An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Proced ure.

NO. COA02-1741


Filed: 6 April 2004


v .                         Iredell County
                            No. 01 CVS 1423

    Appeal by plaintiff from order dated 20 August 2002 by Judge Christopher M. Collier in Superior Court, Iredell County. Heard in the Court of Appeals 9 October 2003.

    Christopher J. Small for plaintiff-appellant.

    Orbock Bowden Ruark & Dillard, PC, by Edwin W. Bowden, for defendant-appellee.

    McGEE, Judge.

    Brown and Walker Company (defendant) is a heating and air conditioning company that provides installation, service and repair and is owned and operated by Tony Brown (Brown) with its sole office in Iredell County, North Carolina. Defendant purchased a workers' compensation insurance policy issued by Cincinnati Insurance Company (plaintiff). Plaintiff initiated an audit of defendant in January 1999 regarding the status of all alleged subcontractors who had performed work for defendant from 30 January 1998 through 26 January 1999.
    Based on that audit, plaintiff determined defendant had not paid sufficient premiums for those subcontractors hired bydefendant during that time period, and plaintiff demanded defendant pay an additional premium to cover individuals and businesses that defendant had stated were subcontractors. Plaintiff issued a premium adjustment invoice to defendant on 22 March 2000 for $22,689.00. This amounted to an increase of $9,862.00 for the policy term, 30 January 1998 through 26 January 1999, and an increase of $12,827.00 for the policy term, 11 February 1999 through 9 July 1999.
    Plaintiff contended that the twenty-two individuals and businesses alleged to be subcontractors by defendant were actually defendant's employees, for whom plaintiff was providing coverage during the time periods subject to the audit.   (See footnote 1)  Plaintiff admits in its brief that eight of the twenty-two listed in the audit were in fact subcontractors, who required no coverage, and according to plaintiff, they were excluded from the premium balance due at the close of the audit. Plaintiff maintained that the remaining individuals and businesses were subject to defendant's supervision and were therefore defendant's employees.
    Plaintiff filed an unverified complaint against defendant to recover unpaid workers' compensation insurance premiums. Both plaintiff and defendant filed motions for summary judgment stating that there was no genuine issue of material fact in dispute. Thetrial court granted defendant's motion for summary judgment on 20 August 2002. Plaintiff appeals.
    In its sole assignment of error, plaintiff argues the trial court erred in granting summary judgment in favor of defendant. Plaintiff contends that for purposes of determining the premium for workers' compensation coverage, there was a genuine issue of material fact as to whether certain individuals and businesses were "independent contractors" or defendant's employees.
    A motion for summary judgment may be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen. Stat. § 1A-1, Rule 56 (2003). In considering a motion, the trial court is to consider all evidence in the light most favorable to the nonmovant. Huntley v. Howard Lisk Co., 154 N.C. App. 698, 702, 573 S.E.2d 233, 236 (2002), disc. review denied, 357 N.C. 62, 579 S.E.2d 389 (2003). In order to succeed on a motion for summary judgment,
        the [movant] must show either that: (1) an essential element of the plaintiff's claim is nonexistent; or (2) the plaintiff is unable to produce evidence that supports an essential element of his claim; or, (3) the plaintiff cannot overcome affirmative defenses raised against him.

Culler v. Hamlett, 148 N.C. App. 389, 391, 559 S.E.2d 192, 194 (2002).
    Once a movant has forecast evidence which tends to establisha right to judgment as a matter of law, the adverse party must present a forecast of evidence which tends to support its claim for relief. Best v. Perry, 41 N.C. App. 107, 110, 254 S.E.2d 281, 284 (1979). N.C.G.S. § 1A-1, Rule 56 provides that
        [w]hen a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.
    In the case before us, plaintiff argues that there is a material issue of fact as to whether certain individuals and businesses were "independent contractors" or employees of defendant for purposes of determining the insurance premium owed. This classification is essential to plaintiff's claim for relief.
    The classification of an individual or business as an independent contractor or as an employee is a mixed question of fact and law. Rhoney v. Fele, 134 N.C. App. 614, 616, 518 S.E.2d 536, 538 (1999), disc. review denied, 351 N.C. 360, 542 S.E.2d 217 (2000). Where a party is an independent contractor there is no employee-employer relationship and the Workers' Compensation Act will not be applicable. Doud v. K & G Janitorial Services, 69 N.C. App. 205, 211, 316 S.E.2d 664, 669, disc. review denied, 312 N.C. 492, 322 S.E.2d 554 (1984). "Whether one employed to perform specified work for another is to be regarded as an independent contractor or as an employee within the meaning of the Act is determined by the application of ordinary common law tests." Youngblood v. North State Ford Truck Sales, 321 N.C. 380, 383, 364 S.E.2d 433, 437 (1988).
    At common law, an independent contractor is "one who exercises an independent employment and contracts to do certain work according to his own judgment and method, without being subject to his employer except as to the result of his work." Id. at 384, 364 S.E.2d at 437. Our Courts have generally recognized eight factors, with no single one being determinative, which indicate independent contractor status:
        The person employed (a) is engaged in an independent business, calling, or occupation; (b) is to have the independent use of his special skill, knowledge, or training in the execution of the work; (c) is doing a specified piece of work at a fixed price or for a lump sum or upon a quantitative basis; (d) is not subject to discharge because he adopts one method of doing the work rather than another; (e) is not in the regular employ of the other contracting party; (f) is free to use such assistants as he may think proper; (g) has full control over such assistants; and (h) selects his own time.

McCown v. Hines, 140 N.C. App. 440, 443, 537 S.E.2d 242, 244 (2000), aff'd, 353 N.C. 683, 549 S.E.2d 175 (2001). "The vital test is to be found in the fact that the employer has or has not retained the right of control or superintendence over the contractor or employee as to details [of how the work is to be performed]." Hayes v. Elon College, 224 N.C. 11, 15, 29 S.E.2d 137, 140 (1944).
    A subcontractor is defined as "[o]ne who is awarded a portion of an existing contract by a contractor . . . . For example, a contractor who builds houses typically retains subcontractors toperform specialty work such as installing plumbing [and] laying carpet[.]" Black's Law Dictionary 1437 (7th ed. 1999). North Carolina's Workers' Compensation Act addresses the status of the employees of a subcontractor. Specifically, N.C. Gen. Stat. § 97- 19 (2003) provides that:
        Any principal contractor, intermediate contractor, or subcontractor who shall sublet any contract for the performance of any work without requiring from such subcontractor or obtaining from the Industrial Commission a certificate . . . stating that such subcontractor has complied with G.S. 97-93 . . . shall be liable . . . to the same extent as such subcontractor . . . for the payment of compensation and other benefits . . . on account of the injury or death of any employee of such subcontractor due to an accident arising out of and in course of the performance of the work covered by such subcontract.

The statute protects the employees of the subcontractor and not the subcontractor himself. N.C.G.S. § 97-19. Thus, an employer is not required to provide workers' compensation coverage to a subcontractor he has hired who has no employees. In the present case, the distinction as to whether the individuals and businesses at issue are independent contractors, subcontractors with employees, or employees is at the heart of plaintiff's claim.
    Plaintiff's complaint and affidavit summarily contend that defendant owes plaintiff $22,689.00 for unpaid premiums for workers' compensation insurance issued by plaintiff to defendant. Neither plaintiff's complaint, affidavit, nor its motion for summary judgment states how the premiums owed were calculated. In support of its allegation, and as permitted by N.C. Gen. Stat. §1A-1, Rule 33(c) (2003), plaintiff submitted a copy of the insurance policy and the audit report in lieu of answering defendant's interrogatory.
    In the audit report, the auditor noted:
        I questioned the insured to determine control and supervision of these subs. Insured informed me that all the subs were operating under his HVAC license and that the contract required that the job is completed at a time determined by the insured, and in a manner determined by the insured. They worked exclusively for the insured and [were] supervised on some jobs by the insured. The insured visited during and upon completion. All equipment was purchased by the insured. All payments to subs were for labor. Included all subs in the audit.

Thereafter, plaintiff admitted that the auditor made findings of "subcontractor" classification as to eight of the entities initially determined by the auditor to be employees. Among those eight originally included in the audit were a pawn shop from which defendant purchased tools and a distributor of heating and air conditioning units from whom defendant purchased equipment. According to plaintiff, these eight individuals and businesses were excluded from the calculation of the premium. Thus, there remained fourteen entities that plaintiff maintained were employees for which coverage was provided without a premium payment by defendant to plaintiff. Defendant submitted subcontractor information forms to plaintiff stipulating that two individuals listed were in fact employees and presented no argument as to the classification of a third, thus leaving the classification of eleven at issue.
    Defendant submitted an affidavit signed by Brown on 20 May2002 in support of its motion for summary judgment. In that affidavit, defendant accounted for the scope of work completed by each of the remaining eleven individuals and businesses at issue. In his affidavit, Brown averred that each was an "independent contractor" who generally worked under minimal supervision, set their own hours, supplied their own tools and transportation, and were paid a fixed amount. The subcontractor information forms submitted by defendant to plaintiff were attached to a second affidavit signed by Brown. In these forms, Brown detailed the work provided by these individuals and businesses and asserted that each was a "subcontractor". After reviewing both affidavits and all accompanying documents, we are unable to discern whether these businesses and individuals were employees, independent contractors, or subcontractors with employees.
    Furthermore, Brown stipulated in his first affidavit that none of these individuals or businesses had any employees; however, later in the same affidavit, Brown stated that defendant had no authority to "hire or fire any of the above independent contractors' employees." Thus, we cannot determine whether these individuals and businesses had employees which would trigger the protections of N.C.G.S. § 97.19.
    If the disputed individuals and businesses were independent contractors, then defendant was not required to provide workers' compensation coverage. However, under N.C.G.S. § 97.19, defendant may have been required to provide workers' compensation coverage for employees of subcontractors if defendant failed to obtain thenecessary certificates of coverage from the purported subcontractors.
    After considering all evidence in the light most favorable to plaintiff, the nonmovant, we conclude that defendant failed to meet its initial burden of establishing that the contested individuals and businesses were not subject to the workers' compensation insurance policy maintained by plaintiff. See N.C.G.S. § 1A-1, Rule 56. Therefore, there is a genuine issue of material fact as to the classification of these individuals and businesses, which determination is essential to plaintiff's claim for relief. The trial court erred in granting defendant's motion for summary judgment. It is incumbent on the trial court to make a determination as to the status of each of the individuals and businesses at issue.
    Reversed and remanded.
Judges HUNTER and CALABRIA concur.
    Report per Rule 30(e).

Footnote: 1
    Plaintiff's audit report lists twenty-eight individuals and businesses as alleged subcontractors. Several parties are listed more than once, first individually and then later under their business name. After carefully reviewing the report and other documents, we discern for purposes of appellate review that there are twenty-two individuals and businesses at issue.

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