Clark v. United Technologies Automotive, Inc.

• Decision Date: 02 June 1999
• Docket Number: Docket No. 108820,No. 1,1
• Parties: Beotis CLARK, Jr., and Mia L. Clark, as husband and wife, Plaintiffs-Appellants, v. UNITED TECHNOLOGIES AUTOMOTIVE, INC., a Delaware corporation; Rousselle Corporation, an Illinois corporation, Presses, Inc., an Illinois corporation; and Rogers Corporation, a Massachusetts corporation, Defendants, Kenneth L. Herzhaft and Marlene L. Herzhaft, doing business as Lincoln Engineering Company. Defendants-Appellees. Calendar
• Court: Michigan Supreme Court

Page 447

594 N.W.2d 447

459 Mich. 681

Beotis CLARK, Jr., and Mia L. Clark, as husband and wife Plaintiffs-Appellants, v. UNITED TECHNOLOGIES AUTOMOTIVE, INC., a Delaware corporation; Rousselle Corporation, an Illinois corporation, Presses, Inc., an Illinois corporation; and Rogers Corporation, a Massachusetts corporation, Defendants Kenneth L. Herzhaft and Marlene L. Herzhaft, doing business as Lincoln Engineering Company. Defendants-Appellees.

Docket No. 108820.

Calendar No. 1.

Supreme Court of Michigan.

Argued Jan. 20, 1999.

Decided June 2, 1999.

Davis & Kuhnke, P.C. (by Peter A. Davis), Ann Arbor, and Fajen & Miller, P.L.L.C. (by Nelson P. Miller), Grand Haven, for plaintiffs-appellants.

Sullivan, Ward, Bone, Tyler & Asher, P.C. (by Ronald S. Lederman), Southfield, for defendants-appellees.

Opinion

TAYLOR, J.

This case presents the issue whether defendants Kenneth and Marlene Herzhaft, doing business as Lincoln Engineering Company, were employers of plaintiff Beotis Clark, Jr., at the time of plaintiff's injury and therefore entitled to assert the exclusive remedy provision of the Worker's Disability Compensation Act, M.C.L. § 418.131; MSA 17.237(131), as a defense to a tort action brought by plaintiff. Applying the economic realities test to this dual employer case, we hold that whether defendants were also employers of plaintiff for purposes of the exclusive remedy provision is a question for the trier of fact. We therefore reverse the judgments of the Court of Appeals and the trial court and remand.

FACTS AND PROCEEDINGS

Defendants Kenneth and Marlene Herzhaft operate two tooling businesses. They are the sole shareholders of Grand Haven Die Casting Co., a die casting corporation, and the sole proprietors of Lincoln, a circuit board part manufacturer for which the Herzhafts had filed an assumed name certificate. ¹

Grand Haven and Lincoln are situated in two adjacent buildings on a lot in the city of Grand Haven. The lot and structures are owned by Kenneth and Marlene Herzhaft doing business as Lincoln. Both companies are run day to day by Kenneth Herzhaft as owner and president.

Plaintiff was hired by Kenneth Herzhaft in August of 1991 and listed as an employee of Grand Haven. Plaintiff was originally placed in Grand Haven's die casting operations. In October of 1991, plaintiff was instructed to begin working at Lincoln's circuit board operation. Thereafter, although plaintiff was paid by way of Grand Haven payroll checks, he continued to rotate back and forth between Lincoln and Grand Haven, performing work for both businesses.

On March 5, 1992, while working at Lincoln, plaintiff was injured when a power punch press machine malfunctioned. Plaintiff sought and received worker's compensation benefits from Grand Haven. He and his wife then sued in tort defendants Kenneth and Marlene Herzhaft doing business as Lincoln. ²

Defendants filed a motion for summary disposition under MCR 2.116(C)(10). Defendants' theory was that application of the economic realities test yielded but one conclusion--that plaintiff was employed by both Grand Haven and Lincoln. Defendants contended that therefore plaintiff's exclusive remedy against them was under the WDCA. The trial court agreed with defendants and granted the motion. After a jury returned a verdict of $1,264,987 against the press manufacturer, the trial court entered its final order from which plaintiff appealed as of right to the Court of Appeals.

In that Court, plaintiff contended that at least a question of fact existed under the economic realities test concerning whether Lincoln, in addition to Grand Haven, was also plaintiff's employer. In response, defendants reiterated their theory that application of the economic realities test established that plaintiff was employed by both Grand Haven and Lincoln. Defendants for the first time also presented the alternative theory that as Grand Haven's sole shareholders they were entitled to reverse pierce Grand Haven's corporate veil, ³ with the result that they and Grand Haven could be considered the same entity for purposes of the exclusive remedy provision. In presenting their alternative theory, defendants relied on Bitar v. Wakim, 211 Mich.App. 617, 536 N.W.2d 583 (1995).

The Court of Appeals issued an order affirming the trial court's grant of summary disposition in favor of defendants. Citing its opinion in Bitar, supra, the Court of Appeals reasoned that the economic realities test did not apply in this case to determine whether an employment relationship existed between plaintiff and defendants, but that defendants were nevertheless properly recognized as plaintiff's employer through a "reverse piercing of the corporate veil." The Court of Appeals therefore concluded that the exclusive remedy provision barred plaintiff's claims in tort.

Plaintiff then filed an application for leave to appeal with this Court. While this application was pending, we reversed the Court of Appeals opinion in Bitar. 456 Mich. 428, 572 N.W.2d 191 (1998). Following this reversal, we granted plaintiff's application for leave to appeal. 458 Mich. 875, 586 N.W.2d 85 (1998).

STANDARD OF REVIEW

Appellate review of a trial court ruling on a motion for summary disposition under

MCR 2.116(C)(10) is de novo. Spiek v. Dep't of Transportation, 456 Mich. 331, 337, 572 N.W.2d 201 (1998). A motion pursuant to MCR 2.116(C)(10) tests the factual support of a plaintiff's claim. Id. The court must consider the pleadings, affidavits and other documentary evidence filed in the action or submitted by the parties, MCR 2.116(G)(5), in the light most favorable to the nonmoving party. Quinto v. Cross & Peters Co., 451 Mich. 358, 362, 547 N.W.2d 314 (1996). The motion may be granted if the documentary evidence shows that there is no genuine issue with respect to any material fact and the moving party is therefore entitled to judgment as a matter of law. Id.

DISCUSSION

In enacting Michigan's Worker's Disability Compensation Act, the Legislature created a system that substitutes statutory compensation for common-law negligence liability and its related defenses. Farrell v. Dearborn Mfg. Co., 416 Mich. 267, 274, 330 N.W.2d 397 (1982). Under this system, employers provide compensation to employees for injuries suffered in the course of employment, regardless of who is at fault. MCL 418.301; MSA 17.237(301). In return for this almost automatic liability, employees are limited in the amount of compensation they may collect from their employer, and, except in limited circumstances, may not bring a tort action against the employer. MCL 418.131; MSA 17.237(131).

The principle that an employer is entitled to protection from tort liability in exchange for essentially a no-fault obligation to pay benefits is expressed in the exclusive remedy provision of the WDCA: "The right to the recovery of benefits as provided in this act shall be the employee's exclusive remedy against the employer...." MCL 418.131(1); MSA 17.237(131)(1). Although by its terms the exclusive remedy provision limits the liability of the employee's "employer," the provision does not define the term "employer," except to note that the term includes certain entities not relevant in this case. ⁴ That being the case, we have regularly applied the "economic realities test" to determine whether an employment relationship exists for purposes of the exclusive remedy provision, and thus whether an individual or entity is the "employer" of a given employee. ⁵ See, e.g., Kidder v. Miller-Davis Co., 455 Mich. 25, 564 N.W.2d 872 (1997); Wells v. Firestone Tire & Rubber Co., 421 Mich. 641, 364 N.W.2d 670 (1984); Farrell, supra. As we have stated, the test is appropriate because it "looks to the employment situation in relation to the statutory scheme of workers' compensation law with the goal of preserving and securing the rights and privileges of all parties." Farrell, supra at 276, 330 N.W.2d 397. As further explained in Kidder, supra at 35, 564 N.W.2d 872:

The economic-reality test was embraced by this Court as a more realistic attempt to define the employer-employee relationship through a "balancing of all the relevant factors in each case," than the rigid control test.[ ⁶] [Renfroe v. Higgins Rack Coating & Mfg. Co., 17 Mich.App. 259, 265, 169 N.W.2d 326 (1969) ]. Given the increasingly complicated relationships developing in today's business and economic marketplaces anything other than a totality of the circumstances test would be an insufficient guide by which to evaluate the employee-employer relationship.

Although the totality of the circumstances are considered, in applying the economic realities test, the courts generally consider the following four factors "(1) [the] control of a worker's duties, (2) the payment of wages, (3) the right to hire and fire and the right to discipline, and (4) the performance of the duties as an integral part of the employer's business towards the accomplishment of a common goal." Askew v. Macomber, 398 Mich. 212, 217-218, 247 N.W.2d 288 (1976); see also Kidder, supra at 34-35, 564 N.W.2d 872; Wells, supra at 648-650, 364 N.W.2d 670. No one factor is controlling. Farrell, supra at 276, 330 N.W.2d 397.

In our effort to determine whether the tort claim at issue in this case is barred by the exclusive remedy provision, it is first helpful to review the caselaw applying the economic realities test for purposes of this provision. Although these cases do not always lend themselves to neat or easy categorization, at least some broad distinctions may be made. One line of authority involves what can be called the dual employer or coemployer cases. In these cases, the employee typically has a "legal" or "actual" employer against whom there is no question that a tort suit is barred by the exclusive remedy provision, and the dispositive question is whether, under the economic realities test, a second entity can also be classified as an employer for purposes...