Anderson v. Tri State Construction

#29336-r-J MK

2021 S.D. 50
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
kKkE*K
STELLA ANDERSON, Claimant and Appellant,

Vv.

TRI STATE CONSTRUCTION, LLC and
CINCINNATI INDEMNITY COMPANY, Employer, Insurer, and
Appellees.

kK KK

APPEAL FROM THE CIRCUIT COURT OF
THE SIXTH JUDICIAL CIRCUIT
HUGHES COUNTY, SOUTH DAKOTA

KEK *

THE HONORABLE CHRISTINA L. KLINGER
Judge

KR K*

REXFORD A. HAGG of
Whiting, Hagg, Hagg, Dorsey
& Hagg, LLP
Rapid City, South Dakota Attorneys for claimant and
appellant.

LAURA K. HENSLEY of

Boyce Law Firm, LLP

Sioux Falls, South Dakota Attorneys for employer, insurer,
and appellees.

we KS

CONSIDERED ON BRIEFS
NOVEMBER 16, 2020
OPINION FILED 08/25/21
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KERN, Justice
[J1.] Stella Anderson (Anderson) was injured in Wyoming while working at
a job site for Tri State Construction, LLC (Tri State), a corporation formed and
headquartered in South Dakota. Tri State carried a workers’ compensation
insurance policy, and Anderson applied for and received workers’ compensation
benefits in Wyoming. Anderson later sought benefits under South Dakota’s more
favorable workers’ compensation statutes. The South Dakota Department of Labor
and Regulation (Department) concluded that it lacked jurisdiction over Anderson’s
claim and dismissed her petition. The circuit court affirmed the Department’s
decision. Anderson appeals. We reverse and remand.

Factual and Procedural Background
[{2.] The facts of this case are straightforward. On August 25, 2018,
Anderson was hired to work for Tri State as a truck driver. Tri State specialized in
the preparation of construction sites, trucking, and the sale and delivery of
aggregate materials, Organized as a South Dakota limited liability company, Tri
State placed its headquarters in Belle Fourche, South Dakota, and hired four office
employees to operate its accounting, payroll, and human resources divisions from its
Belle Fourche office. All of Tri State’s other employees worked outside of South

Dakota, including Anderson and her direct supervisor. Anderson, who resided in

Spearfish, South Dakota, worked primarily in Wyoming.!

1. Spearfish and Belle Fourche are near South Dakota’s border with Wyoming
and Montana. About thirty percent of Anderson’s duties required trips into
Montana.
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[(3.] When applying for the position, Anderson was interviewed and offered
employment in the Belle Fourche office. The parties do not dispute that the
employment contract was executed in South Dakota. She was required to pass a
pre-employment drug test, which she took in Spearfish. She picked up her first
paycheck at the Belle Fourche office as well as her direct deposit paystubs every two
weeks thereafter, although her paychecks after the first one were directly deposited.
[{4.] On October 5, 2018, the day before her scheduled Mine Safety and
Health Administration (MSHA) training? at the Belle Fourche office, Anderson was
injured in a traffic accident in Colony, Wyoming, when the truck she was driving
slid on a curve in the road and rolled into the ditch.? She sustained injuries to her
neck, back, left shoulder, arm, and head in the accident and reported the injuries to
Tri State that same day. The accident occurred close to the South Dakota border,
and Anderson was first taken to the emergency room in Spearfish for treatment for
her injuries, then transported to Rapid City, South Dakota, for further care.

[{5.] Tri State was insured for workers’ compensation in both South Dakota
and Wyoming through the Cincinnati Indemnity Company (Insurer). After
Anderson’s injury, Tri State conducted a post-accident interview in the Belle
Fourche office and, thereafter, filed a first report of injury under the Wyoming

workers’ compensation program, which is a state-administered system. Anderson

2. According to the MSHA, safety courses are designed to limit injuries and
accidents that can occur when operating heavy equipment during mining
operations.

3. The parties do not dispute that Anderson was acting within the scope of her

employment at the time of her injury.

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began to receive benefits, including payment of her medical bills and temporary
total disability payments, through Wyoming’s workers’ compensation system.

[| 6.] Eventually, Anderson consulted with an attorney and discovered that
Wyoming law hmited her eligibility to collect total disability benefits to 80 months,
whereas in South Dakota, she could be eligible to receive permanent total disability
benefits. Accordingly, Anderson, who has not been able to return to work, filed a
petition with the Department on February 4, 2019, seeking to prove her entitlement
to permanent total disability benefits. Because Anderson did not claim or receive
permanent total disability benefits from the Wyoming Department of Labor, she
claimed that there was no risk of duplication of benefits.

[7.] On August 29, 2019, the Department issued a letter decision denying
Anderson’s claim, concluding that there were “insufficient contacts with South
Dakota to give the Department statutory jurisdiction in this matter.” On
September 20, 2019, Anderson appealed the Department's determination to the
circuit court. Anderson claimed the Department erred by failing to: (1) assume
jurisdiction under the plain language of SDCL 62-3-3; and (2) find a substantial
connection between the employment relationship and the State of South Dakota
sufficient to confer jurisdiction to the Department.

[18.] In a memorandum decision entered May 6, 2020, the circuit court

affirmed the Department’s dismissal, concluding that Anderson’s “relationship with

4, Anderson claims her work related injuries render her permanently and
totally disabled and unable to work. Her alleged injuries include a traumatic
brain injury, post-traumatic stress disorder, blurred vision, debilitating neck
pain and headaches, and weakness in walking and climbing.

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South Dakota for purposes of workers’ compensation was minimal, at best, and did
not provide a reasonable relationship that would support a substantial relationship
between employment and the state of South Dakota.” The court observed that
Anderson worked outside of South Dakota and that collecting her pay in South
Dakota was incidental to her employment duties. The court concluded that
Anderson’s decision to live in South Dakota was a personal choice and that, despite
her training schedule, Anderson had never participated in training in South
Dakota. The court further discounted the contacts Anderson’s employment created
with South Dakota by prioritizing where Anderson actually worked versus the place
where she “was interviewed and hired.” Thus, the court affirmed the Department’s
decision, holding that South Dakota did not have a reasonable relationship to the
occurrence, the parties and the employment that could confer jurisdiction to the
Department.
[9.] Anderson appeals, arguing the circuit court erred when it held the
Department lacked jurisdiction to hear Anderson’s claim for workers’ compensation
benefits.

Standard of Review
[]10.] “[A]ctions of the agency are fully reviewable when the issue is a
question of law.” Knapp v. Hamm & Phillips Serv. Co., 2012 8.D. 82, 4 11, 824
N.W.2d 785, 788. “The jurisdictional question in this case—the agency’s scope of
authority under a statute—is a question of law reviewed de novo. Similarly, we
review questions of statutory interpretation de novo.” Winslow v. Fall River Cnty.,

2018 S.D. 25, | 12, 909 N.W.2d 713, 717 (citations omitted).

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Analysis and Decision

[{11.] “An administrative agency has jurisdiction over a matter when the
agency is given power ‘by law to hear and decide controversies.” Knapp, 2012 S.D.
82, 12, 824 N.W.2d at 788 (quoting Martin v. Am. Colloid Co., 2011 S.D. 57, J 10,
804 N.W.2d 65, 67). As this Court has previously explained, the concept of
jurisdiction differs in administrative law settings from that used in a traditional
court setting. Id.; Winslow, 2018 S.D. 25, | 8, 909 N.W.2d at 716. The
determination of jurisdiction in administrative law involves three components:

(1) personal jurisdiction, referring to the agency’s authority over

the parties and intervenors involved in the proceedings; (2)

subject matter jurisdiction, referring to the agency’s power to

hear and determine the causes of a general class of cases to

which a particular case belongs; and (3) the agency’s scope of

authority under statute.

Knapp, 2012 8.D. 82, § 12, 824 N.W.2d at 788-89. At issue here is the third

element—the scope of the Department’s authority to apply South Dakota workers’

compensation statutes to an accident that occurred outside the state.®

5. As an initial matter, we address the propriety of Anderson’s decision to file
for workers’ compensation benefits in two forums. Although Anderson had
already filed a valid claim in Wyoming, the Full Faith and Credit Clause of
the United States Constitution does not preclude her from receiving a
successive workers’ compensation award, nor is Tri State’s interest in
limiting its potential liability within the State “of controlling importance.”
See Thomas v. Wash. Gas Light Co., 448 U.S. 261, 280, 100 S. Ct. 2647, 2660,
65 L. Ed. 2d 757 (1980); see also U.S. Const. art. IV, § 1. As this Court
observed in both Knapp and Martin, the Thomas Court rejected a formal
“rule forbidding supplemental recoveries under more favorable workmens’
compensation schemes” reasoning that:

Compensation proceedings are often initiated informally,
without the advice of counsel, and without special attention to
the choice of the most appropriate forum. Often the worker is
(continued . . .)
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[{12.] South Dakota’s statutory scheme for workers’ compensation is set forth
in Title 62 of the South Dakota Codified Laws, and under SDCL 62-3-3: “Every
employer and employee shall be presumed to have accepted the provisions of this
title, and shall be thereby bound, whether injury or death resulting from such
injury occurs within this state or elsewhere, except as provided by §§ 62-3-4 to 62-3-
5.1, inclusive.” (Emphasis added.)

Whether SDCL 62-38-3 applies

[]13.] Anderson maintains that a plain reading of SDCL 62-3-3
unambiguously places South Dakota employers, such as Tri State, squarely within
the jurisdiction of the statute. She notes that the statute uses the term every before
employer and thus, in her view, every South Dakota employer falls within the
Department's scope of authority. We disagree.

(4114.] When analyzing the text of a statute, “we adhere to two primary rules
of statutory construction. The first rule is that the language expressed in the
statute is the paramount consideration. The second rule is that if the words and
phrases in the statute have plain meaning and effect, we should simply declare
their meaning and not resort to statutory construction.” Winslow, 2018 S.D. 25, f

12, 909 N.W.2d at 717 (citation omitted). The Legislature did not use the words

(... continued)
still hospitalized when benefits are sought as was true in this
case. And indeed, it is not always the injured worker who
institutes the claim.

Thomas, 448 U.S. at 284-85, 100 S. Ct. at 2662-63 (citation omitted).
6. None of the exceptions in SDCL 62-3-3 are relevant to this appeal.

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“South Dakota” in the statute or in the definitions in Title 62.7 Additionally, the
plain language of SDCL 62-3-3, though it refers to every employer, does not set
forth the scope of the Department’s authority to hear a workers’ compensation
claim.®

[915.] However, Anderson further submits that SDCL 62-3-3 creates a
presumption that the Department has jurisdiction over her employment
relationship with Tri State because Tri State 1s headquartered in South Dakota and
is organized as a South Dakota business. According to Anderson, because of this
presumption, Tri State carries the burden to show that it “can opt out” of South
Dakota’s Workers’ Compensation Act.

[16.] In making this argument, Anderson misconstrues the presumption
contained in SDCL 62-38-3. Nearly a century ago in Richardson v. Farmers’ Co-
Operative Union, this Court interpreted § 9437 (formerly SDCL 62-3-3) to mean
that an employer “is presumed to have accepted the [terms of the workers’

compensation] act” unless an exemption in the act applies, but the employer's

7, The Michigan Court of Appeals was presented with this argument and
reached a similar conclusion. See Rodwell v. Pro Football, Inc., 206 N.W.2d
773, 777-78 (Mich. Ct. App. 1973) (noting that the state’s legislature did not
use the word “Michigan” in the statute and therefore refused to read an
“additional requirement limiting the operation of [the statute] to [an in-state]
employer’).

8. Conceivably, a South Dakota employer could have an employment
relationship outside of South Dakota, and a foreign employer could have an
employment relationship inside South Dakota. See, e.g., Pac. Emps. Ins. Co.
vu. Indus. Accident Comm'n of California, 306 U.S. 493, 59 S. Ct. 629, 83 L.
Ed. 940 (1939) (holding that California law could apply to an employee
injured in California, even though the employee was from Massachusetts and
worked for a Massachusetts employer).

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liability is restricted “to the amounts specified in... the act only when the employer
has insurance.” 45 §.D. 357, 187 N.W. 632, 632-33 (1922). Failure to carry
insurance constitutes an election not to operate under the protections of SDCL 62-3-
3. Utah Idaho Sugar Co. v. Temmey, 68 S.D. 623, 626, 5 N.W.2d 486, 487 (1942).
Therefore, the presumption does not refer to the Department’s authority, but
rather, serves to protect the employer who procures insurance.

[{17.| Although an employer who procures insurance coverage may seek the
protections of Title 62, the claim must, as a prerequisite, be within the scope of the
Department’s authority. The parties do not dispute that the Insurer’s workers’
compensation policy brings Tri State within South Dakota’s workers’ compensation
statutory scheme. But the Department cannot be presumed to have authority over
Anderson’s claim simply because Tri State purchased a qualifying insurance policy.
Therefore, the plain language of SDCL 62-3-3 does not confer upon the Department
a presumption of authority to hear Anderson’s claim. As we observed in Martin,
“many other states have addressed” the scope of the agency’s authority “by statute,”
but the South Dakota Legislature has not. 2011 S$.D. 57, | 14, 804 N.W.2d at 69.
“In situations where a statute is silent with respect to its territorial range of
application, the task of determining this range of application falls entirely upon the
courts and administrative tribunals.” Restatement (Second) of Conflict of Laws §
181 (1971) emt. b.

Whether Tri State has a Substantial Connection to South Dakota

[¥18.] In Martin, we recognized that although SDCL 62-3-3 does not

“provide[] a clear answer to the jurisdictional question|[,]” the language of the
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statute anticipates coverage for some injuries that occur outside South Dakota
because it provides coverage for workers’ compensation injuries occurring “within
this state or elsewhere[.|” Martin, 2011 S.D. 57, Jf 13, 14, 804 N.W.2d at 69
(alteration in original). Therefore, we must determine whether, consistent with due
process, the Department has authority to apply South Dakota workers’
compensation laws to Anderson’s exterritorial injuries. See Martin, 2011 S.D. 57,
{| 14-15, 804 N.W.2d at 69-70 (quoting Restatement (Second) of Conflict of Laws §
181 (1971)). We have explained that “to determine if South Dakota workers’
compensation law covered the injury[,] [w]e look for factors that tend to show a
‘substantial connection’ with South Dakota on a case-by-case basis to determine the
location of the employment relationship.” Knapp, 2012 S.D. 82, § 14, 824 N.W.2d at
789 (citations omitted). “No single factor 1s ‘necessarily sufficient on its own to
create a substantial connection to the employment relationship.” Id. | 14, 824
N.W.2d at 790 (quoting Martin, 2011 S8.D. 57, {| 15, 804 N.W.2d at 70).
[{19.] To determine whether Anderson’s employment had a “substantial
connection” with South Dakota, we begin by considering factors hsted in the
Restatement (Second) of Conflict of Laws § 181 (1971). See Martin, 2011 8.D. 57, 4
15, 804 N.W.2d at 69-70; Knapp, 2012 S.D. 82, J 14, 824 N.W.2d at 790. Section
181 provides:

A State of the United States may consistently with the

requirements of due process award relief to a person under its

workers’ compensation statute, if

(a) the person is injured in the State, or

(b) the employment is principally located in the State, or

(c) the employer supervised the employee’s activities from a
place of business in the State, or

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(d) the State is that of most significant relationship to the
contract of employment with respect to the issue of workers’
compensation under the rules of §§ 187-188 and 196, or

(e) the parties have agreed in the contract of employment or
otherwise that their rights should be determined under the
workers’ compensation act of the State, or

(f) the State has some other reasonable relationship to the
occurrence, the parties and the employment.

Restatement (Second) of Conflict of Laws § 181 (1971).9

[120.]

Anderson argues that applying the factors to her case establishes that

a substantial connection exists between South Dakota and her employment

relationship with Tri State. To support her position, Anderson submits that our

holdings in Martin and Knapp, although factually distinguishable, support her

claim that the Department has jurisdiction in this case. We agree.

9. Regarding the factor within subsection (d) above, § 187 of the Restatement
(Second) of Conflict of Laws (1971) focuses on the choice of law negotiated by
the parties. Anderson’s employment contract, however, is silent on this issue.
In such cases, § 188(2) provides that “[i]n the absence of an effective choice of
law by the parties (see § 187), the contacts to be taken into account... to
determine the law applicable to an issue include:

(a) the place of contracting,

(b) the place of negotiation of the contract,

({c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicil, residence, nationality, place of incorporation and place
of business of the parties.”

Further, § 196 provides that:

The validity of a contract for the rendition of services and the
rights created thereby are determined . . . by the local law of the
state where the contract requires that the services, or a major
portion of the services, be rendered, unless, with respect to the
particular issue, some other state has a more significant
relationship ...in which the event the local law of the other
state will be applied.

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[421.] In Martin we analyzed the connection between South Dakota and the
employment. Martin, 2011 8.D. 57, § 16, 804 N.W.2d at 70. The employee, who
was injured at the employer’s facility in Wyoming, lived in Belle Fourche and
worked exclusively in Colony, Wyoming, as a line worker in a large manufacturing
facility. Id. { 4, 804 N.W.2d at 66. The employer was based in Illinois and operated
the Wyoming facility. Id. { 2-3, 804 N.W.2d at 66. Although the employer had a
small administrative office in Belle Fourche, the office did not represent the
employer’s headquarters, did not provide accounting, payroll, or human resources,
and was not the location where the parties entered into the employment contract.
Id. {{| 3-4, 804 N.W.2d at 66. Before being hired, the employee was required to
complete a physical and urinalysis at a Belle Fourche medical clinic. Jd. J 4, 804
N.W.2d at 66. Thus, the only connection between South Dakota and the
employment relationship was the employee’s personal residence. Id. {| 16, 804
N.W.2d at 70. Ultimately, we concluded that while this factor did, to some degree,
strengthen the tie to South Dakota, it was insufficient to provide the substantial
connection necessary for the Department to have authority to hear the claim. Id.
ff 22.] Similarly, we held that the employee in Knapp failed to show a
substantial connection between South Dakota and the employment relationship.
The employee, who was injured while working in North Dakota, lived in Montana
but also owned a home in Camp Crook, South Dakota, where he lived part time.
2012 S.D. 82, Jf] 1-2, 824 N.W.2d at 786. The employee drove a truck hauling
wastewater from oil wells in South Dakota, North Dakota, and Montana for an

employer based in North Dakota and spent about thirty-five percent of his time

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working in South Dakota. Id. | 2-4, 824 N.W.2d at 786-87. The North Dakota
employer did not have an office in South Dakota, although the employee submitted
time logs and picked up paychecks at a third-party’s facility in Buffalo, South
Dakota. Id. ¢{ 3, 16, 824 N.W.2d at 787, 791. We held that “based on all of the
factors surrounding the relationship between [the employee and employer] and
because the injury and place of employment were in North Dakota,” the worker's
employment relationship was not substantially connected to South Dakota. Id.
16, 824 N.W.2d at 791.

[{23.] Here, similar to the employees in Martin and Knapp, Anderson lived in
South Dakota and was injured out of state. However, unlike the employers in
Martin and Knapp, Tri State—organized under South Dakota law—managed and
operated its accounting, payroll, and human resources services from its
headquarters in Belle Fourche. It also conducted training sessions for its employees
at this South Dakota office. In fact, Anderson had been scheduled for training in
that office the day after her accident. Moreover, Tri State conducted a post-accident
interview with Anderson in the Belle Fourche office.

((24.] South Dakota also represents the place where the parties negotiated
and executed the contract. Anderson was interviewed and hired by Tri State at the
Belle Fourche office in South Dakota to do work in Wyoming. In contrast, the
employees in Knapp and Martin entered into employment contracts outside of
South Dakota.

[{25.] In Alaska Packers Association v. Industrial Accident Commission of

California, the United State Supreme Court held that the factor of where the

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parties negotiated and executed the contract was relevant when determining the
forum for adjudication of compensability. 294 U.S. 532, 540-41, 55 S. Ct. 518, 521,
79 L. Ed. 1044 (1935). In that case, the employee had entered into a contract in
California, stipulating that the parties would be bound by the Alaska workers’
compensation scheme for work to be done in Alaska. Jd. at 588, 55 S. Ct. at 519.
The employee subsequently sustained work-related injuries in Alaska, and upon his
return to California, applied for and was granted workers’ compensation benefits in
conformity with California workers’ compensation laws. Id. at 538-39, 55 8S. Ct. at
520. The employer challenged the commission’s decision, and the Supreme Court
affirmed the California high court’s judgment, holding that “where the contract is
entered into within the state, even though it is to be performed elsewhere, its terms,
its obligation and its sanctions are subject, in some measure, to the legislative
control of the state.” Jd. at 540-41, 55S. Ct. at 521.10

[|26.] We note that while it may be that Wyoming shared a relationship to
Anderson’s employment with Tri State based on the location of her duties and the
accident, this does not diminish South Dakota’s connection to the circumstances of
the employment relationship here. As we acknowledged in Martin, “[i]t is
conceivable that both South Dakota and another state could have a substantial
connection to the employment relationship, and both could therefore be considered

the location of the employment relationship. In such a case, the Department would

10. Other courts have also placed special emphasis on the place the parties
contracted. See Pierce v. Foley Bros., 168 N.W.2d 346, 353 (Minn. 1969)
(holding that a basic requirement for jurisdiction is that the employment
contract was entered into in the state in question).

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have jurisdiction even if the other state had awarded benefits under its workers’
compensation laws.” 2011 §.D. 57, § 14 n.2, 804 N.W.2d at 69 n2.

[{27.] Likewise, the location of the accident is not solely determinative of
which state has a substantial connection to the employment relationship. See
Knapp, 2012 8.D. 82, J 14, 824 N.W.2d at 790 (holding that any one factor of the
Restatement (Second) of Conflicts of Law is not dispositive in determining the
Department’s jurisdiction). In Chambers v. Dakotah Charter, Inc., this Court, when
applying a choice of law provision in a multi-state tort action, abandoned the
archaic doctrine of lex loci delecti, which inflexibly applied the law of the place
where the incident occurred, in favor of the Restatement (Second) of Conflicts of
Law, which embraces the “most significant relationship approach to govern” choice
of law conflicts. 488 N.W.2d 63, 64-69 (S.D. 1992).

[[28.] Analogous to this situation is the question the United States Supreme
Court confronted in Cardillo uv, Liberty Mutual Insurance Company, where an
employee worked and was injured in Virginia but lived inside the small territory of
the District of Columbia. 330 U.S. 469, 474-75, 67 S. Ct, 801, 805, 91 L. Ed. 1028
(1947). The Cardillo Court reasoned that “[w]hen such employees reside in the
District and are injured while performing those outside assignments .. . the
District’s legitimate interest in providing adequate workmen's compensation
measures for its residents does noi turn on the fortuitous circumstance of the place of
their work or injury .... Rather it depends upon some substantial connection
between the District and the particular employee-employer relationship[.]” Jd. at

476, S. Ct. at 806 (emphasis added). This holding comports with our general rule

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that “we construe workers’ compensation statutes liberally to provide coverage” in
favor of injured employees. Goodman v. Sioux Steel Co., 475 N.W.2d 563, 565 (8.D.
1991); see Sopko v. C & R Transfer Co., 1998 S.D. 8, | 8, 575 N.W.2d 225, 229 (“The
overall purpose of workers’ compensation is to provide for employees who have lost
their ability to earn because of an employment related accident, casualty, or
disease.”).

[]29.] Based upon the foregoing, we hold that South Dakota has a substantial
connection to Anderson and Tri State’s employment relationship sufficient to
provide the Department with authority to adjudicate Anderson’s claim.
Accordingly, Anderson’s claim for workers’ compensation benefits does not offend
principles of due process. Martin, 2011 8.D. 57, | 9, 804 N.W.2d at 67. Therefore,
we reverse the circuit court’s decision affirming the Department's decision and
remand for further proceedings consistent with this opinion.

[[30.] JENSEN, Chief Justice, and SALTER and DEVANEY, Justices, and
GILBERTSON, Retired Chief Justice, concur.

[{31.] MYREN, Justice, not having been a member of the Court at the time

this action was submitted to the Court, did not participate.

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