‘Buddy Exemption’ Gets a Censure from Alaska Supreme Court

Juneau, AK (WorkersCompensation.com) — It stands to reason that if you hire a friend to do odd jobs around the house for you, that probably won’t qualify you for workers’ compensation insurance, even if you pay him to do it.

However, as was the case in Amos v. Tidwell, No. 2-18626 (Alaska 07/26/24), the so-called “buddy exception” does not necessarily apply if you hire your friend to help you perform work for another friend.

What happened in the Amos case?

A worker fell from the roof of a shop he was helping a builder build. The builder promised to pay the worker for his work. The builder asked the worker to help him with the job, which was on the property of the builder’s friends.

The worker filed a workers’ compensation claim against the builder and the Alaska Workers’ Compensation Benefits Guaranty Fund for his injuries. The builder asked the Alaska Workers’ Compensation Board to deny the claim, arguing that he had not hired the worker, but had brought him in as a friend to help. The board found that the worker had an employment contract with the builder, but determined that the builder was not an “employer” under the Alaska Workers’ Compensation Act.

The board held that the employment-based friendship fell within the consumptive use exemption from coverage under the law. The Alaska Workers’ Compensation Appeals Commission affirmed the board’s decision, agreeing that the employee’s employment fell within a history or practice of friends helping each other.

The employee appealed to the Alaska Supreme Court.

The law that applied and what the Court said

In Nickels v. Napolilli, 29 P.3d 242 (Alaska 2001), the Alaska Supreme Court held that the legislature has a duty under Alaska’s statutory workers’ compensation system to define exempt classes of employees. The commission therefore erred in creating a “buddy” exemption from coverage.

“We conclude that there was an employment relationship” between the employee and the builder, the court said.

Productive versus consumptive use of labor

So, if the “buddy exemption” did not apply, could the builder defend himself on the grounds that his use of the worker’s services was consumptive rather than productive in nature? Not in this case.

In Kroll v. Reeser, 655 P. 2d 753 (Alaska 1982), the Alaska Supreme Court explained that an exception exists for consumer employers who hire employees to perform tasks in or related to their personal residences. The theory applies to “household workers” because, even if they are engaged in a business with compensation, they are not producers of goods or services when they hire someone into their home for their personal benefit. Examples include:

+ Hire a young neighbor to mow the lawn.

+ Hiring a nurse to stay with a sick child.

The question in this case was whether the exemption applied because the builder was friends with the owners of the property.

According to the court, it was not the relationship between the builder and the owners of the property that was the issue at issue, but the relationship between the worker and the builder that mattered.

“A homeowner who hires someone to clear his own driveway can reasonably argue that he is not an ’employer’ as defined in the statute because he hired that person and uses that person’s labor as a consumer to maintain his home,” the court wrote. “But a snowplow is not exempt from the statute if he hires someone to clear the driveways of others.”

The distinction between production and consumption therefore did not apply to the builder’s work in the workshop, because the project “was not his personal project, but on his property,” the court explained.

The court also noted that the commission’s decision that the employee was a “part-time” and “temporary” employee under Alaska law was an error because the board had not addressed the issue in its ruling. This means that the case was not considered when the commission considered the case.

Workers Compensation 101: Those who have read the full Amos case on Simply Research know that in Alaska, “part-time helper” means a person who performs work on an occasional, irregular, discontinuous basis that is either not an integral part of the regular business of the beneficiary of the work or that does not form part of the employee’s regular business, occupation, or profession, while “temporary helper” means a person who has no permanent place of work and who performs work that is not part of the regular business of the beneficiary of the work.

Therefore, the Alaska Supreme Court reversed the commission’s decision and remanded the case for further proceedings.