United States District Court, Northern District of Illinois, E.D
August 27, 1984
CLAUDE SMITH, PLAINTIFF,
JONES WAREHOUSE, INC., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Claude Smith ("Smith") charges his former employer Jones
Warehouse, Inc. ("Jones") with employment discrimination in
violation of Title VII of the Civil Rights Act of 1964,
42 U.S.C. § 2000e to 2000e-17.*fn1 Jones has moved for dismissal
under Fed.R.Civ.P. ("Rule") 12(b)(1) and 12(b)(6) on the ground
Jones does not meet the definition of an "employer" to which
Title VII § 701(b), 42 U.S.C. § 2000e(b) applies.*fn2 Both
sides have submitted evidence in support of their positions.
For the reasons stated in this memorandum opinion and order
Jones's motion is denied.
"Employer" in Title VII terms means only (42 U.S.C. § 2000e(b))
"a person engaged in an industry affecting commerce
who has fifteen or more employees for each working day in each
of twenty or more calendar weeks in the current or preceding
calendar year." Both sides agree if Jones is evaluated without
reference to any related entities it is not an "employer,"
because it always had less than 15 employees. However Smith
argues Jones and its parent company, called Frank E. Greene &
Son, Inc. ("Greene") during the relevant calendar years, should
be considered as a single entity for Title VII purposes. If
such an aggregation of employees is warranted, both sides agree
the resulting Jones-Greene entity had at least 15 employees at
all relevant times.
Jones originally claimed employers may be aggregated only if
their separate existence is a "sham." It proved the companies
were in fact separate legal entities and thus showed there was
no "sham." But "sham" is not the test. For National Labor
Relations Board purposes, existence of a joint employment
relationship depends on four criteria: interrelation of
operations, common management, centralized control of labor
relations and common ownership. See Radio & Television
Broadcast Technicians Local Union 1264 v. Broadcast Service of
Mobile, Inc., 380 U.S. 255, 256, 85 S.Ct. 876, 877, 13 L.Ed.2d
789 (1965) (per curiam). Baker v. Stuart Broadcasting Co.,
560 F.2d 389, 392 (8th Cir. 1977) first applied that same standard
to Title VII. It has been applied consistently ever since. See
Armbruster v. Quinn, 711 F.2d 1332, 1337-38 (6th Cir. 1983),
and cases cited therein.
Both sides now have proffered evidence (documents,
affidavits and a deposition transcript) on those four factors.
In evaluating that evidence, this Court draws all reasonable
inferences in favor of Smith as the non-moving party:
1. To the extent Jones's motion is properly
characterized as a Rule 12(b)(6) motion for
failure to state a claim (see n. 2), the last
sentence of Rule 12(b) requires it to be treated
as one for summary judgment under Rule 56.*fn3
2. Even if Jones's motion were properly viewed
as pertaining to subject matter jurisdiction
under Rule 12(b)(1), this Court would tentatively
draw such inferences in favor of the exercise of
jurisdiction, reserving until trial the question
whether Smith has justified application of Title
VII by a preponderance of the evidence.
Each of the four factors weighs at least to some extent in
favor of viewing Jones and Greene as a single entity:
1. There was a fair amount of interrelation
between the operations of Jones and Greene. They
were located in a single building, which Greene
owned and part of which Jones leased from Greene.
Greene was an important customer of Jones, which
stored and delivered Greene's merchandise for a
fee. Greene sold clerical and accounting services
2. Jones and Greene had common management at
the upper levels. Both their slates of corporate
officers and their boards of directors were
3. Centralized control of labor relations is
the most important of the four factors.
General Drivers, Warehousemen and Helpers, Local
Union No. 89 v. Public Service Co. of Indiana,
705 F.2d 238, 242 (7th Cir. 1983). Control of labor
relations by Jones and Greene, if not wholly
centralized, was certainly interrelated:
(a) Most of Jones's employees were unionized.
Its two who were not unionized operated under
the same personnel guidelines and policies as
Greene's employees (all of whom were
non-union). Those guidelines were issued by
Greene's parent company. Jones's two
non-unionized employees were paid by Greene and
received W-2 forms listing Greene as their
employer. Jones reimbursed Greene for the
salaries of those two employees.
(b) On one occasion a Jones employee received
a letter of termination on Greene stationery,
sent by the president of both Jones and Greene.
He acted in his capacity as Greene president
because the employee had made a bad impression
on Greene's customers while delivering
(c) Occasionally a Greene employee
substituted for one of Jones's non-unionized
(d) Jones's lower level managers occasionally
sought assistance from Greene. For example,
Greene hired counsel for Jones in this
4. Common ownership is present, as Greene owned
all of Jones's outstanding stock.
All four factors taken together present at least "a prima
facie case" for disregarding the legal separateness of Jones
and Greene. See Armbruster, 711 F.2d at 1335, quoting from
Welsh v. Gibbs, 631 F.2d 436
, 438-39 (6th Cir. 1980), cert.
denied, 450 U.S. 981
, 101 S.Ct. 1517
, 67 L.Ed.2d 816 (1981).
Even without the benefit of all reasonable inferences, Smith is
entitled not to have his case dismissed at this early stage of
Jones's motion to dismiss under Rule 12(b)(1) and 12(b)(6)
is denied. Jones is ordered to answer Complaint Count II on or
before September 7, 1984.