Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

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ESTATE OF SUSKOVICH v. ANTHEM HEALTH PLANS (January 22, 2009)

Anthony Suskovich was a computer programmer and analyst. From 1996 until his unfortunate and sudden death in 2006, he provided services to WellPoint. WellPoint retained Suskovich on many projects with limited duration, although frequently one project rolled over into another. He billed WellPoint on an invoice, was paid by the hour, and his income was reported on a 1099. WellPoint adopted a preferred vendor program around 2000 under which it could only avail itself of Suskovich’s services if they were provided by a preferred vendor. Suskovich began a relationship with Trasys. Suskovich would send an invoice to WellPoint, which in turn would refer them to Trasys for payment to Suskovich. Suskovich’s income was still reported on a 1099. In 2001, Suskovich signed an “independent contractor” agreement. Suskovich worked on many different projects, sometimes on more than one at once. He usually worked at WellPoint’s offices with a computer supplied by WellPoint. In 2005, WellPoint informed Suskovich that they would not be using him anymore and asked him to train a replacement. Later, Suskovich and WellPoint had discussions about the possibility of Suskovich becoming an employee of WellPoint but nothing ever came of them. Before his death, the IRS began an investigation of Suskovich for not filing tax returns. The investigation led to his filing of returns for several years in which he listed himself as self-employed. He still had remaining tax liability when he died. His estate brought an action against WellPoint and Trasys, seeking a declaratory judgment that Suskovich was an employee of WellPoint and Trasys and for compensation under the Fair Labor Standards Act (“FLSA”), benefits under ERISA, and tax indemnity. The district court granted summary judgment for the defendants, holding that Suskovich was an independent contractor. The Estate appeals.

In their opinion, Judges Cudahy, Flaum and Sykes affirmed. First, the Court held that the district court did not give improper weight to the “independent contractor” agreement. The Court held that the court below properly followed the law of the Circuit that parties can define their relationship as long as the other factors do not lead to the opposite conclusion. The district court gave primary weight to the contract but did consider and weigh other factors. Next, the Court held that the district court properly resolved the ambiguity in the contract by considering the language of the contract as well as extrinsic evidence. The Court proceeded to the meat of the appeal – whether Suskovich was an independent contractor or an employee. The Court decided to approach the question under the 10-factor Restatement test, even though the asserted claims have different tests. ERISA claims use a 12-factor common law test. FLSA claims use a broader 6-factor test. The Supreme Court has held that the ERISA test is similar to the Restatement test and the Estate relied on the Restatement test. The Court evaluated and weighed the ten factors: a) extent of control, b) whether the worker is engaged in a distinct occupation, c) whether the type of work is generally done without supervision, d) skill required, e) who supplies the tools and workplace, f) length of employment, g) whether the payment is by time or job, h) whether the work is the regular business of the employer, i) the parties’ belief, and j) whether the principal is in business. The Court concluded that only two factors weighed at all in Suskovich’s favor: who supplied the tools and whether the work was the regular part of the business. The former is a relatively unimportant factor and the latter only favors Suskovich as against Trasys. All of the other factors weighed against Suskovich. The district court was correct in awarding summary judgment to WellPoint and Trasys.