son and decided that because the son was aware Mullins was going to work on the house and "acquiesced in" that plan, the work was done in connection with a business or industry. It then affirmed the Board's decision that Yong Kang d/b/a/ Lee's Massage was Mullins's employer under the Act.

         Kang appeals. Neither Mullins nor the Fund participated in this appeal.


         In an appeal from the Alaska Workers' Compensation Appeals Commission, we review the Commission's decision rather than the Board's.[9] "Whether [a claimant] is appropriately considered an 'employee' for purposes of the workers' compensation statute is a mixed question of law and fact."[10] "We independently review the Commission's conclusion that substantial evidence in the record supports the Board's factual findings by independently reviewing the record and the Board's findings."[11] We review de novo "the ...

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