Paul Wagner Homes, Inc., appeals from the compensation judge’s determination that Jeff Barron was an employee of Jerry Szulim at the time of his 2004 injury, and that Mr. Barron and Jerry Szulim were not working in a partnership relationship at that time.  Paul Wagner Homes also appeals from the compensation judge’s order that it is liable for workers’ compensation benefits payable to Mr. Barron based upon its status as a general contractor, and from the order that Paul Wagner Homes pay, to the Special Compensation Fund, a 65% penalty pursuant to Minn. Stat. § 176.183, subd. 2.  Jerry Szulim cross-appeals from the compensation judge’s determination that Jeff Barron was Mr. Szulim’s employee at the time of his injury, and not an independent contractor, and from the determination that Jerry Szulim was not an employee of Paul Wagner Homes.  We affirm in part, reverse in part, and modify in part.

This dispute arises from an injury that Jeff Barron sustained on August 16, 2004, while working with Jerry Szulim, framing houses for Paul Wagner Homes, Inc.  Disputed issues include whether Mr. Barron was an independent contractor or an employee of Jerry Szulim at the time of his injury, and whether Paul Wagner Homes, Inc., (Wagner Homes) was a general contractor working with Jerry Szulim, subcontractor, and, therefore, whether Wagner Homes is liable for workers’ compensation benefits based upon the uninsured status of Mr. Szulim.  Also in dispute is whether Wagner Homes is required to repay to the Special Compensation Fund all workers’ compensation benefits to be paid on behalf of Mr. Barron, in addition to a penalty pursuant to Minn. Stat. § 176.183.

At the time of his injury on August 16, 2004, Mr. Barron was working with Jerry Szulim.  Prior to working with Mr. Szulim, Mr. Barron had worked as a carpenter, primarily in the area of framing carpentry.  He met Jerry Szulim in July 2004, when he responded to a newspaper advertisement by which Mr. Szulim sought framing carpenters.  After meeting on July 5 or 6, 2004, the two men agreed that Mr. Barron would commence working the following day and also agreed on his hourly rate of pay.

Since early 2003, Jerry Szulim has contracted to frame houses for Wagner Homes.  In the course of their work, Jerry Szulim negotiated the price that Wagner Homes paid him per house that he and his colleagues framed.  Wagner Homes paid Mr. Szulim directly for the work performed while framing houses, and provided the framing lumber.  In turn, Mr. Szulim paid his own business expenses and paid his brother, John Szulim, and Jeffrey Barron for their carpentry work.

As part of their business agreements, Wagner Homes required Mr. Szulim, and all of its subcontractors, to submit certificates of liability insurance before working on job sites.  Wagner Homes also required each subcontractor with employees to obtain workers’ compensation insurance for its own employees.  In this case, Mr. Szulim had provided to Wagner Homes a certificate of liability insurance, which remained in effect on the date of injury, and which named Jerry Szulim as the insured and Wagner Homes as the certificate holder.  No workers’ compensation insurance coverage was included in this policy, however.  Neither Mr. Barron nor Jerry Szulim arranged for workers’ compensation coverage for Mr. Barron, although they discussed the issue of insurance.

Mr. Barron earned a total of $3,940.00 for work he performed during the six weeks before his injury date.  Mr. Szulim paid Mr. Barron by a combination of personal checks, drawn on an account in Mr. Szulim’s name, and cash, and deducted no taxes or Social Security insurance payment from the wages paid.  Mr. Szulim issued a 1099 tax form to Mr. Barron in 2004, reflecting the wages paid during the year.  Based upon his wages earned while working with Mr. Szulim and consistent with the calculation method set forth in Minn. Stat. § 176.011, subd. 3, for wages earned by an employee in the construction industry, Mr. Barron’s weekly wage was determined to be $729.65 at the time of his injury.

On August 16, 2004, Mr. Barron worked on scaffolding while performing framing carpentry on site at Chaos Kennels.  As the scaffolding gave way, he fell, landing on a pile of lumber; his left foot rotated internally and was dislocated.  He was taken by ambulance to the Queen of Peace Hospital emergency department in New Prague, Minnesota, where x-rays showed a completely dislocated left ankle.  He underwent surgery that day.  During surgery, Dr. John Anderson noted that the employee had a closed subtalar talonavicular dislocation of his left foot.  Dr. Anderson performed a closed reduction procedure and applied a short leg cast.  Mr. Barron later obtained physical therapy through the Veterans Administration Medical Center.  According to therapy chart notes dated October 14, 2004, the employee had an antalgic gait pattern, and complained of pain, and had reported that although he tried to return to work as a framing carpenter, he was unable to do so because of his foot pain.

Following his injury, Mr. Barron remained off work until at least late June 2006, with the exception of approximately 6 1/2 weeks when he periodically attempted to work either on a full-time or part-time basis.  He obtained follow-up medical treatment through his surgeon, Dr. Anderson, who then referred him to a foot and ankle specialist, Dr. Joseph Cass.  Dr. Cass initially examined Mr. Barron on February 21, 2005.  Based upon MRI scan results, Dr. Cass recommended an arch support and injection of the posterior facet of the subtalar joint.  Although Mr. Barron experienced symptomatic relief for three or four weeks following the injection, his pain returned, and Dr. Cass ultimately recommended a fusion surgery.

On April 13, 2005, Mr. Barron filed a claim petition against Jerry Szulim and the Special Compensation Fund, seeking payment of temporary total disability benefits, payment of medical expenses, and provision of rehabilitation services.  The Special Compensation Fund later filed a petition for reimbursement against Jerry Szulim, for any benefits deemed payable to Mr. Barron by the Special Compensation Fund.  In an amended claim petition, Mr. Barron named Paul Wagner Homes as a party.  Both putative employers denied the employee’s claims; Jerry Szulim contended that he was not Mr. Barron’s employer at the time of his injury, and presented alternative defenses that he and Mr. Barron were both employees of another party, or that they were partners, joint entrepreneurs or joint venturers, and that, as such, Mr. Szulim had no responsibility to purchase workers’ compensation insurance for Mr. Barron.

On April 26, 2005, Dr. Cass performed a left talocalcaneal arthrodesis.  On June 10, 2005, after additional follow-up care, Dr. Cass advised that Mr. Barron could not work for 30 days in his usual occupation but that he could return to work within 90 days.

Dr. Anderson provided additional follow-up medical care to Mr. Barron, and outlined permanent physical restrictions resulting from his ankle injury.  At an examination on June 7, 2006, Mr. Barron reported continued pain and intolerance of being on his foot for any length of time.  Dr. Anderson examined Mr. Barron, and concluded that he had sustained a severe injury from which he had not completely recovered.  Dr. Anderson recommended that Mr. Barron avoid prolonged standing and walking for more than two or three hours and that he completely avoid using ladders and working on uneven surfaces; Dr. Anderson advised that the same restrictions would have applied back to his most recent examination of the employee on December 13, 2005.

On June 8, 2006, at the request of Wagner Homes, Dr. Stephen Barron examined Mr. Barron.  In his reports dated June 22 and 26, 2006, Dr. Barron concluded that Mr. Barron’s medical treatment following his 2004 ankle injury had been reasonable and necessary, and that he had reached maximum medical improvement (MMI) from his 2004 injury as of June 8, 2006.  Dr. Barron concluded that Mr. Barron had been disabled for six months after his injury, but that he now was able to return to work full time building prefabricated walls without restrictions.  Dr. Barron also concluded that Mr. Barron had no restrictions on his ability to return to work as a rough-in carpenter.

An evidentiary hearing was held on June 27 and 29, 2006, to address the employee’s claim and the Special Compensation Fund’s petition for reimbursement.  The primary issues addressed at the hearing were the following:

In her Findings and Order served and filed September 29, 2006, the compensation judge found that Mr. Barron was an employee, and not an independent contractor, on the date of injury, and that he was employed by Mr. Jerry Szulim.  The compensation judge found that the employee had reached MMI as of June 26, 2006, and awarded payment of temporary total and temporary partial disability benefits for certain periods of time between August 16, 2006, and June 7, 2006.  The judge also awarded payment of medical expenses and provision of rehabilitation services, and granted the intervenors’ claims.

The judge found that Jerry Szulim was working as a subcontractor for Wagner Homes, general contractor, on the date of injury, and that because the subcontractor was uninsured for workers’ compensation liability at the time of Mr. Barron’s injury, the general contractor is liable for payment of workers’ compensation benefits owed to Mr. Barron.  Consistent with the order, and because Wagner Homes was also uninsured for workers’ compensation liability at the time of the injury, the Special Compensation Fund is required to pay benefits to and on behalf of Mr. Barron, and has a lien for reimbursement against Wagner Homes, the general contractor.^[1]  The judge also found that the Special Compensation Fund is entitled to payment of a penalty provided for under the terms of Minn. Stat. § 176.183, subd. 2, with payment of that penalty due from Wagner Homes.

Wagner Homes appeals from the compensation judge’s findings that Jeff Barron and Jerry Szulim were not working in a partnership relationship, and from the order that Wagner Homes reimburse the Special Compensation Fund for benefits paid, based on Wagner Homes’ status as a general contractor.  Jerry Szulim cross-appeals from the compensation judge’s determination that Jeff Barron was Jerry Szulim’s employee on the date of injury and not an independent contractor, and from the finding that Jerry Szulim was a subcontractor and not an employee of Wagner Homes at the time of Mr. Barron’s injury.  We affirm in part, reverse in part, and modify in part.

The initial issue analyzed by the compensation judge involved the working relationships of the parties, and, specifically, Mr. Barron’s status.  Wagner Homes and Jerry Szulim both appeal from the compensation judge’s determination that Mr. Barron was an employee of Jerry Szulim on the date of injury, and that he was neither an independent contractor nor a partner with Jerry Szulim on that date.  Jerry Szulim argues that Mr. Barron was an independent contractor on the date of injury; Wagner Homes argues that Mr. Barron was a partner of Jerry and John Szulim on the date of injury, and, therefore, cannot be considered as an employee entitled to workers’ compensation benefits.

1.  Independent Contractor Issue

The compensation judge concluded that Mr. Barron was an employee of Jerry Szulim on the date of his injury.  Applying the criteria listed in Minn. Stat. § 176.042, the compensation judge concluded that Mr. Barron did not meet the criteria necessary to establish that he was an independent contractor at the time of his injury.^[2]  She also concluded that Jerry Szulim was operating as an independent contractor and subcontractor to the general contractor, Wagner Homes, and that Mr. Szulim and Mr. Barron were not partners at the time of the injury.

The issue of Mr. Barron’s employment status at the time of his injury is to be determined under Minn. Stat. § 176.042.  Subdivision 1 of that statute as in effect on the date of the petitioner’s injury reads as follows:

In Thomas v. Carpet Design Center, 61 W.C.D. 128 (W.C.C.A. 2000), this court referred to the expansion of workers’ compensation coverage in the construction industry represented by Minn. Stat. § 176.042.  We noted that subdivision 1 “begins with the premise that construction workers who are otherwise independent contractors are nevertheless deemed to be employees, entitled to protection of the act, as long as they are performing services that are part of their employer’s trade or business.”  Id. at 135 (emphasis in original).  Subdivision 2 provides an exception to this presumptive employee status if the employer establishes that all of the listed conditions for independent contractor status have been satisfied.  We stated in Thomas,

In this case, the compensation judge found that Mr. Barron did not meet the criteria necessary to deem him an independent contractor at the time of his injury.  She analyzed the specific conditions listed in the statute, and, at Finding No. 8, the compensation judge concluded as follows:

The record contains testimony from Mr. Barron which consistently supports each of the various conclusions reached by the compensation judge.  All of the factors cited by the judge were addressed through the testimony presented at the hearing.  In addition, Mr. Barron testified that he was paid an hourly wage by Mr. Szulim as opposed to compensation on a per-job basis, and provided only his basic carpentry tools.  As substantial evidence in the record supports the compensation judge’s determination of Mr. Barron’s status as an employee of Jerry Szulim, we affirm that finding.  See Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984).

2.  Partnership Issue

Wagner Homes appeals from the finding that it is liable for workers’ compensation benefits payable to Mr. Barron.  The compensation judge concluded that Mr. Barron was an employee of Jerry Szulim, who in turn was a subcontractor of the general contractor, Wagner Homes.  Because Jerry Szulim was uninsured for workers’ compensation liability at the time of Mr. Barron’s injury on August 16, 2004, the judge concluded that under Minn. Stat. § 176.215, subd. 1, Wagner Homes, as the general contractor, was liable for workers’ compensation insurance coverage.^[3]  Wagner Homes was also uninsured for workers’ compensation liability at the time of the injury.  As a result, pursuant to Minn. Stat. § 176.183, subd. 1, the Special Compensation Fund is required to pay benefits to and on behalf of Mr. Barron, and has a lien for reimbursement against Paul Wagner Homes, the general contractor.

Wagner Homes does not dispute that it was acting as the general contractor on the job site where Mr. Barron was injured, nor does it dispute that it was uninsured for workers’ compensation liability at the time of Mr. Barron’s injury.  Wagner Homes, however, disputes that by virtue of Mr. Barron’s working relationship with Jerry Szulim at the time of the injury - - a partnership relationship - - Mr. Barron is precluded from recovering workers’ compensation benefits.  Wagner Homes argues that it reasonably believed that Mr. Barron and Jerry Szulim were partners at the time of the injury, relying on Minn. Stat. § 323A.0202, of the Minnesota Uniform Partnership Act, which refers to the association of two or more persons to carry on as co-owners of a business for partnership, whether or not the persons intend to form a partnership.  Paul Wagner argues that the nature of Mr. Barron and Mr. Szulim’s action and their representations implied a partnership relationship.  Referring to Minn. Stat. § 323A.0308, which describes an “ostensible partnership” or partnership by estoppel, Wagner Homes argues that Mr. Barron and Jerry Szulim are estopped from denying that they worked on a partnership basis.

The significance of this argument lies in the effect that Mr. Baron’s employment status has on his claim for workers’ compensation benefits.  Wagner Homes argues that because of Mr. Barron’s and Mr. Szulim’s “partnership by estoppel,” Mr. Barron is precluded from recovering workers’ compensation benefits as against Wagner Homes, even while being found to be an employee of Jerry Szulim and entitled to benefits from Jerry Szulim.  As a result, Wagner argues, because Mr. Barron can assert no claim for benefits against Wagner Homes, the Special Compensation Fund is precluded from asserting a derivative claim against Wagner Homes.

Although at some point Mr. Barron discussed a potential partnership arrangement with Jerry and John Szulim, the three did not formally or informally agree to a partnership arrangement.  As part of their discussions, the three spoke generally about the amount Mr. Barron would be paid for each of the two types of houses the Szulims and he framed for Wagner Homes.  They made no final arrangements for payment on that basis, however, and Mr. Szulim continued to pay hourly wages to Mr. Barron.  The compensation judge found that no partnership existed between Mr. Barron and the Szulim brothers, and that they did not formally or informally agree to a partnership.  She also found that Jerry Szulim did not represent to the public or Mr. Wagner that Mr. Barron was his partner.  In her memorandum, the compensation judge explained the basis for her conclusion that no partnership existed:

The record, including testimony from Mr. Barron, John Szulim, Jerry Szulim and Paul Wagner, supports the conclusions reached by the compensation judge concerning the partnership issue.  The testimony at the hearing included extensive questioning about the nature of the working relationships between Mr. Barron, the Szulims and Mr. Wagner.  We acknowledge that the record also contains testimony that could support the employer and insurer’s arguments concerning a partnership by estoppel.^[4]  The compensation judge had the opportunity to review the evidence and testimony, and based her conclusions, in part, on her assessment of witness credibility.  That assessment remains the unique function of a compensation judge as the trier of fact.  Brennan v. Joseph G. Brennan, M.D., P.A., 425 N.W.2d 837, 839-40, 41 W.C.D. 79, 82 (Minn. 1988).  Findings based on credibility of a witness will not be disturbed on appeal unless there is clear evidence to the contrary.  See Even v. Kraft, Inc., 445 N.W.2d 831, 835, 42 W.C.D. 220, 225-26 (Minn. 1989).  We find no clear evidence to the contrary on the issue of a potential partnership or partnership by estoppel.  As substantial evidence in the record, including witness testimony, supports the compensation judge’s determination of Mr. Barron’s status as an employee of Jerry Szulim, we affirm that finding.  Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984).

In addition to appealing the compensation judge’s finding that Mr. Barron was his employee, Jerry Szulim also appeals from the finding that he, Jerry Szulim, was a subcontractor to Wagner Homes.  Mr. Szulim argues that the criteria set forth in Minn. Stat. § 176.042 also apply to him.  He argues that even though he was considered by Wagner Homes to be an independent contractor, he does not satisfy all the statutory criteria necessary to establish his status as an independent contractor, and therefore must be considered to be an employee of the general contractor, Wagner Homes.  Wagner Homes argues that the criteria and analysis contained in section 176.042 are inapplicable to Mr. Szulim, as he was not the individual who was injured on August 16, 2004.  We agree.

Subdivision 1 of section 176.042 contemplates that the provisions be applied in those instances where the individual claiming to have employee status has been injured.  Mr. Szulim is not an injured worker petitioning for workers’ compensation benefits; the criteria delineated in section 176.042 do not apply to determine his relationship vis-a-vis the general contractor.

Furthermore, the record amply supports the compensation judge’s determination that Mr. Szulim was acting as a subcontractor for Wagner Homes.  Mr. Szulim operated his own business and filed tax returns as a sole proprietor.  He contracted with Wagner Homes to provide roughing and framing carpentry services, as he had contracted with other businesses in the past.  Testimony presented by Paul Wagner, Jeff Barron, and Jerry Szulim concerning the business arrangements between Wagner Homes and Mr. Szulim, along with business records in evidence, clearly support the compensation judge’s finding that Mr. Szulim worked as a subcontractor to Wagner Homes.  We affirm that finding.

Wagner Homes also appeals from the compensation judge’s order that it pay the Special Compensation Fund a penalty, calculated on the basis of 65% of all compensation benefits awarded, in addition to reimbursement of compensation benefits paid by the Fund.  Minn. Stat. § 176.183, subd. 2, requires that if a “liable employer” is neither self-insured nor insured for workers’ compensation coverage,

The wording of Minn. Stat. § 176.183, subd. 2, orders a compensation judge to assess a penalty against an uninsured employer.  The statute neither specifically nor implicitly designates a general contractor as an “employer” for purposes of paying a penalty to the Special Compensation Fund.^[5]  Furthermore, at the hearing held before the compensation judge, the Special Compensation Fund did not assert a claim for the 65% penalty against Wagner Homes, because it was a general  contractor and not Mr. Barron’s employer.  Because the statute imposes a penalty only on employers, and because Jerry Szulim, and not Wagner Homes, was Mr. Barron’s employer in this case, no penalty can be imposed on Wagner Homes.

On appeal, the Special Compensation Fund argues that the compensation judge erred by failing to impose the 65% penalty on the uninsured employer, Jerry Szulim, as mandated by the statute.  We agree that the wording of the statute is mandatory, and requires the uninsured employer to pay a penalty of 65 percent of all workers’ compensation benefits paid on its behalf to Mr. Barron.  See Maher v. Chris Veger, slip op., No. WC05-102 (W.C.C.A. June 28, 2005).  We therefore reverse the compensation judge’s order that Wagner Homes pay the 65% penalty provided by Minn. Stat. § 176.183, subd. 2, and order that the uninsured employer, Jerry Szulim, pay that penalty to the Special Compensation Fund.

Wagner Homes appeals from that portion of the judge’s order that refers to statutory provisions for liens for repayment of benefits paid by the Special Compensation Fund.  In her decision, the compensation judge specified that

The language of these provisions provides for a lien in favor of the Special Compensation Fund against both Wagner Homes, the general contractor, and Jerry Szulim, the employer.  In Order No. 7, the compensation judge correctly granted a lien in favor of the Special Compensation Fund for the benefits to be reimbursed by Wagner Homes; the statutory reference in that order, however, is incorrect, and we therefore modify that order to substitute Minn. Stat. § 176.215 as the statutory authority for the lien granted against Wagner Homes.

We have ordered that the employer, Jerry Szulim, issue payment of the penalty imposed by Minn. Stat. § 176.183; that portion of the statute grants a lien in favor of the Special Compensation Fund as against Mr. Szulim.  For clarification, therefore, we modify Order No. 7 to include a statutory lien against Jerry Szulim, as employer, in favor of the Special Compensation Fund, for the 65% penalty which this court has ordered to be paid by Mr. Szulim.

Wagner Homes also seeks an order from the compensation judge allowing a subrogation right to Wagner Homes, so that it is assured that it retains a right of recovery against the uninsured subcontractor.  Minn. Stat. § 176.215, subd. 2, states that

The compensation judge awarded payment of temporary total and temporary partial disability benefits for various periods of time.  Paul Wagner Homes requests a correction in the dates for which temporary partial disability benefits were awarded.  We agree that modification is required.

The compensation judge concluded that Mr. Barron was temporarily partially disabled from May 30, 2006, through June 7, 2006, while employed at Acorn Lumber, and that his earnings were an accurate reflection of his earning capacity.  The judge also concluded that the employee did not diligently search for work within his restrictions from June 8 through June 29, 2006, at which time he was not employed.  In Order No. 1, however, the compensation judge ordered payment of temporary partial disability benefits from June 8 through June 28, 2006.  This is an obvious typographical error.  We therefore reverse that portion of Order No. 1 that awards temporary partial disability benefits from June 8 through 28, 2006.  We modify the order to include an award of temporary partial disability benefits for the period of time from May 30 through June 7, 2006, while Mr. Barron was employed at Acorn Lumber.