Ernster v. Luxco, Inc.

• Citation: 596 F.3d 1000
• Decision Date: 23 February 2010
• Docket Number: No. 09-1200.,09-1200.
• Parties: Barbara ERNSTER, Plaintiff-Appellant, v. LUXCO, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

596 F.3d 1000 Barbara ERNSTER, Plaintiff-Appellant,
v.
LUXCO, INC., Defendant-Appellee. No. 09-1200. United States Court of Appeals, Eighth Circuit. Submitted: October 21, 2009. Filed: February 23, 2010.

[596 F.3d 1002]

Mark D. Sherinian, argued, West Des Moines, IA, for appellant.

Debra Lynne Hulett, argued, Des Moines, IA, Frank Boyd Harty, on the brief, for appellee.

Before LOKEN, Chief Judge, MURPHY and BYE, Circuit Judges.

LOKEN, Chief Judge.

Barbara Ernster sued Luxco, Inc., alleging wrongful termination in violation of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 626 et seq., and the Iowa Civil Rights Act (ICRA), Iowa Code Ann. Ch. 216. After denying Luxco summary judgment on the threshold issue of whether Ernster was an employee or an independent contractor, the district court¹ ordered a jury trial of that issue. The jury returned a general verdict that Ernster was an independent contractor. The court entered judgment on the verdict dismissing Ernster's claims and denied her post-judgment motion for new trial, based on alleged instruction errors, or for judgment as a matter of law. Ernster appeals, arguing primarily the issue of alleged instruction errors. We affirm.

I. Background

David Day owned and managed Iowa Liquor Products, Inc. (ILP), a brokerage company representing liquor and wine companies selling their products in the State of Iowa. Iowa is a "control" State in which suppliers sell liquor products to the State, which resells to customers such as bars and retail liquor stores. See Iowa Code Ann. § 123.22. ILP's function was to promote suppliers' brands by traveling to bars, restaurants, liquor stores, and other customers around the State.

In 1999, Ernster and Day agreed she would become ILP's exclusive marketing representative in northeastern Iowa, calling on customers throughout the territory to promote ILP brands and products. Day provided Ernster the names and locations of existing customers in her territory, and thereafter advised her of new accounts that Day learned about through ILP's relationship with the State. Ernster was expected to visit customers regularly, making sure that ILP products were effectively displayed, urging customers to stock additional ILP products, distributing promotional materials furnished by ILP's suppliers, and arranging and conducting product demonstrations.

ILP and Ernster had no written employment agreement. Day testified that all ILP marketing representatives understood they were independent contractors, not employees. Ernster testified she "was led to believe that [she] was an employee." Her fellow marketing representative, Mike Ryan, testified that, when Day hired him, Day explained that Ryan would be an independent contractor. ILP did not provide Ernster insurance or retirement benefits. Ryan testified marketing representatives did not receive employee benefits because they "were independent people."²

ILP paid Ernster a fixed monthly stipend that was not calculated as a commission on sales. She also earned commissions or bonuses based upon monthly sales volumes of particular products. ILP did not withhold income taxes from Ernster's monthly compensation. Each year, ILP sent her an annual income tax Form 1099 reporting self-employment income, rather than a Form W-2 reporting wage or salary income. Ernster's tax preparer testified

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that Form 1099 "indicates a self-employed or independent contractor [status]." Ernster reported ILP income and business expense deductions on Schedule C of her annual IRS Form 1040.

Ernster worked out of her home and paid her travel expenses, which were substantial, and the costs of her cell phone and computer. She worked a full-time schedule for ILP, though she also worked part-time as a scheduler and bartender for a local convention center. Ernster testified that she was required to make at least eleven customer calls per day, and that Day called her around 7:30 in the morning to discuss her daily activities. She admitted that she decided when to call on particular accounts, was free to start and end her work days at different times, and did not have to work a fixed number of hours per week. Day testified that he imposed no minimum customer call requirement. He denied calling Ernster each morning but agreed they spoke regularly, usually when Ernster called him. Day testified that Ernster had "no direction as to when she worked, as long as she accomplished the job." Ernster and Day's two other marketing representatives attended monthly sales meetings at his home in Marshalltown and submitted weekly reports of stores visited and new accounts obtained.

In December 2003, Day sold ILP to the David Sherman Corporation (DSC), a liquor "rectifier" based in St. Louis.³ Day remained with DSC as a consultant, continuing to manage and supervise ILP's marketing representatives, including Ernster, who were told the change in ownership did not affect their positions. Don Wackerly became Iowa Division Manager in July 2005, sharing responsibilities with Day until Day retired later that year. DSC changed its name to Luxco in December 2005. In early 2006, Luxco converted the Iowa marketing staff to full-time Luxco employees, requiring the existing marketing representatives to apply for new positions. Ernster applied and interviewed for the job but was not hired. Luxco terminated her contract position in March 2006. A younger female took over part of Ernster's former territory. This age discrimination lawsuit followed.

II. The Instruction Issue

Ernster alleges age discrimination in violation of the ADEA and the ICRA. Both statutes protect employees but not independent contractors. Wortham v. Am. Family Ins. Group, 385 F.3d 1139, 1141 (8th Cir.2004). In Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318, 323-24, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992), the Supreme Court held that, when the definition of "employee" in a federal statute "is completely circular and explains nothing," the Court will adopt the common-law test derived primarily from the Restatement (Second) of Agency § 220(2) (1958), and summarized in Community for Creative Non-Violence v. Reid, 490 U.S. 730, 751-52, 109 S.Ct. 2166, 104 L.Ed.2d 811 (1989):

In determining whether a hired party is an employee under the general common law of agency, we consider the hiring party's right to control the manner and means by which the product is accomplished. Among the other factors relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional

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projects to the hired party; the extent of the hired party's discretion over when and how long to work; the method of payment; the hired party's role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.

Both the ADEA and the ICRA define employee in the same "circular" manner as the ERISA definition at issue in Darden. See 29 U.S.C. § 630(f); Iowa Code Ann. § 216.2(6); compare 29 U.S.C. § 1002(6) (ERISA). Thus, the parties agree that the Darden common-law test applies to Ernster's statutory claims of age discrimination. See Wortham, 385 F.3d at 1140; Jenkins v. So. Farm Bureau Cas., 307 F.3d 741, 743-45 (8th Cir.2002).⁴

The ADEA grants plaintiffs the right to a jury trial "of any issue of fact in any such action." 29 U.S.C. § 626(c)(2). After denying Luxco summary judgment on this issue, the district court ordered a bifurcated jury trial, with the first trial limited to whether Ernster was an employee of Luxco. At the conclusion of this trial, the court submitted a single question to the jury: "Has plaintiff proved by the greater weight of the evidence that she was defendant's employee?" Neither party objected to submitting the issue in this manner. The jury answered the question in the negative, and the court entered judgment on the jury's verdict in favor of Luxco.

Ernster's principal argument on appeal is that the district court abused its discretion in instructing the jury what to consider in determining whether Ernster was Luxco's...