Rogers v. Sugar Tree Products, Inc.

• Decision Date: 17 July 1992
• Docket Number: No. 90 C 20219.,90 C 20219.
• Citation: 824 F. Supp. 755
• Parties: Mary Jane ROGERS, Plaintiff, v. SUGAR TREE PRODUCTS, INC., Defendant.
• Court: U.S. District Court — Northern District of Illinois

824 F. Supp. 755

Mary Jane ROGERS, Plaintiff, v. SUGAR TREE PRODUCTS, INC., Defendant.

No. 90 C 20219.

United States District Court, N.D. Illinois, W.D.

July 17, 1992.

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COPYRIGHT MATERIAL OMITTED

Lawrence Schlam, Northern Illinois University College of Law, DeKalb, IL, for plaintiff.

Peter D. DeBruyne, DeBruyne, Yalden & Olsen, Rockford, IL, for defendant.

ORDER

REINHARD, District Judge.

Introduction

Mary Jane Rogers, plaintiff, has filed a one-count complaint against Sugar Tree Products, Inc., defendant, alleging that defendant violated the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 621 et seq. Defendant has filed a motion to dismiss for lack of subject matter jurisdiction.

Facts¹

Defendant is a Missouri corporation with its plant in Belvidere, Illinois. It is a subchapter "S" corporation. Defendant manufactures animal feed from food waste products. During the relevant period of time in this case, October 17, 1987, to October 16, 1989, it is undisputed that defendant employed at least 17 employees. From 1973 to October 16, 1989, defendant employed plaintiff. Defendant is owned by Fred Brown. Brown is president of defendant with responsibility to direct its operations. Defendant rents the plant facilities and warehouse in Belvidere from Brown's family.

Fred Brown also owns and is president of International Distributing Corporation (IDC). IDC is also a Missouri corporation, located in St. Louis, Missouri. IDC processes food products. It is undisputed that IDC employs more than 20 employees.

In 1986, Brown purchased all the stock of defendant owned by David Oatman. Oatman and Brown were each 50% owners of the business until Oatman sold his stock to Brown. Oatman remained on the payroll until August 30, 1989, and was occasionally present on defendant's premises in 1989. During his deposition, Brown testified to the following:

Q: Okay. And that the purchase of shares terminated Mr. Oatman's relationship with the company?

A: Not really. He was supposed to work but he — we haven't seen him in a few years.

Q: So he's still technically an employee of Sugar Tree?

A: Yes, he is.

The decision to terminate plaintiff was made by Brown, Jim Sullivan and Bryan Damerow. Defendant has characterized Sullivan as a consultant for defendant who was regularly employed by IDC. However, plaintiff states that Sullivan is "ostensibly employed by IDC." Sullivan took part in reorganizing defendant in 1989 and hiring plaintiff's replacement. Sullivan also participated in hiring James Jones as the production manager of defendant in June 1989. During the evidentiary hearing, Damerow, the former plant manager of defendant from January 1, 1989, to August 1, 1989, said that he considered Sullivan to be his boss. However, James Jones, who later became plant manager, testified that he thought that Sullivan was a consultant for defendant. According to Damerow, he reported all facets of defendant's operations to Sullivan, and that he and Sullivan determined the operational objectives of defendant. It is stipulated that Sullivan would receive a bonus each year for the work he did for defendant while he was a full-time employee of IDC. The bonus is based on a formula of how profitable defendant had been that year. The bonus is reported on an IRS Form 1099. Although plaintiff asserts that Sullivan was compensated by IDC for his travel expenses when he went to defendant's premises, Jones testified that defendant compensated Sullivan for his expenses. Finally, Sullivan responded to plaintiff's Equal Employment Opportunity Commission charge with a letter on defendant's stationary, and Sullivan signed the letter as "Agricultural VP." Defendant contends that Sullivan's reference in the letter as "Agricultural VP" of defendant was a mischaracterization.

Three other employees of IDC also performed some tasks for defendant: William Schmalz, Paul Burckhart and Judy Larson (formerly Pikesly). These three individuals received bonuses for the work they did for defendant. William Schmalz is the chief financial officer of IDC and performs financial services for defendant, including preparing monthly financial statements and tax returns. Schmalz oversees defendant's inventory and financial records. Schmalz estimated that he works only one hour per month on these matters for defendant. Unlike Sullivan's bonus, the bonus Schmalz receives is not based on the profitability of defendant.

Paul Burckhart is a bookkeeper for IDC. Although Burckhart is not on defendant's payroll, he spends one-third of his time working on matters for defendant. Burckhart kept financial records of defendant and recorded and made payments for defendant to its creditors. Invoices for defendant's sales are, however, sent out by defendant. Although Judy Larson, from St. Louis, Missouri, arranged for common carriers to transport defendant's product from Belvidere, Illinois, Damerow arranged for local pick-ups and deliveries. Larson also gave directions and instructions to plaintiff.

Although not included on the list of employees, plaintiffs exhibit # 1 includes the name of John Tillman, who worked for defendant from April 21, 1989, to July 28, 1990. Defendant contends that Tillman was not employed for 20 weeks during the relevant period, and plaintiff does not contradict that contention. James Jones, the plant manager for defendant, began his employment with defendant on June 15, 1989.

In addition to the personnel described above, defendant and IDC are related in other ways. Defendant did some business with IDC. The parties stipulated that defendant's sales to IDC represented 40% of defendant's business. This business with IDC totalled $300,000 a year. According to defendant, these transactions were done at "arm's length." Defendant also charged IDC to store material for IDC in Belvidere. Further, as noted previously, IDC scheduled the shipping of defendant's product through a common carrier. Both defendant and IDC have a common pension plan but each made separate contributions to the plan for its own employees. Prior to 1980, defendant had a separate plan but it was terminated because defendant did not have 25 employees as required under the plan.

Contentions

Defendant contends that this court lacks subject matter jurisdiction because defendant did not employ 20 or more employees for 20 weeks during the relevant period. Plaintiff contends that defendant employed the requisite number of employees, or in the alternative, that defendant and IDC are integrated so as to be a single employer.

Discussion

The burden of showing jurisdiction is on the party asserting jurisdiction. See Bowyer v. United States Department of Air Force, 875 F.2d 632, 635 (7th Cir.1989). District courts view whatever evidence has been submitted to determine whether in fact subject matter jurisdiction exists. Bowyer, 875 F.2d at 635. If the evidence raises a factual controversy, the district court must weigh the conflicting evidence in determining whether subject matter jurisdiction exists. Grafon Corp. v. Hausermann, 602 F.2d 781, 783 (7th Cir.1979).

Section 630(b) defines "employer" as the following: "a person engaged in an industry affecting commerce who has twenty or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year." 29 U.S.C. § 630(b). The parties have agreed that the relevant time frame is the period between October 17, 1987, and October 16, 1989.² An "employee" is "an individual employed by any employer." 29 U.S.C. § 630(b). Thus, the determination of who is an employer depends on who is an employee.

The Seventh Circuit has stated that the term "employer" is intended to have its common dictionary meaning and that the term "employee" is defined in the manner common to federal statutes. Zimmerman v. North American Signal Co., 704 F.2d 347, 352 (7th Cir.1983). In Zimmerman, the court held that unpaid, inactive officers are not "employees," Zimmerman, 704 F.2d at 352, and that hourly paid workers are not employees when they are neither working nor on paid leave, Zimmerman, 704 F.2d at 354; see also, McGraw, 707 F.2d at 991; but see Gorman v. North Pittsburgh Oral Surgery Associates, 664 F.Supp. 212, 214 (W.D.Pa.1987); Hornick v. Borough of Duryea, 507 F.Supp. 1091, 1098 (M.D.Pa.1980). Further, in the Seventh Circuit, shareholders or directors are generally employers rather than employees. See Chavero v. Local 241, 787 F.2d 1154, 1156 (7th Cir.1986); E.E.O.C. v. Dowd & Dowd, Ltd., 736 F.2d 1177, 1178 (7th Cir.1984); see also Burke v. Friedman, 556 F.2d 867, 869 (7th Cir.1977) (partner in accounting firm is employer not employee under Title VII); but see Gorman, 664 F.Supp. at 214. In determining whether an individual is an employee, a court must apply the economic realities test. See Knight v. United Farm Bureau Mutual Insurance Co., 950 F.2d 377, 378 (7th Cir.1991) (Title VII case). There are five factors under the economic realities test: (1) the extent of the employer's control and supervision over the worker, including directions on scheduling and performance of work; (2) the kind of occupation and nature of skill required; (3) responsibility for the costs of operation; (4) method and form of payment and benefits; and (5) length of job commitment and/or expectations. Knight, 950 F.2d at 378-79. Of these factors, control is the most important. Knight, 950 F.2d at 378.³

As noted previously, the parties have stipulated that defendant employed at least 17 employees during the relevant period. Therefore, if plaintiff can show that three other individuals were employees under the statute, then she has shown that defendant is subject to the ADEA. The individuals whom plaintiff contends are employees pursuant to § 630(b) are the following: Schmalz, Burckhart, Larson, Sullivan, Oatman, and taken together, Jones and Tillman.

Jones was an employee of defendant from June 15, 1989, to October 13,...