GAUDENCIO MACHUCA, Employee, v. REYNALDO LOPEZ, UNINSURED, and TURNER CONTRACTING, UNINSURED, and LUIS ARMANDO FERNANDEZ and MINNESOTA WORKERS’ COMP. ASSIGNED RISK PLAN/BERKLEY RISK ADM’RS CO., Appellants, and THE LARAMAR GROUP, LLC, and TWIN CITY FIRE INS. CO., Respondents, and UNIVERSITY OF MINN. PHYSICIANS and MINNESOTA DEP’T OF HUMAN SERVS., Intervenors, and SPECIAL COMP. FUND.
WORKERS’ COMPENSATION COURT OF APPEALS
DECEMBER 5, 2008
EMPLOYMENT RELATIONSHIP - SUBCONTRACTOR; EMPLOYMENT RELATIONSHIP - PARTNERSHIP. Where the parties stipulated that one individual was the employer at the time of the employee’s injury, and where substantial evidence of record does not support the compensation judge’s findings that another individual was a subcontractor or a business partner of the employer, the compensation judge’s finding that the purported business partnership and its insurer were liable for payment of compensation benefits must be reversed.
Determined by: Rykken, J., Pederson, J., and Thomas L. Johnson, C.J.
Compensation Judge: Patricia J. Milun
Attorneys: Harlan G. Sween, Sween & Salazar, Bloomington, MN, for the Respondent Employee. Patrick E. Mahoney, Mahoney, Dougherty and Mahoney, Minneapolis, MN, for the Appellants. Kassi Erickson Grove, Tahnk-Johnson and Grove, Eagan, MN, for the Respondents Laramar/Twin City Fire Insurance. Thaddeus V. Jude, St. Paul, MN, for the Special Compensation Fund.
MIRIAM P. RYKKEN, Judge
Luis Armando Fernandez and the Minnesota Workers’ Compensation Assigned Risk Plan/Berkley Risk Administrators Company [MN ARP] appeal from the compensation judge’s determination that Mr. Fernandez was an employer of Gaudencio Machuca at the time of his injury on November 2, 2003, and that Mr. Fernandez and MN ARP are liable for payment of benefits paid to the employee by the Special Compensation Fund, and are liable for statutory penalties as well. We reverse.
On November 2, 2003, Gaudencio Machuca [the employee] injured his right lower extremity when he fell off a balcony at the Plymouth Square at 37th Apartments while working on a roofing crew. Arrangements had been made between an agent of the apartment owners and a construction firm for the provision of a roofing crew to work on the apartment complex. Throughout litigation that originated in 2004, the parties have disputed the designation of the employee’s employer and the designation of the responsible insured party. Exhibits, witness testimony and stipulated information in the record demonstrate the multi-layered business and employment arrangements present at the time of the injury. We have outlined the various parties involved to explain their interrelationship and the impact those relationships have on the issue of determining who employed the employee at the time of his injury.
The owner of the apartment complex where the employee was injured was Maple Leaf Real Estate, Ltd. Partnership. Laramar Communities, LLC [Laramar], acted as the building management company and agent for the owner. Laramar negotiated a construction contract with Turner Contracting [Turner] and Turner made arrangements with Reynaldo Lopez, and allegedly with Luis Armando Fernandez, to provide roofing crews to work on the apartment complex. Gaudencio Machuca, the employee, was employed by Mr. Lopez.
Litigation on this claim commenced with the employee’s claim petition, filed in 2004, in which he sought benefits from Reynaldo Lopez and Turner Contracting. At the time of the employee’s injury, neither Turner nor Mr. Lopez was insured for workers’ compensation liability in Minnesota, and so, through a temporary order, the Special Compensation Fund [Fund] paid workers’ compensation benefits to the employee. The Fund later asserted that, by virtue of an alleged business partnership, both Mr. Lopez and Mr. Fernandez could be considered to be Mr. Machuca’s employer, and petitioned for the joinder of Mr. Fernandez, as an employer, and for the joinder of Laramar, as a general contractor, asserting that either was liable for payment of workers’ compensation benefits.
These two parties were joined to the claim, but later were dismissed by order of a compensation judge. Following the Fund’s appeal, this court concluded that resolution of insurance coverage issues required factual determinations of whether Luis Fernandez or Laramar had an employment relationship with the employee. Concluding that we could not perform our appellate review function until a record was created and factual findings were made, we remanded the case to the Office of Administrative Hearings for further consideration of the employment issues raised by the parties’ motions and for specific factual findings as to those issues. Machuca v. Reynaldo Lopez, No. WC05-311 (W.C.C.A. July 11, 2006).
On November 15, 2007, a hearing was held on remand before another compensation judge. Before that hearing, two significant developments had occurred on the claim. In 2006, the employee entered into a stipulation for settlement with the Fund, by which the Fund paid him certain workers’ compensation benefits in exchange for resolution of his claim. In addition, on November 5, 2007, the Fund filed a petition for reimbursement and/or contribution from Luis A. Fernandez/MN ARP or Laramar/Twin City Fire Insurance. The Fund contended that the employee was employed by either Reynaldo Lopez, who allegedly was working under the assumed name of Luis Fernandez and under an insurance policy purchased in the name of Luis Fernandez, or was employed by Mr. Lopez in partnership with Mr. Fernandez. The Fund also contended that Laramar was a general contractor and therefore was liable for workers’ compensation coverage in the event that Mr. Lopez, as subcontractor, was deemed to be uninsured.
The parties agreed to submit the matter to the compensation judge on stipulated facts along with exhibits, including documentary evidence and depositions of the following witnesses: Gaudencio Machuca, the employee, Luis Fernandez, Reynaldo Lopez, and Chris Baran, project manager for Laramar. In its trial memorandum submitted at the time of the hearing, the Fund contended that Mr. Fernandez had been Gaudencio Machuca’s employer on November 2, 2003, for purposes of workers’ compensation liability, either directly or as a business partner with Mr. Lopez. In his trial memorandum, Mr. Fernandez asserted that no partnership relationship had existed.
In her findings and order served and filed April 11, 2008, the compensation judge found that Mr. Machuca was one of several people who worked for Reynaldo Lopez, and that Mr. Lopez, as a sole proprietor, was uninsured for workers’ compensation coverage on the date of injury. The judge also found that Mr. Fernandez was a business partner to Mr. Lopez, and that their partnership had served as a subcontractor on the roofing project, with workers’ compensation coverage in the name of Mr. Fernandez. The compensation judge concluded that, due to their partnership arrangement, Mr. Lopez and Mr. Fernandez were jointly and severally liable for workers’ compensation benefits owed to the employee. Based on Mr. Lopez’s lack of workers’ compensation insurance, the compensation judge concluded that Mr. Fernandez and his insurer, MN ARP, must reimburse the Fund for all benefits paid to or on behalf of the employee, and must pay penalties mandated under the Workers’ Compensation Act. The compensation judge concluded that
Either there was a business relationship between Mr. Lopez and Mr. Fernandez doing business as Luis Armando Fernandez or Mr. Fernandez was a subcontractor of Turner Contracting and Mr. Fernandez hired Mr. Lopez to be a subcontractor of Luis Armando Fernandez. Either way, Mr. Fernandez’s insurer is responsible for workers’ compensation coverage for the crew that performed the re-roofing work at the Plymouth Square Project. If there was a partnership the insurance covered the employees working for the partnership. Mr. Lopez was uninsured and thus Mr. Fernandez would be an insured general contractor and his insurer would be responsible for coverage.
Mr. Fernandez and MN ARP appeal.
Mr. Fernandez and MN ARP appeal the compensation judge’s determination that Mr. Fernandez was Mr. Machuca’s employer at the time of his injury on November 2, 2003. They argue that the evidence in the record does not support the findings that there was a business partnership relationship between Mr. Fernandez and Mr. Lopez, that this alleged partnership employed Mr. Machuca, or that Mr. Fernandez had valid workers’ compensation insurance coverage for Mr. Machuca’s injury.
The overall issue to be addressed on appeal, therefore, is whether substantial evidence supports the compensation judge’s finding that Mr. Fernandez was an employer of Gaudencio Machuca at the time of his injury, either individually or by virtue of a purported business partnership between Mr. Fernandez and Mr. Lopez. The primary areas of concern involve insurance coverage and employment relationships. To provide a context for the parties’ arguments in those areas, we have listed certain facts to which the parties stipulated at the hearing, and also have summarized the parties’ deposition testimony concerning the insurance and employment disputes.
A. Stipulated Facts
At the hearing, the parties stipulated to numerous facts, summarized below:
1. Gaudencio Machuca sustained an injury on November 2, 2003, to his lower right extremity, while working on the roofing job. He was an employee of Reynaldo Lopez, who had 30 people working with him at that project.
2. Reynaldo Lopez had offered a roofing “crew” to Luis Fernandez, but Mr. Fernandez never actually ran a roofing crew because Mr. Lopez did not comply with that “deal” to provide him with a crew.
3. Laramar Group, LLC, had a contract with the apartment owner, Maple Leaf Estate Limited Partnership, to manage the Plymouth Square at 37th Apartments. Laramar Group, LLC, and Turner Contracting entered into a construction contract dated July 30, 2003, covering the roofing project on which the employee was injured.
4. Laramar Group, LLC, obtained workers’ compensation insurance through Twin City Fire Insurance.
5. Turner Contracting submitted a proposal dated July 29, 2003, to Laramar to re-roof the buildings at “Plymouth Square.”
6. There was a construction contract between Laramar Group, LLC, and Turner Contracting dated July 30, 2003, covering this project.
7. Mr. Fernandez applied for, and obtained, a workers’ compensation policy with MN ARP/Berkley Risk Administrators.
8. On September 2, 2004, a certificate of workers’ compensation insurance through MN ARP for Luis Armando Fernandez, with the certificate holder being Turner Contracting, was issued.
9. Turner Contracting wrote checks payable to Luis A. Fernandez for wages at the project at which the employee was injured.
B. Deposition Testimony
The employee testified that he worked for Reynaldo Lopez, a gentleman he met through his stepfather, Carlos Diaz, and that he had never met and did not know Luis Fernandez. The employee testified that Mr. Lopez was working for a company or “had arranged things with” a company, on the apartment complex job, and after Mr. Lopez received his orders from that company he “would come and tell us what to do.” According to the employee’s deposition testimony, Mr. Lopez set the employee’s hours and provided his tools, materials and ladders; Mr. Lopez paid in cash, based upon the amount of work completed.
Mr. Fernandez testified that he worked in roofing for approximately one year before beginning to work for Mr. Lopez; he worked for Mr. Lopez for 20 to 30 days in 2003, driving a delivery truck, and was paid in cash for his work. Mr. Fernandez never worked at the roofing job where the employee was injured. Mr. Fernandez denied ever receiving or seeing checks paid by Turner for roofing wages and also denied that he endorsed any checks paid by Turner.
As stipulated by the parties, Mr. Fernandez had obtained a workers’ compensation insurance policy through MN ARP. At his deposition, he explained how that insurance was purchased. In exchange for Mr. Lopez’s promise that he would assign Mr. Fernandez a roofing crew, he allowed Mr. Lopez to use his name to obtain an insurance policy. According to Mr. Fernandez, he accompanied Mr. Lopez when Mr. Lopez bought insurance, Mr. Lopez used Mr. Fernandez’s driver’s license or other I.D. to obtain the insurance, and he, Mr. Fernandez, “signed [the application] because he told me that this was for my crew.” Mr. Fernandez, who neither speaks nor writes English, testified that he “signed a paper in the insurance office, but I do not know what paper it was,” nor did he know who the insurance agent was. Mr. Fernandez eventually left the employ of Mr. Lopez before the employee’s injury date of November 2, 2003.
Mr. Lopez testified that in approximately September 2003, he arranged with Turner to work on the roofing project. He worked as a supervisor subcontractor for Turner at three job sites: at the apartment complex in Plymouth, Minnesota, at another job site in Eagan, Minnesota, and at a site in Chicago, Illinois. He testified that when he started working for Turner, Turner asked Mr. Lopez to “bring a piece of paper,” and that Turner “just need[ed] something to show, you know, that he was giving work to us . . . .” To comply with Turner’s request, he asked Mr. Fernandez to lend him his insurance papers. Mr. Lopez testified that Turner paid him for the roofing work, via checks made payable to Luis Fernandez. Mr. Lopez then endorsed the checks by signing Mr. Fernandez’s name and cashed them through a check-cashing service provided by Latino Travel. Mr. Lopez paid his roofing crew leaders directly, and they, in turn, paid the individual workers who worked on the job. According to Mr. Lopez, Turner still owes him $60,000.00 in wages for the roofing project. Mr. Lopez also testified that Mr. Fernandez worked for him for approximately one week, and that Mr. Luis Fernandez had “nothing to do with the job site. That was my dealing with Mr. Turner.”
Mr. Fernandez and MN ARP appeal from the compensation judge’s finding that Mr. Fernandez was a subcontractor of Turner and that Mr. Fernandez had hired Mr. Lopez to be his subcontractor. Mr. Fernandez denies any involvement with the hiring of or payment to the employee on the roofing project. He and MN ARP argue that there is insufficient evidence of any direct relationship between Turner and Mr. Fernandez and of any business partnership between Mr. Lopez and Mr. Fernandez.
The Fund contends that Mr. Fernandez was a subcontractor of Turner. In support of its contention, the Fund submitted a copy of a contract purportedly entered into by Turner and Mr. Fernandez, as a subcontractor, dated November 6, 2003. Deposition testimony in evidence raises doubt about the validity of that contract. When Mr. Lopez was shown a copy of that contract at his deposition, and when he was asked whether that contract related to the roofing job, he responded “. . . I’m really sorry to say something about that, but at that time when [Gaudencio Machuca] fell off, we didn’t have any contract. We didn’t have anything . . . .” Mr. Lopez testified that he made arrangements with Turner to provide roofing crews, and submitted insurance information to Turner. Mr. Lopez testified that Turner had hired him to be a subcontractor, that Turner sent him checks in payment for the roofing work, and that Mr. Fernandez had only worked for a short time on the project as an hourly employee.
In addition, Mr. Lopez and Mr. Fernandez both testified that the signature of Luis Fernandez on the November 6, 2003, contract was not his signature. Furthermore, no representative from Turner testified by deposition or at the hearing, so the testimony of Mr. Lopez and Mr. Fernandez remains unrebutted. We conclude that there is no substantial evidence in the record to support the compensation judge’s finding that Mr. Fernandez was a subcontractor of Turner Contracting, and we reverse that finding.
Mr. Fernandez also appeals from the compensation judge’s alternative findings that Mr. Lopez and Mr. Fernandez could be determined as jointly and severally liable since they were engaged in a “business relationship . . . doing business as Luis Armando Fernandez,” a “regular pattern of business operations,” an “enterprise for profit,” a “business partnership,” or a “joint venture.” In her memorandum, the compensation judge addressed the business partnership between Mr. Lopez and Mr. Fernandez, explaining as follows:
The enterprise for profit between Mr. Lopez and Mr. Fernandez was a business partnership regardless of the failure by either party to honor a term or condition of the partnership and to spell out the details of the agreement in writing.
Mr. Lopez and Mr. Fernandez were engaged in work for profit at the Plymouth Square Project. The Court finds that the receipt of profits from the work were controlled by both men: one named as the payee on the checks and the other who could endorse and cash the payments from Turner Contracting. Lack of a written contract does not alter the facts that either Mr. Lopez or Mr. Fernandez in their joint venture exercised control over the work on the Plymouth Square Project where the employee sustained a work-related injury.
In response, the Fund argues that Mr. Lopez and Mr. Fernandez had engaged in a business partnership enterprise on the roofing project, and it was this business enterprise that had employed the employee at the time of his injury. The Fund therefore contends that both Mr. Lopez and Mr. Fernandez should be considered as employers for purposes of his workers’ compensation claim. Because Mr. Lopez was uninsured for workers’ compensation liability, the Fund contends that Mr. Fernandez, and his insurer, MN ARP, are liable for payment of workers’ compensation benefits owed and paid to the employee.
A partnership is “an association of two or more persons to carry on as co-owners a business for profit . . . .” Minn. Stat. § 323.02(8). “It is essential to the existence of a partnership that there be a joint contribution to the enterprise and something in the nature of a community of interest.” Hansen v. Adent, 238 Minn. 540, 546, 57 N.W.2d 681, 684 (1953). There is no arbitrary test to determine the existence of a partnership; the issue is a question for the trier of fact. See Wormsbecker v. Donovan Constr. Co., 251 Minn. 277, 87 N.W.2d 660 (1958); Cyrus v. Cyrus, 242 Minn. 180, 64 N.W.2d 538 (1954); Blumberg v. Palm, 238 Minn. 249, 56 N.W.2d 412 (1953). In this case, the compensation judge concluded that “Mr. Lopez and Mr. Fernandez were engaged in an enterprise for profit at the time of the employee’s work-related injury. This enterprise for profit between Mr. Lopez and Mr. Fernandez was a business partnership.” The compensation judge relied primarily on two factors in determining whether Mr. Lopez and Mr. Fernandez were in a partnership: (1) Mr. Fernandez’s name on the checks given to Mr. Lopez by Turner, and (2) Mr. Fernandez’s application for the workers’ compensation policy. Regarding the checks, the compensation judge found
Turner Contracting authored checks to Mr. Fernandez for payment of the services provided by the employee and other workers. Mr. Lopez cashed the checks from Turner Contracting by signing the name of Mr. Fernandez and presenting each signed check to a Wells Fargo Bank Account. The signature of Mr. Fernandez by Mr. Lopez on more than one occasion establishes a regular pattern of business operations between the two men for services and financial compensation.
Mr. Fernandez and MN ARP argue that the checks do not demonstrate a business relationship or an agreement by Mr. Fernandez to allow checks for roofing wages to be issued in his name. They argue that the checks themselves provide contradictory evidence of Mr. Fernandez’s participation in the roofing project. The checks issued by Turner Contracting both pre-date and post-date the employee’s date of injury; Mr. Fernandez testified that he left the employ of Mr. Lopez before the employee’s date of injury. Notations on the checks refer to an Eagan, Minnesota, project as well as a Plymouth Project; some of the checks do not specify what project they relate to. No one testified that Mr. Fernandez worked on the Eagan project.
In addition, Mr. Fernandez and MN ARP argue that the record does not support the finding that Mr. Lopez cashed the checks by presenting each signed check to a Wells Fargo bank account. The Fund did not present any bank deposit slips or bank account information. The sole evidence in the record concerning how the checks were processed is found in Mr. Lopez’s deposition testimony. He testified that he was able to cash checks made out to Mr. Fernandez through Latino Travel, “because the cashing place, they knew me very well that they didn’t ask, you know, for anything but the check.”
We conclude that the record does not support the conclusion that Mr. Fernandez’s name on the checks and his application for insurance establish a business relationship or partnership between Mr. Lopez and Mr. Fernandez. Mr. Lopez testified that (1) Mr. Fernandez had nothing to do with the checks, (2) Turner issued checks in Mr. Fernandez’s name after he informed Turner that he, Mr. Lopez, personally had no insurance but that Mr. Fernandez had obtained insurance, and (3) he endorsed the checks with Mr. Fernandez’s name. No other witness contradicted that testimony. We find no evidence in the record that Mr. Fernandez authorized Mr. Lopez to endorse the checks and we find no evidence that Mr. Fernandez had any control over or knowledge of these checks. Because the evidence in the record does not support the compensation judge’s finding that Mr. Fernandez had authorized Mr. Lopez to endorse his name on the checks written by Turner, we reverse that finding as well as the finding that the checks demonstrate a business partnership.
As to the insurance issue, the Fund argues that Mr. Fernandez agreed to allow Mr. Lopez to provide his insurance information to Turner Contracting as proof of Mr. Lopez’s workers’ compensation insurance coverage, and that this conduct is evidence of a partnership relationship. We do not agree.
Mr. Fernandez testified that in exchange for Mr. Lopez’s agreement to assign him a roofing crew, he allowed Mr. Lopez to use his name. Mr. Fernandez also testified that he went with Mr. Lopez to get the insurance and that he signed a document, but did not know what it was since he does not read or write English. Mr. Lopez admitted that he provided Mr. Fernandez’s insurance information to Turner, but that Mr. Fernandez had nothing to do with the roofing project. No testimony was offered to explain why Mr. Lopez did not obtain workers’ compensation insurance in his own name for the roofing project.
In addition, as Mr. Fernandez and MN ARP argue, the record contains no evidence that the insurance policy, purchased in the name of Mr. Fernandez, covered the re-roofing project. No evidence of the actual policy or record of payments on the policy was introduced; the only documentation of an insurance policy is found in a certificate of insurance, dated approximately one year post-injury. In addition, the Fund offered no evidence regarding the insurance premium paid, how the premium was calculated, or what type of work or trade was covered by the purported insurance policy. We find no evidence suggesting that Mr. Fernandez was aware of, or intended to, obtain insurance coverage for the roofing project at issue here. In view of the facts of this case, Mr. Fernandez’s agreement that Mr. Lopez could use his name to obtain insurance is not a determining factor in establishing a partnership.
There is no other evidence to support a partnership relationship, or any sort of oral or written contract, between Mr. Lopez and Mr. Fernandez. Mr. Fernandez’s work as an hourly employee with no supervisory responsibility does not demonstrate a partnership relationship with Mr. Lopez. There is no evidence that Mr. Fernandez would share in any profit with Mr. Lopez. See McAlpine v. Millen, 104 Minn. 289, 116 N.W. 583 (1908) (the issue of whether a partnership has been formed is dependent on the intention of the parties as manifested by their words and conduct). Mr. Lopez, who was stipulated as being the employee’s employer, testified that Mr. Fernandez had “nothing to do with anything.”
Based on our review of the record as a whole, we conclude that the Fund has not established sufficient facts to show that Mr. Fernandez was an employer of Mr. Machuca at the time of his injury by virtue of a business partnership with Mr. Lopez. The evidence shows that Mr. Fernandez’s only involvement with Mr. Lopez was as an hourly employee whose sole input into the alleged business relationship was to obtain workers’ compensation coverage, which Mr. Lopez then co-opted for his own use to show Turner that there was workers’ compensation coverage for the roofing project. We hold that the compensation judge’s findings that Mr. Lopez and Mr. Fernandez were engaged in a business partnership, and therefore Mr. Fernandez and MN ARP are liable for workers’ compensation benefits paid by the Fund to the employee, are not supported by substantial evidence. Accordingly, we reverse the compensation judge’s decision.
In view of our decision, we do not address the issue of whether the benefits paid to the employee by the Fund under the terms and conditions of the 2006 stipulation for settlement were fair, reasonable and appropriate for purposes of the Fund’s petition for contribution and/or reimbursement.
 See Minn. Stat. § 176.215, which addresses the issue of which party is liable for payment of an employee’s workers’ compensation benefits when a subcontractor employer is uninsured. In those instances, the intermediate or general contractor is held liable for payment of all compensation due to the employee.
 The documents submitted to the compensation judge identify Laramar as either Laramar Communities, LLC, or Laramar Group, LLC.
 The findings and order do not include any determination that Laramar, as the managing agent of the apartment complex’s owner, was the general contractor and therefore liable for payment of workers’ compensation benefits pursuant to Minn. Stat. § 176.215. This issue was not raised in the appellants’ notice of appeal nor discussed in their brief. The Fund has raised this issue in its brief, although the Fund, as respondent, did not appeal from the compensation judge’s decision. The jurisdiction of the Workers' Compensation Court of Appeals is "limited to the issues raised by the parties in the notice of appeal or by a cross-appeal." Minn. Stat. § 176.421, subd. 6; Bradford v. Bureau of Engraving, 459 N.W.2d 697, 698, 43 W.C.D. 279, 280 (Minn. 1990). We therefore do not have jurisdiction to address the potential liability of Laramar.
 Fernandez testified that Mr. Lopez asked him “to get insurance in order for me to manage a group, to run a group.” When he declined that request, Mr. Lopez then told Mr. Fernandez that he “was going to get me insurance for the group,” and Fernandez agreed to that.
 It appears that the reference to a Wells Fargo account originated in the stamp on the back of the checks cashed by Mr. Lopez. The stamp states “for deposit only,” a Wells Fargo Bank in St. Paul, Minnesota, from La Palma Market, Inc., d/b/a New Latino Travel.
 When asked about when the certificate of insurance was sent, Mr. Lopez testified that
Everything was done after Mr. Machuca got injured. [Turner] just ask me over there, when we were at the office, to fax some kind of papers, you know, because he need to cover himself. And he say - - he promising me that if we get those papers, he will be paying the full amount of the jobs. But he still doesn’t do it. I think he filed for bankruptcy or something like that, so he closed shop.