Opinion
Civ. 99-5004
July 27, 2000.
Rexford A. Hagg, Whiting, Hagg Hagg, Rapid City, SD, Attorney for Plaintiff.
Robert L. Lewis, Costello, Porter, Hill, Heisterkamp Bushnell, Rapid City, SD, Attorney for Defendant.
MEMORANDUM OPINION AND ORDER
Granting Defendants' Motion for Summary Judgment and Denying Plaintiff's Cross Motion for Summary Judgment
[¶ 1] Lori McNeese brought this action against American Family Mutual Insurance Company, American Family Life Insurance Company, and American Standard Insurance Company of Wisconsin, hereinafter "American Family." McNeese claims she was unlawfully terminated from her position as an American Family insurance agent because of both her sex and a disability, in violation of her claimed rights under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and the Americans with Disabilities Act, 42 U.S.C. § 12101. American Family moves for summary judgment on the basis of lack of jurisdiction. McNeese filed a cross motion for summary judgment based on the issue of employment status. In the event American Family's motion for summary judgment is denied, American Family seeks a bifurcated hearing on the independent contractor-employee issue. This court has jurisdiction pursuant to 28 U.S.C. § 1331 and 1343(3).
FACTS
[¶ 2] McNeese worked as an American Family insurance agent from March 1988, until that relationship was terminated on January 12, 1998. McNeese, a female, operated an insurance agency in Belle Fourche, South Dakota. McNeese was never under daily direct supervision as an agent for American Family. She received commissions and bonuses but no additional compensation. American Family did not withhold income taxes or FICA taxes from McNeese's commission checks. McNeese paid all overhead costs related to the operation of her agency, which included her rent and the salaries of her employees. She set her own work hours and took vacation time without notice to American Family. The manner in which she solicited insurance was left to her discretion.
[¶ 3] McNeese paid for her South Dakota insurance license without the assistance of American Family. McNeese was a member of and paid her own dues to the National Association of Life Underwriters. She also carried her own errors and omissions insurance policy. American Family provided a limited amount of promotional items, but McNeese purchased her own office supplies and stationery. American Family paid 50 percent of the advertising costs incurred by McNeese, but held a right of pre-approval of any non-generic advertising selected by McNeese. Additionally, American Family occasionally sponsored training seminars and meetings for its agents. Although attendance was not mandatory, agents were encouraged to participate and McNeese was reprimanded for not attending a "non-mandatory" meeting.
[¶ 4] After being referred to American Family by a retiring agent, McNeese started as an agent in May of 1988. McNeese signed a contract when she began her relationship with American Family. The contract provided:
"It is the intent of the parties hereto that you are not an employee of the Company for any purposes, but are an independent contractor for all purposes, including federal taxation with full control of your activities and the right to exercise independent judgment as to time, place and manner of soliciting insurance, servicing policyholders and otherwise carrying out the provisions of this agreement. . . ."
American Family also required prior approval of the location of her office and pre-approval of licensed office personnel. McNeese was prohibited from selling insurance products of other companies and she was required to comply with a company dress code. She was not allowed to transfer files without approval of the manager.
[¶ 5] In 1993, American Family notified McNeese that her production was not acceptable.
By 1995, McNeese was required to submit weekly reports to the district sales manager, Peter Koupal, describing each contact McNeese made with prospective clients. In 1996, American Family required McNeese to make a certain number of appointments each week. American Family established production requirements for McNeese in 1997.
[¶ 6] On January 9, 1998, McNeese's contract with American Family was terminated. American Family claims the decision was based on her agency's failures in both production and growth. McNeese alleges that the contract was terminated because of her sex and disability.
[¶ 7] After filing a complaint with the Equal Employment Opportunity Commission, the EEOC dismissed the complaint and issued a right to sue letter dated October 16, 1998. The EEOC dismissed the action on the basis that there was no employer/employee relationship between American Family and McNeese. McNeese filed a complaint with this court on January 14, 1999.
SUMMARY JUDGMENT STANDARD
[¶ 8] Under Rule 56(c) of the Federal Rules of Civil Procedure, a movant is entitled to summary judgment if it can show that "there is no genuine issue as to any material fact and that [the movant] is entitled to judgment as a matter of law." Lambert v. City of Dumas, 187 F.3d 931, 934 (8th Cir. 1999). In determining whether summary judgment should issue, the court must view the evidence and inferences reasonably drawn therefrom "in the light most favorable to the nonmoving party." Lambert v. City of Dumas, 187 F.3d 931, 934 (8th Cir. 1999) (citing Enterprise Bank v. Magna Bank, 92 F.3d 743, 747 (8th Cir. 1996); Adkison v. G.D. Searle Co., 971 F.2d 132, 134 (8th Cir. 1992)). The burden is on the moving party to establish the absence of a genuine issue of material fact and that it is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); see also Enterprise Bank v. Magna Bank, 92 F.3d 743, 747 (8th Cir. 1996); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 1356-57, 89 L.Ed.2d 538 (1986). "As to materiality . . . [o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Once this burden has been met, the nonmoving party may not rest on the allegations in the pleadings, but by affidavit or other evidence must set forth specific facts that create a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986).
[¶ 9] In determining whether a genuine issue of material fact exists, the court views the evidence presented based upon which party has the burden of proof under the underlying substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513, 91 L.Ed.2d 202 (1986). "Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy, and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986). "Summary judgment is to be granted only where the evidence is such that no reasonable jury could return a verdict for the nonmoving party." Lambert v. City of Dumas, 187 F.3d 931, 934 (8th Cir. 1999) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986)).
DISCUSSION
[¶ 10] McNeese claims she was terminated in violation of Title VII and the ADA. Before qualifying for protection under either Title VII or the ADA, it must be established that the claimant was an employee and not an independent contractor. See Schwieger v. Farm Bureau Ins. Co. of Nebraska, 207 F.3d 480, 483 (8th Cir. 2000); Birchem v. Knights of Columbus, 116 F.3d 310, 312 (8th Cir. 1997). Title VII and the ADA protect employees but not independent contractors. See id. at 312.
[¶ 11] Because Congress has utilized a completely circular definition of "employee" for purposes of both Title VII and the ADA, it is presumed that "`Congress intended to describe the conventional master-servant relationship understood by common-law agency doctrine.'" Schwieger, 207 F.3d at 483 (quoting Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992)); see also Community for Creative Non-Violence v. Reid, 490 U.S. 730, 739-740, 109 S.Ct. 2166, 104 L.Ed.2d 811 (1989). Under the common-law approach, determining whether a hired individual is an employee or an independent contractor demands an analysis of all aspects of the working relationship between the parties. See Schwieger, 207 F.3d at 483. A court typically weighs the common-law factors listed in the Restatement (Second) of Agency § 220(2) and other additional factors related to the worker's economic situation to determine whether the individual should be considered an employee or an independent contractor. See Birchem, 116 F.3d at 312-13.
Title VII's definition of employee is found at 42 U.S.C. § 2000e (f), which states, "The term `employee' means an individual employed by an employer. . . ."
The ADA definition of employee is found at 42 U.S.C. § 12111(4), which states, "The term `employee' means an individual employed by an employer."
[¶ 12] In Darden, 503 U.S. at 324, 112 S.Ct. at 1348, the Supreme Court held that the court must consider the hiring parties' right to control the manner and means by which a product is accomplished. Then the court must consider the other factors to be weighed under the common-law test as follows: the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party's discretion over when and how long to work; the method of payment; the hired party's role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.
[¶ 13] This list is not exhaustive. See Schwieger, 207 F.3d at 484; Wilde v. County of Kandiyohi, 15 F.3d 103, 105 (8th Cir. 1994). A court may also weigh the "economic realities" of the work situation. See Schwieger, 207 F.3d at 484; Wilde, 15 F.3d at 105. This includes analysis of how the work situation may be terminated and whether the worker receives yearly leave. See Schwieger, 207 F.3d at 484; Wilde, 15 F.3d at 105.
[¶ 14] All of the incidents of the relationship between the two parties must be weighed, and no one factor is decisive. See Schwieger, 207 F.3d at 483 (quoting Darden, 503 U.S. at 324, 112 S.Ct. at 1348-49). There is no shorthand formula or magic phrase that can be applied to find the answer. See Schwieger, 207 F.3d at 483 (quoting Darden, 503 U.S. at 324, 112 S.Ct. 1348-49). The existence of a contract which refers to the individual as an independent contractor does not end the inquiry. See Schwieger, 207 F.3d at 483 (quoting Darden, 503 U.S. at 324, 112 S.Ct. at 1348-49); Devine v. Stone, Leyton Gershman, P.C., 100 F.3d 78, 81 (8th Cir. 1996).
[¶ 15] The first area to be evaluated is the hiring party's right to control the manner and means by which a task is accomplished. It is of primary consideration. Schwieger, 207 F.3d at 483. American Family did not mandate specific office hours. McNeese determined how to contact and sell insurance to new prospective customers without daily supervision by American Family. McNeese was not required to notify American Family when she was leaving for vacation.
[¶ 16] One of the reasons McNeese agreed to work with American Family was due to a conversation she had with Ryan Powell, then an associate from American Family. Powell stated to her, "The nice thing about having this business and this office, Lori, is if you don't want to do business with this man that comes through the door, you don't have too. You are to make the choices that you think will be profitable to you and the company." McNeese depo. at 11. This is consistent with the evidence presented in this case.
[¶ 17] McNeese claims that American Family mandated worker attendance at training sessions and it reprimanded McNeese for failing to attend a "non-mandatory" meeting. During the last three years of her relationship with American Family, McNeese was required to complete weekly production reports for her district manager, to make a certain number of prospect contacts, and to meet production quotas. Although American Family did not have a written dress code, the American Family district manager did make comments to McNeese about her attire. Although American Family worked with McNeese to improve her progress and profitability, the overall evidence on the issue of control indicates that McNeese was primarily in control of the manner and means of accomplishing her task. This factor is inconclusive. See Schwieger, 207 F.3d at 485.
[¶ 18] The court must also consider the twelve Restatement Second of Agency factors. See Schwieger, 207 F.3d at 485. The first factor to be considered is "the skill required" to be an insurance agent. Id. Similar to the plaintiff in Schwieger, McNeese was an insurance professional, licensed and certified by the state of South Dakota. McNeese was subject to a code of professional ethics and had been a certified member of at least one professional association, the National Association of Life Underwriters. These undisputed facts weigh heavily in favor of independent contractor status. See Schwieger, 207 F.3d at 485.
[¶ 19] The "source of the instrumentalities and tools" is the second factor to be analyzed. See Schwieger, 207 F.3d at 485. Analogous to the agent in Schwieger, McNeese paid for most of her own office supplies and other equipment. As in Schwieger, American Family leased a computer to McNeese and provided her with software for processing policies and maintaining client accounts. Aside from certain promotional materials occasionally given by American Family, McNeese was responsible for everything necessary to run her insurance agency. She paid for general office supplies and other common building expenses. No facts have been submitted by McNeese demonstrating a lack of such control in the instrumentalities and tools of the agency she owned. Although American Family did have limited control of the types of advertising McNeese could utilize, on balance the facts support a finding that this factor weighs in favor of independent contractor status. See Schwieger, 207 F.3d at 485.
[¶ 20] The third factor, "location of the work," weighs in favor of independent contractor status. McNeese worked out of her own office facility and in the field. McNeese selected the location of her office subject to approval by American Family. She was not subject to direct physical supervision in the performance of her daily tasks. These facts weigh in favor of independent contractor status. See Schwieger, 207 F.3d at 485. McNeese had a ten-year work relationship with American Family. Accordingly, the fourth factor, "duration of the relationship between the parties," supports a finding of employee status in light of McNeese's longstanding relationship with American Family. See Schwieger, 207 F.3d at 485.
[¶ 21] Factor five, "whether the hiring party has the right to assign additional projects to the hired party," weighs in favor of finding McNeese an independent contractor. American Family did not usually assign projects to her. Rather, her work was to establish her own client base to sell insurance policies when and where she wished. See Schwieger, 207 F.3d at 485-86. The sixth factor, "the extent of the hired party's discretion over when and how long to work," also weighs in favor of independent contractor status. McNeese maintained her own work schedule, although American Family requested that she work regular hours. This fact weighs in favor of independent contractor status. See Schwieger, 207 F.3d at 485. The seventh factor, method of payment, also weighs in favor of a finding of independent contractor status. McNeese was paid on commission, and received no wage or salary from American Family. See Schwieger, 207 F.3d at 486.
[¶ 22] The eighth factor, "the hired party's role in hiring and paying assistants" does not present the mixed result reached in Schwieger. In Schwieger, the claimant had no voice in determining the amount, timing, or method for the payment of her own employees. See Schwieger, 207 F.3d at 486. Employee salaries were paid directly by the defendant, which were then deducted from the claimant's commission. Unlike the claimant in Schwieger, the undisputed facts demonstrate that McNeese controlled who she employed and what salaries she would pay them. McNeese paid her employees directly, instead of through American Family. While all licensed office personnel were subject to pre-approval by American Family, this evidence does not outweigh the overwhelming evidence of McNeese's control over her employees. This factor weighs in favor of finding independent contractor status.
[¶ 23] As in Schwieger, the ninth and tenth factors, "whether the work is part of the regular business of the hiring party" and "whether the hiring party is in business," both weigh in favor of finding employee status. American Family is a business and McNeese's work of selling insurance is central to that business. See Schwieger, 207 F.3d at 486. Factor eleven, "the provision of employee benefits," weighs in favor of finding independent contractor status. McNeese was responsible for paying out of her own pocket all costs of health, life, and other insurance, including errors and omissions protection. Unlike the defendant in Schwieger, no non-participatory pension plan for career agents was provided to McNeese. See Schwieger, 207 F.3d at 486.
[¶ 24] The twelfth factor, "the tax treatment of the hired party," plainly weighs in favor of finding independent contractor status. As with the claimant in Schwieger, McNeese was "fully responsible for her own federal and state withholding taxes and social security deductions." See Schwieger, 207 F.3d at 486. McNeese has submitted no facts suggesting this factor should weigh otherwise.
[¶ 25] Finally, the court must consider the "economic realities" of the relationship between McNeese and American Family. See Schwieger, 207 F.3d at 486; Wilde, 15 F.3d at 105. Many of the factors previously discussed are also relevant when considering the economic realities of the relationship of the parties. Other factors to be considered include how the relationship may be terminated, if and how yearly leave is obtained, whether the worker accrues retirement benefits, and whether the hiring party pays social security taxes. See Wilde, 15 F.3d at 105. Similar to the evaluation made in Schwieger, American Family had no established leave or vacation policy with McNeese. The contract signed by the parties in 1988 and again in 1993 could be terminated at will by either party. These facts support a finding that McNeese was an independent contractor.
[¶ 26] The relationship between American Family and McNeese is indistinguishable from the relationship in Schwieger, wherein the Eighth Circuit found the employee to be an independent contractor. After considering all the factors in light of the common-law agency principles, the court concludes that the balance of factors clearly support the conclusion that McNeese had an independent contractor relationship with American Family. Because McNeese was an independent contractor, she cannot be afforded the protection of Title VII or of the ADA and summary judgment is appropriate.
[¶ 27] McNeese requested the court analyze the employer/independent contractor dichotomy through an analytical comparison of the contracts of McNeese and her supervisor. However, the Eighth Circuit has specifically provided a well-developed approach to this question, and this court is bound by such precedent. See generally Schwieger, 207 F.3d 480 (8th Cir. 2000); Birchem, 116 F.3d 310 (8th Cir. 1997); and Berger Transfer Storage v. Central States, Southeast West Areas Pension Fund, 85 F.3d 1374 (8th Cir. 1996). Additionally, the Eighth Circuit has established that no one factor is determinative in the employee/independent contractor analysis. See Devine, 100 F.3d at 81 (citing Darden, 503 U.S. at 324, 112 S.Ct. at 1348-49; Wilde, 15 F.3d at 106).
[¶ 28] Accordingly, it is hereby
[¶ 29] ORDERED that the motion for summary judgment (Docket 21) of American Family Mutual Insurance Company, American Family Life Insurance Company, and American Standard Insurance Company of Wisconsin is granted.
[¶ 30] IT IS FURTHER ORDERED that the cross motion for summary judgment (Docket 29) of Lori A. McNeese is denied.
[¶ 31] IT IS FURTHER ORDERED that the motion of American Family Mutual Insurance Company, American Family Life Insurance Company, and American Standard Insurance Company of Wisconsin to bifurcate the trial (Docket 25) is denied as moot.