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Auger v. ABB Flexible Automation, Inc.
Citation: 34 F. App'x 160Docket: No. 00-1585
Court: Court of Appeals for the Sixth Circuit; March 28, 2002; Federal Appellate Court
Plaintiff Edward J. Auger, III filed a negligence lawsuit against ABB Flexible Automation, Inc. after sustaining serious injuries while working as a temporary pipe fitter at ABB's job site. ABB sought summary judgment, claiming it was Auger's "co-employer," thus invoking the exclusive remedy provision of the Michigan Worker’s Disability Compensation Act to bar the negligence claim. The district court granted this summary judgment, concluding that ABB was Auger's "joint employer" based on the "economic reality test." On appeal, Auger contends that the district court erred in its decision, arguing that ABB only "retained control" over his employment and that conflicting evidence regarding his employment status should be resolved by a jury. The appellate court found sufficient grounds to reverse the district court's ruling and remand the case for a jury trial, highlighting the presence of genuine issues of material fact regarding Auger's employment relationship with ABB. The appeal centers on whether conflicting inferences regarding Auger's employment status prevent summary judgment. Summary judgment is warranted when there are no genuine issues of material fact, meaning that a rational trier of fact could not find for the non-moving party. The court reviews evidence favorably towards the non-moving party and must accept direct evidence presented by them as true. Determining if a company is an employer under the relevant Act is a legal question when evidence supports only one inference; however, unresolved factual issues must go to a trier of fact. The critical issue is whether Auger qualifies as an employee of ABB. ABB contends that a labor broker/customer relationship with MTE makes it a co-employer, thereby limiting Auger's recovery under the exclusive remedy provision of the Act. In contrast, Auger argues that no such relationship exists and instead posits a general contractor/subcontractor arrangement. He invokes the "economic reality test," asserting that this framework leads to conflicting inferences regarding his employment status and claims negligence based on retained control, suggesting the matter should be resolved by a jury. The Act stipulates that an employee's recovery is limited to benefits provided under it. Michigan courts apply an "economic reality test" to establish employer/employee relationships, requiring a prior determination of whether a labor broker/customer relationship is present. The district court did not assess whether MTE functioned as a labor broker or if ABB and MTE had a labor broker/customer relationship. As these determinations are crucial to the case's outcome, they must be addressed first. Auger disputes that MTE acted as a labor broker, instead characterizing ABB as a general contractor with MTE as an outside contractor, suggesting a principal-agent relationship rather than a labor broker/customer one. Under Michigan law, a customer in a labor broker scenario is deemed a co-employer of the worker. A labor broker's primary function is to employ contract workers and supply them as temporary labor to customers. Workers sign tax withholding forms at the broker's location and await assignments, which are determined by customer needs communicated daily. Once assigned, the worker operates under the customer's control, which includes the authority to discharge the worker or refuse service. Payments are made by the labor broker to the worker, incorporating costs for various expenses, while the customer pays the broker. In contrast, a general contractor and subcontractor maintain a principal-agent relationship, wherein the agent (subcontractor) acts on behalf of the principal (general contractor) with their consent and under their control. This relationship requires clear indications of authority and mutual consent, as detailed in the Restatement (Second) of Agency. In the specific case of Auger, he was assigned by MTE to ABB on a time-only basis, with ABB holding the authority to discharge him and making payments to MTE rather than directly to Auger. However, MTE's supervisor, Joseph Seedorf, retained direct control over Auger’s work, indicating a blend of labor broker and subcontractor dynamics, as MTE provided not only labor but also maintained supervisory authority over Auger at ABB. ABB contends that supervisor Brian Bourdeaux had ultimate control over the MTE workers, yet evidence shows Bourdeaux communicated orders solely through Seedorf and did not directly instruct plaintiff Auger. This raises a significant question of control, indicating uncertainty whether MTE acted as a labor broker or a subcontractor for ABB, thus creating a genuine issue of material fact regarding their relationship. The analysis does not conclude with this classification; Auger invokes the "economic reality test" traditionally used in Michigan to assess employer-employee relationships, which includes four elements: control over duties, wage payment, hiring and firing rights, and whether the worker's duties contribute to the employer's business goals. The court acknowledges that both parties agree ABB exercised some control over Auger but disputes the degree of that control. Auger argues the control he experienced meets the threshold for negligence liability under the "retained control" doctrine, suggesting conflicting inferences exist about ABB's role as a co-employer, warranting a jury's determination. Conversely, ABB claims it shared sufficient control to qualify as a "joint employer," thus enjoying protection under the Act. Under Michigan law, control is crucial for establishing negligence liability, with mere oversight insufficient to establish a co-employer relationship. The distinction between authoritative control and mere suggestions must be clear, focusing on actual work direction rather than general safety oversight. The Michigan Supreme Court's decision in Clark illustrates that dual employment status, particularly when conflicting factual questions about control arise, is a matter for a jury rather than to be resolved through summary judgment. The Michigan Court of Appeals addressed the control issue in a case involving a crane operation company that supplied a crane and operator to the plaintiff's employer. The plaintiff was injured due to the operator's negligence, and the defendant argued that the operator was a "borrowed servant," thus creating co-employment. The court found that the crane and operator were a leased unit and that the plaintiff's employer exerted minimal control, primarily through hand signals. Consequently, the court reversed a summary judgment favoring the defendants regarding control. In the current case involving Auger, he was supervised by Seedorf, the MTE supervisor, while the defendant claimed oversight by Bourdeaux. However, Bourdeaux communicated with Auger through Seedorf, and there was no evidence of direct control from ABB's employees over Auger. The district court ruled that ABB had sufficient supervisory control due to the nature of administrative tasks like time clock punching and safety requirements, categorizing ABB as a co-employer and granting it summary judgment. This conclusion raised doubts about whether ABB's retained control met the necessary threshold for liability regarding Auger's injuries. Regarding wage payment, MTE paid Auger’s wages, but ABB contended that MTE merely acted as a conduit for ABB's payments. The district court believed ABB could demonstrate wage payment through its contract with MTE, but the prevailing legal interpretation suggests that this case should not be viewed as a conduit scenario. The analysis aligns with the Smith case, where the court concluded that another entity (R.L. White) was responsible for paying wages, not Freedland Steel, despite claims to the contrary. In this instance, invoices from MTE to ABB raised questions about whether ABB's payments included overhead costs, complicating the determination of dual employment. In Clark, the Michigan Supreme Court determined that ambiguity existed regarding the actual payer of a plaintiff's wages due to the commingling of funds between two companies. The court emphasized that merely paying wages does not establish dual employment. In the current case involving Auger, the lack of clarity about which company was responsible for his wage payment necessitates jury deliberation, as conflicting inferences arise about whether a labor broker or contractor/subcontractor relationship existed. The district court incorrectly likened this situation to labor broker cases, where evidence was insufficient to support such a classification. Additionally, the court's finding that ABB met the economic realities test with respect to hiring, firing, and discipline was challenged by Auger, who contended that MTE held the exclusive authority in these areas. ABB claimed the right to send Auger home constituted firing, but the distinction between sending someone home and termination was made clear. The precedent set in Clark recognized hiring by one entity as sufficient to create factual questions, and the court of appeals in Smith reinforced the necessity of considering objective facts over unexercised rights. In this case, since MTE had ultimate disciplinary authority over Auger and ABB did not exercise its right to send him home, genuine issues of material fact regarding who had the authority to hire, fire, and discipline remained. Consequently, the issue of exclusive remedy should be presented to a jury, as the legal distinction between contractual rights and actual control over hiring and firing was highlighted, referencing Erickson v. Pure Oil Corp. to illustrate that mere contractual authority does not equate to liability for injuries to subcontractor employees. Every owner has the right to discharge a general contractor for failure to meet industry standards, subject to damages. In the Schulte case, the court found that a contractual right to remove an employee did not equate to employer control, undermining claims of employee status. The district court incorrectly concluded that ABB had the right to discharge Auger, as this did not establish control sufficient for dual immunity. Both ABB and MTE had rights over Auger’s employment, complicating the determination of who could hire, fire, and discipline him. The court ruled that this issue should have been presented to a jury. The district court also found that ABB needed MTE workers to complete its project on time, fulfilling the common objective test of the economic realities doctrine. MTE was hired for pipe fitting when another contractor could not meet deadlines, indicating a shared goal between ABB and MTE. However, the district court failed to determine if MTE qualified as a labor broker before applying the economic reality test, which is a necessary step under Michigan law. The ambiguity regarding ABB's role—whether as a general contractor or customer—resulted in conflicting inferences about control and payment. Consequently, it was unclear if ABB’s control met the economic reality test. Given these conflicting facts, the issue of dual employment status should have been decided by a jury. The court reversed the district court’s summary judgment and mandated a jury trial on the exclusive remedy issue under Michigan law, affirming jurisdiction based on the diversity of citizenship and the amount in controversy.