*1
1984]
Firestone
Wells
RUBBER COMPANY
TIRE AND
WELLS v FIRESTONE
1).
(Calendar
6,
No.
Argued
December
No. 65372.
Docket
De-
11,
28,
February
1985.
Released
1984.
cided December
liability
brought
third-party products
action in the
a
James
against
Tire and Rubber
Muskegon
Firestone
Circuit Court
injuries
damages resulting
in the
Company
received
from
for
Sup-
Muskegon
employment
Auto
Firestone
with
course of his
Stores,
corporate subsidiary
wholly
ply
a
owned
and Service
Firestone,
rim
a truck tire
manufactured
when
Larnard, J.,
court,
apart.
A.
found that
Charles
blew
The
separate corporate entity
and denied
Firestone was
judgment. The
Court
motion for accelerated
Firestone’s
MacKenzie, JJ.,
Danhof, C.J.,
Appeals,
R. B. Burns and
and
plaintiffs employer
reversed, holding
that Firestone was the
compensation
purposes
and that the action
act
of the workers’
remedy provision of the act
the exclusive
under
was barred
44027).
(Docket
appeals.
plaintiff
No.
The
Cavanagh, joined by
opinion by
Chief Justice
In an
Justice
Supreme
Ryan
Brickley,
Court
Williams and Justices
held:
plaintiffs products liability
action is barred
The
remedy provision of the workers’
act.
exclusive
injured
employed by
and was
was
the defendant
acting
employment.
in the course of his
while
applied
1.
whether the defendant
The test to be
determine
injury
plaintiffs employer
is the
on the
of the
date
[1, 2,
[2,
[3,
[4]
Workers’
81 Am Jur
Workmen’s
Modern status: "dual
5]
82 Am Jur
by employer. 9 ALR4th 873.
employee injured by product
trolling
recovery
4,
81 Am
18 Am Jur
5]
63 Am Jur
compensation immunity
interest in
Jur Workmen’s
2d,
Compensation
2d,
References
2d,
2d,
Workmen’s
Workmen’s
Corporations
2d,
employer corporation. ALR4th 948.
Products
capacity
for Points in Headnotes
in tort. 23 ALR4th 1151.
Compensation
Act as
Compensation
Compensation
§
Liability 906.
manufactured,
doctrine” as basis for
13 et
furnishing
extending
seq.
§§
§
§
288.
§§
exclusive
53,152
51.
sold,
one
or distributed
et
owning
remedy
employee’s
seq.
con-
viewing
requires
test. The test
economic
statutory
in relation to the
scheme
situation as a whole
goal
preserving
act with the
parties.
securing
rights
privileges
of all
Control is
*2
considered,
wages, authority
payment of
to
to be
as is
factor
fire,
responsibility
for the maintenance
hire and
controlling.
discipline,
no one factor is
case,
com-
2.
the defendant maintained one workers’
stores,
pensation
policy
all
local retail
insurance
for
of its
voluntarily
plaintiffs
benefits.
its insurance carrier
paid
separate
There is no evidence that the defendant maintained a
responsibilities
corporation Muskegon
evade its
under the
to
compensation
to
workers’
act or that it did not consider itself
plaintiff
plaintiffs employer.
rely
did the
on the
be the
Nor
subsidiary
distinction between the defendant and its
when he
employer
petition
that the defendant was his
in his
for
asserted
compensation
workers’
benefits.
corporate entity separate
3. The fiction of a distinct
from the
is a
introduced in
stockholders
convenience
the law subserve
justice. Generally,
corporation
permit-
the ends of
a
will not be
pierce
prove
ted to
its own
veil in order to
that it and
However,
subsidiary
entity.
respecting
are. one
where
separate
justice
entities would subvert
or cause a result con-
trary
clearly overriding public policy,
ignored
to a
fiction
case,
the courts. In this
entities must be
disregarded
important public policies underlying
because of the
compensation
protects
the act. The act
workers and
employers.
Covered workers are assured of
in the
they
employment-related injuries. By
event that
sustain
assum-
ing responsibility
injuries, employers
protected
for such
are
potentially
damage
excessive
awards. If liberal construc-
applied
benefits,
tion is
when a worker seeks
the same con-
applied
employer
struction should be
when an
asserts the
provision
remedy
exclusive
of the act as a defense in a tort
rely
applying
action. The
did not
on
the distinction
permitted
for
deny
benefits and should not now be
relationship
upon
that he asserted and
which the defendant
assuming responsibility
payment
relied in
of the benefits.
argument
remedy provision
4. The
that the exclusive
addi-
tionally
apply
does not
in this case because the defendant
occupied
plaintiffs employer
a status other than that of the
rejected.
circumstances,
must also be
Under certain
an em-
ployer may
However,
capacity.
act in a dual
for the dual-
capacity
applied,
employer
doctrine to be
must
have
identity
distinct,
completely
from,
second
so
removed
and unre-
v Firestone
employer
lated to
the status
established standards
case,
recognize
separate legal person.
it
the law will
as a
In this
plaintiffs injuries
acting
occurred while he was
in the
scope
employment.
course of and within the
of his
Affirmed.
Levin, joined by
Kavanagh
Boyle,
Justice
Justices
dis-
senting,
reality
stated that economic
is not determinative of
Muskegon
plaintiffs
whether Firestone or
Firestone was the
purposes
remedy provision
actual
of the exclusive
case,
applied
of the workers’
act. As
in this
new,
existing,
test creates a
rather
than characterizes an
employment relationship. By applying general principles, it
Muskegon
must be concluded that
Firestone and not Firestone
plaintiffs employer,
plaintiffs
was the
and therefore the
action
against
remedy provi-
Firestone is not barred
the exclusive
sion.
The economic
test is a substitute for the control test
characterizing
employment
which is a
relationship
means of
determining
and of
whether
was of a subcontrac-
case, however,
employ-
tor or of a servant. In this
there is no
relationship
ment
between Firestone and
Firestone.
The issue is not whether the control test should be abandoned
*3
reality
adopted,
and an economic
test
but whether an economic
reality
test should be made determinative of whether
subsidiary corporations
single entity
purposes
are a
for the
remedy provision
compensation
of the exclusive
of the workers’
reality analysis
act. Economic
would destabilize workers’ com-
pensation
corporate
Generally,
separateness
law.
the
corporate
respected by
corporate
entities is
the courts and the
pierced only
prevent
veil
injustice.
is
to
fraud or
Total domina-
by
parent corporation
tion
a
subsidiary
justify
of a
does not
piercing
corporate
question
veil. The
whether there is an
employment relationship between Firestone and Wells should
by
be
by implication.
resolved
consent and not
App 790;
(1980)
Opinion op the Court Compensation Remedy. — 1. Workers’ Exclusive products A liability against product action a manufacturer was remedy provision barred the exclusive of the workers’ com- pensation where, viewing plaintiffs act employment by a subsidiary whole, of the manufacturer as a the manufacturer subsidiary entity were one and the manufacturer thus (MCL employer plaintiff 418.131; was the of the MSA 17.237[131]). 421 Remedy — Compensation — Real- 2. Workers’ Economic Exclusive ity Test. reality a whole must of an situation as The economic a defendant in a- order to determine whether be examined in employer date of the on the tort action was an remedy injury purposes applying plaintiffs the exclusive act; provision a factor control is of the workers’ considered, wages, authority payment hire and to to be as is fire, discipline, responsibility for the maintenance of and the (MCL 418.131; controlling MSA but no one factor 17.237[131]). Corporate Piercing Corporate Corporations — — 3. Entities Veil. corporate entity separate The fiction a from the distinct to stockholders is a convenience introduced the law subserve generally, corporation permit- justice; will not be ends of prove pierce corporate veil in to that it and ted its own order subsidiary entity, respecting are one but where justice contrary subvert or cause a entities would result to a clearly overriding public policy, ignored by the fiction is courts. Remedy Compensation Dual-Capacity — — 4. Workers’ Exclusive Test. employer may capacity applica- An act in a dual so as to defeat provision remedy compen- tion of the exclusive of the workers’ act; however, dual-capacity ap- sation for the doctrine to' be plied, employer identity completely must have a second so distinct, from, removed and unrelated to the status as recognize established standards the law will it as a (MCL separate legal person 418.131; 17.237[131]). MSA Dissenting Opinion Levin, Compensation Remedy — — '5. Workers’ Exclusive Economic Real- ity Corporations. —Test parent corporation subsidiary determination whether a and a single entity purposes remedy are a for the of the exclusive provision of the workers’ act should not made be test; on the generally, separate- basis of an economic corporate respected ness of entities should be and a pierced only prevent veil injustice merely fraud or and not *4 subsidiary totally where parent corpora- dominated (MCL418.131; 17.237[131]). tion MSA Feldman, McCroskey, (by Cochrane & Brock J. Brock) Walter plaintiff. Firestone Opinion of the Court Haughey, Roegge (by Smith, Rice & R. Lance
Mather) for the defendant. appear in facts this matter Cavanagh, undisputed succinctly and were stated Appeals: of Court defendant, "The Firestone Company Tire & Rubber (hereinafter 'Firestone’), corporation is an Ohio with its Akron, principal headquarters Ohio. Firestone has country,
various retail stores around the some of which run of are as divisions Firestone while some are wholly majority-owned subsidiary corporations. owned or Muskegon, Michigan, outlets; Firestone two has one is Firestone, operated as a division the second is Stores, Muskegon Supply Firestone Auto and Service Street, Muskegon, at Michigan, located hereinafter Firestone was a the time 925 Terrace 'Muskegon Muskegon termed Firestone’. wholly subsidiary corporation owned at
plaintiff’s cause action arose. Muskegon "Plaintiff James Wells worked at 1971, 21, acting and on October while the course of employment changing his a tube and tire on a truck by Firestone, rim apart, manufactured the rim blew injuring seriously. him Muskegon origi- Firestone was nally dealership up Michigan corpora- was set as a purchased tion around 1930. Defendant Firestone most time, manager of its assets allowing at minority retain a has owned since around all stock interest. Defendant Firestone Firestone the stock in 100% accident, At plaintiff’s 1960. the time of subsidiary’s employees directors were of de- early corporation, Muskegon fendant. In Fire- stone, liquidated is now run a retail division of defendant. "Firestone carried worker’s cover- age for including Muskegon all of local branches compensation citing
Firestone. Plaintiff
filed for
Fire-
receiving
stone as his
and commenced
benefits
carrier,
insurance
Liberty
from Firestone’s
Mutual
In-
paid
surance
which
Company,
continue to be
at
time.
"Plaintiff, subsequent
receiving
benefits from Fire-
*5
421 Mich 641
Opinion of the Court
stone,
third-party product liabil-
the instant
commenced
against
Firestone moved
Firestone. Defendant
ity suit
plaintiff
summary judgment
that
was
on the basis
for
by
bringing
against Firestone
the action
barred
Michigan
provision of the
Work-
remedy
the exclusive
1969,
418.131;
Compensation
MCL
Disability
Act
er’s
MSA
17.237(131).
plaintiff was not an
trial court
found that
"The
employee
corporate entity
Firestone but of
of defendant
Summary judg-
Firestone.
appeal to this Court was
was denied and leave to
ment
Tire &
18,
1979.”1 Wells v Firestone
granted on June
790,
791-793; 296
App
NW2d
Rubber
97 Mich
lia-
plaintiff’s products
whether
must decide
We
remedy
the exclusive
action is barred
bility
Compensation
Disability
of the Worker’s
provision2
turns
on
necessarily
Act.3 That
determination
relationship
existed be-
an
whether
more di-
Stated
plaintiff
tween
and defendant.
was
defendant
question
is whether
rectly,
In an-
of injury.
on the date
plaintiff’s
must determine
initially
swering
question,
we
We find direction
employed.
test
is to be
what
Billot, Nichol
decision
from this Court’s
(1979):
284,
293-294; 279 NW2d
Mich
Muskovitz,
695;
94 NW2d
354 Mich
"Prior to Tata v
determining
(1959),
whether
only test
for
71
person
independent contractor
or an
was
as one
have been denominated
note that the motion should
We
1963, 116.1(2),
it will be
judgment, pursuant
to GCR
accelerated
alleged
apparent.
prejudice
or
treated as one because no
Inc,
Engineering,
See,
Dagenhardt
Special
e.g.,
Machine &
(1984);
Motors
520, 525,
v General
Bednarski
fn
The economic reality
test was
succinctly
de-
Farrell,
scribed in
p 276:
421 Mich
Opinion of the Court
pur-
employment exists
"The issue of whether
been fre-
compensation law has
poses of the workers’
to be
standard
by our courts. The
quently addressed
test,
approach
reality
a broad
economic
used is the
language
Justice Talbot
which,
oft-quoted
in the
sur-
totality of
circumstances
Smith,
looks to the
performed work.
rounding the
"
wages, hiring
factor,
payment
as is
'Control
is a
for the maintenance
firing,
responsibility
reality views these
test of economic
discipline, but the
whole,
single
assigning primacy to no
elements as a
Board
358 Mich
v American Box
one.’ Schulte
(1959).
33; 99
NW2d
Muskovitz,
695;
"See, also,
94 NW2d
354 Mich
398 Mich
Tata v
Macomber,
212;
(1959);
247 NW2d
Askew v
Bodine,
203;
(1976);
App
McKissic v
Billot,
284; 279
(1972);
406 Mich
Nichol v
NW2d 333
Roberts,
(1979);
395 Mich
Solakis v
NW2d
(1975);
Employers Temporary Ser-
Allossery
NW2d
vice, Inc,
App
"[t]he stone was a plaintiffs entity the time at arose, operation was the of action its cause The local store same as the other retail divisions. managers belonged program whereby they branch to a losses; participated profits they in the store’s ordered pur- consignment on and inventory from defendant company chased items outside the resale. some Muskegon Firestone were both other retail store and of telephone directory in as divisions listed the local accounting by Firestone. All dollar was handled man- accounting of defendant. Local store central office Opinion of the Court agers company checks; deposited issue they did not all in money bank accounts in local defendant’s name. The managers monthly profit store received and loss state- regarding their ments individual stores. expenses "Defendant calculated the of each in store operating order to its profit determine annual or loss. charged
Expenses percentage to the stores included a for worker’s insurance rates and other rent, maintenance, expenses payroll, attributable to etc. "The evidence further that the employees indicated of Muskegon Firestone supervision were under subject regulations defendant and to the rules and however, practice, thereof. The common local was managers do hiring firing. to and Certain of employees defendant’s to ability had the hire and fire managers could, chose, the local fire and if they hire employees. manager other local The local store acted within the regulations. framework of defendant’s Employees belong of retail stores did not all fact, same union as employees of defendant. In personnel some retail not. In were unionized others were while cases, metropoli- some retail stores an entire organized tan area regardless were the same union they of whether separate corporations. were supervisor, "Defendant’s district who testified that at the time plaintiffs injury employees control, supervision Firestone were under his employees denied that retail store received different depending treatment sion or a on divi- whether the store fact, separate corporation. the retail all employees participate were entitled to on the same hospitalization basis in defendant’s and retirement ben- programs fringe efit and other benefits. "Muskegon separate corporate Firestone filed a in- tax come return and issued its forms to own W-2 plaintiff However, employees. and its other all of these processed forms were at depart- defendant’s tax central Employees Muskegon ment. pay- Firestone received through accounting checks defendant its central office. of employment relating Records kept other retail store employees were and adminis- personnel department tered of defendant Fire- stone. *8 421 Mich Opinion the of Court of purpose for the factors balancing all of these "In test, that defen- find reality we economic applying the the employer within plaintiff’s Firestone was dant Act Compensation Disability meaning of the Worker’s refusing to Therefore, in judge erred the trial 1969. of on summary judgment motion for
grant defendant’s remedy is under plaintiff’s exclusive ground that Wells, supra, Act.” Disability Compensation Worker’s pp 794-796. persuades factors balancing those same of
Our applied Appeals correctly of the Court us that of case. test to the facts economic However, is warranted because comment further result, effect, "reverse-piercing” a is veil. corporate defendant’s principle that in Mich- recognize general We Klager See respected. entities will be igan Co, 402; 329 NW2d Meyer v Robert 415 Mich Land Bank v Union Joint Stock Finley (1982), Detroit, 281 Mich 214; 274 NW2d Co, v Gledhill Fisher & NW (1935).
However, corporate en- of a distinct fiction is a conve- tity separate stockholders the ends nience in the law to subserve introduced is to subvert justice. When this fiction invoked the courts. Paul Univer- ignored it justice, is Co, 587, 602; sity Motor Sales Mich 278 NW (1938). that, general, This of course means though company even the parent Firestone, its be separate existence will respected, doing justice unless so would subvert to some contrary cause result that would be See, e.g., other overriding public clearly policy. The- Cinderella Detroit Theatre Inc United Corp, atres NW2d 825 Although "piercing traditionally doctrine of applied protect veil” has been *9 651 v Firestone Opinion of the Court creditors, outsiders, or other corporation’s where legal has been used to avoid entity obligations, People ex rel General v Attorney Co, Michigan Telephone Bell 198; 224 Mich Michigan recognized NW courts have it be may appropriate invoke doctrine for the equities benefit of a shareholder where the e.g., See, Montgomery v Central compelling. are Creek, National Bank & Trust Co of Battle (1934). Mich NW disregard Our separate corporate entities of Firestone and its wholly owned subsidiary premised upon recognition our important public policies underlying Michigan Worker’s Disability Compensation Act and our belief that a contrary determination would inequitable be un- der the facts of this case. The statutory workers’ compensation scheme was enacted for protec- tion of both employees and who employers work and do business this state. The system assures covered employees that they will be compensated in the event of employment-related injuries. addition, employers are assured of parameters of their for such liability injuries. By agreeing to assume responsibility for all employment-related injuries, employers protect themselves from the possibility of potentially excessive damage awards. In order to effectuate policies, these the statute has been liberally provide construed to broad cov- erage for injured See, e.g., Farrell v workers. Dearborn Mfg supra.
If the statute is to be construed liberally when an employee benefits, seeks it should not be con- strued differently when the employer asserts it as a defense to a tort action brought by the employee who claimed and accepted benefits arising from that employment relationship. There is absolutely no evidence that defendant maintained Muskegon op Opinion Court insulating purpose itself for the Defendant liabilities.
its workers’ supplied through benefits accepted responsibility company and its insurance injuries of its for the work-related employees. Indeed, and circum- under the facts permitted case, have of this we would stances wholly itself its owned to shield behind Firestone subsidiary compensation payment of workers’ to avoid order plaintiff. Cf. Williams benefits Remand), (After Lang NW2d *10 rely plaintiff significant did not It that also is upon Firestone distinction between the fact, disre- Firestone. garded Fire- when he asserted that this distinction purpose employer obtain- stone ing his compensation payments. Plaintiff workers’ permitted deny to the relation- should not now be ship upon he which which asserted assuming responsibility payment of relied compensation benefits. argues is his cause of action Plaintiff also that provision remedy not barred exclusive Disability Compensation Act the his because Worker’s injuries did arise out relationship. than one maintains that more He type relationship existed between himself reject injured. We defendant at the time he was this attempt "dual-capacity apply the so-called to doctrine.”4_ 4 Michigan Appeals rejected capacity has several dual Court remedy found to avoid exclusive claims and them insufficient factually analogous provision to the instant case. See in situations Works, Inc, 273; App
Neal
Iron
Mich
This requirement fundamental applica- for the tion of dual-capacity doctrine is set forth in 2A Larson, Law, Workmen’s Compensation 72.81, p § 14-229: "An employer may person, become a third vulnerable suit employee, tort if—and only pos- if—he persona sesses a completely second so independent and unrelated to his employer status as estab- that recognizes lished standards legal person.” law it
The great of American majority jurisdictions have held an that who manufactured injury-causing device cannot be held liable to his Id., under a products liability theory. 72.83, p 14-239. Furthermore, § fact product injury-causing was also sold to the public unimportant: *11 that, "What matters employee, to this the product was manufactured adjunct as an of the busi- ness, and furnished to him solely employee, anas not as consuming public. a member of the employer What the does with central rest output change of his cannot Id., 72.83, fact.” p (emphasis 14-246 origi- § in nal). We conclude that was employed by defendant and injured was acting while in the Mich 641 Levin, J. Opinion Dissenting his scope employment. of within
course and Appeals. of the Court of judgment affirm the We Ryan Brickley, JJ., C.J., Williams, and Cavanagh, J. concurred with Wells, (dissenting). Levin, Auto and Service Supply Muskegon Firestone Stores, employment by the course of injured was by Fire- rim manufactured tire explosion At time of the Company. Tire & Rubber stone accident, all the stock capital Firestone owned controlled substantially Muskegon of Ap- Court management operations. its of an "economic application peals Wells’ em- determined that Firestone was test” compen- of the meaning within the workers’ ployer act, products therefore lia- sation and that Wells’ remedy exclusive claim barred bility was provision1 act.2 of the
I is not reality” hold We would "economic of the two question of the which determinative subsidiary, corporations, exclu- purposes Wells’ actual general provision Applying sive act. remedy Firestone, conclude that principles we Firestone, employer, and there- and not was Wells’ does bar remedy provision fore exclusive against action Firestone. Wells’
A support application Prior law does not case 17.237(131). 418.131; MCL MSA App Tire Wells v Firestone & Rubber NW2d *12 655 Wells v Firestone Dissenting Opinion by Levin, of an economic test in reality this case. This Court Muskovitz, in Tata v 354 695; Mich 94 71 NW2d Billot, (1959), and Nichol v 284; Mich (1979), not, NW2d 761 did a by applying flexible approach aspect to a limited compensa of workers’ law, tion make "economic reality” the touchstone for other workers’ determinations. In Tata Court decided that the "control test” was an inappropriate measure for determining injured whether worker independent was an contractor an employee, who then be would entitled to benefits. In rea soning conclusion, to that this Court adopted the dissenting opinion of Justice Talbot Smith Comm, Powell v Employment Security 345 Mich 455; (1956), NW2d which stated an "eco Nichol, nomic test.”3 In reality a tort third-party question action where the again was whether worker was an independent contractor or an em ployee, this Court applied an reality economic test. that, The Court said as compared to the control test, the economic reality test achieved "a freer and more balancing realistic of all the relevant factors each case determine persons which are properly denominated . . . employees [and] persons which should be properly denominated independent contractors.”4
In Funk
Corp,
v General Motors
91;
392 Mich
Dagenhardt
Special
(1974),
NW2d 641
Ma
&
Inc,
chine
Engineering,
Mich
NW2d 164
this Court
the general
affirmed
rule allowing an injured employee of a subcontrac
tor to maintain
against
action
third-party
employer general
subcontractor. That
rule
is not fully consistent with economic reality analy
was,
apparently,
The term "economic
test”
first used in
Roberts,
Solakis
sis. *13 employees if no other there are contractor himself goals employer —pursues of the subcon of the indirectly, employer paid, tractor, at least is questions and, of control of the subcontractor aside, employer generally of the as an functions 5 basis, On of the subcontractor. employers many subcontractors of states treat employees employers of the subcontractor’s provision.6 remedy purposes Nei of the exclusive Legislature Court, however, has nor this ther the adopted accepted, economically widely based rule. reality a test is substitute for
The economic of control is a means charac- control test.7 The terizing ing test relationship, employment of determin- employment a was of subcontrac- whether the however, case, tor of In the instant a servant. relationship Fire- between there is no stone and not The here Firestone. issue be control test should abandoned whether the adopted. reality The control and an economic test test has of whether never been determinative pierced corporate veil or which member should be corporate family aof of a is the "actual” The is whether an economic worker. issue here should reality made determinative test be parent subsidiary corporations are whether 5 (dissenting See, supra, opinion generally, Dagenhardt, p 559 fn J.). Levin, 6 J.), Levin, Dagenhardt, opinion supra, p (dissenting See Law, 72.31(a), Larson, pp citing Compensation if. 14-111 2A Workmen’s § Tata, contractor); supra (employee/independent v Schulte See (1959) (em Co, 21; Mich NW2d 367 American Box Board Smith, J., contractor; concurring, applied ployee/independent eco Erickson, test); 134 NW2d nomic Goodchild v (1965) (dual Solakis, 212; (employer/broker); supra employer); fn (1976) Macomber, (employer/ 398 Mich 247 NW2d Askew Nichol, contractor); broker); supra (employee/independent Farrell (dual (1982) Mfg em 330 NW2d Dearborn ployer/broker). Wells v Dissenting Opinion Levin, single more entity; specifically, of whether they single entity are for the of the purposes exclu- remedy provision sive compensa- tion act.
B majority vast states do not extend the reach of the exclusive remedy provision of a work- act treating parent ers’ and sub- sidiary corporations as a single entity. Courts in California, Colorado, Connecticut, Florida, Illinois, Missouri, Kentucky, Maryland, Mississippi, New York, Carolina, New Jersey, Oklahoma, North Carolina, Tennessee, South Washington, Texas and refused to treat dominant and servient *14 subsidiary corporations as a for single entity purpose.8 The Georgia intermediate appellate 8 Gigax Co, App 591; California: v Ralston Cal Purina 136 3d 186 (1982). (The Rptr being disputed, Cal 395 facts were it unclear whether the was an of a division of the defendant subsidiary or of a ployee of the defendant. The court stated that the em parent subsidiary corporation of a dominated could sue the on products liability theory. employee, a The court also stated that an injured working corporation while for one division of a main could tain an division that was an action based aon tort committed engaged separate enterprise. adopted in a The court enterprise liability standard based on the "hard realities” of intra corporation organization. Davis, compensation Using See Workmen’s — enterprise theory Party of to who determine is a third tort-feasor, [1971]). 32 U Pitt L 289R (D 1983). Inc, Colo, Trailways, Supp Colorado: Peterson v 555 F 827 (Employees wholly parent subsidiary of owned sued for failure to provide the App, workplace. thorough safe This case contains a discussion of issue.) (Colo Service, Inc, See also v Gaber Franchise 680 1345 P2d 1984). (SD Gregory Corp, Supp NY, Connecticut: v Garrett 578 F 871 1983). (Employee parent products subsidiary liability of sued on theories.) negligence Development Wilkerson, Corp Florida: Gulfstream Land & v 420 So 1982). (Fla, (Employee wholly subsidiary parent 2d 587 as a of owned sued property subsidiary owner. Parent and were insured under the compensation policy.) same workers’ insurance Gulfstream overruled Industries, (Fla 1978). Goldberg Inc, App, v Context 362 So 2d 974 Corp, Illinois: Supp McDaniel v Johns-Manville Sales 487 F 714 421 Mich 641
658
Dissenting Opinion
Levin, 1978).
(ND Ill,
companies”
(Employees
sued other
"various related
of
asbestos.)
exposure
injuries arising
companies
out of
for
related
(CA
Co,
Boggs
Kentucky:
Blue
590 F2d 655
v
Diamond Coal
1979)
subsidiary
parent
negli-
wholly
(Employees
owned
sued
.
of
safety
gent performance
influential case on the
is the most
maintenance contract. This
of a
issue.)
1965).
Inc,
(DC,
Hycon,
Supp
Maryland:
244 F
151
Thomas v
parent
subsidiary
(Employee wholly
injuries
sued
truck-owner for
of
owned
subsidiary
brakes. Parent and
had
occasioned
defective
policy.)
joint
compensation
v
insurance
See also Heinrich
(D
1982).
Co,
Md,
Supp
Goodyear
F
1348
Tire & Rubber
532
Williams,
775;
Drilling
Mississippi:
137 So 2d
Index
Co v
242 Miss
(1962).
brought
wholly
subsidiary
(Employee
action
of first
owned
negligence against
wholly
subsidiary that was
second
owned
Employee
engaged
received workers’
in same line of work.
had
subsidiary, probably
wholly owned
under a
from a third
theory.)
borrowed servant
(Mo
Centers, Inc,
May
App,
Boswell v
SW2d 585
Missouri:
1984).(Employee parent
subsidiary.)
of
sued
Co,
148;
Super
Jersey: Mingin v
171 NJ
New
Continental Can
(1979).
wholly
subsidiary
(Employee
one
sued
A2d 146
of
owned
products liability
parent
wholly
subsidiary under a
and second
owned
theory.
pensation
A2d
corporations
the same workers’ com-
All
were insured under
Barrett,
294;
Lyon
policy.)
89 NJ
also
v
insurance
See
(1982).
Leasing
890;
Corp, 75
New
v Gatx
AD2d
NYS2d
York: Samaras
(1980).
subsidiary brought products liability
(Employee
action
48
against
NYS2d 106
of
754;
parent.)
Maigo
Corp,
v
37 AD2d
See also Thomas
(1971);
Holding Corp,
Co-Op
26 AD2d
Daisernia v
GLF
594;
(1966);
City
Corp,
Foley
v
York
Omnibus
NYS2d 542
New
(1952).
660 Levin, by Dissenting Opinion exception state, of the instant with the In this employee uniformly suggest that an case, the cases subsidiary corporation may an ac- maintain of a corporation.11 parent against In the simi- the tion brings in which an lar situation against the and individual shareholder sole action corporation, employer of the courts this the exclu- extend the bar of have refused to state sive piercing corporate remedy protection the veil.12 reality analysis destabilize would
Economic
corporate
law. The
separate
respect
generally
state
the
courts
corporate
pierce
corporate entities, and
the
ness of
injustice.13
only
prevent
fraud or
Total
veil
to
parent corporation
subsidiary
by a
of a
domination
piercing
justify
the
As this
veil.
does
Co, 272
v
&
Mich
Court said in Gledhill
Fisher
353, 358;
The Fire- solely of the entities because corporate forms its subsidiary. dominated or controlled stone in this case corporate forms Respecting wrong.” of a in consummation would "aid Rather, corporate honor thereby we would Firestone. As the Court of established structure in the Sixth Circuit said a similar Appeals Co, Boggs v Blue Diamond Coal situation 1979): (CA 6, F2d range enterprise has of choice business "[A] controlling reciprocal own structure. But its obligations as a result of the choice it makes. arise dividing advantage may of the benefits of owners take parts, princi- separate corporate the business into recognize the reciprocity require courts also ples of separate identities by an enterprises when sued injured employee.”15_ product injured manufactured defective corporation. Because the defendant subsid- the defendant’s *18 products, corporation only parent’s had no iary distributed the own, Appeals the separate identity subsidiary held that of its the Court of conclusion, parent’s reaching In this was for the tort. liable Co, Distributing Bathory the Court v Procter & Gamble relied on (CA 6, 1962), involving of a the distribution F2d 22 parent’s another case subsidiary. products wholly In and dominated a owned cases, considering however, the immu- courts retailers’ both the were negligent liability nity manufacture in cases for resale protected for from rule which distributors acquired product the in which the distributors knowledge responsible of its manufacturer without a danger. piercing reasons for Bathory the in terms of The court did not couch issue Rather, argued corporate that the court "[t]he veil. liability protecting for the or distributor from rule retailer Id., (emphasis p negligence not exist this case.” ... do in added). corporate veil; merely Bathory pierce not it court did involving corporations, in dominated held that retailers’ plied certain cases Shirley Bathory ap- apply. immunity would rule not immunity exception not create rule and did an to the retailers’ ground piercing corporate veil. novel for propo- Shirley authority Significantly, cited no court has finding pierced of veil without a that can be sition proposition, Shirley See does stand this To extent misconduct. the case corporate Petrella, Piercing the Comment: has been criticized. Michigan, U L 81 veil 61 Det J Urb quote Boggs point. See on this least either cite or At seven courts v Firestone Dissenting Opinion by Levin, reality analysis
Economic could be viewed as creating employment relationship newa between reality viewed, Wells and Firestone. So economic analysis concepts overturns traditional of consen- employment. sual In Schulte American Box 21, Board NW2d acknowledged relationship this Court that "the of employee, by statute, unless created relationship.” applied ais contractual As until reality now, the economic test has not violated this principle, only because the test been has used existing relationships. characterize contractual Here, however, the test would determine whether seemingly separate parties entity. two are one reality Economic would be used to characterize relationship, par- a contractual eliminate a subsidiary relationship. ent would, It in the in- case, new, stant create a rather than characterize employment relationship. existent, Trailways, Supp Inc, Peterson 555 F (D 1983), Colo, 831-832 a United States District aspect analyzed Appeals Court this of the Court noting case, and, decision reality that the economic developed indepen- test to decide the contractor/employee question impli- dent in cases cating coemployee employer immunity, criti- cized the extension of the doctrine: analysis independent
"Inasmuch as contractor distinction assumes the existence of a con- relationship among sensual extension parties, the relevant Wells’ raising of the 'economic test’ to cases question this initial seems unwarranted. Thus adher- ence to may the indicators 'economic reality,’ well threaten 'employee’ the economic interests since *19 p 604; Peterson, Gigax, supra, supra, p 833; Gregory, fn 8 fn 8 8fn Gulfstream, supra, p 589; Love, pp 886-887; supra, supra, p fn 8 fn 8 1062; Stoddard, 326; Choate, supra, p supra, p 8fn fn 11 776. See also Daisernia, supra, p fn 8 594. Mich Dissenting Opinion Levin, analysis, conscious agreement receive no his consent implication.” a matter of at best are considered but by quoting this statement supported The court com- on workers’ treatise Larson’s from Professor law: pensation arrangement ... is mutual
"Compensation law employee under which both employer and between give up rights things. to be Since gain certain reciprocal rights employer and between adjusted are employee, it is not logical mandatory resort only but them to discover their rela- agreement between to the tionship. employee upon a worker an status To thrust ordinarily not would he has never consented to which stranger by a liability in a vicarious suit harm him might deprive it him of employer, well against his act, notably under the rights valuable employer common-law dam- right his own to sue ages.”16 remedy provi- the exclusive application becomes, under of economic real- any concept
sion "a and therefore sub- ity, implication,” matter Here, argues manipulation. employer an ject parent that a requires that "economic reality” result be treated as one with the subsidiary entity, that is from suit subsid- shielded Purina Gigax v Ralston iary’s employee. Rptr Cal in con- App 3d Cal trast, his an sued a division that alleging a tort committed corporation other than one which analysis worked. The court applied realities,” based on "substance” and "hard necessarily stated such actions were supra, 47.10, Larson, p 16 1C fn 6 cited for 8-233. Larson also § Gregory, supra, proposition p fn 8 876. *20 Firestone Co Dissenting Opinion by Levin, by remedy provision barred exclusive proper could be maintained in circumstances.17 The abolition of the form "bright line” would unnecessarily complicate original of workers’ The injuries. application of the reality economic test did not create substantial administrative problems because the test replaced ambiguous test,18 the equally control and because contracting provision of the workers’ compen- sation act19 application made of the test unneces- Here, however, in sary some cases. a well-estab- lished, simple framework would be replaced amorphous provides "test” that courts with little guidance. Macomber, Askew v
The concern
in
expressed
212,
(1976) (Wil-
398 Mich
17Gigax, supra, p 607. See also fn 8.
Powell, supra, pp
J.).
See
Smith,
(dissenting opinion
471-474
418.171;
17.237(171).
19 MCL
MSA
test,
originally
control
employer’s
which
limited an
vicarious
liability,
inappropriate
was also
because workers’
in
volves different issues than
explains:
tort law. Professor Larson
liability
"This tort
arose out of
detailed activities carried on
servant, resulting in
person.
some kind of harm to a third
The extent
right
which the
had a
to control these detailed activities
to relieve upon depend such verbal resolution of our made antics.” more certain proved no test has The economic application the control than its in its "freer may determination,” it be test, with not in this case We are of two evils. the lesser "corporate traditional evils. The two faced with predictable provides certain, test test21 status” *21 plan parties permits affairs and to their which disputes. to resolve courts gives compensation act22 no indica- The workers’ Legislature the term intended for that the tion meaning "employer” normal other than its to have parent grant Legislature intended to the or that corporations Leg- remedy protection. The exclusive course, could, have done so. Workers’ islature compensation protec- legislation frequently accords employ- many particular parties. states, In tion to from third- immunized of subcontractors are ers party liability.23 Louisiana, anof shareholders employer ought question highly to the whether was thus to be relevant Larson, supra, legally 43.42. fn 6 § liable for them.” 1C however, compensation, issues that involves Workers’ make control irrelevant. injuries by not with law is concerned "[Workers’] activities, injuries a result to him as in his detailed but with details) (controlled employer by only as to not of his own activities co-employees, independent third contractors and other but of those of not). (some persons issue, employer, and others To controlled right direct of his work has no such of control of details Larson, liability.” fn tort 1C relation as it has to the issue of vicarious supra, 43.42. § Powell, (dissenting Nichol, supra, p 296; supra, pp 467-469 See also J.). Smith, opinion of Peterson, supra, p 832. See third-party provides the basis for this 1952 amendment that The (1952 418.827; 17.237[827]) and the PA now MCL MSA action exclusive central (MCL 418.131; 17.237[131]) provision remedy MSA are of analysis. importance to this 6. See fn Firestone Co Wells v Dissenting Opinion Levin, the exclu- protected by corporation are state, Legisla- In this remedy provision.24 sive no There is immunized insurance ture inspectors.25 intended, Legislature suppose reason protection provide express simply neglected, in Firestone’s corporations for parent position.26 thereby an intent not infer such We would action. As stated of his common-law deprive Wells Professor Larson: compensation policy strong is no reason "[T]here rights every . . . destroying law common [and] preserving those presumption should be on side protection has rights, once basic been assured.”27
C Wells from on relying This Court should bar forms of the and the separate corporate disregard on the basis that he chose to subsidiary compensa- applying those forms when record does not reveal payments. why tion Wells listed as his Firestone employer.28 has not claimed that his third-party Wells waived *22 fn See 8. 17.237(131). 317, amending 418.131; 1969 PA MCL MSA independent contractor/employee employer/bro- Unlike the questions by ker occasions which have been considered this Court on numerous (see 7), ambiguities fn there are no inherent in the determi- Legislature readily nation involved in this case. The could have remedy protection wholly extended exclusive subsidiary the to the of a owned compensation policy insured under the same workers’ parent. 27Larson, 72.50, supra, p quoted point fn 6 14-95. § Larson is on this by Boggs, supra, 660, Choate, p supra, p fn 8 fn 11 776. may urged by Muskegon Wells have been to so file his claim Firestone, simply may Muskegon or he erred. have Firestone also employer. Muskegon may listed Firestone as Wells’ Firestone have done so because Firestone carried the workers’ insur- corporations likely ance for both and was therefore more be to compensation payments. involved in the administration of Wells and may Firestone both have been more concerned with com- 421 Mich by Dissenting Opinion Levin, employer. listing The as his
claim Firestone thereby question waive his Wells did whether question third-party fact, and not of claim is a law, raised and decided which must first be before by the WCAB.
D majority jurisdic- We would follow the vast reality hold that economic is not a basis tions and for piercing corporate veil. The economic real- inappropriate ity test was devised to avoid use of test, the control that concern is not relevant here control alone is not determinative of since corporate pierced, whether the which member of a worker. The ment should be resolved tion. context would veil should be
corporate family employs a question employ- there is an whether relationship Firestone and between implica- consent and not Applying in this the economic test
permit corporations to avoid the reciprocal obligations inherent their choice of corporate many deny employees of structure and would corporations right they
subsidiary Legislature undoubtedly had, at the time au- third-party by employees thorized actions who had compensation benefits, received workers’ to main- third-party tain a action.
II disposition which correct we believe be pleting paperwork initiating payment and with than with observ- ing the formalities. rate, any representations necessarily controlling. At these are not accident, employee Muskegon At the time of the Wells was an subsequent representations operate Firestone. The tively would not retroac- relationship to eliminate this or to create a new appear representation one with Firestone. It does not that Wells’ necessary misled disregard such a manner it now justice. form to secure Firestone has alleged that Wells acted in bad faith. *23 v Firestone Dissenting Levin, Opinion it unnecessary makes to consider the capacity dual In question. this connection we note that opinion of the Court extends the bar of the exclu- provision sive remedy by disregarding determining which of two enti- forms ties is the "real” employer, nevertheless unimpeachable treats the form as purpose deciding whether the bar of the exclusive rem- where it edy provision applies alleged is that acting is in a dual capacity. opinion go The of this Court further than may necessary preserve policy exclusive case, remedy provision. the instant a customer of Muskegon supplied Firestone the defective Fire- product. stone Suppose a Firestone or Muskegon Firestone employee was in the injured course of consequence as a of the blowout of a tire on a rented automobile. It is ques- tionable whether the bar of the remedy exclusive provision preclude should prod- maintenance against ucts action liability Firestone.
This Court has recognized the bar of the exclusive provision be remedy may superseded by other statutory policies.29 products liability provides statute30 statutory prod- for a authority action, ucts liability suggests an inquiry Legislature whether intended products that a action be liability barred the exclusive remedy provision.
Kavanagh Boyle, JJ., concurred with Levin, J._ Freight System, See Mathis v Interstate Motor (1980) (no-fault benefits); Boscaglia NW2d 708 automobile insurance (1984)
Michigan
Telephone
Bell
420 Mich
See also 2
