economic reality test in Michigan

2026An injured party is determined to be an employee and not an independent contractor by applying the economic-reality test which includes four factors: “(a) control of the worker’s duties, (b) payment of wages, (c) right to hire, fire and discipline, and (d) the performance of the duties as an integral part of the employer’s business towards the accomplishment of a common goal.” Adanalic v Harco Nat Ins Co, 309 Mich App 173, 190-191 ; 870 NW2d 731 (2015) citing Parham v Preferred Risk Mut Ins Co, 124 Mich App 618, 624-625 ; 335 NW2d 106 (1983).

2026An injured party is determined to be an employee and not an independent contractor by applying the economic-reality test which includes four factors: “(a) control of the worker’s duties, (b) payment of wages, (c) right to hire, fire and discipline, and (d) the performance of the duties as an integral part of the employer’s business towards the accomplishment of a common goal.” Adanalic v Harco Nat Ins Co, 309 Mich App 173, 190-191 ; 870 NW2d 731 (2015) citing Parham v Preferred Risk Mut Ins Co, 124 Mich App 618, 624-625 ; 335 NW2d 106 (1983).

2025When applying the economic-reality test, courts assess the totality of the circumstances but focus on the following four factors: “(1) the control of a worker’s duties, (2) the payment of wages, (3) the right to hire and fire and the right to discipline, and (4) the performance of the duties as an integral part of the employer’s business towards the accomplishment of a common goal.” Id. at 688 (quotation marks, citation, and alteration omitted).

2024As this Court stated in Duckworth, all factors under the economic-reality test should be considered, Duckworth, 333 Mich App at 219, and, when applying the economic-reality test, courts should consider the totality of the circumstances, Clark v United Technologies Auto, Inc, 459 Mich 681, 688 ; 594 NW2d 447 (1999).

2022See also Kidder v Miller-Davis Co, 455 Mich 25, 46 ; 564 NW2d 872 (1997) (holding the economic- reality test established two businesses shared “the rights and responsibilities over [their] workers” and were, therefore, both employers under the WDCA).

2022See also Kidder v Miller-Davis Co, 455 Mich 25, 46 ; 564 NW2d 872 (1997) (holding the economic- reality test established two businesses shared “the rights and responsibilities over [their] workers” and were, therefore, both employers under the WDCA).

2026Control is a factor, as is payment of wages, hiring and firing, and the responsibility for the maintenance of discipline, but the test of economic reality views these elements as a whole, assigning primacy to no single one.” [Askew v Macomber, 398 Mich 212, 220 ; 247 NW2d 288 (1976).] In Duckworth, this Court observed that there was another variation of the economic reality test set forth in McKissic v Bodine, 42 Mich App 203, 208-209 ; 201 NW2d 333 (1972), which had eight factors that had substantial overlap with the four-factor variation.

2026Control is a factor, as is payment of wages, hiring and firing, and the responsibility for the maintenance of discipline, but the test of economic reality views these elements as a whole, assigning primacy to no single one.” [Askew v Macomber, 398 Mich 212, 220 ; 247 NW2d 288 (1976).] In Duckworth, this Court observed that there was another variation of the economic reality test set forth in McKissic v Bodine, 42 Mich App 203, 208-209 ; 201 NW2d 333 (1972), which had eight factors that had substantial overlap with the four-factor variation.

2014In this case, the trial court erred by applying the economic reality test, as opposed to the control test, to determine whether EPP could be vicariously liable for Hersey’s conduct. “[T]he purpose of the control test is to define and delimit the circumstances under which a master should be held liable for the acts committed by a servant which injure a third party.” Nichol v Billot, 406 Mich 284, 296 ; 279 NW2d 761 (1979).

2014In this case, the trial court erred by applying the economic reality test, as opposed to the control test, to determine whether EPP could be vicariously liable for Hersey’s conduct. “[T]he purpose of the control test is to define and delimit the circumstances under which a master should be held liable for the acts committed by a servant which injure a third party.” Nichol v Billot, 406 Mich 284, 296 ; 279 NW2d 761 (1979).

2020See also Chilingirian v City of Fraser, 194 Mich App 65, 69 ; 486 NW2d 347 (1992) (“The economic reality test looks to the totality of the circumstances surrounding the work performed.”).

2020See also Chilingirian v City of Fraser, 194 Mich App 65, 69 ; 486 NW2d 347 (1992) (“The economic reality test looks to the totality of the circumstances surrounding the work performed.”).

2023Compare Ashker v Ford Motor Co, 245 Mich App 9 , 11-12 15-16; 627 NW2d 1 (2001) (holding that courts apply the economic reality test to determine if an employer is liable under the CRA, not to determine whether the employer’s agent is liable), with Elezovic v Bennett, 274 Mich App 1, 8-9 ; 731 NW2d 452 (2007) (not applying the economic reality test where the plaintiff pursued a claim against supervisor acting as agent of an employer and plaintiff’s employee-employer relationship was not at issue).

2023Compare Ashker v Ford Motor Co, 245 Mich App 9 , 11-12 15-16; 627 NW2d 1 (2001) (holding that courts apply the economic reality test to determine if an employer is liable under the CRA, not to determine whether the employer’s agent is liable), with Elezovic v Bennett, 274 Mich App 1, 8-9 ; 731 NW2d 452 (2007) (not applying the economic reality test where the plaintiff pursued a claim against supervisor acting as agent of an employer and plaintiff’s employee-employer relationship was not at issue).

2021While this Court’s earlier applications of the economic reality test dealt with the distinction between an independent contractor and an employee or, as in Farrell v Dearborn Mfg Co, 416 Mich 267 ; 330 NW2d 397 (1982), with dual employers in a labor-broker situation, we believe it to be appropriate and consistent to utilize the economic reality test in determining in this case which of two separate corporations, parent or subsidiary, was plaintiff’s actual employer for purposes of the Worker’s Disability Compensation Act. [Id. at 647.] HVA is correct that the Court in Wells also addressed the

2021While this Court’s earlier applications of the economic reality test dealt with the distinction between an independent contractor and an employee or, as in Farrell v Dearborn Mfg Co, 416 Mich 267 ; 330 NW2d 397 (1982), with dual employers in a labor-broker situation, we believe it to be appropriate and consistent to utilize the economic reality test in determining in this case which of two separate corporations, parent or subsidiary, was plaintiff’s actual employer for purposes of the Worker’s Disability Compensation Act. [Id. at 647.] HVA is correct that the Court in Wells also addressed the

2026An injured party is determined to be an employee and not an independent contractor by applying the economic-reality test which includes four factors: “(a) control of the worker’s duties, (b) payment of wages, (c) right to hire, fire and discipline, and (d) the performance of the duties as an integral part of the employer’s business towards the accomplishment of a common goal.” Adanalic v Harco Nat Ins Co, 309 Mich App 173, 190-191 ; 870 NW2d 731 (2015) citing Parham v Preferred Risk Mut Ins Co, 124 Mich App 618, 624-625 ; 335 NW2d 106 (1983).

2026An injured party is determined to be an employee and not an independent contractor by applying the economic-reality test which includes four factors: “(a) control of the worker’s duties, (b) payment of wages, (c) right to hire, fire and discipline, and (d) the performance of the duties as an integral part of the employer’s business towards the accomplishment of a common goal.” Adanalic v Harco Nat Ins Co, 309 Mich App 173, 190-191 ; 870 NW2d 731 (2015) citing Parham v Preferred Risk Mut Ins Co, 124 Mich App 618, 624-625 ; 335 NW2d 106 (1983).

1997Id. at 457, 460 , 75 N.W.2d 874 . [4] In Nichol , after applying the economic-reality test, we held that the defendant was an independent contractor as a matter of law, and remanded the case for trial on the issue of negligence.

1989In Tata v Muskovitz, 354 Mich 695 ; 94 NW2d 71 (1959), the Michigan Supreme Court adopted the dissenting opinion of Justice Talbot Smith in Powell v Employment Security Comm, 345 Mich 455 ; 75 NW2d 974 (1956), which set forth the economic reality test as the proper guide to relevant interpretation of the workmens’ compensation statute.

1999As further explained in Kidder, supra at 35: The economic-reality test was embraced by this Court as a more realistic attempt to define the employer-employee relationship through a “balancing of all the relevant factors in each case,” than the rigid control test[ 6 ] [Renfroe v Higgins Rack Coating & Mfg Co, 17 Mich App 259, 265 ; 169 NW2d 326 (1969).] Given the increasingly complicated relationships developing in today’s business and economic marketplaces anything other than a totality of the circumstances test would be an insufficient guide by which to evaluate the employee-employer relation

1999As further explained in Kidder, supra at 35: The economic-reality test was embraced by this Court as a more realistic attempt to define the employer-employee relationship through a “balancing of all the relevant factors in each case,” than the rigid control test[ 6 ] [Renfroe v Higgins Rack Coating & Mfg Co, 17 Mich App 259, 265 ; 169 NW2d 326 (1969).] Given the increasingly complicated relationships developing in today’s business and economic marketplaces anything other than a totality of the circumstances test would be an insufficient guide by which to evaluate the employee-employer relation

1997Control is a factor, as is payment of wages, hiring and firing, and the responsibility for the *877 maintenance of discipline, but the test of economic reality views these elements as a whole, assigning primacy to no single one. [ Id. at 32-33 , 99 N.W.2d 367 (Smith, J., concurring) (citations omitted).] The economic-reality test was embraced by this Court as a more realistic attempt to define the employer-employee relationship through a "balancing of all the relevant factors in each case," than the rigid control test.

1997Control is a factor, as is payment of wages, hiring and firing, and the responsibility for the *877 maintenance of discipline, but the test of economic reality views these elements as a whole, assigning primacy to no single one. [ Id. at 32-33 , 99 N.W.2d 367 (Smith, J., concurring) (citations omitted).] The economic-reality test was embraced by this Court as a more realistic attempt to define the employer-employee relationship through a "balancing of all the relevant factors in each case," than the rigid control test.

1985See, also, Schulte v American Box Board Co, 358 Mich 21 ; 99 NW2d 367 (1959); Goodchild v Erickson, 375 Mich 289 ; 134 NW2d 191 (1965); Solakis v Roberts, 395 Mich 13 ; 233 NW2d 1 (1975); Askew v Macomber, 398 Mich 212 ; 247 NW2d 288 (1976).” Following our departure from the common-law control test, this Court has consistently utilized the economic reality test when questions have arisen relative to the existence of an employment relationship.

1985See, also, Schulte v American Box Board Co, 358 Mich 21 ; 99 NW2d 367 (1959); Goodchild v Erickson, 375 Mich 289 ; 134 NW2d 191 (1965); Solakis v Roberts, 395 Mich 13 ; 233 NW2d 1 (1975); Askew v Macomber, 398 Mich 212 ; 247 NW2d 288 (1976).” Following our departure from the common-law control test, this Court has consistently utilized the economic reality test when questions have arisen relative to the existence of an employment relationship.

1978Goodchild v Erickson, 375 Mich 289, 293 ; 134 NW2d 191 (1965), Cronk v Chevrolet Local 659, 32 Mich App 394, 398; 189 NW2d 16 (1971), lv den, 385 Mich 784 (1971), McKissic v Bodine, 42 Mich App 203, 205-208 ; 201 NW2d 333 (1972), lv den, 388 Mich 780 (1972).

1978Goodchild v Erickson, 375 Mich 289, 293 ; 134 NW2d 191 (1965), Cronk v Chevrolet Local 659, 32 Mich App 394, 398; 189 NW2d 16 (1971), lv den, 385 Mich 784 (1971), McKissic v Bodine, 42 Mich App 203, 205-208 ; 201 NW2d 333 (1972), lv den, 388 Mich 780 (1972).

2020Because we conclude that plaintiff was an employee of Speed Express under the -3- economic reality test, we need not address the trial court’s second finding that he was not self- employed.3 A. DEFINING THE ECONOMIC REALITY TEST “When determining the priority of insurers liable for no-fault PIP benefits, courts must examine MCL 500.3114.” Corwin v DaimlerChrysler Ins Co, 296 Mich App 242, 254 ; 819 NW2d 68 (2012).

2020Because we conclude that plaintiff was an employee of Speed Express under the -3- economic reality test, we need not address the trial court’s second finding that he was not self- employed.3 A. DEFINING THE ECONOMIC REALITY TEST “When determining the priority of insurers liable for no-fault PIP benefits, courts must examine MCL 500.3114.” Corwin v DaimlerChrysler Ins Co, 296 Mich App 242, 254 ; 819 NW2d 68 (2012).

2026GEICO and State Farm opposed Auto Owners’ motion, arguing that the eight factors from McKissic v Bodine, 42 Mich App 203, 208-209 ; 201 NW2d 333 (1972), as applied to the economic-reality test in Duckworth v Cherokee Ins Co, 333 Mich App 202 ; 963 NW2d 610 (2020), indicated that Knight was an employee, and not an independent contractor.

2026GEICO and State Farm opposed Auto Owners’ motion, arguing that the eight factors from McKissic v Bodine, 42 Mich App 203, 208-209 ; 201 NW2d 333 (1972), as applied to the economic-reality test in Duckworth v Cherokee Ins Co, 333 Mich App 202 ; 963 NW2d 610 (2020), indicated that Knight was an employee, and not an independent contractor.

2025In Wells, 421 Mich at 650 , our Supreme Court acknowledged “the general principle that in Michigan separate entities will be respected.” However, after applying the economic-reality test to the specific facts before it, the Wells Court departed from this general principle and effectively engaged in a “reverse-piercing” of the corporate veil of the parent corporation in question.

1999Id. at 651 , 364 N.W.2d 670 . [4] Specifically, § 131(2) provides in relevant part as follows: As used in this section ... "employer" includes the employer's insurer and a service agent to a self-insured employer insofar as they furnish, or fail to furnish, safety inspections or safety advisory services incident to providing worker's compensation insurance or incident to a self-insured employer's liability servicing contract. [MCL 418.131(2); MSA 17.237(131)(2).] [5] Because the Legislature has not chosen to further define "employer" for purposes of the exclusive remedy provision, application

2014See Citizens Ins Co of America v Auto Club Ins Ass’n, 179 Mich App 461, 465 ; 446 NW2d 482 (1989) (stating that the factors of the economic reality test are “(1) control of the worker’s duties; (2) payment of wages; (3) right to hire, fire and discipline; and (4) the performance of the duties as an integral part of the employer’s business towards the accomplishment of a common goal”). -9- is clear that the employee was acting to accomplish some purpose of his own.” Bryant v Brannen (On Remand), 180 Mich App 87, 98 ; 446 NW2d 847 (1989).

2014See Citizens Ins Co of America v Auto Club Ins Ass’n, 179 Mich App 461, 465 ; 446 NW2d 482 (1989) (stating that the factors of the economic reality test are “(1) control of the worker’s duties; (2) payment of wages; (3) right to hire, fire and discipline; and (4) the performance of the duties as an integral part of the employer’s business towards the accomplishment of a common goal”). -9- is clear that the employee was acting to accomplish some purpose of his own.” Bryant v Brannen (On Remand), 180 Mich App 87, 98 ; 446 NW2d 847 (1989).

2001In addressing the first issue McCarthy applied the economic reality test, McCarthy, supra at 455-456 , and in addressing the second it applied the control test.

1998Regarding these issues, both sides claim that the appropriate test for respondeat superior liability is the economic-reality test as set forth in McCarthy v State Farm Ins Co, 170 Mich App 451 ; 428 NW2d 692 (1988).

1997In United States v Silk, 331 US 704, 713 ; 67 S Ct 1463 ; 91 L Ed 1757 (1947), the United States Supreme Court first articulated an economic-reality test for assessing the employer-employee relationship.

1997In United States v Silk, 331 US 704, 713 ; 67 S Ct 1463 ; 91 L Ed 1757 (1947), the United States Supreme Court first articulated an economic-reality test for assessing the employer-employee relationship.