RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 Weary v. Cochran, et al. No. 03-5143 ELECTRONIC CITATION: 2004 FED App. 0251P (6th Cir.) File Name: 04a0251p.06 Harless, LEWIS, KING, KRIEG & WALDROP, Nashville, Tennessee, Robert E. Boston, WALLER, LANSDEN, DORTCH & DAVIS, Nashville, Tennessee, for Appellees. UNITED STATES COURT OF APPEALS ON BRIEF: Angus Gillis III, Ashley N. Arnold, SCHULMAN, LEROY & BENNETT, Nashville, Tennessee, FOR THE SIXTH CIRCUIT for Appellant. Winston N. Harless, John Roy Tarpley, _________________ LEWIS, KING, KRIEG & WALDROP, Nashville, Tennessee, Robert E. Boston, Stanley E. Graham, WALLER, JOHN WEARY , X LANSDEN, DORTCH & DAVIS, Nashville, Tennessee, for Plaintiff-Appellant, - Appellees. - - No. 03-5143 MARTIN, J., delivered the opinion of the court, in which v. - MILLS, D. J., joined. CLAY, J. (pp. 12-29), delivered a > separate dissenting opinion. , WILLIAM S. COCHRAN, et al., - Defendants-Appellees. - _________________ N OPINION Appeal from the United States District Court _________________ for the Middle District of Tennessee at Nashville. No. 00-01121—Thomas A. Wiseman, Jr., District Judge. BOYCE F. MARTIN, JR., Circuit Judge. John Weary appeals the district court’s dismissal of his complaint alleging Argued: March 9, 2004 claims under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., and under Tennessee state law against Decided and Filed: July 29, 2004 Northwestern Mutual Life Insurance Company and William S. Cochran. For the reasons that follow, we AFFIRM. Before: MARTIN and CLAY, Circuit Judges; MILLS, District Judge.* I.
_________________ Northwestern Mutual Life Insurance Company markets its products through “General Agents,” who in turn contract with COUNSEL “Special Agents.” Northwestern Mutual hired William S. Cochran as its General Agent and granted him the exclusive ARGUED: Angus Gillis III, SCHULMAN, LEROY & contractual right to market Northwestern Mutual products in BENNETT, Nashville, Tennessee, for Appellant. Winston N. Tennessee. Cochran’s insurance agency was located in Nashville and, as of January 2000, had nearly one hundred Special Agents under contract. Weary served as one of those Special Agents from 1973 until 2000. * The Hon orable R ichard M ills, United States District Judge for the Central District of Illinois, sitting by designation.
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The contract governing Weary’s business relationship with used by the district court. Shah v. Deaconess Hosp., 355 F.3d Cochran, called the “Full-Time Special or Soliciting Agent’s 496, 498 (6th Cir. 2004). Summary judgment is appropriate Contract,” provided that the “Agent [Weary] shall be an “if the pleadings, depositions, answers to interrogatories, and independent contractor and nothing herein shall be construed admissions on file, together with the affidavits, if any, show to make Agent an employee of the Company [Northwestern that there is no genuine issue as to any material fact and that Mutual], General Agent [Cochran], or First Party [Cochran].” the moving party is entitled to a judgment as a matter of law.” Weary was paid solely upon a commission basis, and agreed FED . R. CIV . P. 56(c). In viewing the evidence, we must draw to meet certain minimum selling standards set by all reasonable inferences in favor of Weary, as the nonmoving Northwestern Mutual and Cochran. Cochran set higher party. Shah, 355 F.3d at 49. standards than Northwestern Mutual, as he was permitted to do, and when Weary failed to meet his minimum earnings Like other federal employment discrimination statutes, the standards in 1998 and 1999, Cochran fired him. At the time Age Discrimination in Employment Act protects employees, of his termination, Weary was over forty years of age. Weary but not independent contractors. Shah, 355 F.3d at 499; filed a claim with the Equal Employment Opportunity Simpson v. Ernst & Young, 100 F.3d 436, 438 (6th Cir. 1996). Commission, asserting that he was impermissibly terminated The determination of whether a plaintiff qualifies as an because of his age. The Commission found, however, that no employee under the Act “is a mixed question of law and fact” employer-employee relationship had existed. Thus, the that a judge normally can make as a matter of law. Lilley v. Commission closed its file and issued a right to sue letter. BTM Corp., 958 F.2d 746, 750 n.1 (6th Cir. 1992). As a general matter, this Court has repeatedly held that insurance Weary then filed the instant complaint against agents are independent contractors, rather than employees, in Northwestern Mutual and Cochran, asserting claims under the a variety of contexts. See, e.g., Ware v. United States, 67 Age Discrimination in Employment Act, as well as state law F.3d 574 (6th Cir. 1995) (insurance agent was an independent claims for breach of contract, breach of the duty of good faith contractor for tax purposes); Wolcott v. Nationwide Mut. Ins. and fair dealing, fraud in the inducement to contract and Co., 884 F.2d 245 (6th Cir. 1989) (insurance agent was an negligent or intentional misrepresentation. The district court independent contractor under ERISA); Plazzo v. Nationwide awarded summary judgment in favor of Northwestern Mutual Mut. Ins. Co., No. 88-4016, 1989 WL 154816 (6th Cir. Dec. and Cochran on the federal age discrimination claims, holding 22, 1989) (unpublished opinion) (same). Other courts are in that neither qualified as Weary’s “employer” within the accord with this view. See, e.g., Butts v. Comm’r of Internal meaning of the Act. Having dismissed the federal claims, the Revenue, 49 F.3d 713 (11th Cir. 1995) (insurance agents were district court also dismissed the state law claims for lack of independent contractors for tax purposes); Oestman v. Nat’l jurisdiction. Farmers Union Ins., 958 F.2d 303 (10th Cir. 1992) (insurance agent was an independent contractor under the Age II. Discrimination in Employment Act). The sole issue in this appeal is whether Weary was an We have recently clarified that the proper test to apply in “employee” of Northwestern Mutual or Cochran within the determining whether a hired party is an employee or an meaning of the Act. In analyzing the district court’s independent contractor under the Act is the “common law resolution of this issue, we employ de novo review, using the agency test” set forth in Nationwide Mutual Insurance same standard under Federal Rule of Civil Procedure 56(c) Company v. Darden, 503 U.S. 318, 322 (1992). See Shah, No. 03-5143 Weary v. Cochran, et al. 5 6 Weary v. Cochran, et al. No. 03-5143
355 F.3d at 499. In Darden, the Supreme Court described the which is set forth below – reflects upon, and is relevant to, common law agency test as follows: this core issue of control. Before turning to those specific factors, however, we consider in a more general manner the In determining whether a hired party is an employee extent to which Northwest Mutual or Cochran had the right to under the general common law of agency, we consider control the manner and means by which Weary marketed and the hiring party’s right to control the manner and means sold life insurance policies. by which the product is accomplished. Among the other factors relevant to this inquiry are the skill required; the We begin by noting two pieces of evidence that shed light source of the instrumentalities and tools; the location of on how the parties themselves viewed the nature of their the work; the duration of the relationship between the working relationship. First, the Special Agent Contract parties; whether the hiring party has the right to assign characterized Weary as an “independent contractor” and additional projects to the hired party; the extent of the explicitly cautioned that “nothing herein shall be construed to hired party’s discretion over when and how long to work; make [him] an employee” of Northwestern Mutual or the method of payment; the hired party’s role in hiring Cochran. This evidence, while not dispositive of the issue, is and paying assistants; whether the work is part of the certainly relevant to the inquiry. See, e.g., Eyerman v. Mary regular business of the hiring party; whether the hiring Kay Cosmetics, Inc., 967 F.2d 213, 218 (6th Cir. 1992) party is in business; the provision of employee benefits; (emphasizing that a cosmetic salesperson’s employment and the tax treatment of the hired party. agreement “unambiguously declared [her] to be an independent contractor”); Wolcott v. Nationwide Mut. Ins. Darden, 503 U.S. at 323-34; see also Shah, 355 F.3d at 499- Co., 884 F.2d 245, (6th Cir. 1989) (noting the significance of 500; Simpson, 100 F.3d at 443. “Since the common-law test the employment agreement’s characterization of the plaintiff contains no shorthand formula or magic phrase that can be insurance agent as “an independent contractor and not an applied to find the answer, . . . all of the incidents of the employee”); Daughtrey v. Honeywell, Inc., 3 F.3d 1488, 1492 relationship must be assessed and weighed with no one factor (11th Cir. 1993) (the fact that the consultant agreement stated being decisive.” Darden, 503 U.S. at 324. Of the applicable that the plaintiff was hired as an independent contractor was Darden factors,1 the vast majority weigh in favor of “probative of the parties’ intent” regarding the nature of the characterizing Weary as an independent contractor, rather employment relationship). than an employee. Second, Weary admitted in his deposition that he intended The crux of Darden’s common law agency test is “the to be an independent contractor: hiring party’s right to control the manner and means by which the product is accomplished.” 503 U.S. at 323. This is a Q. So by contract, you agreed that you were an broad consideration that is embodied in many of the specific independent contractor and not an employee of Mr. factors articulated in Darden. Our analysis of those factors – Cochran or Northwestern Mutual, correct? A. According to this document and what I was led to believe, the answer is yes, but the law says if one 1 The parties agree that the factor relating to whether the hiring party party has control over the other party, then it doesn’t is in business is irrelevant and unhelpful to this analysis, as almost any make any different what the parties to the contract hiring party is in business. No. 03-5143 Weary v. Cochran, et al. 7 8 Weary v. Cochran, et al. No. 03-5143
call themselves, you have an employer/employee Mutual manual. That limited authority that Northwest Mutual relationship. retained over these aspects of Weary’s work, however, is “not the type of control that establishes an employer/employee Q. What I get confused about that, Mr. Weary, is going relationship.” Oestman, 958 F.2d at 306 (finding plaintiff to back to your initial comments . . . in essence, you be an independent contractor despite being required to obtain intended that to be true, correct? permission from the defendant before advertising any of defendant’s products). See also Ware, 67 F.3d at 576 A. That’s correct. But I – (holding that an insurance salesman was an independent contractor despite being required to comply with various Q. You have intended to be an independent contractor, guidelines set by the insurance company); Kirby v. Robby Len didn’t you? Swimfashions, 904 F.2d 36, at **3 (6th Cir. 1990) (Table) (“While [defendant] required orders and paper work to be A. I did. But the law changed the contract. administered on [its] forms and in conjunction with [its] (Emphasis added). practices, the infringement of [plaintiff’s] discretion in the affairs of his business by these requirements was minimal”). In addition to this evidence concerning the parties’ intent, Northwestern Mutual’s authority over those aspects of the record is replete with other evidence – much of which Weary’s operations is understandable, see Oestman, 958 F.3d Weary himself has admitted – indicating that Weary was an at 306 (reasoning that defendants “have a substantial interest independent contractor who, for the most part, had the right in controlling the advertising of their products because [they] to control – and did, in fact control – the manner and means may be liable for [the plaintiff’s] misstatements or by which he accomplished his own work. For example, and misrepresentations”), and does not undermine our conclusion as discussed in greater detail below in connection with the that, in general, Weary controlled the manner and means by more specific Darden factors, Weary was paid solely on a which he performed his job. commission basis; he was free to take other jobs – and, in fact, sold insurance policies for approximately fourteen other The more specific factors articulated in Darden also favor insurance companies; he set his own hours and could take characterizing Weary as an independent contractor. The first vacation at his leisure; he employed his own staff and paid factor relates to the skill required to perform the job in them out of his own pocket; he decided whom to solicit for question. In Schwieger v. Farm Bureau Insurance Co., 207 business; he paid for his own office space, equipment, F.3d 480, 485 (8th Cir. 2000), the court found that this factor supplies, car and travel expenses; and he kept his own “weigh[ed] heavily in favor of independent contractor status” financial records and monitored his own profit and loss. This where the insurance agent “considered herself an insurance is just a sampling of the abundant evidence in the record professional: she was licensed by the state of Nebraska at her pointing toward independent contractor status. own expense, was subject to a code of professional ethics, and had been certified by professional associations.” In this case, We recognize, as the dissent points out, that Weary’s Weary admitted that the sale of insurance is a “highly independence was not entirely unrestrained. He was required, specialized field,” requiring considerable “training,” for instance, to comply with applicable legal and ethical rules “education” and “skill.” He also admitted that a state license and certain administrative guidelines set out in a Northwest was required in order to sell insurance and that he had taken licensure examinations in “several” states. Weary held a No. 03-5143 Weary v. Cochran, et al. 9 10 Weary v. Cochran, et al. No. 03-5143
specialized “Series VI” license for the sale of securities, a expense, had sole discretion in hiring, firing and Chartered Life Underwriter certification and a business compensation matters, and withheld and remitted taxes to the administration degree. Thus, this factor weighs in favor of federal government in his capacity as the employer of his staff independent contractor status. members. Weary points out that his affidavit states that Cochran required him to hire and maintain a secretary for Second, the source of instrumentalities and tools used in twenty hours per week and if he did not, he would suffer a Weary’s business was Weary himself, not Northwest Mutual reduction in his expense allowance. That fact is insignificant, or Cochran. Weary admits that he paid for and procured his however, because it says nothing about whether Northwestern own office equipment, internet and phone service, postage, Mutual or Cochran played any role in hiring or paying copies and automobile. He also paid for meals with Weary’s assistants. The affidavit only alleges that Cochran prospective clients and for his attendance at professional required Weary to hire and pay a secretary to work at least training courses. twenty hours per week. Third, with respect to the location of Weary’s work, he The seventh and eighth factors relate to the provision of admits that he worked either at his home office or at benefits and tax treatment. Weary places particular emphasis commercial office space that he rented at his own expense. on the fact that Northwestern Mutual provided him certain He did not work at offices owned or controlled by pension and health benefits and that it withheld social security Northwestern Mutual or Cochran. Therefore, this factor taxes from his commissions. As the district court held, weighs in favor of independent contractor status. See however, the Internal Revenue Code permitted Northwestern Wolcott, 884 F.2d at 251 (relying upon the fact that an Mutual to provide those benefits and to withhold those taxes insurance agent owned and maintained his own office because of Weary’s status as a non-employee. See, e.g., 26 condominium in finding him to be an independent U.S.C. § 3121(d) (permitting a “full time life insurance contractor). salesman” who is not a common law employee to be deemed an employee “for purposes of this chapter” – i.e., Chapter 21, Fourth, Weary admits that neither Northwestern Mutual nor Federal Insurance Contributions Act); 26 U.S.C. § 7701 (a)(2) Cochran had any authority or discretion regarding when or (permitting a “full time life insurance salesman who is how long he worked, except to require him to attend periodic considered an employee for the purpose of Chapter 21 to be compliance meetings and sales meetings and to meet deemed a statutory “employee” who is entitled to participate minimum selling standards. Weary was free to take vacation in group pension and benefit plans). The district court found at his leisure and did not report his hours to anyone. that Weary “admitted to being informed of his ‘statutory employee’ status.” The district court found it even “[m]ore Fifth, the fact that Weary was paid solely upon a instructive” that Weary deducted his profits and losses on his commission basis and did not earn a salary lends further own tax returns as a sole proprietor and declared on loan support to the conclusion that he was an independent documents that he was self-employed. We agree with the contractor. See, e.g., Ware, 67 F.3d at 578; Wolcott, 884 F.2d district court that these factors also sway the balance in favor at 251. of independent contractor status. Sixth, with regard to the hiring and paying of assistants, While at least two factors weigh in favor of characterizing Weary admits that he employed his own staff at his own Weary as an employee – i.e., the duration of the relationship No. 03-5143 Weary v. Cochran, et al. 11 12 Weary v. Cochran, et al. No. 03-5143
and the fact that Weary’s work was a regular part of the hiring ______________ party’s business2 – those factors do not offset the overwhelming evidence that compels the opposite conclusion. DISSENT ______________ In sum, we hold that Weary was an independent contractor, not an employee, and was, accordingly, not entitled to CLAY, Circuit Judge, dissenting. In determining whether protection under the Age Discrimination in Employment Act. Plaintiff was an “employee” of NML or Cochran under the His claim under the Act having been properly dismissed for Age Discrimination in Employment Act, the majority makes this reason, the district court was entitled, as Weary admits, two major errors. First, the majority misstates applicable law to dismiss the remaining state law claims as well. by omitting the two most important factors in the definition of “employee”: the employer’s ability to control job For these reasons, the district court’s judgment is performance and the employer’s ability to control AFFIRMED. employment opportunities. Both factors indicate that Plaintiff was NML’s “employee.” Secondly, the majority overstates the extent to which analysis of other factors yields the conclusion that Plaintiff was not an “employee” of NML. In fact, these other factors are somewhat ambiguous, but on close analysis, they favor the conclusion that Plaintiff was an “employee.” These two errors lead the majority to the wrong disposition. I. The majority omits the two most important factors in the definition of the term “employee.” When Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992) enumerated numerous factors (many of which are applied by the majority), the first and most important factor listed was “the hiring party's right to control the manner and means by which the product is accomplished.” Id. at 323 (quoting Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 751-52 (1989)). Also, this Court, in Lilley v. BTM Corp., stated a test that “looks to whether the putative employee is economically dependent upon the principal or is instead in business for himself.” 958 F.2d 746, 750 (6th Cir. 1992) (citations omitted). These two tests were issued within a short time of 2 one another, creating some confusion as to the standard for W hether the hiring party may assign additional responsibilities may determining “employee” status. also arguably weigh in W eary’s favor, although it is not entirely clear that this factor is applicable under the facts o f this case. No. 03-5143 Weary v. Cochran, et al. 13 14 Weary v. Cochran, et al. No. 03-5143
A later case ruled on the issue of whether or not Lilley At the outset, it is worth noting that the functional standard (filed on March 12, 1992) was overruled by Darden (filed on stated in Simpson (and reiterated in Satterfield) leaves little, March 24, 1992) and also clarified the definition of if any, room for considerations of contractual disclaimers of “employee.” This Court stated that Lilley was not overruled, an employment relationship. This runs contrary to the because Darden had adopted the same standard as that in majority’s citation to the contract’s boilerplate language Lilley, for defining the term “employee”: attempting to disclaim an employment relationship in the present case. See also Schwieger v. Farm Bureau Ins. Co., Lilley, like Darden, defines the underlying common 207 F.3d 480, 483 (8th Cir. 2000) (“The existence of a denominator of the employer/employee rubric as the contract referring to a party as an independent contractor does employer's ability to control job performance and not end the inquiry, because an employer may not avoid Title employment opportunities of the aggrieved individual as VII by affixing a label to a person that does not capture the the most important of many elements to be evaluated in substance of the employment relationship.”) (citations and resolving the issue after assessing and weighing all of the internal quotation marks omitted). incidents of the relationship with no one factor being decisive . . . . Moreover, even if the contractual disclaimer were relevant, its attempt to avoid an employment relationship is belied by Simpson v. Ernst & Young, 100 F.3d 436, 442 (6th Cir. 1996). terminology in other important documents. The Agents The other factors listed in Darden retain importance but none Manual of Information, distributed to Plaintiff by NML of the other factors is as significant as each of the two most states, “As a Northwestern Mutual Life agent . . . . You are important factors: the employer’s ability to control job part of a company that has a reputation of being performance and the employer’s ability to control knowledgeable, caring . . . .” (J.A. at 754.) Under ordinary employment opportunities. Simpson’s interpretation of parlance, an independent contractor would not be considered Darden has been reiterated by this Court: “part of a company.” Rather, only an employee would merit such designation. Thus, to the extent that terminology is for the purposes of the ADA and other Civil Rights Acts, relevant, it does not clearly favor NML’s position. an employer/employee relationship is identified by considering: the entire relationship, with the most Similarly, the majority is wrong to attribute anything more important factor being the employer's ability to control than token significance to the fact that NML initially had job performance and employment opportunities of the succeeded in convincing Plaintiff that he was an “independent aggrieved individual. contractor.” Again, this is irrelevant to the functional standard that is employed in defining “employee” status. See Satterfield v. Tennessee, 295 F.3d 611, 617 (6th Cir. 2002) also Armbruster v. Quinn, 711 F.2d 1332, 1340 (6th (citations and internal quotation marks omitted). Overall, the Cir.1983) (“Though the manner in which the parties view the Darden test, as interpreted by this Court in Simpson and relationship is some evidence as to whether the Satterfield, considers numerous factors, the most important of manufacturer’s representative in any particular case will be which are an employer’s ability to control job performance deemed an ‘employee’ for Title VII purposes, it is not and an employer’s ability to control an employee’s determinative of that question.”). employment opportunities. No. 03-5143 Weary v. Cochran, et al. 15 16 Weary v. Cochran, et al. No. 03-5143
A multi-factored, functional analysis governs this case. The e-mail.” (J.A. at 871.) E-mail solicitations and other analysis begins with the first of the two most important solicitations were subject to NML review. (J.A. at 871) factors, the ability to control job performance. Here, it is (“Any variable product-related e-mail that is sent to multiple instructive that the contract reserved for NML the right to individuals, either collectively or individually, and which adopt regulations limiting a Special Agent’s freedom to repeats the same central message or theme is considered sales conduct business. This provision gave NML widespread material. As such, it must be reviewed and approved before “ability to control job performance.” Simpson, 100 F.3d at use as described above.”). Plaintiff was not allowed to 442 (emphasis added). develop his own illustrations for presentations, independently of NML. (J.A. at 760) (agent’s manual, stating, “To ensure Beyond retaining the general ability to control job accuracy, use only illustrations produced through the performance by adopting regulations, NML’s contract with Northwestern Mutual LINK proposal system.”). Plaintiff was Plaintiff also expressly reserved more specific mechanisms of subject to precise rules on proper sales presentations. (J.A. at control, and NML undertook measures, including the 760) (“Do not . . . characterize a lower-than-current-scale adoption of detailed regulations, that actually controlled illustration as a ‘worst case’ scenario . . . .”). As can be seen, Plaintiff’s performance. Plaintiff’s record-keeping and these rules were highly detailed and specific; they governed submitting of insurance applications were subject to review, daily operations. according to NML guidelines. In the contract, NML expressly reserved the right to require Plaintiff to surrender The second key factor, the employer’s ability to control “all records” relating to transactions to NML or to Cochran. employment opportunities, evaluates whether the individual (J.A. at 464) (item 11, Records). In the Field Management is free to engage in other employment, outside of a given Business Conduct Guidelines, Plaintiff was advised by NML: relationship. In the present case, written permission from “You must be aware of the need to prevent, detect and rectify Northwestern Mutual Investment Services, LLC (“NMIS”), any deviation from the ‘Northwestern Mutual Way.’” (J.A. an affiliate of NML, was required for any outside business at 887.) On occasion, NML reviewed Plaintiff’s records: activity, including unpaid activities and including activities Plaintiff received a letter from Diane Ertel, a Specialist in the unrelated to the insurance business. The “Fastrack Agents’ Market Conduct Division of NML, critiquing Plaintiff’s file- Self-Study Guide” states: keeping and advising him of procedures that he was expected to make. Before you engage in any “outside business activity” which is not a part of your normal insurance and Beyond record-keeping regulations, NML exercised its securities business, you must obtain written permission ability to influence Plaintiff’s daily operations in other from NMIS [Northwestern Mutual Investment Services, manners. The contract provided for performance LLC]. This is required whether or not compensation is requirements instituted by NML, in addition to potentially received for the activity. Note the NASD requires all higher requirements from a General Agent (Cochran). Thus, outside business activities to be disclosed on Form U-4 Plaintiff was not free to determine his own performance level, Outside business activities include, but are not limited to: if he wished to maintain his relationship with NML. Also, NML’s “Fastrack Agents’ Self-Study Guide” provided Full-time, part-time, or self-employment of any sort detailed rules regarding the use of e-mail and the internet. away from Northwestern Mutual and NMIS. . . . . For example, NML stated, “Illustrations may not be sent via No. 03-5143 Weary v. Cochran, et al. 17 18 Weary v. Cochran, et al. No. 03-5143
Becoming a trustee, director, officer, partner, etc. of and granted–otherwise, presumably NML and Cochran could any organization or business, (public or private) have asserted this as the reason for the termination, instead of including churches and charitable organizations. failure to meet production requirements. If Plaintiff did not obtain such permission, then Plaintiff breached the Participating in multi-level marketing programs. contract–this might provide grounds for a separate legal Examples include Amway, Mary Kay, Prepaid Legal action by NML, but this does not prove that NML lacked the Services, Inc./The People’s Network (PPLSI/TPN), ability to control employment opportunities, in the context of Rexall Showcase, etc. analysis of the standard for “employee” status. The contractual language clearly granted NML the ability to (J.A. at 873) (emphasis in original). control Plaintiff’s outside work opportunities. The contract also contains a relevant provision on Moreover, there is no clear indication that Plaintiff’s sales “exclusive dealing”: work for other companies constituted “employment opportunities,” as opposed to “independent contractor” Agent shall do no business for any other company which opportunities. By the definition of “employment” here, there issues annuity contracts, or life insurance or disability is no evidence that the other insurance companies controlled income insurance policies, except in connection with the manner and means of job performance or required written Applications with respect to persons who are then permission for Plaintiff to sell insurance for NML or other insured by the Company to the limit it will issue on them companies. In fact, the other sales relationships appear to or who are otherwise not acceptable for insurance by the have been more minimal: the other insurance companies did Company . . . . not pay Social Security, retirement benefits, or health insurance; nor did the other companies have production (J.A. at 464.) Both provisions quoted here grant NML the requirements. Because these relationships with other ability to limit and control Plaintiff’s employment companies were more limited than Plaintiff’s relationship opportunities. with NML, it is obvious that if any of the other relationships But the exclusivity issue merits further analysis. As the were of an employment nature, then so too was Plaintiff’s majority points out, in addition to selling Northwestern relationship with NML. As a result, there is no way in which Mutual insurance policies, Plaintiff also sold policies for Plaintiff’s work for other companies can be cited as numerous other insurance companies. Plaintiff’s work for illustrating NML’s lacking the ability to control Plaintiff’s other insurance companies might be taken to show that employment opportunities. Plaintiff had other employment opportunities. Hence, it is clear that NML maintained the ability to control However, the standard in question is the employer’s ability employment opportunities, notwithstanding the possibility to control such opportunities. The regulation and contract that NML may have granted written permission for Plaintiff language quoted above evince NML’s “ability” to limit to engage in independent contractor work for other outside employment, regardless of whether NML actually companies and notwithstanding the possibility that Plaintiff chose to exercise this ability. The record does not contain (by failing to get written permission) breached contractual written permission requests, but they may have been made provisions relating to NML’s ability to control outside work. No. 03-5143 Weary v. Cochran, et al. 19 20 Weary v. Cochran, et al. No. 03-5143
Hence, both of the key factors favor of the conclusion that contemporaneous work selling insurance for other companies. Plaintiff was NML’s employee. On the other hand, Cochran helped to train Plaintiff, through weekly performance reviews, monthly training meetings, II. annual seminars, and other meetings. (J.A. at 1202.) Thus, Plaintiff’s skill was not acquired independently of his The other Darden factors must be considered, although relationship with NML–although, for the reasons explained in none of them is as important, individually, as either of the two the second Darden factor, below, the training from Cochran key factors analyzed above. Satterfield, 295 F.3d at 617; begs the question of Plaintiff’s status. Simpson, 100 F.3d at 443. Still, on balance, because the skill of selling insurance is a i. The skill required general one, the majority may be correct in its conclusion that this factor favors independent contractor status. The majority errs in defining this factor as relating to the amount of skill required to do a job. (It goes without saying ii. The source of the instrumentalities and tools that many individuals are employed in jobs that require an extremely high skill level.) The legal issue here is not the Plaintiff worked in Cochran’s office for approximately six amount of skill required but, rather, whether the skill is in an years, where presumably Plaintiff used Cochran’s office independent discipline (or profession) that is separate from supplies and facilities. The use of Cochran’s tools and the business and could be (or was) learned elsewhere. instrumentalities begs the question of whether Plaintiff was an Hojnacki v. Klein-Acosta, 285 F.3d 544, 550 (7th Cir. 2002) “employee.” Due to the similarities in Cochran’s and (“Dr. Hojnacki did not derive her medical skills from her Plaintiff’s contracts and positions, it is indisputable that if employment with the DOC.”); Schwieger v. Farm Bureau Ins. Plaintiff was “employee” of NML, then so too was Cochran. Co., 207 F.3d 480, 485 (8th Cir. 2000) (“First, regarding ‘the If Cochran was an “employee” of NML, then the tools and skill required,’ Schwieger does not dispute that throughout instrumentalities that he offered to Plaintiff can be attributed her relationship with Farm Bureau she considered herself an to NML. Although neither party briefed the issue of insurance professional: she was licensed by the state of Cochran’s relationship to NML, the possibility that he was an Nebraska at her own expense, was subject to a code of employee of NML must be entertained. professional ethics, and had been certified by professional associations. Thus, this factor weighs heavily in favor of Regardless of Cochran’s role here, additionally, Plaintiff independent contractor status.”); Mulzet v. R.L. Reppert, Inc., cites approved and prepared marketing literature as 2002 U.S. App. LEXIS 27369, at *3 (3rd Cir. Dec. 11, 2002) instrumentalities and tools. Plaintiff stated in an affidavit, (“The first factor, the skill required, cuts in [alleged “Until 1992, I was required to send all supply requisitions for employer] Reppert's favor. The District Court found that the NML products through my general agent. At all times, I had skill required to hang drywall was based on Mulzet's many to order all stationery from NML in a form controlled by years of independent experience, rather than any teaching by NML.” (J.A. at 1202.) In turn, NML attempts to show that Reppert.”) (unpublished) (citations omitted). Plaintiff provided his own office supplies, such as computer, postage, internet, and phone service. The skill of selling insurance is best conceived of as general one, not specific to NML’s business. This explains Plaintiff’s No. 03-5143 Weary v. Cochran, et al. 21 22 Weary v. Cochran, et al. No. 03-5143
Given the difficulties in discerning Cochran’s relationship iv. The duration of the relationship between the parties to NML and the other ambiguous evidence, here, this factor is ambiguous. It is undisputed that there was a long relationship between the Plaintiff and both Defendants, lasting from 1973 to 2000. iii. The location of the work (The district court acknowledged this.) Plaintiff worked in Cochran’s office between 1973 and v. Whether the hiring party has the right to assign 1979. After 1979, it does not appear that Plaintiff worked in additional projects to the hired party an NML-affiliated office. Yet Plaintiff was required to attend regular weekly and monthly meetings with Cochran, which There is no indication that NML or Cochran had the right presumably were at Cochran’s office or an NML office. Also, to assign additional projects. This factor favors NML. Plaintiff testified that he was required by Cochran to rent commercial office space, instead of telecommuting. Again, all of this involves Cochran and thus begs the question of vi. The extent of the hired party's discretion over when Plaintiff’s relationship with NML, for the reasons stated and how long to work under the second Darden factor. Requirements as to what hours or how many hours an Also, this factor is of limited significance, given the employee must work help to establish control of an prevalence in our current economy of arrangements whereby individual. Although there were no precise requirements of employees telecommute (from home or other remote what hours or how many hours Plaintiff had to work, there locations). E.g., Susan J. Wells, For Stay-Home were work quantity requirements that are the very subject of Workers, Speed Bumps on the Telecommute, N.Y. this lawsuit–the contract contains NML requirements and Times, Aug. 17, 1997, available at General Agents’ (allegedly discriminatory, in the present http://commtechlab.msu.edu/Humans/heeter/PortalReports/ case) sales requirements, above those required by NML. In NYTimesTelecommute.html (“Forty-two percent of fact, these work quantity requirements almost certainly companies of various sizes have telecommuting imposed de facto requirements over what hours and how arrangements, according to a 1996 study of 305 North many hours must be worked. In practice, a certain minimum American business executives by the Olsten Corp., a number of hours would generally be needed in order to have Melville, N.Y., staffing services company. . . . Estimates of a reasonable chance to meet the performance requirements. the number of American telecommuters range from 9 million Additionally, if a Special Agent is nearing a performance to 42 million.”). This factor is not cited as relevant in evaluation deadline, then he may have to work on a given Simpson, 100 F.3d at 443. afternoon, to have a chance at meeting the performance requirements.1 This factor yields no clear conclusion and is of limited importance. 1 Plaintiff never sets forth this precise reasoning in his brief. Thus, the majority claims that P laintiff admits that, aside from m eetings, NML exercised no control over hours. But, given that Plaintiff has presented all of the relevant evidence, this Court is not at all bound by Plaintiff’s failure to make the precise argument as to performance requirements dictating No. 03-5143 Weary v. Cochran, et al. 23 24 Weary v. Cochran, et al. No. 03-5143
Also, Plaintiff’s work in Cochran’s office between 1973 Yet there are countervailing considerations. It is noted that and 1979 imposed actual time constraints–Cochran would Plaintiff received travel reimbursements, which might be penalize Plaintiff for not having a secretary for at least twenty characteristic of an employee–though perhaps independent hours per week. The work in Cochran’s office, and the contractors also receive such advances. But this does not additional performance requirements imposed by Cochran, appear sufficiently telling to alter the rest of the analysis of beg the question of Plaintiff’s relationship with NML, for the this factor. Another consideration is the “Quality Incentive reasons stated under the second Darden factor, above. Compensation” system, which appears to create bonuses and incentives that are more characteristic of an employment In addition, the exclusivity provisions referenced above, in relationship than a piece-meal independent contractor the first part of this opinion (contractual provisions limiting relationship. Also, a Special Agent’s renewal commissions Plaintiff’s ability to work for other companies), imposed did not fully vest until the agent worked for NML for fifteen controls on Plaintiff’s working hours. years–this would promote a long-term relationship that would appear to be more of an employment nature. Finally, as the majority notes, Plaintiff was required to attend periodic meetings, which, of course, meant that Hence, although the factor still favors NML, since Plaintiff Plaintiff did not have discretion to decline to work at the time was paid on commission, not salary, the other considerations of the meetings. appear to temper the conclusion. On balance, this factor favors “employee” status: NML did viii. The hired party's role in hiring and paying not control Plaintiff’s working hours, but NML’s performance assistants requirements established a high level of de facto control of hours, and NML required Plaintiff to attend meetings. Plaintiff states, in an affidavit: “Between 1973 and 1976, Mr. Cochran hired and paid for my secretary. . . . Between vii. The method of payment 1976 and 1979, Mr. Cochran’s office manager hired my secretary and I was responsible for a portion of her salary.” The contract specifies “commissions” at specified rates, (J.A. at 1210.) After 1979, Cochran would penalize Plaintiff with thirty days advance notice of reduction in rates. for not having a secretary for at least twenty hours per week. Although the contract provides for Cochran to pay the Cochran’s paying for a secretary or requiring a secretary begs commissions to Plaintiff, it also provides that NML sets the the question of Plaintiff’s relationship with NML, for the commission rates. Id. Cochran was paid directly by NML, reasons stated under the second Darden factor, directly above. making it likely that the money he paid Plaintiff came from NML. The fact that Plaintiff was paid in commission, not The majority states that Cochran’s requiring Plaintiff to hire salary would suggest that Plaintiff was an “independent a secretary “is insignificant, however, because it says nothing contractor” with respect to NML. Wolcott v. Nationwide Mut. about whether Northwestern Mutual or Cochran played any Ins. Co., 884 F.2d 245, 251 (6th Cir. 1989); Schwieger v. role in hiring or paying Weary’s assistants; it only establishes Farm Bureau Ins. Co., 207 F.3d 480, 486 (8th Cir. 2000). that Cochran required Weary to hire and pay a secretary to work at least twenty hours per week.” This is fallacious. Plaintiff had only a limited role in hiring assistants, if the only working ho urs. No. 03-5143 Weary v. Cochran, et al. 25 26 Weary v. Cochran, et al. No. 03-5143
reason that he hired a secretary was his employer’s the purposes of employment taxes, the term ‘employee’ requirement that he do so. includes ‘any individual who, under the usual common law rules applicable in determining the employer-employee Due to the ambiguities as to Cochran’s relationship with relationship, has the status of an employee’. Sec. 3121(d)(2); NML (as described in the second Darden factor), there is no accord sec. 3306(i).”). clear conclusion, here. Nor do the tax consequences for NML appear to be ix. Whether the work is part of the regular business of relevant–the factor here is simply the provision of benefits. the hiring party Ordinarily, an independent contractor would not receive benefits from any one client. Ordinarily, a full-time employee The majority rightly concedes that Plaintiff was a part of would receive benefits from an employer. Plaintiff received the regular business of the hiring party. benefits from NML, which suggests that Plaintiff was NML’s employee. NML points out that Plaintiff was not covered by x. Whether the hiring party is in business a workers’ compensation plan, which might temper the conclusion here a bit–but this would not change the overall As the majority correctly states, this factor is of limited conclusion that NML offered benefits to Plaintiff. relevance. (This factor is not cited as relevant in Simpson v. Ernst & Young, 100 F.3d at 443.) xii. The tax treatment of the hired party xi. The provision of employee benefits In the factor directly above, it is mentioned that NML withheld Social Security taxes, but that the statute allows a NML withheld Social Security and paid retirement benefits business to do this for an insurance salesperson who is not a and health insurance. NML apparently set aside fund for common-law employee. Thus, the Social Security Plaintiff that was termed the “Persistency Fee Guarantee withholding does not appear to favor Plaintiff. Fund” and was governed by the Employee Retirement Income Security Act (“ERISA”). (J.A. at 862-68); (Plaintiff’s Brief Plaintiff’s tax returns were filed on a “Sole Proprietor” at 5). Also, NML offered a defined benefit plan, the Agent’s form, at times listing his “Business name” as “John F. Weary Retirement Plan, also governed by ERISA. This would all Insurance.” (J.A. at 619.) Never did Plaintiff list an favor Plaintiff. “Employer ID number.” Plaintiff deducted business expenses, which would not have been allowed by a common- NML suggests that it was allowed to contribute group law employee. 26 U.S.C. § 62 (“The deductions allowed by benefits to Plaintiff and to withhold Social Security taxes only this chapter (other than by part VII of this subchapter) which because of Plaintiff’s status as an “independent contractor.” are attributable to a trade or business carried on by the NML cites two tax definitions of “employee” that include taxpayer, if such trade or business does not consist of the both common-law employees and insurance salespersons. 26 performance of services by the taxpayer as an employee.”) U.S.C. §§ 3121(d)(3)(B), 7701(a)(20). There is no support (emphasis added). for NML’s position here, in the sources cited; rather, the tax court case that NML cites indicates that Social Security taxes There appears to be additional evidence of Plaintiff’s tax could be withheld for an ordinary, common-law employee. treatment as an independent contractor. This evidence does Ewens & Miller, Inc. v. Comm’r, 117 T.C. 263 (2001) (“For No. 03-5143 Weary v. Cochran, et al. 27 28 Weary v. Cochran, et al. No. 03-5143
not appear to be needed, as the matter appears to be clear. “independent contractor” status (under factor i, Plaintiff’s Plaintiff’s citing to the Social Security tax withholding general skills in selling insurance were gleaned partly through appears to be rendered irrelevant by NML’s argument on that training from Cochran). matter. Plaintiff appears to generally concede that his tax treatment was not one of an employee–arguing, correctly, that The two remaining factors yield no immediate conclusions, this factor is not dispositive in the case.2 The factor is due to Cochran’s unclear relationship with NML. See factors relevant, though. ii (source and instrumentalities), viii (role in hiring and paying assistants). However, in all reality, it is difficult not Plaintiff was not treated as an employee of NML for tax to view these factors as favoring “employee” status. The only purposes. basis for any relationship between Plaintiff and Cochran was through NML. NML expressly delegated authority to The Darden factors overall are ambiguous or else favor the Cochran, including specific powers, such as the ability to set conclusion that Plaintiff was an “employee” of NML. Two performance requirements above those set by NML–this factors are unimportant (factor iii, the location of work, and power, of course, ultimately gave rise to this lawsuit (with factor x, whether the hiring party is in business). (Neither of Plaintiff’s allegations that Cochran’s performance these factors would clearly favor “independent contractor” requirements were discriminatory). The personnel structure status: factor iii is ambiguous, and factor x favors “employee” here–with a supervisor exercising control over a subordinate, status.) sharing tools and instruments (factor ii), dictating work location (factor iii), and requiring that the subordinate hire a Four factors favor “employee” status. As the majority secretary for a minimum of twenty hours per week (factor stated, factors iv (duration of relationship) and ix (part of viii)–indicates delegated control that is characteristic of regular business or company) favor Plaintiff’s argument. corporate employment relationships.3 To the considerable Factor v favors Plaintiff’s argument, because, NML’s extent that Cochran controlled Plaintiff, through authority performance requirements limited Plaintiff’s discretion as to expressly delegated by NML, both Cochran and Plaintiff may working hours, NML required Plaintiff to attend certain have been employees of NML. meetings, and Cochran required Plaintiff to hire a secretary for at least twenty hours per week. Also, factor xi favors Thus, in conclusion to the analysis of the remaining Darden “employee” status, since benefits were provided. Likewise, factors (aside from the two most important factors, analyzed four factors favor NML’s position: factors i (the skill in the first part of the opinion, above), the remaining factors required), v (additional projects), vii (method of payment), that yield an immediate conclusion produce a split result, with and xii (tax treatment). Although one of the factors favoring four factors on each side. Two other significant factors “employee” status is slightly ambiguous (under factor v, appeared ambiguous, due to Cochran’s role; but, upon closer NML only exercised de facto control of working hours), the scrutiny, in light of the fact that Cochran’s control of Plaintiff same ambiguity exists for one of the factors favoring
2 3 Plaintiff’s Brief at 23 (“even though Weary was considered an A corporate employment relationship is also evinced by the Agents independent contractor or sole proprietor for income tax purposes, that Man ual of Information statement that “[a]s a N orthwestern M utual Life fact is not de terminative of the employm ent relationship under the agent . . . . You are part of a company that has a reputation o f being ADE A.”). knowledgeable, caring . . . .” (J.A. at 754) (emphasis added). No. 03-5143 Weary v. Cochran, et al. 29
was delegated and defined by NML, it appears that both Cochran and Plaintiff were “employees” of NML. Conclusion The first part of this opinion set forth the two most important factors of the analysis. These factors both favored “employee” status: NML had the ability to control job performance and the ability to control employment opportunities. The second part of the opinion examined the remaining Darden factors (aside from the two most important ones). At most, NML might show that these remaining factors are split, on balance; however, such an ambiguous showing would not overcome the two most important factors. Moreover, in light of NML’s delegation to Cochran of power to control Plaintiff’s work, it does not appear that NML can even legitimately make a showing that the remaining factors are evenly split; the remaining factors, on balance, favor “employee” status for Plaintiff. Finally, it is important to note the larger framework in which the analysis takes place. In Lilly v. BTM Corp., this Court stated that “[t]he term ‘employee’ is to be given a broad construction in order to effectuate the remedial purposes of the ADEA.” 958 F.2d at 750. This consideration is not necessary to reach the conclusion that Plaintiff was an “employee” of NML; but the principle enunciated in Lilley provides even more support for the conclusion that, to the extent that there are large ambiguities regarding certain relevant factors, the analysis should be resolved in favor of a conclusion that Plaintiff was an “employee” of NML. On the record before us, it cannot reasonably be argued that, on balance, the relevant factors unambiguously defeat Plaintiff’s “employee” status. For the aforementioned reasons, I respectfully dissent.