David Fesler v. Whelen Engineering Company , 688 F.3d 439 ( 2012 )

United States Court of Appeals
For the Eighth Circuit
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No. 11-2666
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David K. Fesler
lllllllllllllllllllll Plaintiff - Appellant
v.
Whelen Engineering Company, Inc.
lllllllllllllllllllll Defendant - Appellee
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Appeal from United States District Court
for the Southern District of Iowa - Davenport
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Submitted: March 13, 2012
Filed: August 16, 2012
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Before WOLLMAN, COLLOTON, and BENTON, Circuit Judges.
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COLLOTON, Circuit Judge.
David K. Fesler sued Whelen Engineering Company, Inc. (“Whelen”) for
breach of contract. The district court1 granted summary judgment for Whelen, and
Fesler appeals. We affirm.
1
The Honorable Robert W. Pratt, United States District Judge for the Southern
District of Iowa.
I.
In October 1980, Fesler began working as a sales representative for Whelen,
a manufacturing company headquartered in Chester, Connecticut. John Olson, the
president of Whelen, hired Fesler based on an oral conversation, and Fesler did not
sign any contract, agreement, or other documentation related to his relationship with
Whelen.
As a sales representative, Fesler was responsible for promoting and selling
Whelen automotive, industrial, and public warning products in his assigned territory.
The territory initially included Minnesota, Iowa, Nebraska, and Kansas. Neither
Olson nor other Whelen officials described to Fesler the terms of his payment as a
sales representative, other than that he would be paid on a commission basis. Fesler
learned the nature of the commission structure from other sales representatives. His
commission was based on a percentage of sales in his territory, initially set at nine
percent. Every year of Fesler’s relationship with Whelen, Whelen issued Fesler an
IRS Form 1099 for his commission payments.
From the beginning of his relationship with Whelen in 1980 until
approximately 1988, Fesler deposited his commission compensation into an account
for Dan R. Fesler & Son, Inc. Fesler then received a paycheck from that account,
with all tax withholdings, unemployment, and workers’ compensation taxes paid
through Dan R. Fesler & Son, Inc. In 1988, Fesler formed a new corporation named
David Kimm Fesler, LTD, and thereafter received his paychecks from that entity.
Through his own company, David Kimm Fesler, LTD, Fesler operated an
office, hired employees, and paid for the expenses incurred in promoting and selling
Whelen products. Fesler was responsible for setting up the office and paying for
office supplies and equipment. Fesler had to pay for some sample Whelen products,
although Whelen provided him other samples at no cost. Fesler’s employees were
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employed by Fesler’s company, and all payments and withholdings were made by his
company. Whelen occasionally provided Fesler an additional commission
percentage, based on sales in the region, to cover personnel expenses. Whelen also
paid for Fesler’s lodging and group meals if he attended a sales meeting or trade
show, although Fesler covered his own travel expenses.
Throughout his tenure as a sales representative, Whelen provided Fesler with
a series of documents that outlined the policies and procedures applicable to sales
representatives. The documents, issued in 1985, 1994, and 1995, all identified sales
representatives as “independent contractors, not employees,” and stated that they
were appointed on a “non-exclusive” basis to certain territories and product lines.
The 1995 policy document, which superseded the 1985 and 1994 policies, provided
that sales representatives “shall pay for their own expenses, insurance, transportation
and other travel or living expenditures,” and are “responsible for the payment of all
of his/her own expenses, which include, but are not limited to: taxes, workman’s
compensation, retirement plan, health insurance, etc.” The policy also included
numerous requirements applicable to sales representatives, including that they work
with Whelen to determine which trade shows to attend, make two annual visits to the
Whelen plant for an annual sales meeting and a two-day training session, maintain a
separate Whelen telephone line, contact the Whelen plant once per day to obtain
messages and report on activities, respond to customer complaints and coordinate
service or resolve problems, and collect information on competitors’ activities.
The 1995 policy also contained the following provisions concerning
termination:
I.p. TERMINATION
I.p.1 Whelen Engineering reserves the right to terminate portions of
territories or individual product lines of a given Authorized Managing
Sales Representatives.
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I.p.2 Every effort will be made to provide warnings of an Authorized
Managing Sales Representative’s failings.
I.p.3 If, in the opinion of the Management of Whelen Engineering
Company, an Authorized Managing Sales Representative has not met
general goals as detailed, such Authorized Managing Sales
Representative may be put on “notice” (i.e. probationary period) up to
6 months that mandates improved performance. At the end of the time
period, if revised targets and goals are not met, then the Company will,
at its option, either aggressively look for a replacement Authorized
Managing Sales Representative or may elect to notify the Authorized
Managing Sales Representative of termination.
I.p.4 If termination is opted, commission payout will continue on any
order booked before the effective termination date and invoiced
subsequently.
I.p.5 If it is found that the Authorized Managing Sales Representative
has sold or converted a customer to buy a competitor[’]s product, it is
grounds for immediate termination.
I.p.6 Conduct that could harm the reputation of the company could also
be grounds for immediate termination.
On July 11, 2007, Whelen Vice President Phil Kurze informed Fesler that his
relationship with Whelen would end on July 31, 2007. Kurze told Fesler that the
company was going in a different direction, and that Fesler did not fit into that
direction. Kurze sent Fesler a follow-up letter, formally stating that Fesler’s services
as a sales representative were terminated.
On July 8, 2009, Fesler sued Whelen in the Iowa District Court for Johnson
County. Whelen removed the action to federal court. Fesler filed an amended
complaint on January 6, 2010, alleging one count of breach of contract. Fesler
alleged that he was an employee of Whelen, that the 1985, 1994, and 1995 policy
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documents created a unilateral contract of employment, and that Whelen breached
that unilateral contract of employment by terminating him without just cause and by
failing to provide him with notice of substandard performance and an opportunity to
cure.
Whelen moved for summary judgment, arguing (1) that Fesler was an
independent contractor and not an employee of Whelen, (2) that even if Fesler was
an employee, his employment was at-will because he did not have a contract of
employment with Whelen, and (3) that even if the written policies were sufficient to
constitute a unilateral contract of employment, Fesler has not demonstrated a breach
of any provision. The district court granted summary judgment in favor of Whelen.
The court ruled (1) that no reasonable jury could conclude that Fesler was an
employee of Whelen, (2) that even assuming that Fesler could be classified as an
employee, the written policies were not sufficiently definite to constitute a unilateral
contract of employment, and (3) that even assuming that the written policies
constituted a contract of employment, no reasonable jury could find a breach of
contract.
II.
Fesler argues that the district court erred in holding that no reasonable jury
could conclude that he was an employee of Whelen. The ultimate issue of whether
an individual is an employee or independent contractor is a question of law, and it
may be resolved on summary judgment if there is no genuine issue of material fact.
See Lerohl v. Friends of Minn. Sinfonia, 322 F.3d 486, 488 (8th Cir. 2003). We
consider the question of employment status de novo. Birchem v. Knights of
Columbus, 116 F.3d 310, 313 (8th Cir. 1997).
Under Iowa law, the following factors are relevant in determining whether an
individual is an employee or an independent contractor: (1) the individual’s right to
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control the physical conduct and progress of the work, except as to final results; (2)
whether the individual was on the employer’s payroll; (3) the method of payment,
whether by time or by job; (4) the individual’s obligation to furnish necessary tools,
supplies, and materials to accomplish the work; (5) the existence of a contract for the
performance by a person of a certain piece or kind of work at a fixed price; (6) the
independent nature of the individual’s business; (7) the individual’s employment of
assistants, with the right to supervise their activities; (8) the time for which the
individual is employed; (9) whether the work is part of the regular business of the
employer; and (10) the intent of the parties. Iowa Mut. Ins. Co. v. McCarthy, 572
N.W.2d 537, 542-43 (Iowa 1997). The primary focus, however, is on “the extent of
control by the employer over the details of the alleged employee’s work.” Id. at 542.
Most of these factors weigh heavily in favor of finding that Fesler was an
independent contractor for Whelen. Fesler was on the payroll of his own independent
business, David Kimm Fesler, LTD, not on the payroll of Whelen. Whelen paid him
commissions based on sales in his territory, not on the amount of time he worked.
Through his independent business, Fesler hired, paid, and supervised employees,
furnished his own office equipment and supplies, and paid for his own travel
expenses, taxes, workers’ compensation, and insurance, as required by the 1995
policy document. Although Fesler claims he did not intend to be an independent
contractor, Whelen intended for Fesler and all other sales representatives to be
independent contractors, as evidenced by the explicit references to sales
representatives as “independent contractors, not employees” in the policy documents.
Only two factors weigh against independent contractor status. Fesler was a sales
representative for Whelen for nearly twenty-seven years, and Fesler’s
work—promoting and selling Whelen products—was arguably part of the regular
business of Whelen.
Fesler’s primary contention is that although he operated his own independent
business, Whelen exercised significant control over the details of his activities.
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Whelen required Fesler to provide weekly itineraries of his planned activities in his
territory, to pursue recommended sales leads and report the results to Whelen within
thirty days of receiving the leads, to make daily contact with Whelen, and promptly
to return telephone calls from Whelen management. On occasion, Whelen also
directed the hiring of additional personnel and gave approval for the hiring of some
staff. And while Fesler generally could select his own office location, Whelen twice
told Fesler to move his office—once out of his father’s office, which was a Whelen
distributorship, and once out of his personal residence.
Whelen did exercise some control over Fesler’s work, but the limited degree
of direction evidenced here did not make Fesler an employee. Some control is
permitted “so as to enable [the company] to see to it that the final result contemplated
by the arrangement was accomplished.” LaFleur v. LaFleur, 452 N.W.2d 406, 410
(Iowa 1990); see also Meredith Publ’g Co. v. Iowa Emp’t Sec. Comm’n, 6 N.W.2d
6, 10-11 (Iowa 1942). Fesler generally was able to perform his work—promoting and
generating sales of Whelen products—in the means and manner that he saw fit.
Whelen did not control the “methods, details, and particulars” of Fesler’s work, so as
to give rise to a relationship of employer and employee. LaFleur, 452 N.W.2d at 410.
Considering the combined weight of the relevant factors, we agree with the district
court as a matter of law that Fesler was an independent contractor.
Because Fesler is an independent contractor and not an employee, the policy
documents could not have created a unilateral contract. See Anderson v. Douglas &
Lomason Co., 540 N.W.2d 277, 282 (Iowa 1995). The district court thus properly
dismissed Fesler’s claim for breach of contract.
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The judgment of the district court is affirmed.
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