September 26, 2012
AMERITEMPS, INC., PLAINTIFF-APPELLANT,
HAINESPORT INDUSTRIAL RAILROAD, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. DC-10783-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted May 22, 2012
Before Judges Messano, Yannotti and Kennedy.
Plaintiff, Ameritemps, Inc., appeals from a final judgment in the Special Civil Part, following a bench trial, in favor of defendant Hainesport Industrial Railroad, dismissing its complaint for money due on a contract between them. Plaintiff's complaint asserted causes of action based upon a book account, breach of a promise to pay, and quantum meruit. Defendant asserted a counterclaim in which it alleged that plaintiff "failed to provide services and insurance as agreed." The final judgment also dismissed the counterclaim, but defendant has not filed an appeal or cross appeal from that ruling.
We discern the facts from the trial record. Plaintiff is a corporation located in Camden that provides its clients with temporary staff on a contract basis. Defendant is a business entity that runs a "shortline railroad" servicing the Hainesport Industrial Complex.
At some point in 2008, defendant hired three individuals to work as general laborers and paid them on a cash basis. However, these workers may not have been citizens of the United States and Darryl Caplan, one of defendant's principals, became concerned about whether they were "legally permitted to work in the country." He also wanted to be certain that their taxes were paid properly and workers' compensation insurance was in place. Because of the nature of defendant's business, Caplan wanted to be certain that "there were no issues"; and he "did not feel that internally [defendant] had the ability to ensure full compliance." Consequently, defendant decided "to move those employees to an employee leasing type company."
Defendant contacted plaintiff, and Troy Brady, plaintiff's representative, met with another of defendant's principals and went over with him a sample contract and "control sheet." Brady explained the contract terms in detail and left the documents with defendant.
The contract stated on the first page, under the heading "Permanent Placement," that no employee of plaintiff will be hired by the other party "without first paying the permanent placement fee." The contract also stated that "[t]his [c]ontract contains [the] agreement of the parties, also binding are client information on back of staffing control [sheet][.]"
The staffing control sheet is, in effect, a time sheet listing Ameritemps employees assigned to a client. The client was required to fill it out each week and certify the hours worked by each individual. The sheet stated that "[b]y execution of this form . . . client agrees to the terms and conditions on the reverse side . . . ." On the reverse side of the sheet, various terms were listed, including three paragraphs whereby the "client" agreed to pay plaintiff various sums of money if it hired directly any of plaintiff's "[t]emporary employee[s]." Defendant's principal went over the documents with Brady but had no questions about any of the provisions therein.
In April 2008, plaintiff and defendant executed the contract whereby plaintiff agreed to provide to defendant "General Labor" at "$12.00 per hour per person" which rate was to include "all Workers Comp., Payroll, Taxes, and Liability Insurance." Later, at defendant's request, the amount was raised to $12.75 per hour because plaintiff kept $3.75 of that sum for its services, and defendant wanted to insure that the laborers received the full $9.00 per hour that they had received before they were hired by plaintiff and assigned to defendant.
The three individuals that caused concern for defendant were thereafter hired by plaintiff and listed for "payroll purposes" as independent contractors for Ameritemps PA, a Pennsylvania corporation wholly owned by plaintiff. According to plaintiff, defendant wanted the three employees to be engaged as "independent contractors" in order to insure they received payment of $9.00 per hour without deductions for backup withholding. The employees wanted to be listed as independent contractors, as well. Plaintiff agreed to this arrangement because, according to Jesse Proctor, plaintiff's president, "one, the customer requested it; two, they worked for the railroad and that's one of the industries where you can pay employees [as independent contractors] . . . ."
Accordingly, the three individuals signed W-9 forms, certifying they were citizens of the United States not subject to "backup withholding." The three individuals were then paid $9.00 per hour by Ameritemps PA and assigned to work at defendant's facility. They worked an average of sixty hours per week for approximately sixteen weeks. Defendant filled out the staffing control sheets for the three individuals each week and submitted them as directed by plaintiff.
A dispute arose between plaintiff and defendant after a few months. Defendant claimed plaintiff did not properly credit its payments and plaintiff claimed that defendant was behind in paying invoices. Defendant "terminated" the contract on September 22, 2008, and on October 10 issued a check to plaintiff for $8325.75, indicating on the check "pain [sic] in full." This was the outstanding balance due at the time on plaintiff's invoices, and defendant's principal claimed he had reached an "agreement" with Brady that he would pay that sum "in full and final satisfaction and you can take it if you want it or not."
Brady went to defendant's office to pick up the check and observed the three individuals still working at the site. Defendant had not notified plaintiff that it had hired the three individuals directly. Plaintiff thereafter sent an invoice to defendant for $14,040 for its permanent placement fee using a calculation based upon a combination of the provisions set forth in the staffing control sheets. Plaintiff contended it was entitled to the fee under the plain terms of its contract because defendant had directly "hired" its assigned "temporary" employees.
Defendant did not pay the permanent placement fee and this litigation ensued. At trial, defendant claimed that plaintiff breached the contract because it failed to obtain liability and workers' compensation insurance, and that plaintiff's claims were barred by the doctrine of accord and satisfaction. Defendant also contended that it was unaware of the language on the reverse side of the staffing control sheets and that it had used photocopies of the front of the forms supplied by plaintiff which did not include the reverse side.
The evidence adduced at trial showed that Ameritemps PA had a workers' compensation policy with Liberty Insurance Corporation for the period of July 12, 2008 to July 12, 2009. The classification page of the policy lists plaintiff's address in Camden. Further, plaintiff's policy of workers' compensation insurance expired June 30, 2008, thereby leaving a coverage gap of twelve days. Additionally, the record contains several letters from Liberty to the insurance producer inquiring about the status of "Ameritemps, Inc." which its research indicated was "related" to the insured. Liberty wanted an "ownership form" for plaintiff and explained that additional information would also be required "[i]f you are adding a named insured to the policy[.]"
Following the presentation of evidence, the trial judge issued his findings and conclusions from the bench. He stated, in pertinent part:
Hainesport Industrial Railroad at one time had three employees. They were paying them $9 an hour in cash. Somebody evidently got nervous about it and they said we're [going to] hire somebody else to do this for us so they retained or hired Ameritemps of Pennsylvania to do payroll.
On the issue of insurance, we have a Liberty Mutual Insurance policy that was issued to Ameritemps of Pennsylvania. It covers Ameritemps employees only not Ameritemps, Inc . . . . [It] will cover Ameritemps of Pennsylvania employees in New Jersey, . . . but not Ameritemps, Inc., because Ameritemps, Inc. is not listed as an insured.
[The insurance agent] said Ameritemps of Pennsylvania was the insured and to be covered under that policy . . . you had to be an employee of the insured, being Ameritemps of Pennsylvania.
Based upon those facts, I find a fact that there was no Worker's Comp insurance on these workers while working at Hainesport.
I find that there were three men who were independent contractors based upon their 1099s, and as independent contractors there would be no coverage under the Ameritemps of Pennsylvania policy or Inc. if there was such a policy.
In the beginning of this transaction Hainesport, as I said, had three employees being paid in cash. Hainesport wanted someone to take over payroll, take care of taxes, Worker's Comp, et cetera. Plaintiff agreed. I think under the facts you can really say Ameritemps became a payroll agent, nothing more for Hainesport. However, plaintiff asked the men . . . how they wanted to be paid, and they all picked they wanted to be paid as independent contractors.
Hainesport terminated the contract . . . . I find that both parties breached the contract . . . . [Defendant] hired plaintiff to manage the payroll . . . and that's all they did was to do payroll . .
Hainesport hired plaintiff to manage payroll while they did, and that's all that they did. They didn't supply the insurance. They didn't take care of the taxes. They didn't do anything else, so they breached the contract.
. . . [D]efendant has proven no damages as a result of the failure to obtain the Workers Compensation Insurance, and I find that they also are entitled to no damages.
. . . [T]here was no proof of any damages to Hainesport other than their failure to obtain Worker's Compensation insurance and there's no testimony as to what that damages are. So, therefore, it's a no cause all the way around.
Judgment was thereafter entered dismissing the complaint and the counterclaim. Only plaintiff now appeals.
We begin with a brief statement of the principles that guide our analysis. Our "review of the [trial] judge's findings of fact based on the testimony presented during [a] plenary hearing is limited." Mountain Hill L.L.C. v. Twp. Comm. of Middletown, 403 N.J. Super. 146, 192 (App. Div. 2008), certif. denied, 199 N.J. 129 (2009). "'The general rule is that findings by the trial court are binding on appeal when supported by adequate, substantial, credible evidence. Deference is especially appropriate when the evidence is largely testimonial and involves questions of credibility.'" Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011) (quoting Cesare v. Cesare, 154 N.J. 394, 411-12 (1998)); see also In re Return of Weapons to J.W.D., 149 N.J. 108, 116-17 (1997). We "should not disturb the factual findings and legal conclusions of the trial judge unless [we are] convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice." Seidman, supra, 205 N.J. at 169 (internal quotation omitted).
Moreover, "'[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference[,]'" and are subject to de novo review. Mountain Hill L.L.C., supra, 403 N.J. Super. at 193 (first alteration in original) (quoting Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)). Construction of a contract is for the court, Driscoll Constr. Co. v. State of N.J., Dep't of Transp., 371 N.J. Super. 304, 313 (App. Div. 2004), while whether conduct constitutes a breach of the contract is a question for the factfinder. Magnet Res., Inc. v. Summit MRI, Inc., 318 N.J. Super. 275, 286 (App. Div. 1998).
Here, it is undisputed that plaintiff assigned the three individuals to Ameritemps PA for payroll purposes; the individuals were paid through that company; Liberty issued a workers' compensation policy to that company, with a New Jersey endorsement; and the policy was paid up. Accordingly, we find it difficult to conclude that the trial judge's determination that plaintiff breached the contract by failing to secure workers' compensation insurance is supported by substantial, credible evidence. Seidman, supra, 205 N.J. at 169.
There is a more fundamental problem with the conclusions of the trial judge, however. The trial judge explicitly concluded that the three individuals were independent contractors, a finding that defendant does not challenge on appeal. Only "[a] person who is an 'employee' is entitled to workers' compensation, and a person who is an 'independent contractor' is not." Frappier v. Eastern Logistics, Inc., 400 N.J. Super. 410, 415 (App. Div. 2008).*fn1 Also, independent contractors are not subject to income withholding. Cf. Conley v. Oliver and Co., 317 N.J. Super. 250 (App. Div. 1998). There was no finding here that having the three individuals fill out and sign the W-9 forms concerning the "backup withholding" of taxes was improper.
Consequently, the trial judge's determination that plaintiff breached the contract by not securing insurance and not "tak[ing] care of the taxes" is not supported by the record and must be reversed. As we have noted, independent contractors are not entitled to workers' compensation and these individuals, by their election to become independent contractors, were not subject to tax withholding. Defendant cannot claim that plaintiff breached its contract by engaging the workers as independent contractors, when that was exactly what defendant asked plaintiff to do, and the workers themselves elected to be engaged as independent contractors.
Given his ruling, the trial judge did not address defendant's accord and satisfaction defense and did not address the issue of plaintiff's damages. If defendant prevails on the accord and satisfaction defense, judgment should be entered for defendant. If defendant does not prevail on that issue, then the trial court must address the question of whether plaintiff is entitled to damages for the breach of contract and, if so, the amount of damages it is entitled to receive. Accordingly, we remand this matter to the trial court to address the defense of accord and satisfaction and damages.
Reversed and remanded. We do not retain jurisdiction.