COURT OF APPEALS DECISION DATED AND RELEASED September 26, 1996 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 95-0369
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT IV
MALCOLM STACK and
DUNLOP ASSOCIATES, INC.,
Plaintiffs-Respondents-
Cross Appellants,
v.
KELLY JOESTEN,
Defendant-Third Party Plaintiff-
Appellant-Cross Respondent,
BELL LABORATORIES,
INC.,
Third Party Defendant-Respondent-
Cross Appellant.
APPEAL from a judgment
of the circuit court for Dane County:
MORIA KRUEGER, Judge. Affirmed.
Before Eich, C.J., and
Paul C. Gartzke and Robert D. Sundby, Reserve Judges.
PER
CURIAM. This litigation was initiated when Malcolm Stack and
Dunlop Associates, Inc., sued Kelly Joesten for the return of property Joesten
allegedly kept after she left their employment. Joesten filed a counterclaim seeking unpaid overtime under
federal and state law, unpaid wages and expenses, and compensation for health
insurance benefits. Joesten also filed
a third-party complaint against Bell Laboratories, a corporation owned
principally by Stack. She made a
similar claim for unpaid overtime from Bell and alleged various discrimination
claims under Title VII against Stack, Dunlop and Bell.
Stack, Dunlop and Bell
moved for summary judgment. The trial
court granted Bell's motion, and dismissed all claims against it. The court also dismissed all of the Title
VII claims, Joesten's claim for overtime against Dunlop and her claim for
health insurance benefits. The trial
court refused to dismiss Joesten's claim for overtime against Stack and for
back wages and expenses against Stack and Dunlop. The trial court also denied a motion, filed by Stack, Dunlop and
Bell, for sanctions under § 802.05, Stats.
On appeal and
cross-appeal, the parties seek appellate review of the trial court's rulings
adverse to them.[1] We affirm.
BACKGROUND FACTS
Stack is the president
and majority stockholder of Bell, a manufacturer of rodenticides and related
products. Other family members own the
rest of the Bell stock. Stack also owns
a pleasure farm in Ridgeway, where he stables horses. Linda Stack Hughes, Malcolm's daughter, is the president and sole
stockholder of Dunlop, an advertising and public relations firm, whose major,
but not sole, client is Bell. Bell and
Dunlop are located in the same building.
They share some equipment and services, such as a single receptionist,
but are largely separate. Dunlop pays
rent to Bell for its space and the shared equipment and services.
Motomco, Ltd., is
another Stack-family corporation.
Motomco purchases rodenticides from Bell and distributes them under its
own label. Some cattle owned by Motomco
were kept at Stack's Ridgeway farm.
Stack met Kelly Joesten
at a horse clinic in June 1992. Joesten
was a recent college graduate with a degree in English and an interest in
writing. Stack was interested in
retaining Joesten's services as a horse trainer at his farm, but could not
offer a full-time position. Stack
approached Hughes and asked if Dunlop would hire Joesten as a writer. Stack proposed that he and Dunlop share
Joesten's services. Hughes agreed, and
Joesten was hired. Stack agreed to
reimburse Dunlop for 50% of Joesten's salary.
Dunlop issued Joesten's W-2 tax form.
Joesten began working
for Dunlop and Stack in July 1992. By
autumn, Joesten had moved into a vacant house on the farm, and was given a
computer so she could do her Dunlop work at the farm. As part of her farm duties, Joesten hired other persons to assist
with the farm work. Motomco and Bell
issued those persons' W-2 forms.
In February 1993, Stack
and Joesten traveled south for various horse shows and events. Hughes agreed that Joesten need not do any
Dunlop work while on this trip. During
the trip, Stack and Joesten had a falling-out, and Joesten eventually returned
to Wisconsin alone. Joesten submitted a
letter of resignation to Dunlop on March 24, 1993. Further facts will be stated below as necessary.
SUMMARY JUDGMENT METHODOLOGY
Section 802.08, Stats., provides summary judgment shall
be granted when there is no genuine issue as to any material fact and the
moving party is entitled to judgment as a matter of law. When reviewing a summary judgment, we follow
the same methodology as the trial court.
Kremers-Urban Co. v. American Employers Ins. Co., 119
Wis.2d 722, 733, 351 N.W.2d 156, 162 (1984).
That methodology is stated in many cases, such as In re Cherokee
Park Plat, 113 Wis.2d 112, 116, 334 N.W.2d 580, 582-83 (Ct. App.
1983). We need not repeat it. While a court cannot choose between
competing inferences on summary judgment, Berg v. Fall, 138
Wis.2d 115, 119, 405 N.W.2d 701, 703 (Ct. App. 1987), a dispute as to
irrelevant or immaterial facts or inferences does not preclude summary judgment. See Hilkert v. Zimmer,
90 Wis.2d 340, 342, 280 N.W.2d 116, 117 (1979).
DID BELL EMPLOY JOESTEN?
The trial court held
that there was no material issue of fact as to whether Bell was Joesten's
employer, or a joint employer with Stack and Dunlop. In addition to being dispositive as to Joesten's claims against
Bell, Bell's status as an employer is crucial to Joesten's Title VII claims
against Stack, Dunlop and Bell. Title
VII applies only to employers in commerce that have fifteen or more employees. 42 U.S.C. § 2000e(b). Neither Dunlop nor Stack, nor Dunlop and
Stack together, meet the fifteen-employee threshold. Therefore, Joesten must show that Bell was a joint employer with
Stack and Dunlop in order to maintain any Title VII claims.
We agree with the trial
court that there is no genuine issue of material fact, and that Bell is
entitled to judgment as a matter of law.
We start with Joesten's
admitted belief that she worked for Dunlop, and did not consider Bell to be her
employer. While Joesten now describes
that belief as a legal conclusion that she is ill-qualified to make, common
sense tells us that a person's understanding as to who is one's employer
carries great weight. The corroborating
documentary evidence such as her W-2 form and resignation letter further
establish that Joesten was employed by Dunlop.
Joesten admittedly
performed various horse-related duties at the farm. Joesten's attempt to transform the farm into an arm of Bell is
not persuasive. Dunlop subcontracted
Joesten's services to Stack, in his personal capacity, not to Bell and not to
Stack as president of Bell. Bell has no
ownership interest in the farm, and did not use the farm for any business
purpose.[2]
In sum, we agree with
the trial court that there is no genuine issue of material fact as to whether
Bell was Joesten's employer.
We next consider whether
Bell may be considered a "joint employer" with Stack or Dunlop. In addition to a basis for Joesten's claim
for overtime under the federal Fair Labor Standards Act, 29 U.S.C. § 201 et
seq., this inquiry is crucial to the viability of Joesten's Title VII
claims.
For purposes of the
FLSA, joint employment exists: (1) when there is an arrangement between the
employers to share the services of the employee, for example, to interchange employees;
(2) when one employer is acting directly or indirectly in the interest of the
other employers in relation to the employee; or (3) when the employers are not
completely disassociated, either directly or indirectly, in regard to the
person's employment because "one employer controls, is controlled by or is
under common control with the other employer." Karr v. Strong Detective Agency, Inc., 787 F.2d
1205, 1207 (7th Cir. 1986) (citing 29 C.F.R. § 791.2(b)). The focus is on the "economic
reality" of the situation. Id.
The relevant factors
under Title VII are similar: (1) the interrelation of operations such as common
offices, common record keeping, shared bank accounts and equipment; (2) common
management, directors and boards; (3) centralized control over labor relations
and personnel; and (4) common ownership and financial control. Rogers v. Sugartree Products, Inc.,
7 F.3d 577, 582 (7th Cir. 1993). Again,
the "economic reality" of the situation must be examined. Knight v. United Farm Bureau Mut. Ins.
Co., 950 F.2d 377, 380 (7th Cir. 1991).
Applying those factors
to the record before us, we conclude that Bell is not a joint employer for
purposes of the FLSA and Title VII. As
discussed above, there is no evidence that Joesten performed any work for
Bell. Her services on the farm
benefited Stack, not Bell. There is no
evidence of any arrangement between Bell and either Stack or Dunlop to share
Joesten's services. Similarly, there is
no evidence that either Stack or Dunlop was acting directly or indirectly in
Bell's interest in its dealings with Joesten.
Joesten relies heavily
on the familial connections between Stack, Dunlop and Bell, and suggests that
Dunlop and Bell should be treated as a single entity under Stack's
control. While Hughes is Stack's
daughter, there is no evidence that Stack controls her business, either
personally or in his capacity as the president of Bell. Hughes owns 5% of Bell stock, but she does
not take an active role in the company.
Dunlop's business is totally unrelated to the manufacture of
rodenticides. That Bell is a client of
Dunlop's does not inexorably link the companies. Dunlop has other clients, and there is no evidence that Bell is
afforded any special treatment by Dunlop.
The fact that Joesten worked on Bell materials as part of her Dunlop
responsibilities does not elevate Bell into employer status. Although Bell and Dunlop are located in the
same building and share some common areas, Dunlop pays rent to Bell for its
space and there is no evidence that the businesses are financially connected.
Joesten's claim for
overtime against Bell under the federal Fair Labor Standards Act, 29 U.S.C. §
201 fails.[3] Because the fifteen-employee threshold of
Title VII is not met, Bell, Dunlop and Stack are entitled to summary judgment
dismissing Joesten's Title VII claims against them.
ARE DUNLOP AND STACK JOINT
EMPLOYERS?
We next consider whether
the trial court correctly dismissed Joesten's FLSA claims against Dunlop and
Stack. Looking to the "joint
employment" tests summarized in Karr, we conclude that the
trial court correctly granted summary judgment.
While Joesten worked for
both Stack and Dunlop, they did not share her services. Joesten's work for Dunlop was unrelated to
her duties for Stack. Unlike the
situation in Karr, Joesten's duties for Stack did not benefit
Dunlop, and vice versa. Cf. Karr,
787 F.2d at 1207 (detective's surveillance work benefited both the detective
agency and the store). Dunlop's
advertising and public relations business and Stack's farm operate
independently from each other and, as we noted above, Stack does not control Dunlop.
We further conclude
that, as to Stack individually, the trial court correctly dismissed Joesten's
FLSA claim. The overtime provisions of
the FLSA apply to an "employer ... who ... is engaged in commerce or in the
production of goods for commerce, or is employed in an enterprise engaged in
commerce or in the production of goods for commerce." 29 U.S.C. § 207(a). It is undisputed that Stack was not engaged
in commerce in the operation of the farm.
See 29 U.S.C. § 203(s)(1).
As to Dunlop, the trial
court properly relied on Joesten's admission that she never worked more than
forty to fifty hours per month for Dunlop.
Thus, there is no factual basis for an FLSA claim against Dunlop.[4]
JOESTEN'S CLAIM FOR HEALTH INSURANCE BENEFITS
The trial court granted
summary judgment dismissing Joesten's claim for health insurance benefits. It is undisputed that Dunlop agreed to make
health insurance available to Joesten and that, for reasons not apparent from
the record, health insurance was never extended to Joesten. Joesten concedes that she was carried on her
father's health policy during her employment with Dunlop and Stack and that her
father did so voluntarily. Joesten
claims a "moral obligation" to repay her father for the value of the
insurance premiums.
Joesten's claim sounds
in contract, that is, that Dunlop and Stack breached the employment contract
when they failed to provide health insurance coverage. A necessary element of any breach of
contract action, however, is damages. See
Pleasure Time, Inc. v. Kuss, 78 Wis.2d 373, 385, 254 N.W.2d 463,
469 (1977) (contractual damages compensate a person for losses necessarily and
foreseeably flowing from the breach, but the person is not entitled to be
placed in a better position than if the contract had been performed). Because there is no allegation that Joesten
sustained any compensable loss, the trial court correctly dismissed Joesten's
claim for health insurance benefits.
CROSS-APPEAL
Bell, Dunlop and Stack
cross-appeal various trial court rulings adverse to them. First, Stack argues that summary judgment
should have been granted dismissing Joesten's claim against him for overtime
under state law. Stack contends that,
as to him, Joesten was an independent contractor and thus Joesten cannot
maintain a cause of action for overtime.[5] Alternatively, Stack argues that Joesten
cannot recover overtime because she was engaged in "agricultural"
work, as defined in 29 U.S.C. § 203(f).
Independent Contractor
The
parties agree that whether Joesten was an independent contractor hinges on
"whether the worker is economically dependent upon the business to whom he
renders services." Brock v.
Lauritzen, 624 F. Supp. 966, 968 (E.D. Wis. 1985), aff'd, 833
F.2d 1529 (7th Cir. 1987), cert. denied, 488 U.S. 898 (1988).
In
determining whether a worker is an employee or an independent contractor,
courts should consider the degree of control which an employer has over the
manner in which the work is performed, the opportunities for profit or loss
dependent upon the managerial skill of the worker, the worker's investment in
equipment or material, the skill required, the permanence of the working
relationship, and whether the service rendered is an integral part of the
alleged employer's business.
Id.
We concur with the trial
court's conclusion that Joesten was not an independent contractor. While Joesten exercised considerable freedom
in the performance of her duties at the farm, it is undisputed that Stack
retained the power to discharge Joesten and otherwise modify the employment
setting. Although Stack's supervision
apparently was "minimal," he had not ceded his authority in that
regard to Joesten. See id.
Prior to her hiring by
Stack, Joesten was not in the horse-training business. There is no evidence that she held herself
out as such after working at the farm.
We agree with the trial court's description of the minimal outside
income generated by Joesten while employed by Stack as
"moonlighting."
Joesten owned some
personal tack and related equipment that she used at the farm. However, Stack provided the housing, feed
and transportation for the farm animals, and contributed the bulk of the
equipment used at the farm. Although
Joesten had developed the specialized skills necessary to employment as a
horse-trainer, she chose to apply them in a farm or stable setting that
primarily benefited Stack. She did not
choose to apply them in a fashion that might have benefited herself, for
example, as an instructor of many persons.
Joesten's use of her skills for Stack alone suggests that she was his
employee and not an independent contractor who might offer her skills to many
persons.
Stack retained Joesten
for an indefinite term. While their
working relationship ended within several months of its beginning, there is no
evidence that the parties contemplated such an abrupt end when Joesten was
hired. The relatively short duration of
Joesten's hire does not compel the conclusion that she was an independent
contractor throughout her stay at the farm.
The farm was not
operated as a business, but existed solely to house Stack's horses and to
accommodate his interest in that hobby.
The services that Joesten provided to the farm were central to its
existence. This consideration also
suggests that Joesten is an employee.
Lastly, the totality of
the circumstances compel the conclusion that Joesten was economically dependent
upon Stack. The circuit court aptly
summarized this matter:
The
"economic reality" is that hiring and firing, the amount of income,
the duties to be performed, the provision of the most expensive and extensive
equipment, the actuality of [Joesten's] work hours were dictated, however
gently and accommodatingly, by [Stack], in cooperation with Dunlop. The "position" consisting of an
assignment with the advertising agency and of responsibilities at the farm was
created by [Stack] and constituted [Joesten's] livelihood.
Agricultural Exemption
Stack also contends that
Joesten was an agricultural employee and thus not eligible for overtime. We disagree. Stack's farm was not operated for profit, and its sole purpose
was to stable horses for Stack's pleasure.
"Agriculture," as defined in 29 U.S.C. § 203(f),[6]
contemplates a commercial enterprise engaged in for profit. See Hodgson v. Ewing,
451 F.2d 526, 529 (5th Cir. 1971).
There is no question that Stack maintained the farm for pleasure and
hobby purposes. Thus, Joesten cannot be
considered an agricultural employee for purposes of overtime law.
Miscellaneous Expenses
The second issue raised
by Stack and Dunlop on cross-appeal concerns the trial court's refusal to
dismiss Joesten's claim for miscellaneous expenses, such as food, mileage and
motels. Stack and Dunlop characterized
Joesten's claim as speculative. We
agree with Joesten that whether Joesten is entitled to recoup any of these
expenses is a factual question which cannot be resolved on summary judgment.[7]
Sanctions under § 802.05, Stats.
Lastly,
Bell, Stack and Dunlop contend that the trial court erred when it denied their
motion for sanctions under § 802.05, Stats. Under § 802.05(1)(a), an attorney who signs
a pleading, motion or other paper warrants that to his or her best
"knowledge, information and belief, formed after reasonable inquiry,"
the document is "well-grounded in fact."
Bell, Stack and Dunlop
moved for sanctions under this statute because they felt Joesten's summary
judgment motion and supporting papers "lack[ed] support in the record,
[were] misleading, or in fact [were] entirely contrary to the
record." The trial court denied
the motion for sanctions, concluding that "[f]or the most part, the
problems ... are far from major. In
many instances, the complained of language is interpretive or argument."
This court reviews a
denial of a motion for sanctions under the erroneous exercise of discretion
standard. Riley v. Isaacson,
156 Wis.2d 249, 256, 456 N.W.2d 619, 622 (Ct. App. 1990). This court will uphold a discretionary
decision "if the trial court examined the relevant facts, applied a proper
standard of law and, using a demonstrated rational process, reached a
conclusion that a reasonable judge could reach." Id. at 256-57, 456 N.W.2d at 622.
The parties submitted
voluminous documents, and the trial court was well acquainted with their
divergent viewpoints on the factual and legal issues in litigation. We defer to that court's assessment of the
claimed misstatements, and conclude that the trial court properly exercised its
discretion.
No costs to any party.[8]
By the Court.—Judgment
affirmed.
This opinion will not be
published. See Rule 809.23(1)(b)5, Stats.
[1] The trial court's judgment dismissing all claims against Bell disposes of the entire matter in litigation as to Bell and therefore is a final judgment. See § 808.03(1), Stats. By order dated April 25, 1995, this court granted discretionary review of the nonfinal aspects of the judgment.
[2] Motomco housed cattle on the farm and paid the wages of Wayne Ballweg, a Bell employee who worked on the farm prior to Joesten, as well as those of Ballweg's successor. Those circumstances do not implicate Bell in the farm operation. We also see little significance in the fact that two persons Joesten hired to work on the farm were paid by Bell and were issued W-2 forms by Bell. That those persons may have been Bell employees does not mean that Joesten also was a Bell employee.
[3] Joesten also sought overtime from Bell under state law, but she makes no separate argument in support of her state claim. Joesten's state law overtime claim fails for the same reason that her FLSA claim fails, that is, Bell was not her employer.
[4] Joesten's claim for overtime from Dunlop under state law suffers from the same factual deficiency. For that reason, we need not address Dunlop's argument, made in its cross-appellant's brief, that Joesten was not covered by state overtime law because she was a professional employee.
[5] If successful, Stack's independent contractor argument would also defeat Joesten's FLSA claim against Stack.
[6] 29 U.S.C. § 203(f) states:
Agriculture includes farming in all its branches and among other things includes the cultivation and tillage of the soil, dairying, the production, cultivation, growing, and harvesting of any agricultural or horticultural commodities (including commodities defined as agricultural commodities in section 15(g) of the Agricultural Marketing Act, as amended, the raising of livestock, bees, fur-bearing animals, or poultry, and any practices (including any forestry or lumbering operations) performed by a farmer or on a farm as incident to or in conjunction with such farming operations, including preparation for market, delivery to storage or to market or to carriers for transportation to market.
[7] Stack also argues that Joesten's claim for overtime is speculative. As with the miscellaneous expenses, Joesten's claim for overtime also presents a factual issue.
[8] As a final observation, we note that on several occasions, both parties "incorporated by reference" arguments made in briefs filed with the trial court. Counsel for Bell, Stack and Dunlop bluntly conceded that he was doing so because of this court's page limitations. However, those limitations exist for good reason, and parties may not circumvent them by incorporating by reference material found in the record or appellate appendix.