Estate of Anthony J. Suskovich v. Anthem Health Plans of Virgini ( 2009 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 08-1070
E STATE OF A NTHONY J. S USKOVICH,
Plaintiff-Appellant,
v.
A NTHEM H EALTH P LANS OF V IRGINIA , INC., A NTHEM
INSURANCE C OMPANIES, INC., A NTHEM L IFE INSURANCE
C OMPANY, H EALTH M ANAGEMENT S YSTEMS, INC.,
O RIENTATION B ENEFIT A DMINISTRATORS, INC.,
T HE W ELLPOINT C OMPANIES, INC., W ELLPOINT, INC.,
and its Pension and Welfare Benefits Plans, the Fiduciaries
and Administrators of the Plans, and T RASYS, INC.,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 06 CV 425—Sarah Evans Barker, Judge.
A RGUED D ECEMBER 2, 2008—D ECIDED JANUARY 22, 2009
Before C UDAHY, F LAUM, and S YKES, Circuit Judges.
F LAUM, Circuit Judge. Until his sudden death in 2006,
Anthony J. Suskovich worked as a computer programmer
for WellPoint, a health insurance company, and Trasys, an
2 No. 08-1070
information technology (IT) company. In exactly what
capacity he worked for those two companies is the
subject of this present case. Suskovich’s estate claims
that he was a regular employee, and worse, one that was
not paid overtime or enrolled in benefits programs for
which he was eligible, and who owes state and federal tax
agencies various taxes that WellPoint and Trasys should
have withheld. WellPoint and Trasys claim that Suskovich
was an independent contractor, and thus ineligible for
benefits or overtime, and that he owes back taxes because
of his own failure to file proper tax returns or pay his
withholding taxes. After the district court granted sum-
mary judgment to WellPoint and Trasys, the estate
brought this appeal.
For the following reasons, we affirm the district court’s
grant of summary judgment.
I. Background
Suskovich was a computer analyst and programmer
who worked, at various points over ten years, with one
of the defendants in this case, WellPoint/Anthem (“Well-
Point”). WellPoint is a related group of companies that
provide health care coverage to clients throughout the
United States. In 1995, Suskovich formed his own
Indiana corporation, Indy Imaging, Inc., which he listed
on his resume as “Indy Imaging, Inc. d/b/a Anthony J.
Suskovich.” WellPoint retained Suskovich and other IT
professionals to work on the company’s IT team in 1996.
While no record exists of any contractual agreement
between Suskovich and WellPoint, Suskovich stated on a
No. 08-1070 3
form he used to access WellPoint’s computer system that
he was a “contractor,” and he billed WellPoint for his
time on an invoice form that he had created, stating that
he was a “salesperson” who sold “computer consulting” to
WellPoint. He was paid at an hourly rate of $60, resulting
in an annualized salary of about $200,000, and received
no benefits. For tax purposes, his salary was reported on
a 1099 form rather than a W-2.
Suskovich was retained for limited durations, usually
about six months, although these limited engagements
were often rolled over into new engagements. WellPoint
stopped retaining Suskovich in 1999, but because of his
expertise with various IT issues, sought to bring him
back in 2000. Due to the company’s new vendor con-
solidation program, Suskovich could only be retained if
his services were offered through a preferred vendor. At
this point, Suskovich began his relationship with the
other defendant in the present case, Trasys, Inc., which
agreed to bring Suskovich on as part of their team of IT
professionals working with WellPoint. He was compen-
sated for his time by submitting invoices to WellPoint,
which would then approve them and return them to
Trasys, which in turn paid Suskovich. Again, for tax
purposes, Trasys issued Suskovich a 1099 form rather
than a W-2. The 1099 forms that WellPoint and Trasys
issued Suskovich listed his income as “nonemployee
income” or “other income.”
In February 2001, Suskovich signed an “Independent
Contractor Agreement” with Trasys; this was apparently
the first time that Suskovich and Trasys had put
4 No. 08-1070
Suskovich’s relationship to the company in contractual
form. Trasys labeled the writing as an independent con-
tractor agreement, but the form contained terms that
could refer to both an employment relationship and an
independent contractor relationship; for instance, it
referred to “wages” and consideration for “employment,”
but was also an agreement that only extended for a tempo-
rary period of time, and that began with the words “Trasys
offers to contract you. . . .” As before, Suskovich would
have to submit his hours to WellPoint and have them
approved before he could receive any compensation
from Trasys. Suskovich was paid $62 an hour under the
agreement, and received no other benefits.
Throughout his time with WellPoint and Trasys,
Suskovich worked on a variety of projects, and occasionally
worked on different projects for different divisions of
WellPoint at the same time. For instance, in 2001
Suskovich was working on mainframe issues for Well-
Point’s Federal Employee Program while simultaneously
working on a print-mail project for a different division. In
2005, Suskovich entered into an agreement with Anthem
Health Plans of Virginia to work on a Medicaid
subrogation project; Suskovich did not go through Trasys
when arranging this work, but rather drafted and sub-
mitted an “Agreement for Consulting Services with
WellPoint Virginia” in which he described himself as an
independent contractor and that nothing in the contract
should be construed as creating an employer-employee
relationship. Under the terms of the agreement, Suskovich
was responsible for all income tax, unemployment insur-
ance, and withholding. Anthem Health Plans of Virginia
No. 08-1070 5
issued Suskovich a 1099 form rather than a W-2, and the
other divisions of WellPoint and Trasys were apparently
unaware of this additional work.
During his time with WellPoint, Suskovich worked in
a cubicle at WellPoint, with a computer supplied to him
by the company. He apparently did not have a direct
supervisor and worked under the WellPoint employee
who was supervising whatever project he was working
on. He occasionally worked offsite, but was expected to
work at WellPoint’s offices and to answer to the supervi-
sors on his projects.
Sometime in August 2005, WellPoint informed Suskovich
that they would not be keeping him on past the end of the
year; in mid-September, they declined to renew his con-
tract through Trasys. WellPoint was attempting to train
one of their in-house programmers in the work that
Suskovich was doing for them, but when getting her an
outside training program proved to be too difficult,
WellPoint asked Suskovich to train her. Suskovich began
looking for additional work at this time, and WellPoint
was disappointed with his efforts in training the in-house
employee and attending his project meetings. WellPoint
told Trasys that they would replace Suskovich with
someone from another vendor if he did not improve his
performance, and Trasys then told WellPoint that
Suskovich’s performance would improve.
Suskovich continued to look for other work, and ap-
proached Tom Eberhard, who had previously an inde-
pendent contractor with WellPoint but who had
accepted an offer of employment from the company and
6 No. 08-1070
had risen to a managerial role over some of the projects
Suskovich worked on. Eberhard, along with another
former IT contractor, Bruce Jeschke, who had also become
a full-time employee of WellPoint, had made various
attempts over the years to coax Suskovich into working
for the company directly. In late 2005, Suskovich asked
Eberhard if he had any work for him. Eberhard told him
that he had no need for any contract work but did
discuss the possibility of full-time employment with
WellPoint. Suskovich’s initial salary demand was appar-
ently too high, however. Before Eberhard had a chance to
negotiate, Suskovich contracted pneumonia and passed
away suddenly.
Before his death on January 1, 2006, the IRS was investi-
gating Suskovich because of his failure to file tax returns
for several years. In response Suskovich filed delinquent
tax returns for 1999-2002, and tax returns for the 2003
and 2004 tax years. On those returns, he listed himself as
a self-employed computer consultant, and claimed that
he derived his income from his computer consulting
business. He also claimed substantial business deduc-
tions, again related to his computer consulting business.
After the investigation, Suskovich agreed to a monthly levy
on his income from the IRS, although at the time of his
death he had not paid the full amount of his back taxes,
including $100,000 in tax debt to the IRS and approxi-
mately $33,000 in tax debt to the state of Indiana.
Suskovich’s wife sought relief from this outstanding
debt as an innocent spouse, but the IRS denied her request.
In March 2006, Kathy Suskovich, as the personal represen-
No. 08-1070 7
tative of Suskovich’s estate, filed the present lawsuit. The
estate initially sought declaratory relief in the form of a
judgment that Suskovich was an employee of WellPoint
and then a joint employee of Trasys and WellPoint. On
the basis of that determination, the suit also sought a
monetary award for compensation that Suskovich was
supposedly denied under the Fair Labor Standards Act
and other benefits that Suskovich was denied under the
Employee Retirement Income Security Act, as well as
indemnification for Suskovich’s tax liabilities. The estate
moved for summary judgment on April 6, 2007, and
WellPoint and Trasys likewise moved for summary
judgment on all counts. In December 2007, the district
court denied the estate’s motion for summary judgment
and granted summary judgment to WellPoint and Trasys,
finding that Suskovich was an independent contractor
rather than an employee. This appeal followed.
II. Discussion
The estate’s appeal raises three issues. First, the estate
claims that the district court mistakenly found that the
deciding factor with respect to Suskovich’s employment
status was the contractual relationship between the
parties; second, that the district court wrongly found
that the factors in the control test overwhelmingly
favored the appellees; third, that the district court con-
sidered hearsay testimony that should have been barred
by the Dead Man’s Statute. WellPoint and Trasys raise
an additional issue, arguing that they can prevail on
alternative grounds for the ERISA, FLSA and indemnifica-
8 No. 08-1070
tion claims even if this court decides the employment
question against them.
We review a district court’s grant of summary judgment
de novo, reviewing the facts in the light most favorable to
the non-moving party. AutoZone, Inc. v. Strick, 543 F.3d
923, 929 (7th Cir. 2008). Summary judgment is appropriate
where “the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no
genuine issue of material fact and that the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(c). If the district court applied the proper standard
to the employment inquiry in this case, this court
reviews its findings only for clear error. Ost v. West Subur-
ban Travelers Limousine Co., 88 F.3d 435, 438 (7th Cir. 1996).
A. Whether the district court incorrectly found the
employment contracts between the parties as deter-
minative of Suskovich’s employment status.
The estate first argues that the district court improperly
found the employment contracts between Suskovich and
Trasys and WellPoint Virginia to be determinative of his
employment status. The estate argues that the district
court afforded improper weight to this factor, ignored
contradictory evidence in the employment contracts, and
ignored the other factual considerations in the control test.
More specifically, the estate argues that the district court
misapplied this circuit’s decision in Stone v. Pinkerton
Farms, Inc., 741 F.2d 941 (1984), which gives parties to a
contract the freedom to define their relationship as one
of principal and independent contractor only if other
No. 08-1070 9
factors do not support a finding of an employer-employee
relationship. Id. at 945 (“An employer-employee relation-
ship may be found even though the parties define their
relationship as one of principal-independent contractor
if enough of the indicia of a master-servant relationship
are present. . . . Where, as here, the parties define
their relationship as that of an independent contrac-
tor-principal, and the facts of their relationship support
that conclusion, courts will not interfere with the intent
of the parties.”).
Trasys responds that this argument either misreads or
misinterprets the district court’s opinion, which found the
contractual definition of the relationship to be a “primary”
factor in the analysis, but still examined whether the
traditional control test provided sufficient indicia of an
employment relationship. This indeed seems to be what
the district court did. The district court stated that it
placed “primary emphasis” on the intent of the parties
when determining the nature of the relationship, but then
conducted an analysis of the ten-factor control test from
the Restatement (Second) of Agency, and adopted by
the Indiana Supreme Court in Moberly v. Day, 757 N.E.2d
1007 (Ind. 2001). The district court acknowledged that it
attached particular importance to the ninth factor of the
control test, the belief of the parties concerning a mas-
ter/servant relationship. That approach fits with the
logic of Stone, however, since the district court was at-
tempting to follow the intent of the parties as expressed
in the contractual agreements unless enough facts indi-
cated the existence of a traditional employment relation-
ship. In part, this approach recognizes that the Restate-
10 No. 08-1070
ment test was not designed solely as a test of employment
status; it is also frequently used in tort cases to determine
whether an employer is liable for an injury to a third party.
See Restatement (Second) of Agency § 220.1 cmt. c. Since
the Restatement test is a multi-factor balancing test, courts
applying the test in an employment suit, cognizant of the
freedom given to parties to create their relationship
through contract, may choose to emphasize evidence
that is especially probative of the parties’ beliefs about
the nature of the relationship. Such probative evidence
would include evidence of an explicit contractual defini-
tion of that relationship or evidence of the tax status of
the relationship.
The estate also argues that the district court overlooked
contradictory evidence, since the Independent Contractor
Agreement between Trasys and Suskovich contained
references to both an independent contractor relation-
ship and an employer-employee relationship. And
because Trasys drafted the contract, the estate argues that
contract law requires that any ambiguity be construed
against the drafter. United Thermal Indus., Inc. v. Asbestos
Training & Employment, Inc., 920 F.2d 1345, 1349 (7th Cir.
1990). However, United Thermal also holds that extrinsic
evidence of the intent of the parties can be admitted where
the terms of the contract are unclear or ambiguous, and
Indiana cases holding that ambiguities should be con-
strued against the drafter also hold that extrinsic evidence
of the parties’ intent is admissible in order to resolve
ambiguities. See Rieth-Riley Const. Co., Inc. v. Auto-Owners
Mut. Ins. Co. 408 N.E.2d 640, 645 (Ind. App. 1980). In
determining the intent of the parties, the district court
No. 08-1070 11
considered evidence from inside and outside of the con-
tract. The district court first found that the contracts’ terms
were inconsistent with an employer-employee relation-
ship despite the use of phrases like “employee” and
“wages” because the contract made any “employment”
subject to the approval of WellPoint, which is an odd
term indeed for an employment contract. Second, the
district court credited the evidence that the purpose of
the contract with Trasys was to allow Suskovich to con-
tinue working on WellPoint projects after the company
had established its preferred vendor system. Outside of
the citation to United Thermal, the estate does not chal-
lenge the district court’s summary judgment findings
resolving the ambiguity in the contract, and we accord-
ingly find that the district court was correct in con-
sidering the contract in its summary judgment ruling.
B. Whether the district court improperly determined
that Suskovich was an independent contractor based
on the control test.
The estate next argues that the district court
improperly determined the ten-factor control test from the
Restatement (Second) of Agency in favor of WellPoint and
Trasys despite several factors that the estate argues are
ambiguous or tilt in favor of finding a traditional
employer-employee relationship. The issue of the
control test raises the preliminary question of exactly what
standard this court should apply when determining
whether or not Suskovich was an employee or an inde-
pendent contractor, given that the estate makes common
12 No. 08-1070
law, FLSA, and ERISA claims, and there are slightly
different tests for each of those claims. ERISA cases use
a 12-factor common law standard to determine if a party
to a lawsuit was an employee under the act. The
Supreme Court has held that this standard is similar to
the 10-factor Restatement test. Nationwide Mut. Ins. Co. v.
Darden, 503 U.S. 318, 323-24 (1992). FLSA cases, meanwhile,
are decided utilizing a broader definition of employee
than the common law, and determine whether an ar-
rangement is an employment or independent contractor
relationship with a six-factor test to determine the “eco-
nomic reality” of the situation. Secretary of Labor, U.S. Dept.
of Labor v. Lauritzen, 850 F.2d 1529, 1534 (7th Cir. 1987). The
district court followed the Restatement test, an approach
that we will follow as well.1 Given that the majority of the
claims in this case revolve around the bare question of
employment status and the Restatement test is generally
equivalent to the common law test from Darden, that test
provides the best means of resolving the main employ-
ment question before us.
Under the Restatement test, a court examines: (1) the
extent of control which, by the agreement, the master may
exercise over the details of the work; (2) whether or not the
one employed is engaged in a distinct occupation or
business; (3) the kind of occupation, with reference to
whether, in the locality, the work is usually done under
1
Additionally, the estate invokes the Restatement test in its
arguments and briefs and thus has waived any argument that
the broader FLSA standard ought to apply to this case.
No. 08-1070 13
the direction of the employer or by a specialist without
supervision; (4) the skill required in the particular occupa-
tion; (5) whether the employer or the workman
supplies the instrumentalities, tools, and the place of
work for the person doing the work; (6) the length of time
for which the person is employed; (7) the method of
payment, whether by the time or by the job; (8) whether or
not the work is a part of the regular business of the em-
ployer; (9) whether or not the parties believe they are
creating the relation of master and servant; (10) whether
the principal is or is not in business. Moberly, 757 N.E.2d
at 1010; see also Restatement (Second) of Agency § 220.
1. Extent of control
The district court’s summary judgment opinion found
that the control factor supported WellPoint and Trasys’
claim that Suskovich was an independent contractor
rather than an employee. The estate challenges this
finding on appeal, citing WellPoint and Trasys’ control
over important aspects of Suskovich’s work. Specifically,
the estate cites the fact that WellPoint and Trasys man-
dated that he work from at least 8:30 a.m. to 4:00 p.m.,
controlled the number of hours he could bill in a given day,
required that he attend project meetings, monitored his
progress on projects and asked him to train a replacement.
The estate also argues that WellPoint and Trasys “disci-
plined” Suskovich for tardiness and receiving personal
telephone calls; presumably, the estate is referring to
WellPoint’s conversations about finding someone else
for Suskovich’s projects if his tardiness did not improve.
14 No. 08-1070
None of the facts that the estate sets forth are sufficient
to establish WellPoint and Trasys’ control over the
details of Suskovich’s work. Merely setting a work sched-
ule is not sufficient to support a finding that a given
person is an employee rather than an independent con-
tractor. Ost, 88 F.3d at 438. Nor is the fact that a person is
required to be at a given place at a given time or assigned
project work sufficient to support an employer-employee
relationship. Alexander v. Rush North Shore Medical Center,
101 F.3d 487, 493 (7th Cir. 1996) (finding that setting “on
call” hours and assigning patients was not sufficient to
create an employment relationship between a doctor and
a hospital). Rather, the question is whether the details
of the work were in the control of Suskovich or WellPoint
and Trasys. See Ost, 88 F.3d at 438-39. The record here
seems to indicate that Suskovich controlled the details of
his work, and that he was accountable to Trasys and
WellPoint only for the results of his work. Indeed, as the
district court pointed out, neither Trasys nor WellPoint
had employees who could adequately supervise the
computer programming work that Suskovich did, which
was the reason the companies retained him in the first
place.
The record bears this observation out as well; for in-
stance, Aaron Longdon, a project leader in WellPoint’s
Federal Employees Program, averred that, “[Suskovich’s]
programming expertise and skill in computer program-
ming languages such as Mercator were beyond FEP’s level
of technical knowledge. FEP exerted no control over the
details by which Suskovich conducted his work.” As a
rebuttal to this argument, the estate points to com-
No. 08-1070 15
mentary in the Restatement that even skilled artisans can
be considered employees. That is beside the point. Obvi-
ously, a company can control the work of even a very
advanced computer programmer if there is evidence
that the company controls how the programmer goes
about the job and does not just examine the final result.
The record in this case indicates that Suskovich was
answerable only for his final performance on projects, and
accordingly this factor favors the district court’s sum-
mary judgment finding that Suskovich was an
independent contractor.
2. Instrumentalities
The estate next argues that Suskovich was an employee
rather than an independent contractor because WellPoint
and Trasys supplied the instrumentalities of his work.
Suskovich was required to do his work on site, and was
given a desk, computer, filing cabinet, and other sup-
plies. The estate argues that because these were instrumen-
talities of substantial value the district court should have
drawn an inference of employment. WellPoint and Trasys
respond that, since Suskovich was a computer program-
mer, it is hardly surprising that he would work
on equipment provided by the company.
Courts that have been presented with this claim in the
past seem to have decided that this factor is relatively
unimportant. The Second Circuit, evaluating a similar
employee versus independent contractor question,
found that this factor favors an employment relationship
should not weigh heavily in the analysis, since computer
16 No. 08-1070
programming work will always be done on a company’s
computers. Aymes v. Bonelli, 980 F.2d 857, 864 (2d Cir.
1992); see also Bigalke v. Neenah Foundry, Co., No. 05-C-29,
2006 WL 1663717, at *5 (E.D. Wis. June 9, 2006) (finding
that while this factor weighed in favor of the plaintiff, “the
various trappings of employment she cites seem more
superficial than substantive indicia of employment sta-
tus.”).
The district court made a similar determination when
holding that this factor should not have much sig-
nificance in the overall analysis. The estate objects to this
part of the opinion, claiming that the district court is
making a “custom argument” that is not supported by
the record. That is incorrect, however, and ignores what
other courts that have evaluated the same issue have
previously held. An independent contractor working on
a company’s computer system will be using computer
equipment supplied by that company—that is the logical
result of hiring the consultant to do programming work
on that system in the first place. One need not have any
familiarity with the customs of IT work to draw this
inference. So while we note that WellPoint and Trasys
did indeed supply Suskovich with the instrumentalities
of his work, we also recognize that such is the nature of
IT work, and that this is not a factor that bears much
weight in the overall analysis.
3. Length of employment
The estate next argues that the district court erroneously
found that the length of Suskovich’s employment sup-
No. 08-1070 17
ported independent contractor status. The district court
concluded that this factor favored WellPoint and Trasys
because Suskovich was only employed for the length of
short term contracts, because his employment was not
guaranteed, and because he worked for different divisions
of the company and other companies during the time
he worked for WellPoint. The estate now argues that the
short term of the contracts is irrelevant, as is Suskovich’s
side work, citing Lauritzen, which held that persons
retained for seasonal work could still be employees for
purposes of the FLSA.
Trasys and WellPoint argue that Suskovich was only
engaged for limited periods of time and that he went
through occasional periods where his projects with Well-
Point ended and he performed no work for the company.
Thus, they conclude, the district court correctly found
that this factor favored a finding that Suskovich was an
independent contractor. This court has previously held
that where a person is engaged to work for a company
for a limited period of time with no expectation of
contract renewal, that fact favors independent contractor
status. EEOC v. North Knox School Corp., 154 F.3d 744, 750-
51 (7th Cir. 1998). Suskovich worked with WellPoint on
and off for about ten years, five of those years through
Trasys. While this is a substantial period of time, Suskovich
was only engaged for short projects, usually lasting six to
twelve months. The record shows that he never enjoyed
any guarantees that his work would extend beyond this
limited duration, and accordingly, as this court has held
before, this factor favors independent contractor status.
18 No. 08-1070
Finally, the citation to Lauritzen is little help in this case.
Lauritzen was decided under the FLSA which, as previ-
ously discussed, takes a broader view of employer-em-
ployee relationships than the common law or ERISA tests.
It thus provides little support for the position that a
person who was engaged for limited periods of time
without an expectation of permanent employment can
claim to be an employee under a traditional analysis.
4. Method of payment
The estate next argues that because Suskovich was paid
by the hour, he was an employee rather than an independ-
ent contractor. It cites Moberly, and various commentary
to the Restatement emphasizing that when a person is paid
by the hour rather than by the job, such payment is evi-
dence of a traditional employment relationship. Trasys
and WellPoint, on the other hand, point out a number
of cases from this court holding that tax forms and tax
returns are essential when deciding which status this
factor favors. See Taylor v. ADS, Inc., 327 F.3d 579, 581 (7th
Cir. 2003); see also Mazzei v. Rock N Around Trucking, Inc.,
246 F.3d 956, 964-65 (7th Cir. 2001). Most relevant to the
present case, this court has previously held that issuing
1099 forms, which are used for non-employee compensa-
tion, “would be appropriate for independent contractor
status.” North Knox School Corp., 154 F.3d at 750. In this
case, Suskovich was issued 1099 forms from both WellPoint
and Trasys, and the record shows that he was never
added to WellPoint or Trasys’ payroll. Instead, he had to
invoice his hours in order to be paid. On his own tax
No. 08-1070 19
returns, Suskovich also listed his income as income from
a sole proprietorship, and he claimed business deductions
related to that proprietorship. The bare argument that
Suskovich was paid by the hour and thus is classified by
the Restatement commentary as an employee is simply
inadequate; it would require this court to reverse its
previous holdings about the significance of tax status, as
well as Suskovich’s own tax returns.
5. Part of the regular business
The estate next argues that the district court erroneously
found that Suskovich’s work was not part of the regular
business of WellPoint or Trasys. The estate argues that
Trasys provides IT professionals to various businesses,
and so Suskovich’s work was in line with their core
business operation. It also argues that WellPoint’s
business of providing and administering health plans
depends upon computers and computer networks and so
Suskovich’s work was part of their regular business.
The estate’s last point proves too much; nearly every
organization uses computers for its operations, and nearly
every organization has some kind of network. If the estate
is correct, this finding could support an employer-em-
ployee relationship between IT personnel and just about
anyone. The argument is stronger with respect to Trasys,
since it is a company that provides IT professionals to
companies in need of assistance, and Suskovich was an
IT professional working for WellPoint. The argument is
ultimately superficial, however. The facts of this case
indicate that Suskovich only operated through Trasys
20 No. 08-1070
because there were projects that WellPoint wanted him
to work on but on which they could not retain him
directly because of the preferred vendor agreement. As
the district court also pointed out, Trasys made less than
its usual profit margin on Suskovich’s work. While
Suskovich may have been engaged in the same funda-
mental operation as Trasys the facts of this case indicate
that his work was not part of their regular business—that
is, he was not hired or compensated in the regular way,
and he was brought on as an accommodation to WellPoint.
While this is a closer question, it is not a factor that out-
weighs the more definite evidence of Suskovich’s tax
returns and his contractual agreement with Trasys.
6. Beliefs of the parties
The estate finally argues that the district court should
not have resolved the “beliefs of the parties” factor in
favor of WellPoint because there is a disputed issue of
fact here—the testimony of Suskovich’s widow that he
considered himself an employee of WellPoint and Trasys.
Trasys and WellPoint argue that the other evidence in the
record contradicts this statement. First, they argue that
Suskovich’s tax returns, which he signed under penalty
of perjury, claim he was a sole proprietor of a consulting
business and list no wages from employment. Second,
Suskovich’s resumes, which he prepared while working
for Trasys and WellPoint, list his occupation as an “inde-
pendent computer consultant.” He also listed himself as
a subcontractor and a salesman on his invoices, and
listed himself as a contractor on a form he prepared to get
access to WellPoint’s computer system.
No. 08-1070 21
Moreover, WellPoint argues the deposition testimony
does not establish that Suskovich believed he was an
employee, merely that he “felt that due to the way he
was treated” that he was considered an employee. This
point may be parsing the statement a little too closely, but
WellPoint also makes the stronger point that this testi-
mony is inadmissible hearsay. The estate argues that it is
admissible under Fed. R. Evid. 803(3) as a statement of a
then-existing mental condition. However, the “mental
conditions” referred to in Rule 803(3) are things such as
intents, plans, motives, or designs, and not statements of
belief. In fact, statements of belief are specifically inad-
missible under the rule to prove the fact remembered or
believed, unless it relates to the terms of a will, which the
statement here does not. Fed. R. Evid. 803(3). Thus the
testimony of Suskovich’s widow would not be admissible
at trial, or on summary judgment. Even if the statement is
admissible, however, this is hardly enough to create a
disputed issue of fact, as the other evidence—the tax
returns, resumes, tax forms, and contractual agreement
with WellPoint Virginia, which explicitly disclaims an
em ployer-em ployee relationship— overwhelmingly
favors the conclusion that Suskovich considered himself
an independent contractor.
7. Other factors
Three other factors, the “distinct occupation or busi-
ness” factor, the “kind of occupation” factor, and the “skill
required” factor, were all resolved in favor of WellPoint
and Trasys, since Suskovich had the sort of advanced
22 No. 08-1070
programming skills that allowed him to contract his work
out to a number of companies, and even started his own
business, Indy Imaging, Inc. These factors are not con-
tested on appeal.
8. Conclusion
With the exception of the instrumentalities factor, which
should not weigh heavily in the estate’s favor under the
circumstances, and the regular part of business factor,
which would at most weigh only slightly against Trasys,
not a single factor in the test supports the conclusion that
Suskovich was an employee rather than an independent
contractor. In fact, overwhelming evidence suggests that
he considered himself an independent contractor, filed
his tax returns as an independent contractor, and was
compensated like an independent contractor. Accordingly,
the district court properly awarded summary judgment
to WellPoint and Trasys on this issue.
C. Whether the district court improperly admitted the
statements of Eberhard and Jeschke in violation of
the Indiana Dead Man Statute.
The estate next argues that the district court
improperly considered the testimony of Eberhard and
Jeschke, who testified that Suskovich did not consider
himself an employee because he routinely rejected offers
of regular employment as a computer programmer with
WellPoint. Specifically, the estate argues that this testi-
mony is barred by the Indiana Dead Man Statute, Indiana
No. 08-1070 23
Code § 34-45-2 et seq. We can divide our discussion of this
issue into three subsidiary issues. First, whether the
Indiana Dead Man’s Statute applies to a proceeding in
federal court. Second, whether the testimony at issue
actually ran afoul of the statute. Third, whether the
error, if any, was or was not harmless. Because this is
an evidentiary issue, this court reviews only for an abuse
of discretion. Wasson v. Peabody Coal Co., 542 F.3d 1172,
1175 (7th Cir. 2008).
The estate made two federal law claims—under the
FLSA and ERISA—and one state law claim. WellPoint
and Trasys thus argue that the Dead Man’s Statute
should not apply in federal court. The law of this circuit
is fairly clear that where state law provides a federal court
with the grounds for its decisions, that court should
also apply state law restrictions on the competency of
witnesses. The evidentiary standard in a case such as this
one, where both federal and state law claims are involved,
is less certain. District courts in this circuit that have
considered the issue have previously held that Federal
Rule of Evidence 601, which creates a broad presumption
of competency, applies to cases alleging both federal and
state law claims. See Estate of Chlopek v. Jarmusz, 877 F.
Supp. 1189, 1193 (N.D. Ill. 1995); see also Donohoe v. Consoli-
dated Operating & Production Corp., 763 F. Supp. 845, 860-61
(N.D. Ill. 1990), vacated on other grounds 982 F.2d 1130 (7th
Cir. 1992). This rule conforms with the Advisory Commit-
tee’s Note accompanying Federal Rule of Evidence 501,
which states that “[i]f the rule proposed here results in two
conflicting bodies of privilege law applying to the same
piece of evidence in the same case, it is contemplated that
24 No. 08-1070
the rule favoring reception of the evidence should be
applied.” Fed. R. Evid. 501. Accordingly, Rule 601, rather
than the Indiana Dead Man’s Statute, applies to the
competency of witnesses, at least insofar as the evidence
relates to any of the federal claims. However, that rule
provides that “in civil actions and proceedings, with
respect to an element of a claim or defense as to which
State law supplies the rule of decision, the competency of
a witness shall be determined in accordance with state
law.” Fed. R. Evid. 601. We thus still need to consider
whether the Indiana Dead Man’s statute would bar testi-
mony if the evidence related solely to the common law
claims.
The Indiana Dead Man’s Statute states, in brief, that in
a case where an executor or administrator of an estate is
a party and the estate may receive or be liable for or
receive a judgment in the action, a person who is a neces-
sary party to the issue or case and whose interest is
adverse to the estate is not competent to testify. Indiana
courts hold that “the general purpose of the Dead Man’s
Statute is to protect the decedent’s estate from spurious
claims.” Bedree v. Bedree, 747 N.E.2d 1192, 1195 (Ind. Ct.
App. 2001). While the facts of this case satisfy a few of the
requirements of the Dead Man’s Statute, it is a stretch to
hold that Eberhard and Jeschke are necessary parties or
have interests adverse to the estate. Eberhard and Jeschke
testified that they discussed regular employment with
Suskovich at various times, but that he wanted to
continue with his original arrangement with WellPoint.
The estate argues that because both are employees of
WellPoint, their interests are adverse to the estate’s and
No. 08-1070 25
thus that they are incompetent to testify. But nothing in
the record suggests that Eberhard or Jeschke have any
personal stake in the outcome of the litigation, and the
estate’s interpretation of the statute would sweep in any
adverse witness who would testify against an estate in a
case brought by the estate. Nor are Eberhard and Jeschke
“necessary parties” to the action or issue, as they are not
named in the suit. The district court thus did not abuse
its discretion in considering this testimony on summary
judgment.
D. Whether summary judgment is appropriate for
the defendants on the alternative grounds that even
if Suskovich was an employee he was not eligible for
FLSA or ERISA benefits, and is ineligible for com-
mon law indemnification.
WellPoint and Trasys make a final series of arguments
showing that even if the estate prevails on the issue of
whether or not Suskovich was common law employee, the
estate cannot prevail on its FLSA, ERISA, or common
law indemnification claims. The estate’s FLSA claim is
based on a purported failure to pay Suskovich overtime
for the weeks where he worked more than forty hours.
The FLSA, however, contains exemptions to the overtime
pay requirement that would cover Suskovich. The first
is an exemption for computer programmers, software
analysts, computer engineers, and other similarly skilled
workers. 29 U.S.C. §§ 213(a)(1), 213(a)(17). The exemption
applies to employees who earn more that $27.63 per
hour, and whose primary duties are related to computer
26 No. 08-1070
systems or programs. 29 C.F.R. § 541.401(b). WellPoint
also claims that Suskovich would be ineligible for over-
time under the FLSA because he was a highly com-
pensated worker who earned over $100,000 per year. See
29 C.F.R. § 541.601 (applying an exemption to the
overtime requirements for employees who earn in
excess of $100,000 and who perform primarily non-
manual work, such as office work).
With respect to the ERISA claims, the estate is seeking
damages for WellPoint and Trasys’ alleged failure to
enroll Suskovich in retirement benefit plans for which
he was eligible. Eligibility under ERISA is not automatic
for common law employees, however. A plaintiff must
also demonstrate that he was eligible under the terms of
the employer’s own benefit plans. “Nothing in ERISA,
however, compels a plan to use the term ‘employee’ in
the same way it is used in the statute. Indeed, because
a plan governed by ERISA need not include all categories
of employees there is no reason to expect that it
would.” Trombetta v. Cragin Fed. Bank Ownership Plan, 102
F.3d 1435 (7th Cir. 1996) (internal citation omitted). Both
Trasys and WellPoint cite their own employee benefit
plans, which include the caveat that anyone not treated
as an employee who is later ruled to be a common law
employee in a lawsuit remains ineligible for benefits.
WellPoint makes the same argument with respect to the
estate’s breach of contract claims against them, arguing
that even if Suskovich was a common law employee he
never had an employment contract that would have
entitled him to fringe benefits such as participation in
the company’s employee stock purchase plan.
No. 08-1070 27
Finally, both WellPoint and Trasys argue that Suskovich
is not eligible for indemnity under Indiana law. Common
law indemnity in Indiana requires a court’s determina-
tion that the party seeking indemnity is without fault.
Bourbon Mini-Mart v. Gast. Fuel & Serv., Inc., 783 N.E.2d 253,
257-58 (Ind. 2003). The estate seeks indemnity for his back
taxes based on his failure to file tax returns for several
years, failure to pay withholding and income tax, and
claiming improper deductions. These failures, they argue,
mean that he was at fault for his tax liability and thus
cannot seek common law indemnification.
The estate’s response to all three arguments urges this
court to overlook the alternative grounds because they
were not ruled on by the district court. Of course, this
court can affirm summary judgment on any non-waived
ground, even if the district court did not address it. Door
Systems, Inc. v. Pro-Line Door Systems, Inc., 83 F.3d 169, 173
(7th Cir. 1996). The estate claims, however, that these
alternative grounds all involve factual disputes that the
district court did not address, and could not resolve on
summary judgment. However, the estate does not present
any evidence contesting the applicability of the FLSA
exemptions, or establishing Suskovich’s eligibility under
either Trasys or WellPoint’s benefit plans, or evidence
that Suskovich properly paid his taxes every year. While
we need not reach this question, having already deter-
mined that the district court correctly held that Suskovich
was an independent contractor rather than an employee,
we simply note that these alternative grounds would also
provide a basis for affirming the judgment of the district
28 No. 08-1070
court even assuming arguendo that Suskovich was a
common law employee.
III. Conclusion
For the foregoing reasons, the judgment of the district
court is A FFIRMED.
1-22-09