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Hannigan v. Goldfarb

Decided: December 16, 1958.


Schettino, Hall and Gaulkin. The opinion of the court was delivered by Gaulkin, J.A.D.


This is a workmen's compensation case. In the Division of Workmen's Compensation petitioner was awarded compensation for the death of her son, Donald Hannigan, who was killed while driving one of respondent's taxicabs. On appeal the County Court reversed, on the ground that the decedent was not an employee of respondent. The petitioner now appeals from the judgment of the County Court.

Respondent Goldfarb owns five taxicabs and "manages" five others belonging to his mother. Although the membership is technically in the name of his mother, for the purposes of this case we may consider him a member of the "Twentieth Century Taxi Cab Association," a New Jersey non-pecuniary profit corporation organized in 1938 (hereafter called the Association) about which more will be said later. Goldfarb's ten cabs were painted the same color and bore the same "20th Century Cab" insignia as the cabs of all other members of the Association.

Goldfarb insists he does not operate taxicabs, but only rents them. Petitioner admits the decedent (hereafter called Hannigan) agreed to pay Goldfarb $8 for every 12-hour shift during which he operated one of Goldfarb's cabs; that he kept all his fares and tips and did not account to Goldfarb for them; and that he paid for the gas and oil used during the time he operated the cab. (Hereafter, for brevity, we will call this the "three-phase arrangement.") Goldfarb

contends that this arrangement proves conclusively that, regardless of any other incidents of the relationship between Hannigan and Goldfarb, this was a mere rental and Hannigan was not an employee.

This appears to be a case of first impression in New Jersey. In other jurisdictions there is a split of authority on whether a driver under such an arrangement is an employee. See Annotations, 152 A.L.R. 520, 522 and 10 A.L.R. 2 d 369; 1 Larson, Workmen's Compensation Law , § 46.00 et seq. In some cases it has been held that the taxi driver may be the employee of the owner even under a "three-phase arrangement." Salt Lake Transportation Co. v. Board of Review , 5 Utah 2 d 87, 296 P. 2 d 983 (Sup. Ct. 1956); Diamond Cab Co. v. Adams , 91 Ga. App. 220, 85 S.E. 2 d 451 (Ct. App. 1954); Redwine v. Wilkes , 83 Ga. App. 645, 64 S.E. 2 d 101 (Ct. App. 1951); Jones v. Goodson , 121 F.2d 176 (10 Cir. 1941); Kaus v. Unemployment C.C. , 230 Iowa 860, 299 N.W. 415 (Sup. Ct. 1941). See also Kaus v. Huston , 35 F. Supp. 327 (D.C.N.D. Iowa 1940), affirmed on other grounds 120 F.2d 183 (8 Cir. 1941); Maher v. Commander Taxi Corp. , 227 App. Div. 832, 237 N.Y.S. 831 (App. Div. 1929). In other cases (sometimes in the same jurisdiction) the courts have held to the contrary. Fidelity & Casualty Co. of N.Y. v. Windham , 209 Ga. 592, 74 S.E. 2 d 835 (Sup. Ct. 1953); Party Cab Co. v. U.S. , 172 F.2d 87, 10 A.L.R. 2 d 358 (7 Cir. 1949), certiorari denied 338 U.S. 818, 70 S. Ct. 62, 94 L. Ed. 496 (1949); New Deal Cab Co. v. Fahs , 174 F.2d 318 (5 Cir. 1949), certiorari denied 338 U.S. 818, 70 S. Ct. 62, 94 L. Ed. 496 (1949); U.S. v. Davis , 154 F.2d 314 (D.C. Cir. 1946); Magruder v. Yellow Cab Co. , 141 F.2d 324, 152 A.L.R. 516 (4 Cir. 1944); Coviello v. Industrial Comm. , 129 Ohio St. 589, 196 N.E. 661 (Sup. Ct. 1935). See also Rockefeller v. Industrial Comm. , 58 Utah 124, 197 P. 1038 (Sup. Ct. 1921).

Most of the above cited cases arose not under workmen's compensation acts but under social security and unemployment compensation acts. Nonetheless, for present purposes

their reasoning is apposite. Cf., De Monaco v. Renton , 18 N.J. 352, 357 (1955).

It is true that (as the annotation in 10 A.L.R. 2 d says, at p. 369), "* * * it must be pointed out that varying facts account in no small measure for the contrary results reached." One of those "facts" is the difference in the definitions of employee contained in the particular statutes involved. An illuminating illustration of the effect of the definition in a statute is given in detail in the Party Cab Co. case, supra , at page 89 of 172 F.2d. There the court pointed out that in 1935, when the federal Social Security Act was enacted, the term "employee" was not defined. The federal courts interpreted it broadly, beyond its strict common-law meaning, with reference to the purpose of the law to give protection to the alleged employee where the economic facts of the relationship seemed to the court to require such protection. Congress was not happy with that result, so in 1948 the law was amended, over the President's veto, to expressly provide that "employee * * * does not include any individual who, under the usual common-law rules * * * is not an employee." (It is interesting to note that in his veto message the President said the amendment would exclude "* * * persons working as * * * taxicab drivers * * *.") Since that amendment the interpretations of "employee" by the federal courts have tended to be upon strict common-law principles. This may account, in some measure at least, for the difference in the pre-amendment cases, such as Jones v. Goodson, supra , and the post-amendment cases. But see Larson, supra , § 43.41.

But almost equal in importance to difference in facts is the difference in the attitude of the courts of the several jurisdictions towards legislation such as the Workmen's Compensation Act. As Justice Rutledge said in N.L.R.B. v. Hearst Publications , 332 U.S. 111, 122, 64 S. Ct. 851, 856, 88 L. Ed. 1170, 1179-1180 (1943),

"It is enough to point out that, with reference to an identical problem, results may be contrary over a very considerable region of doubt in applying the distinction, depending upon the state or jurisdiction

where the determination is made. * * * In short, the assumed simplicity and uniformity, resulting from application of 'common law standards,' does not exist."

Illustrating this, Justice Rutledge pointed out that on the same facts upon which the courts of New Jersey found there was the employer-employee relationship (Auer v. Sinclair Ref. Co. , 103 N.J.L. 372 (E. & A. 1926), and Schomp v. Fuller Brush Co. , 124 N.J.L. 487 (Sup. Ct. 1940), affirmed In re Schomp , 126 N.J.L. 368 (E. & A. 1941)), courts of other jurisdictions, whose attitude toward such legislation is different than ours, held there was not. As Larson says (§ 43.10):

"It has been said that precedents may be found on both sides of almost every conceivable situation in which the question [of 'employment'] could arise. The explanation of this paradox -- complete agreement on principles and endless disagreement in actual decisions -- seems to lie partly * * * in the extent to which courts define status in view of the purpose served by the particular legislation rather than as a fixed and static concept."

The term "employee" in our Workmen's Compensation Act is not limited to narrow common-law concepts for, in addition to servants, it "includes all natural persons * * * who perform service for an employer for financial consideration." N.J.S.A. 34:15-36. This is a broad definition which includes relationships not ordinarily considered to constitute employment. Our act is construed to bring as many cases as possible within its coverage, Parker v. Zanghi , 45 N.J. Super. 167, 171 (App. Div. 1957); El v. Newark Star Ledger , 131 N.J.L. 373 (Sup. Ct. 1944). Cf., De Monaco v. Renton, supra; Parks Cab Co. v. Annunzio , 412 Ill. 549, 107 N.E. 2 d 853, 854 (Sup. Ct. 1952); Salt Lake Transportation Co. v. Bd. of Review, supra , 5 Utah 2 d 87, 296 P. 2 d 983, at page 985. We therefore hold that in spite of such a "three-phase arrangement," a taxi driver may be an employee under our Workmen's Compensation Act.

Whether or not Hannigan was, in fact, an employee must be determined not upon that arrangement alone but

upon the totality of the facts surrounding the relationship. The testimony of the arrangement between Hannigan and Goldfarb was oral, but even if it were written (as Goldfarb said it was, in a contract which he said he could not find) the language which the parties used in the contract would not be conclusive. "We are not so much concerned with the formal wording * * * as we are with the factual relation * * *" when we inquire whether parties are employer and employee. El v. Newark Star Ledger, supra , 131 N.J.L. , at page 379. Cf. Fenwick v. U.C.C. , 133 N.J.L. 295 (E. & A. 1945); Electrolux Corp. v. Board of Review , 129 N.J.L. 154 (E. & A. 1942); Schomp v. Fuller Brush Co. , 124 N.J.L. 487 (Sup. Ct. 1940), affirmed In re Schomp , 126 N.J.L. 368 (E. & A. 1941). "Regard must be had to the attendant circumstances and the object in view, and also the course of practice of the parties in its execution, since that is significant of the common purpose * * *." Fury v. New York & Long Branch R.R. & Co. , 126 N.J.L. 25, 30 (Sup. Ct. 1940), affirmed 127 N.J.L. 354 (E. & A. 1941), certiorari denied 315 U.S. 815, 62 S. Ct. 800, 86 L. Ed. 1213 (1942). Cf., Galler v. Slurzberg , 31 N.J. Super. 314 (App. Div. 1954), aff'd o.b. 18 N.J. 466 (1955).

The parties here agree that whenever the employer retains the right to direct the manner in which the business shall be done, as well as the result to be accomplished, or in other words, not only what shall be done, but how it shall be done, it usually proves that the relationship of employer and employee does exist.

Since Hannigan took the cab daily, and did not return it until 12 hours later, Goldfarb contends that during those 12 hours he could not possibly have directed the manner in which the business was to be done. That, he argues, establishes conclusively that there was no control, and hence no employer-employee relationship. But that does not necessarily follow. "When the manner of performing the service is beyond another's control because of its nature, absence of direct control over such details" may become "insignificant in the overall view of the facts * * *."

De Monaco v. Renton , 18 N.J. , at page 357. That is especially true where, as will be seen was the case here, the city by ordinance licenses the drivers and tells them how to behave, under pain of losing their licenses. We therefore turn to the overall view of the facts in the case at bar, and weigh it in the fashion directed by Russo v. United States Trucking Co. , 26 N.J. 430 (1958).

The members of the Association are cab owners like Goldfarb, and he testified they all operate as he does. Goldfarb operates only through the Association. The certificate of incorporation of the Association provides that one of the purposes for which the Association was formed is "To regulate the methods and pass rules and to enforce such rules for the carrying on of the taxi cab business under one uniform system, and which shall apply to all of its members." (Emphasis ours)

On behalf of its members the Association maintains a garage, and offices in which a staff receives telephone calls from prospective passengers and relays them over its two-way radio system to the member cabs nearest the caller. The Association also maintains call boxes and open stands for the member cabs. It was admitted by Mr. Davis, secretary and treasurer of the Association, that the purpose of all this is to lead the public to believe that "20th Century Cab" is a large, responsible organization that gives good service.

To make sure that this objective will be accomplished, the Association requires each member to abide by the rules and regulations of the organization. Goldfarb testified that each member is responsible for the conduct of his cabs "in the company," and Davis testified that if a driver misbehaved "we would reprimand him and tell him ...

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