CHARLES W. GORRES, Employee/Appellant, v. BRETT A. DUNCAN and R. DUNCAN FARMS, INC., aka DUNCAN FARMS, INC., UNINSURED, Employer, and MINNESOTA DEP’T OF LABOR & INDUS./VRU, Intervenor, and SPECIAL COMPENSATION FUND.
WORKERS’ COMPENSATION COURT OF APPEALS
APRIL 26, 2010
EXCLUSIONS FROM COVERAGE - FAMILY FARM. The statute, case law, and the record as a whole supported the compensation judge’s conclusion that the employer qualified as a family farm, within the meaning of Minn. Stat. § 176.011, subd. 11a, and that the employee’s claim is therefore not compensable under the workers’ compensation act, pursuant to Minn. Stat. § 176.041, subd. 1(b).
Determined by: Wilson, J., Johnson, C.J., and Rykken, J.
Compensation Judge: Bradley J. Behr
Attorneys: DeAnna M. McCashin, Schoep & McCashin, Alexandria, MN, for the Appellant. Christopher J. Cadem, Hatling Law Office, Fergus Falls, MN, for the Respondents. Thaddeus V. Jude, St. Paul, MN, for the Special Compensation Fund.
DEBRA A. WILSON, Judge
Charles Gorres appeals from the compensation judge’s decision denying his claim for benefits based on the statutory “family farm” exclusion from workers’ compensation coverage. We affirm.
The Duncan family has run a farm for many years, most recently growing corn, soybeans, and sugar beets on about 1,650 acres of land. In 1992, the operation was incorporated as R. Duncan Farms, Inc. [the farm]. Roger Duncan [Roger] and his wife were the sole executive officers and shareholders of the corporation at that time. Roger also ran a business known as Duncan Trailers [the trailer operation], which was located on the farm property. The trailer operation sells, leases, and repairs semi-trailers.
In 2006, Roger sold the farm to his son Brett [Brett] and Brett’s wife, in part because Roger’s wife, Brett’s mother, had developed significant health problems. That same year, the trailer operation was incorporated, with Roger the sole executive officer and shareholder of that business. Also in 2006, Brett constructed a large commercial shop building about four miles from the farm, which he leased to Roger to use for the trailer operation. Brett maintained an office for the farm in this building, for a time, in addition to an office at the farm site.
Charles Gorres worked occasionally on a seasonal basis for the farm when it was owned by Roger. In about April of 2007, against Roger’s advice, Brett offered Gorres a year-round laborer job on the farm. When the farm job did not require him full time, Gorres was allowed to pick up hours at Roger’s trailer operation. Brett paid Gorres for both his farm work and for his work at the trailer operation. In exchange for Gorres’s work and for the use of the shop building, Roger allowed Brett to use trailers, without charge, for harvest and other farm needs.
It was expressly understood by all parties that Gorres was employed exclusively by Brett and that Brett was his only boss. While Gorres and Roger had some history of verbal confrontations, Gorres nevertheless chose to supplement his hours by working at the trailer operation when farm work was slow. The farm employed other laborers during harvest and for certain other specific activities, and Roger was paid for some consulting work for the farm after its sale to Brett, but Gorres was the farm’s only full-time, year-round worker. Because of continuing disputes between Roger and Gorres, Brett eventually moved the farm office out of the commercial building housing the trailer shop.
On October 4, 2008, during the sugar beet harvest, a large piece of farm machinery broke down. Because of its size, and because time is of the essence during harvest, the equipment was moved for repair to the nearest shop, Roger’s trailer shop, rather than to the farm machine shop. Brett sent Gorres to that location to assist with the repair, and, while he was there, Gorres got into a physical altercation with Roger. Gorres and Roger offered conflicting accounts as to just what occurred, but criminal charges were brought against Roger, and civil lawsuits are apparently pending.
Gorres evidently missed a few days of work after the fight but then returned to his job at the farm. Brett terminated him from employment in November of 2008.
Gorres claimed entitlement to workers’ compensation benefits due to injuries he allegedly sustained in the October 4, 2008, fight with Roger. Brett had a farm liability insurance policy but carried no workers’ compensation insurance. When the matter came on for hearing before a compensation judge, one of the primary issues was whether the farm was exempt from workers’ compensation liability pursuant to the “family farm” exclusion contained in Minn. Stat. § 176.041, subd. 1(b), as defined by Minn. Stat. § 176.011, subd. 11a. Extensive evidence was offered concerning the farm and the trailer operation, including farm tax and pay records and corporate documents. Witnesses included Gorres, Brett, Roger, and seasonal laborers of the farm.
In a decision issued on October 5, 2009, the compensation judge concluded that R. Duncan Farms qualified as a family farm within the meaning of the statute and that Gorres’s workers’ compensation claim was therefore excluded from coverage. Gorres appeals.
STANDARD OF REVIEW
On appeal, the Workers’ Compensation Court of Appeals must determine whether “the findings of fact and order [are] clearly erroneous and unsupported by substantial evidence in view of the entire record as submitted.” Minn. Stat. § 176.421, subd. 1 (2008). Substantial evidence supports the findings if, in the context of the entire record, “they are supported by evidence that a reasonable mind might accept as adequate.” Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984). Where evidence conflicts or more than one inference may reasonably be drawn from the evidence, the findings are to be affirmed. Id. at 60, 37 W.C.D. at 240. Similarly, findings of fact should not be disturbed, even though the reviewing court might disagree with them, “unless they are clearly erroneous in the sense that they are manifestly contrary to the weight of evidence or not reasonably supported by the evidence as a whole.” Northern States Power Co. v. Lyon Food Prods., Inc., 304 Minn. 196, 201, 229 N.W.2d 521, 524 (1975).
“[A] decision which rests upon the application of a statute or rule to essentially undisputed facts generally involves a question of law which [the Workers’ Compensation Court of Appeals] may consider de novo.” Krovchuk v. Koch Oil Refinery, 48 W.C.D. 607, 608 (W.C.C.A. 1993).
Pursuant to Minn. Stat. § 176.041, subd. 1(b), the workers’ compensation act does not apply to “a person employed by a family farm” as defined by Minn. Stat. § 176.011, subd. 11a. Minn. Stat. § 176.011, subd. 11a, provides as follows:
Subd. 11a. Family Farm. (a) “Family farm” means any farm operation which pays or is obligated to pay cash wages exclusive of machine hire, to farm laborers for services rendered during the preceding calendar year in an amount:
(1) less than $8,000; or
(2) less than the statewide average annual wage as described in subdivision 20 when the farm operation has total liability and medical payment coverage equal to $300,000 and $5,000, respectively, under a farm liability insurance policy, and the policy covers injuries to farm laborers.
(b) For purposes of this subdivision, farm laborer does not include any spouse, parent or child, regardless of age, of a farmer employed by the farmer, or any executive officer of a family farm corporation as defined in section 500.24, subdivision 2, or any spouse, parent or child, regardless of age, of such an officer employed by that family farm corporation, or other farmers in the same community or members of their families exchanging work with the employer. Notwithstanding any law to the contrary, a farm laborer shall not be considered as an independent contractor for the purposes of this chapter; provided that a commercial baler or commercial thresher shall be considered an independent contractor.
In the present case, the parties stipulated that the “statewide average annual wage,” for purposes of subdivision 11a(a)(2), was $41,996.00. It was also undisputed that Gorres, alone, earned more than the $8,000 limit specified in subdivision 11a(a)(1), but less than the statewide average annual wage, during the calendar year preceding the date of the alleged injury.
In his decision, the compensation judge concluded that the farm was obligated to pay less than the stipulated statewide average annual wage in 2007 and also that the farm had in place the kind of farm liability insurance policy specified by subdivision 11a(a)(2). On this basis, the judge determined that Gorres’s claim was not compensable, under the workers’ compensation act, pursuant to Minn. Stat. § 176.041, subd. 1(b). On appeal, Gorres challenges the compensation judge’s decision on several grounds, raising both legal and factual issues.
1. Statutory Interpretation - Wage Limits
One of Gorres’s primary legal arguments concerns the interplay between clauses 1 and 2 of Minn. Stat. § 176.011, subd. 11a(a). Under Gorres’s theory, the family farm exclusion does not apply unless no individual worker is paid more than $8,000, pursuant to clause 1, and the total compensation paid to all farm workers does not exceed the statewide average annual wage, in this case, $41,996.00, pursuant to clause 2. Gorres concedes that his interpretation would require the court to conclude that the “or” at the end of clause 1 be read to mean “and.” He argues, however, that to interpret the statute otherwise would give no meaning to the $8,000 wage limit contained in clause 1. As an example, Gorres poses a situation in which a farm pays four workers $9,000 each. While that pay would exceed the $8,000 cap in clause 1, the farm could nevertheless escape liability for workers’ compensation benefits under clause 2. Gorres maintains that the legislature could not have intended such a result. We think, however, that this is precisely how the statute was intended to work.
In Meyering v. Wessels, 383 N.W.2d 670, 38 W.C.D. 482 (Minn. 1986), the supreme court explained that the legislature’s intent in setting the $8,000 wage restriction was to severely limit what was previously a broad general exclusion for farms “to one that exists only where minimal cash wages are paid,” in order to “prevent hardship only to those small farm operations basically run by resident family members with a minimal amount of [other] labor.” Id. at 673, 38 W.C.D. at 485. It is well settled, in keeping with this policy, that the $8,000 limit in clause 1 applies to the total cash wages paid by a farm to all farm laborers, not simply to the wages of any individual worker. See, e.g., id.; Scanlon v. Caille Farm, Inc., 65 W.C.D. 44 (W.C.C.A. 2004). In 1993, well after the court’s decision in Meyering, the legislature added clause 2 to Minn. Stat. § 176.011, subd. 11a(a), exempting family farms paying up to the statewide average annual wage - - now considerably more than $8,000 - - as long as those farm operations carry certain farm liability insurance covering injuries to farm laborers.
It seems apparent that, while clause 1 continues to allow very small farms to operate without workers’ compensation or other insurance obligations of any kind, clause 2 was intended to allow somewhat larger farms to avoid exposure for workers’ compensation benefits as long as those farms procure the specified liability coverage. Clause 2 may have been added in legislative recognition of both the effects of inflation and of changes in the nature of farming in recent years. However, whatever the legislature’s purpose, treating clause 1 and clause 2 as establishing two different ways to qualify for exclusion is the only construction of the statute that gives effect to the word “or” between clauses. And, Gorres’s interpretation would require us not only to ignore the word “or” but also to overrule longstanding case law as to which wages count for purposes of clause 1. We find no compelling reason to do so.
Because we reject Gorres’s theory of statutory construction, we also reject his argument that, because his earnings alone exceeded the $8,000 limit in clause 1, the family farm exclusion is inapplicable. The question then becomes whether the requirements of clause 2 have been satisfied here.
2. Includable Cash Wages
Evidence concerning cash wages paid by the farm in 2007, the relevant calendar year, includes W2 and 1099 forms, a wage spread sheet, and 2007 corporate tax returns. Excluding pay to Roger and Brett that year, and also excluding a $1,500 Christmas bonus that was paid to Gorres but not included as W2 earnings, the compensation judge determined that the farm paid $39,399.42 in cash wages in 2007. Using this figure, the judge then went on to conclude that cash wages to farm laborers that year did not exceed the statewide average annual wage for purposes of Minn. Stat. § 176.011, subd. 11a(a)(2).
On appeal, Gorres contends that the compensation erred in excluding the wages paid to Brett ($8,000) and to Roger ($11,348.41) when calculating cash wages paid by the farm in 2007. More specifically, Gorres argues that, while family farm owners and certain of their relatives are excluded from workers’ compensation coverage, the statute “does not exclude the actual wages [paid to owners and relatives] in the definition of those farms that are excluded from having to provide workers’ compensation coverage for . . . employees.” However, Gorres’s position on this point is not consistent with the express language of the statute.
Pursuant to Minn. Stat. § 176.011, subd. 11a(a), a family farm is one which is “obligated” to pay less than the previously discussed limits on cash wages to “farm laborers” (emphasis added). The statute goes on to specify that, “for purposes of this subdivision, farm laborer does not include any parent . . . of a farmer employed by the farmer, or any executive officer of a family farm corporation,” among others. Id. at subd. 11a(b) (emphasis added). The only conceivable purpose of this language is to make clear that the specified workers are not to be considered “farm laborers” for purposes of the wage limits contained in subdivision 11a(a)(1) and (2). No other conclusion is possible. The compensation judge therefore properly excluded farm pay to both Brett, an executive officer of the farm corporation, and to Roger, his father.
The compensation judge also concluded that the Christmas bonus paid to Gorres was not includable for purposes of evaluating whether the farm had stayed below the applicable wage cap, reasoning that the farm was not obligated to pay the bonus, as required by subdivision 11a(a). Contrary to Gorres’s argument, the fact that the bonus may be taxable as income has little or no bearing on whether it is includable for purposes of the wage limits for family farm exclusion from workers’ compensation liability. Similarly, and again contrary to Gorres’s suggestion, the fact that the farm neglected to withhold taxes from the bonus is simply irrelevant to the question of workers’ compensation coverage. At any rate, as the judge also noted, adding the $1500 bonus payment to the total cash wages paid by the farm would not change the result, as the total would remain less than the statewide average annual wage for that year.
The judge’s decision that the farm paid or was obligated to pay cash wages less than the limit specified in Minn. Stat. § 176.011, subd. 11a(a)(2), is not clearly erroneous or unsupported by substantial evidence, and we affirm.
3. Farm Liability Insurance Coverage
The exclusion from workers’ compensation coverage available under Minn. Stat. § 176.011, subd. 11a(a)(2), does not apply unless “the farm operation has total liability and medical payment coverage equal to $300,000 and $5,000, respectively, under a farm liability insurance policy, and the policy covers injuries to farm laborers.” In the present case, the farm had an insurance policy issued by North Star Mutual Insurance Company, effective August 21, 2008, with $5,000 in medical coverage and $500,000 in liability coverage. Brett testified that he specifically asked his insurance agent for a policy “appropriate” under the workers’ compensation act, and the policy specifies that it applies to injuries sustained by farm workers “excluded from coverage by the workers’ compensation statutes under Minn. Stat. § 176.041, subd.1.” The compensation judge concluded that the liability insurance policy requirements of the statute had been met, noting, in his memorandum, that, before the record closed, North Star settled with several intervenors who had provided medical services to Gorres following the October 4, 2008, incident.
On appeal, Gorres argues that the judge erred in finding liability coverage under the policy, citing the following language on the policy declarations page:
FARM EMPLOYER’S LIABILTY COVERAGE
CLASS C: PART TIME, WORKING 40 DAYS OR LESS PER YEAR -
TOTAL NUMBER OF MAN-DAYS IS: 40 OR LESS
Because he was employed full time by the farm, working more than 40 days, Gorres argues, the insurance policy will not cover his claim. The purpose of the cited language is not clear. However, as the compensation judge observed, nothing else in the policy suggests that coverage is limited to farm laborers who work less than 40 days a year or that coverage exists only if no more than 40 total days are worked by all farm laborers; in fact, as previously indicated, the liability carrier entered into negotiated settlements with Gorres’s medical providers.
Also contrary to Gorres’s claim, the record reasonably establishes that North Star has not denied coverage. Rather, North Star is simply awaiting a decision on Gorres’s workers’ compensation claim, because injuries covered by the workers’ compensation act are expressly excluded by the liability policy. In a letter dated March 30, 2009, North Star indicated that “[t]he Liability Insurance Policy will defend and indemnify [the farm] for any civil matter should the Courts decide that this is not a workers’ compensation claim.” Obviously North Star considers the policy applicable once issues relating to potential workers’ compensation coverage have been resolved.
Finally, Gorres contends that the farm “failed to meet its burden of proof that medical bills for the work injury will be paid beyond the $5,000 limit given in the policy.” However, Minn. Stat. § 176.011, subd. 11a, imposes no such burden. As evidenced by the policy limits mandated by clause 2, the legislature did not intend that farm liability policies pay all benefits that would otherwise be payable under the workers’ compensation act. It is, after all, liability insurance, not workers’ compensation insurance, that is required by this provision.
Substantial evidence supports the compensation judge’s decision that the farm carried farm liability insurance, covering farm laborers, consistent with the requirement of Minn. Stat. § 176.011, subd. 11a, and we therefore affirm his decision on this issue as well.
4. Relationship Between the Farm and the Trailer Operation
Gorres also argues that, regardless of whether the requirements of Minn. Stat. § 176.011, subd. 11a, were otherwise satisfied, the family farm exclusion does not apply, in that his employment involved work for both Brett’s farm and Roger’s trailer operation, which are, according to Gorres, inextricably intertwined. The compensation judge rejected this basis for imposing workers’ compensation liability on the farm, and we agree.
Gorres cites the case of Lentz v. Zerebko, No. WC08-187 (W.C.C.A. Dec. 8, 2008), as primary support for his position on this issue. The Lentz case involved a family business that was arguably a farm but primarily a petting zoo. While the petting zoo livestock was kept on a farm site, the primary activity of the business was the exhibition of exotic animals at regional fairs. And the farm, to the extent it existed, was not treated by the owners as separate and distinct from the zoo - - only one set of records and one checkbook were kept, and all income from both operations was reported on one tax return. For a number of reasons, including the intermingling of the businesses, this court concluded that the family farm exclusion was inapplicable.
In the present case, we acknowledge that there is some connection between the farm and the trailer operation, demonstrated primarily by the fact that Brett paid Gorres for hours he put in at the trailer operation, as well as for hours he put in at the farm. Also, Roger pays no cash to Brett for use of the trailer shop constructed by Brett on Brett’s property. There are, however, significant distinctions between this case and Lentz.
It is undisputed that Brett did not hire Gorres to work at the trailer operation; rather, he gave Gorres the option to pick up hours there if work on the farm was slow, with the idea of keeping Gorres satisfied enough with his pay to stay on as year-around labor for the farm. Gorres was not expected or required to work for the trailer operation, only for the farm, and all parties agree that Brett was his sole employer and boss. And, while Brett paid Gorres for his work at the trailer operation, he did so in exchange for the use of Roger’s trailers during harvest and for other farm purposes. Testimony at hearing indicated that labor and equipment exchanges are common among area farms. Moreover, and importantly, unlike the case in Lentz, the farm and the trailer operation are legally separate corporate entities, with separate books and records, and no shareholders or executive officers in common. Finally, we note that Gorres’s claimed injuries occurred while he was performing farm labor during harvest. While the result might perhaps have been different had he been injured while working for the trailer operation, that issue is not before us here.
Gorres was hired to perform farm labor for a family farming operation. His alleged injuries occurred while he was so engaged. The two businesses in question - - the farm and the trailer shop - - are wholly separate legal entities with different owners. Under these circumstances, we affirm the judge’s decision that the two businesses were not so intertwined as to dictate denial of the claimed “family farm” exclusion from workers’ compensation liability. We therefore affirm the judge’s decision in its entirety.
 The shop building is owned by the farm; the land the building sits on is owned by Brett, individually. Brett, individually, also owns the farm residence and much of the land utilized by the farm.
 The equipment in question, a beet topper, was co-owned by the Duncan farm and a neighboring sugar beet farmer, Guy Koehl. Beet farmers cooperate during harvest, exchanging labor, and settle up at the end of the year based in part on the number of acres harvested for each farm. During harvest, each farm pays its own workers regardless of where the work is performed.
 The criminal case against Roger was continued for dismissal on condition that Roger pay court costs and undergo an anger assessment.
 Obviously, the statewide average annual wage is generally likely to increase on a yearly basis.
 And, generally, “[a]bsent context revealing that the word ‘or’ should be read as a conjunctive,” courts “have generally read ‘or’ to be disjunctive.” Amaral v. Saint Cloud Hosp., 598 N.W.2d 379, 385 (Minn. 1999).
 In W2 and 1099 payments, payments for casual labor, and payments for driving and machine hire.
 In his brief, Gorres contends that the farm submitted only the front page of the declarations sheet for the insurance policy. However, the farm, in fact, submitted the entire policy.
 While making this argument, Gorres nevertheless asserts, in passing, that the workers’ compensation courts have no jurisdiction to interpret a contract of insurance for farm liability, “which places an onerous burden upon an injured farm laborer in order to prevail in a workers’ compensation setting.” We do not entirely follow his argument in this regard, but we would note that workers’ compensation courts clearly have jurisdiction to decide whether the family farm exclusion is applicable, and, to do so, we must of necessity determine whether all the elements of the statute have been satisfied, including those relating to farm liability insurance.
 Also, as the farm points out, it appears that Gorres worked fewer than 40 days between the start of the policy period and the date of his alleged injuries.
 In his reply brief, Gorres also argued that the policy in evidence did not meet the requirements of the statute because that policy was not in effect during the calendar year preceding his alleged injuries. However, a reply brief is not the place to raise an issue for the first time. Minn. R. 9800.0900, subp. 5 (reply briefs “may address only issues addressed in the respondent’s brief”). Moreover, under Gorres’s interpretation of the statute, a farm could escape workers’ compensation liability if it had a liability policy in place during the calendar year preceding an injury but no policy in force on the actual date of injury. In other words, a family farm could qualify for exclusion under clause 2 even if an injured farm laborer had no recourse to any other insurance. The legislature could not have intended to create such a loophole in coverage requirements. Also in his reply brief, Gorres contended that the farm “is asserting that it had a policy of insurance in effect that covered the injured worker in this case but that the coverage does not apply to Mr. Gorres.” However, the farm’s whole point is that the policy does apply. Just what will be paid under the policy, beyond $5,000 in medical expenses, is a different question that is beyond the scope of the present proceedings.