7th Cir. Clarifies Standard for Showing Indirect Employer Status Under Title VII

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By Jay-Anne Casuga

March 10 — A black foreman for a construction sub-subcontractor in Milwaukee failed to show that the general contractor on a city hall project was liable for alleged race discrimination against him, the U.S. Court of Appeals for the Seventh Circuit ruled March 9, clarifying the test for determining de facto or indirect employer status under Title VII of the 1964 Civil Rights Act.

Although a lower district court stated that two distinct tests existed in the Seventh Circuit for establishing indirect employer status—an economic realities test that focused on control in the alleged employment relationship and a separate five-factor test—the appeals court said those tests are neither independent nor mutually exclusive. Instead, the Seventh Circuit said the five-factor test “is merely a more structured analysis of whether the putative employer exercised sufficient control, and whether the ‘economic realities' are such that the putative employer can be held liable under Title VII.”

Applying those factors to the present case, the court affirmed summary judgment to JP Cullen & Sons, Inc., finding that it wasn't Walter Love's de facto or indirect employer.

The court said JP Cullen didn't control or supervise Love; didn't provide training apart from periodic safety meetings; wasn't responsible for the costs of operation; didn't provide payment or benefits; and didn't expect Love to continue working with it after the city hall project was completed.

The court made no ruling on the merits of Love's claims that he was removed from the project because of his race and that the work site was racially hostile.

Judge Joel M. Flaum wrote the opinion, joined by Judges Diane P. Wood and Daniel A. Manion.

Employee Hired by Sub-Subcontractor

According to the court, JP Cullen entered into a subcontract with Eugene Matthews Inc. on the Milwaukee city hall renovation project, and Eugene Matthews subcontracted with Union Contracting Inc.

Union Contracting hired Love as a foreman in June 2007. Love worked for about eight months until JP Cullen called for his removal from the project after he was involved in an altercation with the employee of another subcontractor.

Love sued JP Cullen under Title VII. The U.S. District Court for the Eastern District of Wisconsin granted summary judgment to JP Cullen upon finding that it wasn't Love's employer.

Court Focuses on Control, Economic Realities

Affirming on appeal, the Seventh Circuit observed that it established a five-factor test in Knight v. United Farm Bureau Mutual Insurance Co., 950 F.2d 377, 57 FEP Cases 697 (7th Cir. 1991) to determine when an entity is a de facto or indirect employer.

Then in EEOC v. Illinois, 69 F.3d 167, 69 FEP Cases 306 (7th Cir. 1995), it said it focused on the amount of control exerted by a purported de facto employer in considering the existence of an employment relationship, with an emphasis on the “economic realities.”

The five-factor Knight test and the economic realities test are not competing standards, the appeals court explained, adding that the Knight factors “are simply a more detailed application of the economic and control considerations present in the ‘economic realities' test.”

The appeals court explained that the five-factor Knight test and the economic realities test are not competing standards. It said the Knight factors, which also examine the issue of control, “are simply a more detailed application of the economic and control considerations present in the ‘economic realities' test.”

Company Wasn't Indirect Employer

After applying the five factors, the Seventh Circuit agreed that JP Cullen wasn't a de facto or indirect employer of Love and thus can't be held liable for any alleged race discrimination.

Although the company had the power to remove subcontractor employees from a work site for safety reasons, it had no other control over Love, the court said. It couldn't hire or fire, set his hours, assign or supervise his work, or promote or demote him.

JP Cullen also didn't provide Love with any opportunities to learn skills outside of mandatory safety training, and didn't furnish “labor, materials, equipment and services necessary” to complete work conducted by the subcontractors.

Additionally, Love received all of his payments directly from Union Contracting, not JP Cullen. Furthermore, JP Cullen didn't provide Love with any benefits such as health insurance, sick leave or vacation time, the court said.

Finally, it said, there is no evidence that either Love or JP Cullen expected to continue any association past the completion of the city hall project.

The court acknowledged that JP Cullen's involvement in Love's dismissal from the city hall project “is certainly relevant to their relationship.”

“[But] it is not enough to overcome our analysis under the Knight factors, which shows that Cullen—in the aggregate—exercised very little control over Love in the course of their relationship,” the court said.

Hinshaw & Culbertson represented Love. Nowlan & Mouat represented JP Cullen.

To contact the reporter on this story: Jay-Anne Casuga in Washington at jcasuga@bna.com.

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com.

Text of the opinion is available at http://www.bloomberglaw.com/public/document/Love_v_Jp_Cullen__Sons_No_133291_2015_BL_62335_7th_Cir_Mar_09_201.