Schweitzer v. Advanced Telemarketing Corp. , 104 F.3d 761 ( 1997 )

United States Court of Appeals,
Fifth Circuit.
No. 95-11017.
Eunice SCHWEITZER, Plaintiff-Appellee,
v.
ADVANCED TELEMARKETING CORPORATION, Advanced Telemarketing of
Texas Corporation and NRP, Inc., Defendants-Appellants.
Jan. 31, 1997.
Appeal from the United States District Court for the Northern
District of Texas.
Before JONES, DUHÉ and EMILIO M. GARZA, Circuit Judges.
DUHÉ, Circuit Judge:
Edith Schweitzer sued Appellants Advanced Telemarketing
Corporation ("ATC") and NRP, Inc. ("NRP") under the Age
Discrimination in Employment Act ("ADEA"). The district court
entered judgment on a jury verdict in Ms. Schweitzer's favor and
denied the defendants' motions for judgment as a matter of law or,
in the alternative, for a new trial. ATC and NRP appeal, alleging
Ms. Schweitzer produced insufficient evidence to show either age
discrimination or that ATC and NRP constitute a single employer,
and that the district court made evidentiary errors and incorrectly
charged the jury. We hold the district court erroneously
instructed the jury, and reverse the judgment and remand for a new
trial.
I. Background
ATC, a subsidiary of NRP, provides clients with telemarketing
services of two types. Outbound service is sales oriented, with
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employees making calls to solicit orders. Inbound service focuses
on employees answering calls to take orders or provide customer
service. Clients contract with ATC to provide the desired service.
ATC's need for employees is contingent on clients' demand for
telemarketing, and may fluctuate greatly.
ATC has no written, uniform policy for workforce reduction,
allowing its different departments to independently decide how to
carry out reductions in force. The outbound department uses
performance evaluations of employees' work to choose whom to
retain, while the inbound department relies on employee seniority.
Appellee Eunice Schweitzer began working at ATC in 1985 as a sales
representative, and eventually reached the rank of senior
supervisor. In the summer of 1992, the department she worked in
was reduced, and Ms. Schweitzer was transferred to the GTE Customer
Service Department as a supervisor.
The GTE Department was an inbound department responsible for
taking orders for GTE services and responding to GTE customers who
called in with problems. In August and September of 1992, the GTE
Customer Service Department chose to reduce its work force because
of a significant reduction in call volume. To effectuate the lay
off, the department retained those employees with greater
seniority, and laid off employees with less. Ms. Schweitzer was
one of those employees laid off in September 1992. She sued NRP
and ATC alleging age discrimination under 29 U.S.C. § 621 et seq.
NRP moved for summary judgment, arguing it could not as a
matter of law be considered a single entity with ATC, and thus an
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employer of Ms. Schweitzer. The district court denied both this
motion and a subsequent motion for summary judgment by all
defendants that Ms. Schweitzer could not prevail on a claim of age
discrimination.
At trial, the court instructed the jury on determining when
two separate entities might be considered a single employer. The
defendants objected to portions of the charge. The jury returned
a verdict in favor of Ms. Schweitzer, finding that ATC violated the
ADEA by discriminating against Ms. Schweitzer because of her age,
that ATC did so knowingly and recklessly, and that ATC and NRP were
a single employer of Ms. Schweitzer.
Evidence revealed that: the three members of the ATC Board of
Directors all sat on the NRP board, NRP had a 99.5% share of ATC
stock, NRP guaranteed ATC's line of credit, and ATC had a negative
net worth until it achieved a positive cash balance in 1994.
Testimony also showed, however, that NRP provided no human resource
functions or policy direction to ATC and had no operational
involvement with ATC. ATC employees were solely responsible for
decisions regarding the hiring, firing or reduction in force of
personnel at ATC. Indeed, the vice president of ATC testified NRP
was unlikely to know when ATC was forced to reduce staff, and was
never involved in making such decisions involving personnel.
II. Jury Instruction
ATC and NRP assert the district court erred in instructing the
jury on the circumstances in which NRP and ATC could be found to be
a "single employer," so that NRP would be liable with ATC for ATC's
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decision to lay off Ms. Schweitzer.
A. Standard of Review
We employ the standard of review discussed in F.D.I.C. v.
Mijalis, 15 F.3d 1314 (5th Cir.1994):
First, the challenger must demonstrate that the charge as a
whole creates "substantial and ineradicable doubt whether the
jury has been properly guided in its deliberations." Second,
even if the jury instructions were erroneous, we will not
reverse if we determine, based upon the entire record, that
the challenged instruction could not have affected the outcome
of the case.
Id. at 1318, citing Bender v. Brumley, 1 F.3d 271, 276 (5th
Cir.1993) (citations omitted). If the party complaining of an
incorrect jury instruction on appeal proposed another instruction
to the district court, their proposed instruction must have
correctly stated the law. Mooney v. Aramco Services Co., 54 F.3d
1207, 1216 (5th Cir.1995). In short, the critical issues are
whether it was correct to instruct the jury with the objected to
instructions and, if incorrect, was the error harmless? Bender, 1
F.3d at 277.
B. The "Single Employer" Test
In civil rights actions, "superficially distinct entities may
be exposed to liability upon a finding they represent a single,
integrated enterprise: a single employer." Trevino v. Celanese
Corp., 701 F.2d 397, 404 (5th Cir.1983). Trevino set out a four
part formula to determine when a parent corporation should be
considered the employer of a subsidiary's employee. The formula
focuses on actual control of employees by the parent company. The
Trevino test has been used repeatedly in both this circuit and
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others to ascertain when distinct entities may be considered
integrated as a single employer. Garcia v. Elf Atochem North
America, 28 F.3d 446, 450 (5th Cir.1994); Chaiffetz v. Robertson
Research Holding, Ltd., 798 F.2d 731, 735 (5th Cir.1986).
Trevino 's four part test considers (1) interrelation of
operations; (2) centralized control of labor relations; (3)
common management; and (4) common ownership or financial control.
Trevino, 701 F.2d at 404. The second of these factors has
traditionally been most important, with courts refining their
analysis to the single question, "What entity made the final
decisions regarding employment matters related to the person
claiming discrimination?" Id., quoting Odriozola v. Superior
Cosmetic Distribs., Inc., 531 F. Supp. 1070, 1076 (D.P.R.1982);
Chaiffetz, 798 F.2d at 735.
Other Fifth Circuit cases have utilized a "hybrid economic
realities/common law control test" to resolve when companies will
be considered single employers in ADEA suits. Barrow v. New
Orleans S.S. Ass'n, 10 F.3d 292, 296 (5th Cir.1994), Deal v. State
Farm County Mut. Ins. Co. of Texas, 5 F.3d 117, 118 (5th Cir.1993).
The hybrid test was first used in the context of determining if a
worker employed as an independent contractor should be considered
the employee of an entity for the purposes of Title VII. Mares v.
Marsh, 777 F.2d 1066 (5th Cir.1985). It was then extended to ADEA
cases in Fields v. Hallsville Independent School District, 906 F.2d
1017 (5th Cir.1990).
While the hybrid test has been used to resolve single employer
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disputes in ADEA cases, Trevino was the original test used in this
circuit to determine if separate, related business entities could
together be considered the employer of a civil rights plaintiff.
The hybrid test developed as a means of determining when plaintiffs
could be considered employees of business entities, not to
ascertain if different entities were so integrated as to constitute
a single employer of that plaintiff.
Trevino and the hybrid test are very similar, since under the
hybrid test, "the right to control an employee's conduct is the
most important component...."1 Deal, 5 F.3d at 118. However, we
hold that while the Trevino and hybrid tests are similar, and will
frequently yield the same results, the tests should not be used
interchangeably. Rather, the hybrid test should be used as an
initial inquiry to resolve, if need be, whether a plaintiff is an
employee of the defendant (or one of the defendants, in a multi
defendant case) for the purposes of Title VII.2 If the plaintiff
is found to be an employee of one of the defendants under the
1
The Deal court gave the details of the hybrid test:
When examining the control component, we have focused on
whether the alleged employer has the right to hire and
fire the employee, the right to supervise the employee,
and the right to set the employee's work schedule. The
economic realities component of out test has focused on
whether the alleged employer paid the employee's salary,
withheld taxes, provided benefits, and set the terms and
conditions of employment.
Deal, 5 F.3d at 119 (citations omitted).
2
Such an inquiry would be necessary, for example, to determine
whether an independent contractor has a sufficiently close
relationship to a defendant that the defendant should be liable to
the contractor for its conduct.
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hybrid test, but questions remain whether a second (or additional)
defendant is sufficiently connected to the employer-defendant so as
to be considered a single employer, a Trevino analysis should be
conducted. The Trevino analysis will establish if the second or
additional defendant is also an employer of the plaintiff.
Since neither ATC nor NRP disputed that Ms. Schweitzer was an
employee of ATC for the purposes of the ADEA, there was no need for
the district court to instruct on the hybrid test. In this case,
the Trevino test was the proper analysis to determine if ATC and
NRP were a single employer.
C. The District Court's Instruction
The district court defined "employer" under the ADEA for the
jury, informing them what they needed to find for ATC and NRP to
represent a single employer. Appellants ATC and NRP proposed an
instruction based on the Trevino test, requesting the court to
instruct the jury:
An employer is one who directs work assignments and determines
the hours, means and manner of performance of work. Separate
corporate entities may be treated as a single employer when
they are interrelated in matters relating to employment or
share centralized control of labor relations. The critical
question is the following: what entity made the final
decisions regarding employment matters related to the person
claiming discrimination?
The district court rejected this proposed charge and instead gave
the jury the following instruction:
You are instructed that ATC was the employer of the Plaintiff.
Plaintiff contends that ATC and NRP, Inc. should be treated as
a single employer. Under some circumstances, separate
corporate entities may be treated as a single employer. They
may be treated as a single employer where disregard of the
corporate form is necessary to prevent fraud, illegality, or
injustice, or where recognition of the separate corporate
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entity would defeat public policy. Among the factors which
you may consider in determining whether ATC and NRP should be
treated as a single employer of the Plaintiff are the
following:
1. The interrelation of operations;
2. Common officers and directors;
3. Centralized control of labor relations;
4. Common ownership or financial control of the employer
and the corporation;
5. Financing of a subsidiary corporation by the parent
corporation;
6. The subsidiary corporation's inadequate
capitalization.
Your determination of whether the two corporations are a
single employer should not be based upon any single factor.
For you to find that ATC and NRP were a single employer, you
must determine that there was such domination of the finances,
policies, and practices of ATC by NRP, that ATC had no
separate mind, will, or existence of its own and is but a
business conduit of NRP. The mere ownership of substantially
all of the stock of ATC by NRP is not sufficient to establish
such liability.
D. Analysis
The district court erred in not following the Trevino test to
determine single employer status. The district court's instruction
did not focus on control of labor relations but instead on a
multitude of other factors. None of the four Trevino factors
concentrates on common financing, capitalization, or officers.
Trevino instructs us to focus on the control a parent company
exercises over the employment decisions of its subsidiary.
As well, the district court's charge was far too broad. Since
it allowed the jury to pick and choose from various components of
different tests to make its determination, the jury made a skewed
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finding that NRP and ATC were a single employer. Evidence
irrelevant to single employer status, such as stock control and
common financing, became important. Evidence that was central to
finding a single employer relationship, namely involvement in the
daily employment decisions of ATC, was disregarded in favor of this
unimportant information.
Since we agree with Appellants' contention the jury
instruction was incorrect and reverse on those grounds, we do not
address the remaining arguments.
Judgment is REVERSED, and the case is REMANDED for a new
trial.
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