United States District Court, D. North Dakota, Northwestern Division
Dawn Vail, individually and as Trustee for North Dakota Workforce Safety & Insurance, Plaintiff,
S/L Services, Inc., Defendant.
ORDER DENYING MOTION TO DISMISS
CHARLES S. MILLER, Jr., Magistrate Judge.
Before the court is a "Motion to Dismiss" filed by defendant S/L Services, Inc. ("S/L Services"). Defendant argues this action must be dismissed because plaintiff Dawn Vail's ("Vail") exclusive remedy against it for her work-related injury was recovery from North Dakota Workforce Safety & Insurance ("WSI"), a state-operated workers' compensation fund. For the reasons set forth below, the motion is denied.
The following facts are either uncontested or stated most favorably for Vail. On January 23, 2014, Vail, individually and as trustee for WSI, initiated this action by filing a complaint alleging one count of negligence against defendant S/L Services. In support of her claim, Vail alleges that she was injured while working for S/L Services, that her injuries were the result of the negligence of an S/L Services employee, and that S/L Services is vicariously liable for its employee's negligence.
Before initiating this action, Vail was awarded WSI benefits for the injury at issue. Vail alleges that she is entitled to pursue the dual remedies of collecting WSI benefits and bringing a civil action because S/L Services failed to comply with the relevant statutes governing WSI coverage.
Before the specific facts of this case are addressed, some discussion of the calculation of WSI premiums provides helpful background. Employers required to maintain WSI coverage must pay an annual premium. See N.D.C.C. § 65-04-04. The amount of an employer's premium is based on the classification of its employees ( i.e., the type of work its employees perform) and its payroll information. Id . According to information published on WSI's website and submitted with the parties' briefing, an employer applying for a new WSI account is required to provide its employee classifications and the estimated value of its payroll for the next 12-month period. (Docket No. 9-7, p. 3; see Docket No. 9-2, p. 3). When the new account is established, WSI initially bills the employer for a premium amount based on the estimates provided in the application. (Docket No. 9-7, p. 3; see Docket No. 9-3). At the end of that premium period and each subsequent premium period, the employer is required to report its actual payroll for the 12-month period to WSI in an "Employer Payroll Report." (Docket No. 9-7, p. 3; see Docket No. 9-4). WSI then adjusts the employer's premium by billing for an additional amount if the actual payroll was more than the estimated payroll and issuing a credit if the actual payroll was less than the estimated payroll. (Docket No. 9-7, p. 3; see Docket No. 9-5).
Vail was hired by S/L Services and was injured during the first period that S/L Services had WSI coverage. She was hired and her injury occurred after S/L Services applied for WSI coverage and paid its initial premium and before S/L Services submitted its first 12-month "Employer Payroll Report."
S/L Services submitted its "Application for Insurance" to WSI on August 23, 2012. (Docket No. 9-2). In the application, S/L Services estimated that in the next 12 months, it would have 42 employees and total taxable wages of $976, 500.00. (Id. at p. 3). On August 28, 2012, WSI issued S/L Services a "Premium Billing Statement" charging an estimated premium for the period from August 23, 2012 to August 31, 2013. (Docket No. 9-3, p. 2). S/L Services paid the premium by check dated September 4, 2012. (Id. at p. 3). On September 10, 2012, WSI issued S/L Services a "Certificate of Premium Payment" with an expiration date of November 14, 2013. (Docket No. 9-6).
On September 22, 2012, S/L Services hired Vail as a welder's helper. (Docket No. 15-1, p. 5). S/L Services intended to treat Vail as an independent contractor rather than an S/L Services employee. (Id.; Docket No. 15-9). Vail did not consider herself an independent contractor. (Docket No. 15-2, ¶¶ 3, 6). On May 25, 2013, Vail's thumb was crushed while she was working for S/L Services at a construction site near Watford City, North Dakota. (Docket Nos. 1, ¶ 5; 15-2, ¶ 1). Vail alleges that the injury occurred when an S/L Services employee using a forklift to carry a piece of pipe dropped the pipe on Vail's thumb. (Id.).
On June 5, 2013, a "First Report of Injury" identifying Vail as the worker and S/L Services as her employer was submitted to WSI. (Docket No. 15-8). S/L Services' office manager, Whitney Becker, filled out the portion of the report to be completed by the employer. (Id.). In response to the statement "If you question this claim, state reason, " Becker wrote, "Dawn Vail is a subcontractor not an S/L Services, Inc. employee." (Id.).
WSI determined that Vail was an S/L Services employee and awarded her WSI benefits. (Docket No. 15-4). In a "Notice of Decision Establishing Employee Status and Accepting Claim and Awarding Benefits, " dated July 10, 2013, WSI advised that it "ha[d] determined S L Services Inc is an employer of Dawn Vail and any similarly situated workers and awarded benefits." (Id.). The notice further stated that "[p]ursuant to North Dakota Century Code § 65-04-33 S L Services Inc... is ordered to submit all wages for all employees including Dawn Vail, and any similarly situated employees, to WSI for the previous six (6) years" and that S/L Services could request reconsideration of the decision within 30 days. (Id.). S/L Services apparently did seek review of WSI's decision. The manner in and extent to which the decision was reviewed is unclear from the record. However, nothing before the court indicates that WSI's decision was reversed or that review of the decision is pending.
On August 22, 2013, S/L Services submitted its "Employer Payroll Report" for the period from August 23, 2012 to August 31, 2013. (Docket No. 9-4). To complete the report, S/L Services was required to provide the name, classification, and payroll information of each of its employees. (Id.). S/L Services did not list Vail as an employee. (Id. at p. 6). On September 6, 2013, WSI issued S/L Services a "Premium Billing Statement" that included an additional charge of $4, 100.49 for the period from August 23, 2012 to August 31, 2013. (Docket No. 9-5). S/L Services paid the premium by check dated September 12, 2013. (Docket No. 9-5, p. 3).
On April 1, 2014, WSI audited S/L Services for the period from August 23, 2012 through August 31, 2013, i.e., the period of Vail's injury. (Docket No. 15-6). WSI's "Audit Remarks and Message" discussing the audit stated, in part:
The business issued 24 1099s during the audited period totaling $665, 189.38. They were issued for the services of welding. The 1099s were reviewed closely as per the notes on the account, an individual reported a claim under this account and was claiming to be an employee while the employer stated they were a 1099 individual. After much review with these 1099s, it was determined we will be picking up the individuals that do not have a contract on file with the employer, are not currently listed as employees of the company, and do not have a business name. Many detailed questions were asked to the employer to get a better understanding of these individuals and the burden of proof was not met to treat them as independent. For this reason, these individuals were picked up as employees. See Payroll Cap Worksheet None to 6301.
(Docket No. 15-6, p. 5). The payroll cap worksheet included with the audit materials lists the name, class, and wages of seven individuals who were picked up by WSI. (Id. at p. 4). Vail is not on that list. (Id.). On June 20, 2014, WSI sent S/L Services a "Notice of Decision" advising that, as a result of the audit, S/L Services would be charged an additional premium for the audit period and for the period from September 1, 2013 to August 31, 2014. (Docket No. 18-2). It is unclear from the record whether S/L Services was billed for or paid a WSI premium that covered the wages it paid Vail during the period of her injury.
A. Summary judgment standards
S/L Services' "Motion to Dismiss" relies on matters outside the pleadings and will be treated as a motion for summary judgment. See Fed. R. Civ. P 12(d) ("If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56."). The standards governing summary judgment are well known to the court and need not be repeated here. See, e.g, Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Fed R. Civ. P. 56. North Dakota substantive law governs this diversity action. Commercial Res. Grp., LLC v. J.M. Smucker Co., 753 F.3d 790, 793 (8th Cir. 2014).
B. Exception to the general rule that WSI benefits are an exclusive remedy
It is well established that the North Dakota workers' compensation scheme generally makes WSI compensation an injured employee's exclusive remedy against an employer. E.g., Richard v. Washburn Pub. Sch., 2011 ND 240, ¶ 13, 809 N.W.2d 288 (quoting Mitchell v. Sanborn, 536 N.W.2d 678, 683 (N.D. 1995)) ("The Workforce Safety and Insurance Act generally provides the exclusive remedy for an employee who suffers a compensable injury.'"); Zimmerman by Zimmerman v. Valdak Corp., 1997 ND 203, ¶ 9 n.1, 570 N.W.2d 204 (identifying four WSI "exclusive remedy" provisions at N.D.C.C. §§ 65-01-01, 65-01-08, 65-04-28, and 65-05-06).
An exception to this general rule is codified in the Workforce Safety and Insurance Act at Chapter 65-09 entitled "Proceedings by Injured Employee Against Uninsured Employer." The two provisions in that chapter provide, in relevant part:
§ 65-09-01. Liability of uninsured employer for injury to employees
1. Any employer subject to this title who is in violation of subsection 1 or 2 of section 65-04-33 or declared uninsured pursuant to section 65-04-22 is not protected by the immunity from civil liability granted to employers under this title for injuries to that employer's employees for damages suffered by reason of injuries sustained in the course of employment....
§ 65-09-02. Application for compensation-Common-law defenses not available- Fund subrogated to recovery-Hearing-Time for filing
An employee whose employer is in violation of section 65-04-33, who has been injured in the course of employment... may file an application with the organization for an award of compensation under this title and in addition may maintain a civil action against the employer for damages resulting from the injury.... In the action, the employer may not assert the common-law defenses of:
1. The fellow servant rule.
2. Assumption of risk.
3. Contributory negligence.
The organization is subrogated to the recovery made in the action against the ...