Gig economy blurs lines, Michigan high court urged to revisit cases

By Kelly Caplan
BridgeTower Media Newswires
 
DETROIT, MI — Double dipping by a party is frowned upon by Michigan’s courts.

But that is precisely what the defendant tried to do in this workers’ compensation case by arguing that two entirely separate entities were entitled to immunity under the Worker’s Disability Compensation Act, or WDCA, even though only one of them had workers’ comp insurance.

Now, a Court of Appeals ruling could pave the way for a change in how contract workers in the growing gig economy are treated if the Michigan Supreme Court heeds the call to bring clarity.

In Bolen v. Marada Industries Inc., Marada retained ATCO to perform parts inspection services for General Motors. Julie Bolen was hired by ATCO to work as a site leader on the project.

Bolen was injured when a hi-lo forklift operated by one of Marada’s employees knocked over some bins. She filed a negligence suit against Marada.

But Marada said Bolen’s assignment by ATCO meant she was dually employed under a labor broker-customer relationship; as an employee of both entities, the exclusive remedy provision of the WDCA barred her claims and request for damages.

Bolen pointed out that Michigan Supreme Court decisions interpreting statutes using the definite article “the” — as the language in the WDCA’s exclusive remedy provision does — have cast doubt on the dual-employer doctrine’s viability.

And even if it applied, summary disposition was inappropriate; ATCO was not a labor broker and Marada was not her employer on the basis of the economic reality test.

The Oakland County Circuit Court denied Marada’s motion for summary disposition; Bolen’s reliance on Robinson v. City of Detroit, 462 Mich 439 (2000), combined with the definite article “the” in the exclusive remedy provision was persuasive and showed the Legislature’s intent to entitle only one employer to immunity from suit under the WDCA.

That wasn’t the end of the trial court’s analysis, though.

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Conflicted analysis

The trial court said Bolen’s argument conflicted with two earlier cases — 1982’s Farrell v. Dearborn Mfg Co. and 1997’s Kidder v. Miller-Davis Co. — that found dual employers could exist in situations involving labor brokers and their customers.

Therefore, the lower court said it was “mandated to follow Farrell and Kidder” even though it agreed with Bolen that those cases clashed with Robinson.

The trial court continued its conflicted analysis by saying there could be dual employers in this case, and that there was a broker-customer relationship between ATCO and Marada.

It added that the first factor of the economic reality test — control of the worker’s duties — and the fourth factor — performance of duties as an integral part of defendant’s business toward the accomplishment of a common goal — favored Marada.

In the end, though, the second and third factors were hurdles that couldn’t be overcome.

The lower court said there was insufficient evidence “to draw a legal conclusion with regard to the payment of [p]laintiff’s wages,” and that there was a genuine issue of material fact as to the right to hire, fire and discipline employees.

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Gig economy

Now, a Court of Appeals panel has said the trial court’s analysis reached “internally inconsistent findings,” which led to an improper analysis of the economic reality test. It reversed the lower court’s denial of summary disposition for the defendant.

The panel said courts are required to consider the totality of the circumstances in that assessment; no single factor is controlling.

“Even if the trial court was concerned that defendant could not have plaintiff fired … the other factors of the economic reality test favored a finding of a dual-employer situation, and that only one inference could be drawn from the totality of the circumstances,” the panel explained. “Thus, we conclude that the trial court erred by denying defendant’s motion for summary disposition where defendant was a coemployer of plaintiff and, as a result, comes under the protection of the exclusive remedy provision of the WDCA.”

But in his concurrence, Judge Douglas B. Shapiro wrote separately to urge Michigan’s high court to reconsider its holdings in Farrell and Kidder, saying it was plain that the nature of certain employment relationships has changed in the intervening years.

“The ‘gig’ economy has blurred the lines between employers, contractors, employees and labor brokers,” he noted. “If for no other reason than the need to consider whether and how to address these changes, the Supreme Court should grant leave to appeal.”

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Signal to the Supreme Court

Robert M. Raitt, of Raitt Law in Southfield, represented Bolen. They will be filing application for leave to appeal.

“Clearly we want to send a signal to the court that this is a very important issue. In this particular case, we have outstanding facts to suggest that, if this case finds dual employment, what case won’t?” he asked. “With the gig economy — which is something so important and so common for Michigan residents and employees — do you really want to base law on cases that are 20-30 years old, and not look at what other states that have addressed this more recently have done?”

He pointed out that Bolen was doing work for her company in Marada’s warehouse.

“She had a very specific job that was very specific to her company’s expertise and totally foreign to the other company,” he explained. “The head of human resources for the defendant wrote on the paperwork after the incident that she is not our employee.”

He said he tried to look at it from a layman’s and a common sense perspective.

“This woman works for Company A that was asked to provide employees because Company B doesn’t do the thing Company A does, and then she goes to work at their place of business,” he explained. “These employees are told, ‘If you screw up, it’s on you. We’re not going to pay comp.’ They’re told, ‘You’re not an employee.’ But when their employee made a crate fall on her head and she has to have multiple surgeries now all of a sudden they’re going to be considered her employer and comp is going to be the exclusive remedy? It’s crazy.”

Marada’s counsel, Anthony Caffrey III of Cardelli Lanfear in Royal Oak, said he was pleased with the decision.

“All three judges of the Michigan Court of Appeals agreed that this case is controlled by the well-established law that has been binding precedent for nearly 40 years now,” he said. “The existing precedent has stood the test of time to ensure that as many employee-employer relationships fall within the purview of the workers’ compensation system, and has consistently applied that standard both to conferring benefits to employees and providing immunity to employers.”

He said if there is a new public policy basis to reverse course after this many years, “the Michigan Legislature is the appropriate entity to consider the necessity and parameters of any such change in the law.”