Lake County Sewer Company

Plain-English summary

An excavation collapsed during sewer work in Willowick, Ohio, injuring one worker. On remand from the Commission, the judge reconsidered whether Lake County Sewer or Brennan Excavating employed the three excavation workers at the site. The judge credited the workers' testimony and payroll records showing that Lake paid them, exercised supervisory authority, could hire and fire them, and purchased project materials and equipment. Lake's effort to label workers as independent contractors through 1099 forms did not outweigh the actual employment relationship, and an Ohio workers' compensation ruling reached the same conclusion for the injured worker. The judge determined that Lake County Sewer was the employer of all three exposed workers.

Decision snapshot

• Cited standard(s): None identified in this remand decision.
• Outcome: The judge found that Lake County Sewer employed the three workers exposed at the excavation site.
• Key point: Payroll records, control over work, and hiring and firing authority can establish an employment relationship despite subcontractor labels or 1099 paperwork.

Full text (OSHRC public release)

               UNITED STATES OF AMERICA
   OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION

Secretary of Labor,
Complainant
v. OSHRC Docket No. 07-1786
Lake County Sewer Company, Remand
Respondent.

Appearances:

   Paul Span os, Esquire, O ffice of the Solicitor, U.S. Departm ent of L abor, Cleveland , Ohio
           For Complainant

   John P. O’Donnell, Esquire, Lyo ns & O’D onnell Co., L.P.A ., Painesville, O hio
            For Respondent

Before: Administrative Law Judge Stephen J. Simko, Jr.

                                    DECISION ON REMAND
   On May 10, 2007, the Occupational Safety and Health Adminstration (OSHA) conducted

an inspection of an excavation that collapsed in Willowick, Ohio. The court held a hearing in this
matter on May 7, 2008. On September 16, 2008, the court issued a decision determining, among
other things, that the Secretary had properly cited Lake County Sewer company (Lake) as the
employer of excavation workers Gary Brennan, Brooks Stanek, and Scott Kazsuk. On
February 2, 2009, the Commission remanded this case to the court for additional findings regarding
the employment relationship between Lake and the exposed workers. The parties have filed post-
remand briefs. For the following reasons and for the reasons set forth in the original decision in this
case, the court finds that Lake was the employer of Brennan, Stanek, and Kazsuk at the time of
inspection that gave rise to this case.

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Witnesses
Aside from OSHA compliance officer Joseph Schwartz, the witnesses at the hearing were
Scott Kazsuk, Brooks Stanek, Gary Brennan, and Richard Marucci. Kazsuk and Stanek were
excavation workers (Stanek was the worker injured when the excavation collapsed). Gary Brennan
is an excavation worker and owner of Brennan Excavating, Inc. (BEI). Marucci is the chief
operating officer of Lake.
On December 31, 2004, Lake and BEI entered into a subcontract agreement to excavate
sewer laterals for a project Lake contracted to do for the City of Willowick. In May 2006, Lake put
Brennan, Stanek, and Kazsuk on its payroll. At issue is whether Lake or BEI was the employer of
Brennan, Kazsuk, and Stanek on May 10, 2007. Marucci contends BEI was the employer. Brennan
counters that Lake was the employer. Marucci and Brennan each have a direct financial stake in the
outcome of the case. The demeanor of both men at the hearing was observed. The testimony of
each man reflects his bias. Each made self-serving statements designed to minimize his own
authority on the site and to emphasize the control exercised by the other. Brennan knew Lake’s
counsel from his previous dealings with Lake, and had a contentious relationship with him at the
hearing. Brennan was combative and sarcastic in his testimony. Marucci was evasive and vague
in his answers. When questioned closely on specific topics, Marucci’s responses were defensive and
confusing.
In contrast, Kazsuk and Stanek were forthright and open when testifying. Their recollections
are consistent with each other. They have no obvious financial stake in the determination of who
their employer was. Their testimony is accorded greater weight than that of Brennan. Brennan is
found to be credible to the extent that his testimony is consistent with the testimony of Stanek and
Kazsuk, and the documentary evidence in the record. Marucci’s testimony is found to lack
credibility. His testimony was inconsistent with all other evidence relating to the issue of whether
Respondent was the employer of the workers at the jobsite at issue.

                                        Background
   In April or May 2006, excavation worker Tom Stropki approached Marucci (Tr. 220).

Marucci testified that he was told, “that Gary was ripping them off in overtime, and he was going
to go to the Labor Department if we didn’t get it taken care of, and he brought it to Gary’s attention

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a couple of times and it wasn’t being taken care of on Gary’s end” (Tr. 239). It is telling that Stropki
felt comfortable approaching Marucci, the top officer of the contractor, with this problem.
Usually under these circumstances, it might be expected that a contractor would warn the
subcontractor to comply with the law, or take legal action against it, or fire it and hire a complying
subcontractor. Ohio is home to numerous excavating companies. Instead, Lake put the excavation
workers, including Brennan, on its payroll. There is no evidence BEI suffered any repercussions
for its failure to properly pay its workers, despite Marucci’s testimony BEI’s negligence jeopardized
Lake’s contract with the City. When Lake needed more work done in 2007, it contacted Brennan.
Lake’s actions in putting the workers on its payroll converted them to its own employees. Its
subsequent treatment of the workers supports this finding.

                                         Supervision
       Brennan testified he worked as a supervisor for Lake on the site. As supervisor, it is not

surprising Brennan exercised authority over the workers at the site. Brennan testified Marucci made
daily visits to the site during which they discussed the project. Brennan stated “Marucci, would just
come and check up every day, see how things are going and ask us if we needed anything” (Tr. 13).
Although Stanek did not see Marucci on the site the day of the excavation collapse, he saw him
earlier that week (the first day of work was Monday, May 7, and the collapse occurred Thursday,
May 10). Stanek testified Marucci had the authority to tell him where to work and what safety
precautions to take. Kazsuk stated he saw Marucci on the site periodically. When asked what role
Marucci played, Kazsuk replied, “Gary had to go to him if there was any changes to be made”
(Tr. 132). The testimony of Brennan, Stanek and Kazsuk is consistent that Marucci visited this
jobsite regularly and demonstrated that Marucci actually supervised work on this jobsite. Marucci’s
contrary testimony that he never visited the job is not corroborated or supported by other evidence.
I find his testimony lacking credibility as to whether he had authority to supervise work on this
jobsite.

                               Hiring and Firing of Employees
       Marucci flatly denied he could hire and fire employees working on the excavation. This

self-serving statement is contradicted by the other workers on the jobsite. Brennan stated Marucci

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told him to “grab Brooks [Stanek] and Scott [Kazsuk]” for the May 2007 job (Tr. 26). As
supervisor, Brennan also had the authority to fire the workers, but he had no authority over Marucci.
When asked if Marucci could fire Stanek and Kazsuk, Brennan responded, “Absolutely, and myself”
(Tr. 75). Stanek stated Marucci could fire him from this job because, “It’s his company” (Tr. 96).
Stanek also testified Marucci had authority to tell him where to work, what to do and what safety
precautions to take.
Kazsuk’s testimony on this point was direct and unequivocal:
Q. What was your understanding of Mr. Marucci’s role on this project in
May of ‘07?
Kazsuk: That it was basically his job, and we were working for him.
Q. Did Mr. Marucci have the authority to fire you?
Kazsuk: Oh, yes.
Q. Did he have the authority to tell you where to work?
Kazsuk: And what to do.
Q. Did he have the authority to tell you to make safety corrections?
Kazsuk: He had the authority to do whatever he wanted to do.
(Tr. 132)
I find the testimony of Brennan, Stanek, and Kazsuk consistent and convincing. Marucci’s
testimony is unsupported by and inconsistent with other evidence, lacking in credibility, and is
rejected. I find Marucci had authority to hire and fire workers on this jobsite.

                          Ownership of Tools and Equipment
   Gary Brennan owned the dump truck, the backhoe, and the tool van on the site. Lake owned

the trenching equipment. Any new materials or equipment bought for the project were charged to
Lake’s account. Stanek kept track of purchases and collected the receipts. He dropped the receipts
off at Lake’s office for payment by Respondent. It was not unreasonable for Brennan and his crew
to continue to use Brennan’s dump truck and other equipment after they were converted to Lake
employees in May, 2006.

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Lake maintained control and ownership of tools and equipment by purchasing new materials
and equipment on its account. This included materials purchased by Stanek and other workers as
well as materials and equipment delivered to the site by other companies for Respondent’s use.

                                Previous Work for BEI

   Stanek and Kazsuk were able to clearly differentiate between their time working for BEI and

for Lake. Both stated they were working for Lake in May 2006 and May 2007. Stanek testified he
worked for BEI in 2001 and 2002, and Brennan paid him in cash. Stanek began working for Lake
in May 2006, when he first worked on sewer laterals. Kazsuk stated he first worked for BEI, “about
eight years ago and worked for them for about three years” (Tr. 141).

                             Lake’s Employment Policies
   Lake makes two other assertions in support of its argument that it did not employ the

excavation workers. First, Marucci testified Lake’s employees were required to join the Teamsters
union. Brennan, Kazsuk, and Stanek were not Teamsters. This establishes only that Lake failed to
comply with its union contract, not that the workers could not be employees of Lake. Second,
Marucci stated the excavation workers could not be Lake’s employees because Lake does not do
excavations. That statement is totally meaningless and without merit. Lake began doing
excavations once it converted the workers to its employees by placing them on its payroll and
exercising supervisory authority over them. Marucci’s protestations to the contrary are rejected.

                                         Payroll
   In the original decision, the court analzed the evidence showing the three workers were on

Lake’s payroll. In its brief on remand, Lake argues, [T]here was neither testimony, nor
documentation offered by the Complainant which established that either Brennan, Stanek, or Kazsuk
were on the payroll of LCS on May 9, 2007, or May 10, 2007” (Lake’s brief p. 4). The court rejects
this argument. Kazsuk testified regarding how he was paid for work in May, 2007 as follows:
Q. And, How were you paid for your work on this project?
Kazsuk: I got paid by check from Lake County Sewer.
Q. Please describe how you were paid and that type of thing?

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Kazsuk: How I was paid? I went to pick up my check at Lake County
Sewer. Q. Were there any unusual circumstances in terms of your being paid by
Lake County Sewer?
Kazsuk: No, but I only worked there for one week.
Q. Did you have to sign for anything?
Kazsuk: Yes, I had to sign a paper before I could receive my check.
Q. What was the substance of that paper you had to sign.
Kazsuk: That it was for my 1099.
Q. And, do you know what a 1099 is?
Kazsuk: Yes, where I have to pay my income tax on it.
Q. Did you consider yourself an independent contractor on this job?
Kazsuk: Sublabor, I guess. I mean, to get my check, I had to sign whatever
he asked. I needed my money.
Q. Say that again?
Kazsuk: I said I needed my check. I signed whatever he put in front of me
to sign.
Q. Were you on Lake County’s payroll?
Kazsuk: Just the one check.
Q. Did you receive a paycheck from any other company for your work in ‘07
on this project?
Kazsuk: No.
(Tr. 133-134)
The record establishes that Kazsuk was on Lake’s payroll for May 2007. Lake forced him
to sign a statement (Exh. R-4) and file a 1099 form to receive his check, but, as Kazsuk noted, he
would have signed anything Lake required to get his money. He stated, “I didn’t find out I was an
independent contractor until I signed that to get my check” (Tr. 138).
In 2006, Respondent paid Stanek as an employee, not as an independent contractor. Marucci
admitted at the hearing the project that ended in 2006 would extend into 2007. Respondent does not
perform sewer work during the winter months. Marucci further admitted that he put Brennan,
Stanek and another worker Tom Stropki, on Lake’s payroll for this project in 2006.

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The contract between Lake and the city of Willowick for sewer work was a continuing
contract which was extended year to year. Extensions of the contract were done by written change
orders. Marucci claimed Lake’s original written subcontract with Brennan on this job was extended
from 2005 through 2006 and into 2007. He admitted, however, the subcontract extensions were
verbal, not written.
Marucci’s behavior regarding control and payment of workers on this job, however, was
inconsistent with his claim that Brennan was a subcontractor during 2006 and 2007. In May or June,
2006, Lake put Brennan, Stanek and Stropki on its payroll. It paid them as employees and listed
them on certified payrolls as Lake’s employees.
Testimony of Stanek, a careful review of his W-2 form for 2006, and other evidence illustrate
that these workers were treated as employees of Lake and not employees of Brennan or as
independent contractors.
Stanek’s W-2 Form, Wage and Tax Statement (Exh. C-6), was prepared by Lake and filed
with the Internal Revenue Service. On it, Respondent lists its own employer identification number
and lists the name of the employer as Lake County Sewer Company, Inc. The individual named on
the W-2 by Lake as an employee is Brooks E. Stanek. Stanek worked on this project as a laborer
and filed a W-4 Form in 2006 listing Lake as his employer.
Stanek’s W-2 Form for 2006 shows all wages earned as well as withholdings made by Lake
for Federal, State and Local income taxes, Social Security taxes, and Medicare taxes. In 2006,
Stanek was paid weekly by Lake by direct-deposit of wages into his account.
Stanek worked only four days in May, 2007, the beginning of the construction season in
Ohio, when the accident occurred. Workers on this job had not yet been paid since the first work
week had not been completed. To date, Stanek has not been paid for that work by Lake or any other
entity. Stanek testified that he submitted the time for work done in May 2007. After the accident,
when he got out of the hospital, he spoke to Marucci about getting paid for the time he worked.
Marucci told Stanek that the only way he would get paid was if he signed a 1099 Form stating that
he was an independent contractor. Stanek refused to sign as requested. His understanding was that
it was going to be the same set up as the previous year with a direct-deposit of wages into his
account with taxes withheld. Stanek believed he was to continue being paid as an employee of Lake
in 2007, as he was in 2006. Stanek’s testimony is consistent internally, and consistent with his W-2

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Form, the certified payrolls and other credible evidence received at hearing. I find his testimony
forthright, credible and convincing.
Stanek kept daily records for work done by the three workers on the job in May, 2007. He
turned records into Respondent’s office for payment by Lake. This was also done in 2006 and 2007.
He clearly testified that he did not work for Brennan.
Respondent’s Payroll Register (Exh. C-12) clearly shows Stanek was paid as an employee
in 2006. Certified Payroll records show Brennan, Stanek, and Stropki as employees of Lake (Exhs.
C-10, C-11). Respondent is listed as both the General/Prime Contractor and as the Employer. These
certified payrolls were prepared by Respondent and submitted to the City of Willowick for payment.
Brennan was not listed on these payrolls as a subcontractor.
I am unpersuaded by Marucci’s attempt at the hearing to explain that the employees listed
on the certified payrolls were not Lake’s employees, but just employees on the project. He was
asked at the hearing to explain the reason that Lake was listed on the certified payrolls as the prime
contractor and the employer when, as he claimed, respondent was not the employer. His response
was: “That’s just how these forms are” (Tr. 252).
The certified payrolls are consistent with Lake’s payroll register, Stanek’s W-2 Forms and
testimony, and all other evidence presented at hearing other than the testimony of Marucci.
Marucci’s testimony is inconsistent with records prepared and maintained by Lake prior to the
accident. It is clear that the workers on this jobsite were considered to be and, in fact, were paid as
employees of Lake and not as Brennan’s employees or as independent contractors. Mr. Marucci’s
testimony is found to be unconvincing and rejected based on lack of credibility.

                            Worker’s Compensation Benefits
   Stanek filed a worker’s compensation claim with the state of Ohio after his accident.

The Industrial Commission of Ohio held a hearing on Stanek’s claim on September 24, 2007, after
Lake appealed an administrator’s order finding Lake was Stanek’s employer. The Industrial
Commission found Lake was Stanek’s employer:
The compelling evidence involving the employer/employee
relationship are the payroll records involved in this claim. While the
sewer company had some sort of a contractual relationship with
Brennan, the relationship that the sewer company had with the
claimant is that of employer/employee. The history between the two

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indicate that the claimant received payroll checks from the employer
and was not paid directly by Brennan. The pay that is being withheld
is being withheld by the sewer company. Given that the history
between the claimant and the sewer company is that the claimant
would be on the payroll of the sewer company and perform services
consistent with the business mission of the sewer company, the
District Hearing Officer concludes that on 05/10/2007 there was an
employer/employee relationship between the two parties. The
claimant was an employee of the Lake County Sewer Company, Inc.

                                                                  (Exh. C-9, p. 2)

   The Industrial Commission’s decision is consistent with the analysis and conclusions reached

by the court in this decision and the original decision in this case. There, as here, Stanek was found
to be on the payroll of Lake as an employee and performed services consistent with the business
mission of Lake. In some worker’s compensation cases, a prime contractor is held responsible for
employees of subcontractors that do not have separate certificates of insurance for their employees.
In this case, the Industrial Commission stated clearly that its decision was based on the direct
employer/employee relationship between Lake and Stanek.

                                        Conclusion
   The preponderance of the evidence establishes Lake was the employer of Brennan, Stanek

and Kazsuk. The testimony of Stanek and Kazsuk, who are deemed credible witnesses, is consistent
with Brennan’s statements regarding the employment relationship with Lake. Only Marucci
contends he did not have the authority to supervise, or to hire and fire the excavation employees.
When Brennan’s erratic payment system was brought to his attention, Marucci did not fire BEI or
take legal action; he, acting for Lake, took over the payroll. That action along with Marucci’s
exercise of control over all aspects of the work on this project converted Lake’s relationship with
these three workers to that of an employer/employee relationship.
Based on the level of authority Marucci exercised over the workers and the payroll history
(including paychecks, tax forms, and worker’s compensation), the court reiterates its finding that
Lake was the employer of Brennan, Stanek, and Kazsuk on May 10, 2007.

               FINDINGS OF FACT AND CONCLUSIONS OF LAW

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The foregoing decision constitutes the findings of fact and conclusions of law in accordance
with Federal Rule of Civil Procedure 52(a).
ORDER
Based upon the foregoing decision, it is hereby ORDERED:
That Lake County Sewer Company is determined to be the employer of exposed workers on
this jobsite.

                                                 _/s/___________________________
                                                 STEPHEN J. SIMKO, JR.
                                                 Judge

Date: April 16, 2009

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