Brooks v. Claywell , 215 Ark. 913 ( 1949 )

We are so accustomed to the fiction of corporate entity that at first blush it may seem novel for any one to contend that the president of a corporation is not its employee. Of course he is an employee for many purposes, as for the rule of respondeat superior, but I can find no case holding that the owner of a business is ipso facto an employee within a compensation law merely because the business is incorporated. The courts point out that the very title of a Workmen's Compensation Act indicates the intention to benefit the workman rather than the executive head of the concern. These statutes provide a small weekly income, usually limited to twenty or twenty-five dollars, for workmen to whom disability would otherwise mean a cessation of income. This consideration does not apply to the executive officers of the company, whose salaries usually continue during disability and to whom the weekly payments would be more in the nature of pocket money than of a means of subsistence during unemployment. For these reasons the cases uniformly hold that an employee's status for compensation purposes depends upon his relative position in the hierarchy of the business rather than upon the fact that the organization is incorporated. Cases very similar to this one on the facts include Leigh Aitchison, Inc., v. Industrial Commission,188 Wis. 218, 205 N.W. 806, 44 A.L.R. 1213, and Donaldson v. Wm. H. B. Donaldson Co., 176 Minn. 422,223 N.W. 772, both denying compensation to the president of a corporation.

I agree that in some cases the president might also be an employee, but here the undisputed facts do not establish such a case. The true test of the employer-employee relationship is that of supervision and control. An employee must be employed by some one. Brook was in effect the owner of this business. The other stockholders were his sister and brother-in-law, who lived in Blytheville and never took the slightest interest in the company. No dividends had ever been paid. All the profits were taken by Brook himself, without accountability to any one. In the store itself Brook was in absolute control. The other workers were all under his supervision, but he took orders from no one. The business was in fact an individual proprietorship, though conducted as a corporation.

The Commission rested its decision solely on Brook's testimony that at times he went behind the counter and sold goods to the public. It was said that in so doing Brook was acting as an employee and not as the president of the corporation. But the fallacy in this statement is that an employee's status is not to be determined by the nature of his activities while at work; the test is whether those activities are subject to some one else's supervision and control. As I cannot find a syllable in this record to indicate that any one else had the power to direct Brook's activities, I think we must say as a matter of law that he was not an employee. No issue of fact is involved.

The policy favoring a liberal construction of the Act is not applicable here. So far as I can find, this is the only reported case in which it has been necessary to count an executive officer as an employee in order to provide compensation for a true employee. In all the other cases it has been the president or other officer who was injured and applied for compensation. We may assume that our cases in the future will be of that nature. Thus the practical effect of this decision will be to provide compensation for executive officers rather than for the workmen contemplated by the Act.