Saladworks, LLC and Wesco Ins. Co. v. WCAB (Gaudioso and UEGF)

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Saladworks, LLC and Wesco :

Insurance Company, :

Petitioners :

:

v. :

:

Workers' Compensation Appeal :

Board (Gaudioso and Uninsured :

Employers Guaranty Fund), : No. 1789 C.D. 2014

Respondents : Argued: May 4, 2015

BEFORE: HONORABLE BERNARD L. McGINLEY, Judge

HONORABLE BONNIE BRIGANCE LEADBETTER, Judge

HONORABLE PATRICIA A. McCULLOUGH, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION

BY JUDGE McGINLEY FILED: October 6, 2015

Saladworks, LLC and Wesco Insurance Company (Saladworks)

challenge the order of the Workers’ Compensation Appeal Board (Board) that

reversed the Workers’ Compensation Judge’s (WCJ) denial of the Uninsured

Employers Guaranty Fund’s (UEGF) petition to join Saladworks.

I. Background.

A. General.

Frank Gaudioso (Claimant) worked at a Saladworks restaurant.

Claimant’s job duties included placing food orders, doing prep work, working the

cash register, and making salads. On March 14, 2011, Claimant walked out of the

back of the store to throw away a box. Claimant sustained an injury when he

slipped and twisted both of his knees. On May 26, 2011, Claimant petitioned for

benefits against Saladworks though that name was later amended to G21, LLC

d/b/a Saladworks (G21). Claimant also petitioned for penalties on the basis that

G21 had not filed any Bureau documents to accept or deny the claim in violation of

Section 406.1 of the Workers’ Compensation Act (Act)1, 77 P.S. §717.1.

On September 7, 2011, Claimant filed a separate claim petition

against UEGF. On December 9, 2011, UEGF filed a joinder petition against

Saladworks and alleged that Saladworks was “an additional employer, agent,

statutory employer of Claimant” and that Saladworks was jointly and severally

liable. Saladworks moved that the joinder petition be dismissed/stricken because

Saladworks had no relationship with Claimant but was a franchisor that granted

certain rights to G21 to use its registered trademarks and system pursuant to the

terms and conditions of the Franchise Agreement (Agreement).

B. Joinder Petition, Claim Petition against G21, and Penalty Petition against

G21.

At hearing before the WCJ on January 25, 2012, Roseann Maillie

(Maillie), the director of franchise administration for Saladworks, testified that

Saladworks was a franchisor and “we sell franchises to prospective franchisees to

open up their businesses with Saladworks’ concept.” Notes of Testimony, January

25, 2012, (N.T.) at 10; Reproduced Record (R.R.) at 68a. Maillie testified that the

Saladworks in the Bourse building in Philadelphia was independently owned by

G21, the franchisee. Mr. Ko2 (Ko) was the owner of G21. N.T. at 11; R.R. at 69a.

The relationship between Saladworks and G21 was established through the signing

of the Agreement. N.T. at 11; R.R. at 69a. The Agreement was then entered into

1

Act of June 2, 1915, P.L. 736, as amended. This section was added by February

8, 1972, P.L. 25.

2

Mr. Ko’s first name is not part of the record.

2

evidence. According to Maillie, Saladworks did not know the identity of

employees at franchised locations, did not do any of the hiring or firing of

employees at franchise locations, did not dictate how many hours an employee

worked at a franchised location, and did not provide any training for the day to day

operational employees of a franchisee. N.T. at 12-15; R.R. at 70a-73a. On cross-

examination, Maillie admitted that Saladworks trains the owner of the franchise,

that Saladworks’ marketing department assists the franchisees with marketing, and

that someone from Saladworks comes to the franchisee’s location to assist the

franchisee prior to the opening of the location. N.T. at 16-18; R.R. at 74a-76a.

Further, Saladworks conducts operational performance reviews of franchisees.

N.T. at 18; R.R. at 76a. Saladworks provides the franchisee with a confidential

business manual which instructs the franchisee how to run the business. N.T. at

25-26; R.R. at 83a-84a. Maillie admitted that Saladworks has the authority to

terminate a franchise if the franchisee fails to make a requested remodel of a store.

N.T. at 27; R.R. at 85a. Further, a franchisee must submit proposed advertising to

Saladworks for its approval and spend a certain amount for advertising per year.

N.T. at 28; R.R. at 86a. Under the franchise agreement Saladworks requires the

franchisee to maintain certain types of insurance, including workers’ compensation

insurance. N.T. at 29-30; R.R. at 87a-88a.

At the conclusion of Maillie’s testimony, the WCJ granted

Saladworks’ motion to strike the joinder petition because “I do not see any at-will

employment relationship here and I am not aware of any case that holds that a

franchisor is an employer.” N.T. at 38-39; R.R. at 96a-97a.

3

Claimant testified3 that on March 14, 2011, while employed by G21 as

a prep person, he “walked out of the store in the back hallway to throw away a box

and I slipped on water and twisted both my knees.” N.T. at 41; R.R. at 99a. When

Claimant told Ko about his injury, Ko told him that he did not have insurance and

“if I could wait a few weeks, let him get insurance, then he’ll put me on a claim.”

N.T. at 42; R.R. at 100a. Claimant described his knees as “stiff, sore, they’re

swollen, it’s hard to walk on them. They hurt.” N.T. at 46; R.R. at 104a.

Claimant has not worked since the injury. He did not believe that he could return

to work because he would have to stand for his whole shift, and he could not

handle that. N.T. at 46-47; R.R. at 104a-105a. On cross-examination, Claimant

admitted that he received social security disability benefits for herniated discs in

his neck and back, nerve damage in his arms, and an amputated finger. These

injuries were unrelated to the alleged work-related injury. N.T. at 51; R.R. at 109a.

The WCJ granted Claimant’s claim petition against G21. The WCJ

granted Saladworks’ motion to strike the joinder petition and dismissed UEGF’s

joinder petition. The WCJ granted Claimant’s penalty petition against G21. The

WCJ made the following relevant findings of fact:

11. The WCJ finds despite being correctly served with

the Claim Petition, Employer [G21] did not file an

answer to the petition within 20 days of the Notice of

Assignment to the WCJ. Accordingly, as explained

below, all well-pled allegations of the Claim petitions

[sic] are deemed admitted and Employer [G21] is

prevented from presenting any evidence to defend the

claim.

....

3

Claimant’s testimony also served as evidence in the claim petition against UEGF.

4

13. The Judge finds that Employer did not provide an

adequate excuse for failing to file a timely answer to the

claim petition.

....

15. With regard to the joinder petition, the Judge finds

Ms. Maillie’s testimony fully credible. Based on her

testimony and the Franchise Agreement entered into

evidence, the Judge finds that Saladworks, LLC does not

know who the employees of any individual franchise

[are] and has no contact or control over the individual

franchisee’s employees. Saladworks, LLC does not hire,

fire, set the hours or have any control for any of the

franchisee’s employees. Rather, it is the franchisee that

controls the employees of the franchisee. In this case, the

franchisee was G21, LLC.

DISCUSSION

The uncontroverted evidence of record shows that the

Employer [G21] failed to timely answer the Claim

Petition in this matter. Moreover, the evidence

demonstrates that the Claim Petition itself was well pled

to meet the requirements regarding Yellow Freight

motions.

Under Yellow Freight, Inc. v. WCAB [Workmen’s

Compensation Appeal Board] (Madara), 423 A.2d 1125

(Pa. Cmwlth. 1981), and Section 416 of the Workers’

Compensation [Act] Act of June 2, 1915, P.L. 736, as

amended, 77 P.S. §821, a claimant can motion for a

workers’ compensation judge to close the record and

issue a decision based upon the petition itself if the

employer failed to file an answer to the claim petition

within 20 days time. Moreover, when an employer fails

to file a timely answer without adequate excuse, every

well pled factual allegation is admitted as true and the

employer is barred from presenting challenges to the

allegations in the petition and from presenting any

affirmative defenses. . . .

The failure to file a timely answer precludes an employer

from presenting any evidence in rebuttal or as an

affirmative defense with respect to those alleged facts;

5

the workers’ compensation judge may only consider the

allegations set forth in the claim petition and any

additional evidence presented by the claimant (emphasis

added) [by WCJ]. . . .

....

The second issue regards Saladworks, LLC’s motion to

strike the UEGF’s joinder petition. Saladworks, LLC

argues that is merely a franchisor, and not an employer,

and thus should be dismissed from this workers’

compensation action. This Judge agrees.

The . . . Workers’ Compensation Act applies to

‘employers’ and requires compensation of injured

‘employees.’. . . . Thus, determining whether the parties

fall into these categories is a threshold determination in

workers’ compensation cases.

The determination of whether a particular party is an

‘employer’ under the Act is one governed by reference

both to the statutory definition and to the significant case

law that has developed under it. Briefly, the statute

defines the term as synonymous with the term ‘master.’ .

. . The cases hold that the statutory definition is applied

by reference to the body of common law dealing with the

master-servant relationship in a general context. . . .

The law has a long heritage; cases have explored the

employment relationship and the specific issue of

employer identity for many years. In general, the cases

hold that an entity which controls, or has the right to

control, the details of the injured worker’s labor, is a

‘master’ and potentially liable to such a ‘servant’ under

the Act. . . .

In the case at bar, the Franchise Agreement between

Saladworks, LLC and G21, LLC explicitly states that

G21, LLC is an independent contractor and has no

authority to act as an agent of Saladworks, LLC. Ms.

Maillie credibly explained that Saladworks, LLC does

not know who the employees of any individual franchise

[are] and has no contact or control over the individual

franchisee’s employees. Saladworks, LLC does not hire,

fire, set the hours, or have any control for any of the

6

franchisee’s employees. Rather, it is the franchisee that

controls the employees of the franchisee. In this case, the

franchisee was G21, LLC. Saladworks, LLC merely

provides training to the owner of the franchisee, not the

employees of the franchisee. Saladworks, LLC, as the

franchisor, merely has certain proprietary items and

trademarks (such as any franchisor like McDonalds and

Burger King) and establishes with the franchisee certain

policies for the layout and look of individual locations.

Claimant testified that the employer’s name on his

paycheck was ‘G21,’ LLC. Given Saladworks, LLC

does not meet the statutory definition of employer, or the

cases interpreting it, Saladworks, LLC should be

dismissed.

This Judge cannot find one single Pennsylvania workers’

compensation case where a franchisor has been held to be

an employer and the UEGF has not provided any support

for this assertion. . . . To force Saladworks, LLC to

remain in this case without a scintilla of evidence that it

meets the definition of ‘employer’ under the Act is . . .

needless and unreasonable.

WCJ’s Decision, April 3, 2012, Findings of Fact Nos. 11, 13, and 15 and

Discussion at 3-6.

UEGF appealed the denial of its joinder petition to the Board and

asserted that the WCJ erred when he determined that Saladworks was not a

statutory employer of Claimant. The Board agreed and reversed:

Here, the WCJ relied on the ‘control test’. . . to find that

Saladworks, as a franchisor, did not meet the definition

of an ‘employer’ under the Act because it did not control,

‘or have the right to control, the details of the injured

worker’s labor.’. . . However, the status as a statutory

employer is not established through an actual

employment relationship. Rather, a statutory employer

‘is a master who is not a contractual or common-law one,

but is made one by the Act’ . . . . Here, the WCJ failed to

7

address whether Saladworks was a ‘statutory employer’

under Section 302(a) of the Act. . . .

....

We agree with UEGF that the Supreme Court in Six L’s

Packing Co. [v. Workers’ Compensation Appeal Board

(Williamson), 44 A.3d 1148 (Pa. 2012)] held that the

McDonald test[4] applies to Section 302(b) of the Act and

not to Section 302(a). . . . Further, it is clear that Section

302(b) of the Act is not applicable to this case, as

Saladworks did not own or occupy the premises where

Claimant was injured. Conversely, Section 302(a)

recognizes class of statutory employers who [sic] are not

in possession or control of the premises and use

subcontractors for services that are a ‘regular or

recurrent’ part of the business. . . . Although statutory

employer status is most often seen in the context of

construction cases, it can arise in other circumstances. . . .

Therefore, we determine that cases involving franchisors

and franchisees must be analyzed on a case-by-case basis

under Section 302(a) in order to determine if the

franchisor is a statutory employer in the event the

franchisee is uninsured. . . . As such, the relationship

between Saladworks, the franchisor, and G21, the

franchisee, must be examined and a determination made

whether Saladworks has contracted with G21 ‘to have

work performed of a kind which is a regular or recurrent

part of the business, occupation, profession or trade of

such person’ . . . .

....

Based on the Franchise Agreement, Saladworks had a

contractual obligation to ensure that G21 had the

appropriate workers’ compensation insurance coverage in

place, which would have protected Saladworks from

liability in this case and would have ensured that

Claimant had coverage for his work-related injuries.

4

In McDonald v. Levinson Steel Company, 153 A. 424 (Pa. 1930), our

Pennsylvania Supreme Court set forth five factors to be used to determine whether there is a

statutory employer: 1) the entity is under contract with an owner or one who is in the position of

an owner; 2) the entity occupies or controls the premises where the injury took place; 3) the

entity entered into a subcontract; 4) the entity entrusted a portion of its regular business to the

subcontractor; and 5) the injured party was employed by the subcontractor.

8

However, for whatever reason, Saladworks did not fulfill

its obligation under the contract, and G21 was without

workers’ compensation insurance to cover Claimant’s

injuries.

The record evidences that Saladworks, as the franchisor,

contracted with G21, as the franchisee, to have work

performed which is a regular or recurrent part of

Saladworks’ business, occupation or trade. Specifically,

Saladworks contracted with G21 to open a Saladworks

restaurant facility in accordance with the ‘unique

system,’ developed and owned by Saladworks, relating to

‘the establishment, development and operation of

restaurant facilities offering on-premises dining and

carry-out services, featuring a variety of salads and other

bread and beverage produced.’ . . . . As such, Saladworks

is a statutory employer under Section 302(a) of the Act,

77 P.S. § 461.

Furthermore, the purpose of the statutory employer

doctrine is to place responsibility for payment on the first

entity in a contractor chain when an injured employee’s

direct employer, the subcontractor, fails to secure

workers’ compensation insurance. . . . Our determination

that Saladworks is a statutory employer supports that

purpose as well as the humanitarian purposes of the Act.

(Citations and footnote omitted.)

Board Opinion, September 10, 2014, (Opinion) at 3, 5, 9, and 10.5

5

In the claim petition against UEGF, Claimant presented the deposition testimony

of Zohar Stark, M.D. (Dr. Stark), a board-certified orthopedic surgeon and Claimant’s treating

physician. Dr. Stark first examined Claimant on July 11, 2011. Upon examination, Dr. Stark

diagnosed Claimant with “sprain/contusion of both knees” which he related to the March 14,

2011, incident at work. Deposition of Zohar Stark, M.D., October 27, 2011, (Dr. Stark

Deposition) at 9; R.R. at 29a. Dr. Stark last treated Claimant on September 12, 2011. His

diagnosis of Claimant did not change. He recommended that Claimant undergo arthroscopic

surgery on both knees to determine the source of his pain and to possibly alleviate it. Dr. Stark

Deposition at 11-12; R.R. at 30a. Dr. Stark did not release Claimant to return to his time of

injury job because he “cannot stand on his feet for that amount of time, for 20 hours a week,

cannot walk out, he cannot push the garbage that he has to do.” Dr. Stark Deposition at 12-13;

R.R. at 30a.

(Footnote continued on next page…)

9

Saladworks contends that the Board erred when it reversed the WCJ’s

denial of the joinder petition.6

(continued…)

UEGF presented the deposition testimony of Eugene A. Elia, M.D. (Dr. Elia), a

board-certified orthopedic surgeon. Dr. Elia examined Claimant on February 1, 2012, took a

history, and reviewed medical records. After he conducted the examination, Dr. Elia found no

objective findings of ongoing disability. Deposition of Eugene A. Elia, M.D., August 27, 2012,

(Dr. Elia Deposition) at 12-13; R.R. at 192a-193a. Dr. Elia explained that Claimant would not

squat but could get up and down from the examination table which was significant because “if

somebody can get up and down from the examination table, I always find it interesting that they

would not perform other activities when I would ask them to.” Dr. Elia Deposition at 13; R.R. at

193a. Dr. Elia determined, based on the history, examination, and review of medical records,

that Claimant suffered sprained knees on April 14, 2011, but that, as of the date of the

examination, February 1, 2012, he had no objective findings of any ongoing disability or

continuance of the injury. Dr. Elia Deposition at 19; R.R. at 199a. Dr. Elia testified within a

reasonable degree of medical certainty that Claimant could return to his time of injury job. Dr.

Elia Deposition at 24; R.R. at 204a.

With respect to the claim petition against UEGF, the WCJ granted the claim

petition. The WCJ found Claimant credible and found Dr. Stark more credible than Dr. Elia.

UEGF did not appeal this decision. Claimant and UEGF subsequently entered into a

Compromise and Release Agreement:

The UEGF has agreed to waive its subrogation lien against

Claimant’s third party recovery in return for a full and final

compromise and release of Claimant’s rights to payment of

ongoing wage loss benefits as well as any potential claim for

disfigurement or specific loss Claimant has in relationship to his

3/14/2011 work injury.

Compromise and Release Agreement by Stipulation pursuant to Section 449 of the Workers’

Compensation Act, [77 P.S. §1000.5], August 5, 2014, Paragraph No. 10(1) at 2.

6

This Court’s review is limited to a determination of whether an error of law was

committed, whether necessary findings of fact are supported by substantial evidence, or whether

constitutional rights were violated. Vinglinsky v. Workmen’s Compensation Appeal Board

(Penn Installation), 589 A.2d 291 (Pa. Cmwlth. 1991).

10

II. Discussion.

Saladworks asserts that Section 302(a) of the Act, 77 P.S. §461, does

not apply to franchisor/franchisee agreements and that Six L’s Packing Company

v. Workers’ Compensation Appeal Board (Williamson), 44 A.3d 1148 (Pa. 2012)

is clearly distinguishable and not applicable to the facts present here.

Section 302(a) of the Act, 77 P.S. §461, provides:

A contractor who subcontracts all or any part of a

contract and his insurer shall be liable for the payment of

compensation to the employes of the subcontractor unless

the subcontractor primarily liable for the payment of such

compensation has secured its payment as provided for in

this act. Any contractor or his insurer who [sic] shall

become liable hereunder for such compensation may

recover the amount thereof paid and any necessary

expenses from the subcontractor primarily liable therefor.

For purposes of this subsection, a person who contracts

with another (1) to have work performed consisting of (i)

the removal, excavation or drilling of soil, rock or

minerals, or (ii) the cutting or removal of timber from

lands, or (2) to have work performed of a kind which is a

regular or recurrent part of the business, occupation,

profession or trade of such person shall be deemed a

contractor, and such other person a subcontractor. This

subsection shall not apply, however, to an owner or

lessee of land principally used for agriculture who is not

a covered employer under this act and who contracts for

the removal of timber from such land.

In Six L’s, our Pennsylvania Supreme Court addressed the

applicability of Section 302(a) of the Act in the context of whether a party bears

liability for workers’ compensation benefits as the statutory employer of an injured

truck driver who was employed by an independent contractor. Six L’s Packing

11

Company (Company) grew, harvested, processed, and distributed tomatoes and

other produce. In April 2002, the Company contracted with F. Garcia & Sons

(Garcia) to perform services for it. One of the tasks was the transportation of

tomatoes between a warehouse in Shickshinny, Pennsylvania, and a processing

facility in Crisfield, Maryland. Garcia employed Williamson7 as a truck driver.

Williamson was involved in a motor vehicle accident on a Pennsylvania roadway

while he was transporting tomatoes owned by the Company from Shickshinny to

Crisfield. Williamson was injured in the accident and petitioned for benefits.

Garcia did not carry workers’ compensation insurance. Williamson argued that the

Company was his statutory employer under Section 302(a) of the Act and was

secondarily liable for the payment of workers’ compensation benefits. Six L’s, 44

A.3d at 1150.

Before the WCJ, the Company presented evidence to establish that it

did not own trucks or employ drivers but used independent contractors for its

transportation needs. The Company also took the position that Section 302(a) did

not apply because Williamson did not establish that (1) the entity was under

contract with an owner; (2) the entity occupied or was in control of the premises

where the injury took place; (3) the entity entered into a subcontract; (4) the entity

entrusted a part of its regular business to the subcontractor; and (5) the injured

person was an employee of the subcontractor. See McDonald v. Levinson Steel

Company, 153 A. 424 (Pa. 1930). Because Williamson was injured on a public

highway and not on premises owned or controlled by the Company, the Company

took the position that the McDonald test was not met, and the Company was not a

7

The opinion does not list Williamson’s first name.

12

statutory employer. The WCJ found that the McDonald test was satisfied and that

the Company was the statutory employer under Section 302(a). The Board

affirmed though for a slightly different reason. The Board determined that

McDonald pertained to a different section of the Act and, while it did apply to

Section 302(b) of the Act,8 77 P.S. §462, it did not apply to Section 302(a). The

Board reasoned that the Company contracted with Garcia to have work performed

that was a regular part of the Company’s business. As a result, the Board

considered the Company a contractor under Section 302(a) and Garcia a

subcontractor. Because Williamson was injured while in the employ of the

Company’s uninsured subcontractor, Garcia, the Board determined that the

Company was Williamson’s statutory employer and was secondarily liable for the

payment of workers’ compensation benefits. The Company appealed to this Court

which affirmed. Six L’s, 44 A.3d at 1152-1153. Our Pennsylvania Supreme Court

affirmed and held that McDonald did not apply to Section 302(a) of the Act. Six

L’s, 44 A.3d at 1159.

Saladworks argues that neither Section 302(a) nor Six L’s applies to

the present case. Claimant worked for G21, a Saladworks’ franchisee, which did

8

Section 302(b) of the Act, 77 P.S. §462, provides:

Any employer who permits the entry upon premises occupied by

him or under his control of a laborer or an assistant hired by an

employe or contractor, for the performance upon such premises of

a part of such employer’s regular business entrusted to that

employe or contractor, shall be liable for the payment of

compensation to such laborer or assistant unless such hiring

employe or contractor, if primarily liable for the payment of such

compensation, has secured the payment thereof as provided for in

this act.

13

not have workers’ compensation insurance on the date of the injury. The Board

determined that Saladworks fit the definition of a statutory employer under Section

302(a) because Saladworks contracted with G21 to perform work which was a

regular part of Saladworks’ business, occupation, or trade. Specifically, according

to the Board, Saladworks contracted with G21 “to open a Saladworks restaurant

facility in accordance with the ‘unique system,’ developed and owned by

Saladworks, relating to ‘the establishment, development and operation of

restaurant facilities offering on-premises dining and carry-out services, featuring a

variety of salads and other bread and beverage produced.’” Opinion at 9-10.

Saladworks argues that the Board misunderstood the nature of its

business. As Maillie testified, Saladworks sells franchises to franchisees that open

their own businesses using Saladworks’ concept. Saladworks does not own the

location. Saladworks does not know any of the employees, does not hire or fire

employees, and has nothing to do with the day to day operation of the franchise.

Saladworks does provide marketing assistance and the use of trademarks.

Saladworks asserts that its regular or recurrent business is selling franchise licenses

rather than the establishment, development, and operation of restaurant facilities.

Saladworks further asserts that the Board misunderstood its

relationship with G21 because the franchisor-franchisee relationship is different

than that of a traditional contractor-subcontractor. In the traditional contractor-

subcontractor setting, the contractor hires a subcontractor to perform a specific role

or task that aids in the overall goal of the contractor. For instance, a contractor

building a new building may hire an electrician as a subcontractor to install the

14

wiring in the building. In contrast, the franchisor-franchisee relationship is

different in that Saladworks’ goal is to sell more franchises so that it can reap the

benefit of franchise fees and royalty payments. Saladworks is not trying to sell

more salads itself.

Once again, Section 302(a) of the Act, 77 P.S. §461, provides that a

an entity must subcontract to have work performed that is a regular or recurrent

part of its business in order to be considered a statutory employer:

[A]ll or any part of a contract and his insurer shall be

liable for the payment of compensation to the employes

of the subcontractor unless the subcontractor primarily

liable for the payment of such compensation has secured

its payment as provided for in this act. Any contractor or

his insurer who [sic] shall become liable hereunder for

such compensation may recover the amount thereof paid

and any necessary expenses from the subcontractor

primarily liable therefor.

For purposes of this subsection, a person who contracts

with another . . . (2) to have work performed of a kind

which is a regular or recurrent part of the business,

occupation, profession or trade of such person shall

be deemed a contractor, and such other person a

subcontractor. (Emphasis added.)

Therefore, as Saladworks points out, the key question is whether the

work performed by G21 under the Agreement was a regular or recurrent part of the

business, occupation, profession, or trade of Saladworks. Under the Agreement,

Saladworks granted G21 the right to use the mark “Saladworks” and to operate a

Saladworks restaurant and to use the system established by Saladworks. In return,

G21 agreed to pay a franchise fee as well as a weekly Continuing Services and

15

Royalty Fee of five percent of gross sales. G21 was responsible for purchasing or

leasing a suitable site. G21 was required to provide Saladworks with a site survey,

architectural plans and specifications. G21 was also required to periodically make

reasonable capital expenditures to remodel, modernize, and redecorate the

premises. G21 was required to pay one and one-half percent of its gross sales to

Saladworks’ advertising and development fund. G21 was also required to obtain

different types of insurance coverage including workers’ compensation. The

Agreement also sets forth fifteen conditions of default which could result in

termination of the agreement.

Also, as part of the agreement, Saladworks agreed to provide G21

with a copy of a confidential operations manual, training and assistance, and

proprietary marks. Saladworks had approval of any advertising.

This Court must agree with Saladworks that its main business is the

sale of franchises to franchisees that desire to use its name and “System” and

marketing expertise. While Saladworks and G21 are connected through the

Agreement, this Court is not prepared to adopt the reasoning of the Board. While

Saladworks provides certain services to independent franchisees like G21, it is not

in the restaurant business or the business of selling salads.

The situation here does not compare with that of Six-L’s. In Six-L’s,

the Company hired Garcia to perform an essential part of its business: the

transportation of produce from a warehouse to a processing facility. Williamson

was injured performing this essential function. Here, in contrast, Saladworks was

16

in the business of selling franchises that used its unique system. Claimant was

injured while working for a franchisee that was in the business of selling salads

and other food products.9

Claimant was not an employee of Saladworks. The evidence

established that G21 was Claimant’s employer at the time of injury and was liable

for the payment of benefits. It also appears that G21 lacked workers’

compensation insurance. Therefore, UEGF is responsible pursuant to Section

1602(c) of the Act, 77 P.S. §2702(c).10

9

Interestingly, the Board acknowledges that its opinion is contrary to its decision in

Dorvil v. Prof Pizza It’s a Domino’s Pizza, A11-0670. In Dorvil, Anuel Dorvil (Dorvil) was

injured in a motor vehicle accident while delivering pizzas for Professional Pizza, Inc.

(Professional), a franchisee of Domino’s Pizza, LLC (Domino’s). Professional did not have

workers’ compensation insurance. Dorvil petitioned for benefits from the UEGF. The UEGF

filed a joinder petition and alleged that Domino’s, as the franchisor, was Dorvil’s employer at the

time of the work-related injury. The WCJ found that Dorvil suffered injuries in the accident and

was disabled from employment. The WCJ denied the claim petition, granted the joinder petition,

and found Domino’s liable for the payment of Dorvil’s benefits. Domino’s appealed to the

Board which reversed in part because the Board determined that a franchisor was not a

contractor for purposes of Section 302(a) of the Act.

It is unclear why the Board reached the opposite conclusion in the present case which

was decided approximately one year later.

10

This section was added by the Act of November 9, 2006, P.L. 262. Section

2702(c) of the Act provides:

The administrator shall establish and maintain the fund for the

exclusive purpose of paying to any claimant or his dependents

workers’ compensation benefits due and payable under this act and

the act of June 21, 1939 (P.L. 566, No. 284), known as The

Pennsylvania Occupational Disease Act, and any costs specifically

associated therewith where the employer liable for the payments

failed to insure or self-insure its workers’ compensation liability

under section 305 at the time the injuries took place.

17

Accordingly, this Court reverses the order of the Board.

____________________________

BERNARD L. McGINLEY, Judge

18

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Saladworks, LLC and Wesco :

Insurance Company, :

Petitioners :

:

v. :

:

Workers' Compensation Appeal :

Board (Gaudioso and Uninsured :

Employers Guaranty Fund), : No. 1789 C.D. 2014

Respondents :

ORDER

AND NOW, this 6th day of October, 2015, the order of the Workers’

Compensation Appeal Board in the above-captioned matter is reversed insofar as it

reversed the WCJ’s denial and dismissal of the Uninsured Employer Guaranty

Fund’s petition to join Saladworks, LLC.

____________________________

BERNARD L. McGINLEY, Judge