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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Gaede v. Saunders (8/30/2002) sp-5617

Gaede v. Saunders (8/30/2002) sp-5617

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,


MICHAEL GAEDE,           )
                              )    Supreme Court No. S-10113
               Appellant,          )
                              )    Superior Court No.
     v.                       )    1JU-00-1025 CI
MIKE and KATE SAUNDERS,       )    O P I N I O N
                Appellees.          )    [No. 5617 -  August  30,

          Appeal  from the Superior Court of the  State
          of  Alaska, First Judicial District,  Juneau,
          Larry R. Weeks, Judge.

          Appearances:   Paul  M.  Hoffman,  Robertson,
          Monagle  &  Eastaugh,  P.C.,  for  Appellant.
          Paul   H.   Grant,   Philip  M.   Pallenberg,
          Batchelor,  Pallenberg & Associates,  Juneau,
          for Appellees.

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, Bryner, and Carpeneti, Justices.

          MATTHEWS, Justice.

           Mike  and  Kate  Saunders hired workers  to  build  an

addition to their home.  One of the workers, Michael Gaede,  fell

from  a  ladder  and  was injured.  Gaede's  claim  for  workers'

compensation  benefits  was denied by the  Workers'  Compensation

Board  on  the ground that Gaede was not an employee  within  the

meaning  of  the  Workers' Compensation Act.  The superior  court

affirmed, as do we.

           Under  the  Workers' Compensation  Act  employees  are

entitled  to  recover workers' compensation benefits  from  their

employers in the event of their work-related disability or death.1

But not all persons who are employees within the usual meaning of

that  term are employees covered by the act.  The act defines  an

employee  as "an employee employed by an employer as  defined  in

[AS 23.30.395(13)]."2  An "employer," in turn, is defined as "the

state  or its political subdivision or a person employing one  or

more persons in connection with a business or industry . . .  ."3

The  act  thus  excludes  private common law  employees  who  are

employed other than "in connection with a business or industry."

           In Kroll v. Reeser we recognized that the "business or

industry"  language  is  meant to convey that  not  every  person

working  in  the service of another is a covered  employee.4   In

Kroll a property owner was building a four-plex.  He intended  to

occupy  one of the units and rent out the other three.  A  worker

on  this  project was injured.5  The board ruled that the  worker

was covered by the act, holding that "every person in the service

of  another under contract" was an employee.6  We concluded  that

this  interpretation was too broad in that  it  failed  "to  give

proper   weight   to  the  statutory  limitation  to   employment

relationships `in connection with a business or industry.' "7  We


          In  Larson's  terms, the policy  question  is
          whether Kroll's construction activity, either
          by  itself  or  as an element of  his  rental
          activities,  was  a profit-making  enterprise
          which  ought  to bear the costs  of  injuries
          incurred   in  the  business,  or   was   the
          construction  activity simply a  cost-cutting
          shortcut  in what was basically a consumptive
          and not a productive role played by Kroll.[8]
We  remanded the case to the board to determine whether Kroll was

an employer in light of the "business or industry" limitation.

           In  Nickels  v.  Napolilli we addressed  the  question

whether a farm which was not the owners' primary source of income

was  a  "business"  within the meaning of AS 23.30.395(13).9   We

upheld  the  superior  court's conclusion that  the  farm  was  a

business.   Thus  the  farm owners were  "employers"  within  the

meaning  of the act and the farm worker was an "employee."10   We

again   recognized   "Professor  Larson's   distinction   between

consumptive  activities  which should  not  bear  the  burden  of

workers'   compensation   insurance,  and   productive   business

activities, which should."11  We also observed that "[a] business,

unlike  a  homeowner, can pass the cost of workers'  compensation

insurance  on  to  the  consumers of the  business's  service  or


          Here, there was no "business or industry" aspect to the

Saunders' building project.  They were not enlarging their  house

with  a  view  toward  producing goods or  services  for  others.

Instead,  their  role  with respect to  the  house  addition  was

consumptive, for the house was intended to be used only as  their

family  residence.  Thus the project on which Gaede  was  working

when  he  was  injured was not "in connection with a business  or

industry."  The Saunders were therefore not employers  under  the

act, and Gaede was not an employee covered by the act.13

          The judgment of the superior court is AFFIRMED.

1See AS 23.30.010 ("Compensation is payable under this chapter in
respect of disability or death of an employee.").
2AS 23.30.395(12).
3AS 23.30.395(13).
4655 P.2d 753 (Alaska 1982).
5Id. at 754-55.
6Id. at 757.
8Id. (emphasis in original).
929 P.3d 242, 252-53 (Alaska 2001).
10Id. at 253.
13The  result we reach is consistent with the result  reached  in
most jurisdictions with respect to householders' activities.  See
4  A.  Larson,  Workers' Compensation Law   50.21  (1999):   "The
courts have consistently held that compensation acts do not apply
in  such  instances.  The examples that can be drawn from decided
cases  cover  a  range as varied as the hypothetical  cases  just
suggested:    a  carpenter  helping  to  build  or  remodel   the
employer's own residence . . . ."