Hickey v. Arkla Industries, Inc.

• Decision Date: 07 March 1983
• Docket Number: No. 81-2506,81-2506
• Citation: 699 F.2d 748
• Parties: 31 Fair Empl.Prac.Cas. 238, 69 A.L.R.Fed. 692, 31 Empl. Prac. Dec. P 33,415 Perry HICKEY, Plaintiff-Appellant, v. ARKLA INDUSTRIES, INC. and Arkansas Louisiana Gas Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 748

699 F.2d 748

31 Fair Empl.Prac.Cas. 238, 69 A.L.R.Fed. 692,

31 Empl. Prac. Dec. P 33,415

Perry HICKEY, Plaintiff-Appellant, v. ARKLA INDUSTRIES, INC. and Arkansas Louisiana Gas Company Defendants-Appellees.

No. 81-2506.

United States Court of Appeals,

Fifth Circuit.

March 7, 1983.

Joel J. Reinfeld, Houston, Tex., for plaintiff-appellant.

Arthur Val Perkins, Houston, Tex., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Texas.

ON PETITION FOR REHEARING

(Opinion October 12, 1982, 5 Cir., 1983, 688 F.2d 1009)

Before GEE, GARWOOD ^* and JOLLY, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

The appellant's petition for panel rehearing is GRANTED. Among other grounds, the appellant suggested that the panel had evaluated the evidence in this case under the wrong standard, pointing out the opinion's reference to Rule 52 of the Federal Rules of Civil Procedure when the case had been tried by a jury and came to us on appeal from the district court's order granting a motion for directed verdict in favor of the appellee. Because the proper standard for evaluating the evidence in this case is that standard set forth in Boeing Co. v. Shipman, 411 F.2d 365 (5th Cir.1969) (en banc), we have granted the petition for panel rehearing.

We have reviewed the record in this case and have very carefully and critically evaluated the evidence to determine whether there was "evidence of such quality and weight that reasonable and fair minded men in the exercise of impartial judgment might" conclude that Hickey was an employee of Arkla within the meaning of the relevant cases of this circuit. After considering and evaluating the evidence in this light, we adhere to our affirmance of the district court, but we VACATE our prior opinion, 688 F.2d 1009 (5th Cir.1983), and substitute the following in its stead.

CORRECTED OPINION

Perry Hickey brought suit against Arkla Industries, Inc., and its parent company, Arkansas Louisiana Gas Company, under the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. Secs. 621-634, alleging that the two companies had jointly discriminated against him on the basis of his age by discharging him as a Manufacturer's Sales Representative. ¹ Following the presentation of Hickey's evidence, the two companies moved the district court for a directed verdict. Finding that there was no evidence which would enable the jury to properly find that Hickey was an employee under the ADEA, the district court granted the two companies' motion for directed verdict and entered judgment in their favor.

Under the standards set out in Boeing Co. v. Shipman, 411 F.2d 365 (5th Cir.1969) (en banc), if the facts and inferences point so strongly and overwhelmingly in favor of the conclusion that Hickey was not an employee that reasonable men could not arrive at a contrary conclusion, granting of the motion for directed verdict was proper. On the other hand, if there is evidence of such quality and weight that reasonable and fair minded persons in the exercise of impartial judgment could conclude that Hickey was an employee, the motion should have been denied and the case submitted to the jury. Finding, pursuant to applicable decisions of this Court, that reasonable men, based upon the evidence in this record, could not conclude that Hickey was an employee, we find that the district court's granting of the motion for directed verdict was proper.

In 1961, Hickey began his employment with Arkla Industries, Inc. (Arkla), as a service representative. Shortly thereafter, he became a District Sales Representative, but left Arkla's employ in the mid-1960's. However, he returned to Arkla in 1966 as a District Sales Representative.

As a District Sales Representative, Hickey was paid a salary plus a 3% commission on all his sales of Arkla Products. Like all other District Sales Representatives, he received certain insurance benefits, an automobile allowance, and expenses and travel reimbursements. He was also allowed to participate in Arkla's retirement plan.

While a District Sales Representative, Hickey could only sell Arkla products. Furthermore, he was required to submit numerous daily and weekly reports concerning customer calls he either had made or planned to make.

On March 1, 1980, Hickey voluntarily chose to become one of Arkla's Manufacturer's Sales Representatives. As such, he received no salary or wages. His only compensation from Arkla came from an 8% commission on sales of gas grills and gas lights in an exclusive sales territory. He was also not eligible for any of the allowances, reimbursements or benefits which he had received as a District Sales Representative. In addition, he specifically withdrew from Arkla's Employee Retirement Fund and received his termination payment from that fund.

The Manufacturer's Sales Representative Agreement which Hickey signed designated him as an independent contractor. It also provided that the agreement, which was for an indeterminate period of time, could be cancelled by either party upon 30 days notice. In addition, the agreement contained clauses concerning the sale of competing products, the prices at which Arkla products were to be sold, the manner in which compensation was to be paid, the ineligibility for expense reimbursements, and the non-assignment of the agreement.

After Hickey became a Manufacturer's Sales Representative, Arkla did not make any withholding from his commissions for social security or income tax purposes. Hickey filed his tax return on the forms for self-employed individuals. He personally established a Keogh Retirement plan which, by its very terms, is limited to self-employed individuals.

As a Manufacturer's Sales Representative, Hickey was allowed to sell products of other companies, including those of Arkla's competitors, as long as such products were not directly competitive with Arkla products he sold. Hickey established Perry Hickey Enterprises as the corporate vehicle for his sales of Arkla products. With another individual, he also established a partnership, Southern States Sales. Hickey sold Arkla products to Southern States Sales and collected his commission. Sixty to sixty-five percent of his sales of Arkla products were made to that company. Southern States Sales then sold the products to its customers. It also sold the products of other companies, such as gas ranges and freezers.

Arkla did not exercise any control over which customers Hickey could call upon in his territory. Furthermore, it did not exercise any control over the manner of marketing, distribution or the advertising of his marketing of its products. However, Arkla did set the prices at which Hickey could sell its products and did place credit limits on customers.

While Hickey did not have to report to Arkla about his daily activities, he was required to attend Arkla sales meetings. He was also subject to performance evaluations by Arkla and was given a sales quota. Without any charge, Arkla provided Hickey with office space and secretarial services. Arkla did, however, require him to pay the costs of remodeling and redecorating the office space.

In 1976, as a result of the recommendation of a nationally recognized management consulting firm, Arkla decided to change to a different marketing structure. In the new structure, the functions of the Manufacturer's Sales Representatives were absorbed by Zone Managers, undisputedly employees of Arkla. In November, 1976, as a result of the restructuring, Arkla cancelled Hickey's contract, and it is upon this act that Hickey, who was then 49 years of age, bases his claim of employment discrimination on the basis of age.

In our determination of whether the district court properly granted Arkla's motion for directed verdict, i.e., correctly found that there was no evidence of such quality and weight which would support a conclusion that Hickey was an employee under the ADEA, Hickey asks this court to apply the approach used under the Fair Labor Standards Act (FLSA) in such cases as Mednick v. Albert Enterprises, Inc., 508 F.2d 297 (5th Cir.1975); Usery v. Pilgrim Equipment Co., Inc., 527 F.2d 1308 (5th Cir.1976); and Weisel v. Singapore Joint Venture, Inc., 602 F.2d 1185 (5th Cir.1979). In these cases, this Court applied an "economic realities" test under which persons are considered employees if they, "as a matter of economic reality, are dependent upon the business to which they render service." Mednick, supra, quoting Bartels v. Birmingham, 332 U.S. 126, 130, 67 S.Ct. 1547, 1550, 91 L.Ed. 1947 (1947).

Hickey asks that this approach be used instead of the considerably...