Brown v. J. Kaz, Inc.

OPINION OF THE COURT

Appellant Kimberly Brown appeals the District Court’s grant of summary judgment in favor of appellee J. Kaz, Inc., d/b/a Craftmatic of Pittsburgh (“Craftmatic”), on her employment discrimination claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq., the Civil Rights Act of 1866, 42 U.S.C. § 1981, and the Pennsylvania Human Relations Act (“PHRA”), 43 Pa. Cons.Stat. §§ 951 et seq.

We will affirm the District Court’s grant of summary judgment on Brown’s claims under Title VII and the PHRA because, as the District Court concluded, Brown was an independent contractor, rather than an employee, of Craftmatic and therefore outside the protections of those statutes. In contrast, Brown’s claim under section 1981 requires more extended consideration, as that claim presents us with a matter of first impression in this circuit.

I.

Craftmatic is a distributor of adjustable beds. Craftmatic sells its products through sales representatives who visit potential customers’ homes to demonstrate the beds and attempt to make sales. In the summer of 2006, Brown, an African-American female, responded to a Craftmatic advertisement seeking sales representatives and spoke twice by telephone with Jay Morris, Craftmatic’s recruiting manager, regarding a job.

Morris invited Brown to attend a training session at Craftmatic’s Pittsburgh, Pennsylvania, office in August 2006. During these conversations, Brown, a resident of Cleveland, Ohio, told Morris that she would take the bus to Pittsburgh because she preferred not to drive in unfamiliar places. Morris testified at his deposition that he was concerned about Brown’s ability to meet the transportation requirements of the sales representative position in light of Brown’s unwillingness to drive to Pittsburgh, but nonetheless invited her to training because she was well-spoken and showed enthusiasm for the position.

Brown attended a training session, which was held from August 8-10, 2006, with two other trainees, Ronald Gibbs and Daryl Rinehart, neither of whom was African-American. Brown, Gibbs and Rinehart were met at Craftmatic by Morris. Brown contends that, during that initial meeting, Morris stated that “I know she [Brown] is going to be a problem” and that “She’s going to be a headache. She asks a lot of questions.” App. at 324.

Craftmatic’s training manager, Daniel Pesta, conducted the training session, during which the trainees were introduced to the product they would be selling and Craftmatic’s business practices. As part of the training, Pesta gave the trainees an assignment to complete between the first *178and second days of training and another assignment between the second and third days; the assignments required the trainees to complete standard sales contracts and similar activities. According to Pesta, Brown failed to complete both assignments. However, Craftmatic’s owner, John Girty, testified at his deposition that Pesta told him that Brown completed her assignments; Brown also contends that she completed her assignments. In any event, Pesta provided Brown with a copy of Craftmatic’s “Independent Contractor Agreement” at the end of the second day of training, and Brown signed the agreement on the final day of training.

Later the final training day, Brown, Gibbs and Rinehart took a break on a deck outside of Craftmatic’s office. Morris approached them, extended his hand to all three, shook hands with Gibbs and Rinehart, and exchanged pleasantries with them. However, for reasons that are unclear, Brown refused to shake Morris’ hand.

The details of what happened next are disputed, although it is undisputed that Brown and Morris had a heated argument. According to Brown, after she refused to shake his hand, Morris stated, “Well, you ain’t nothing but a black person anyway” and “Well, you ain’t nothing but the N word.” App. at 329. Brown states that, after she asked, “Are you calling me a nigga,” Morris “smirked and shook his head.” App. at 329-30. Morris, on the other hand, testified at his deposition that he told Brown that “not shaking a man’s hand is like calling a black person a derogatory name” and that “it’s like calling a black person the N-word.” App. at 157-58. After this exchange, as summarized by the District Court, “the two engaged in some discussion about slapping or hitting people, although it is unclear, but irrelevant, as to who initiated this topic of discussion.” App. at 4.

Brown thereafter returned to the training room. Morris entered the room and told Brown that, if he had anything to say about it, she would not work for Craftmatic. Morris then reported the incident to Girty and told him that he did not want Brown to be a sales representative. Girty told Morris that he had used a bad choice of words. Pesta, who was not present at the incident, also met with Girty following the incident and also believed that Brown should not be permitted to act as a sales representative for Craftmatic, although it is unclear whether he so informed Girty at that meeting.

After meeting with Morris and Pesta, Girty decided that Craftmatic would not use Brown as a sales representative. Pesta informed Brown of Girty’s decision and provided a check from Craftmatic to reimburse her for the expenses she incurred in attending the training session.

Brown thereafter timely filed charges of discrimination with the Equal Employment Opportunity Commission (“EEOC”) and the Pennsylvania Human Relations Commission. The EEOC issued a dismissal and notice of rights to Brown on March 27, 2007, and Brown then filed the instant action alleging violations of Title VII, section 1981 and the PHRA based on theories of disparate treatment, hostile work environment, and retaliation. Following discovery, the District Court granted summary judgment to Craftmatic on all of Brown’s claims.

The District Court granted summary judgment on the claims under Title VII and the PHRA because Brown was an independent contractor and therefore outside the protections of those acts. On the other hand, the District Court concluded that Brown’s claims under section 1981 were not barred because of her indepen*179dent contractor status. However, the Court held that Brown could not prove that the termination of her contractual relationship with Craftmatic violated section 1981 under either the mixed-motive analysis of Price Waterhouse v. Hopkins, 490 U.S. 228, 109 S.Ct. 1775, 104 L.Ed.2d 268 (1989), or pretext analysis of McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). According to the Court, even assuming that Brown produced direct evidence of discriminatory racial animus that was causally related to Girty’s decision to terminate her employment, Craftmatic was entitled to summary judgment because it proved that the same decision would have been made regardless of Brown’s race.

Specifically, the Court concluded that Girty had two concerns regarding Brown that justified her termination. First, based on the altercation with Morris, Girty was concerned that “Brown would exhibit inappropriate behavior in a customer’s home.” App. at 17. The Court reasoned that, “[h]ad Morris uttered no racial slurs during the argument, but reported the same incident to Girty, Girty would have been equally concerned with Brown’s attitude and behavior” because sales representatives must enter customers’ homes and “Girty would need to be comfortable knowing that his sales representative could remove himself or herself from the altercation swiftly and without escalating it.” App. at 17-18. Second, Girty was concerned “that Brown, who admittedly does not like to drive in unfamiliar places, could not perform the job of a traveling sales representative.” App. at 17.

Finally, the Court granted Craftmatic summary judgment on Brown’s hostile work environment claim because Brown produced no evidence that racial discrimination was regular or pervasive at Craftmatic and on Brown’s retaliation claim because she had not engaged in any protected activity before her contractual relationship with Craftmatic was terminated. Brown timely appealed.

II.

The District Court had jurisdiction under 28 U.S.C. § 1331. This court has jurisdiction under 28 U.S.C. § 1291. “On an appeal from a grant or denial of summary judgment, our review is plenary and we apply the same test the district court should have utilized initially.” Giles v. Kearney, 571 F.3d 318, 322 (3d Cir.2009). “A court may grant summary judgment only when the record ‘shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.’ ” Id. (quoting Fed.R.Civ.P. 56(c)). We must construe the evidence in favor of the non-moving party, and summary judgment must be denied if there exists enough evidence “to enable a jury to reasonably find for the nonmovant on the issue.” Id. (citation omitted).

III.

A. Title VII and PHRA Claims

Brown contends that the District Court erred in concluding that she was an independent contractor of Craftmatic, rather than an employee, and therefore not protected by Title VII or the PHRA.1 *180The term “employee” is defined in Title VII as “an individual employed by an employer.” 42 U.S.C. § 2000e(f). In Nationwide Mutual Insurance Co. v. Darden, a case arising under the Employee Retirement Income Security Act, the Supreme Court construed an identical provision to incorporate traditional agency law principles. 503 U.S. 318, 323, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992); see also Walters v. Metro. Educ. Enters., Inc., 519 U.S. 202, 211-12, 117 S.Ct. 660, 136 L.Ed.2d 644 (1997) (citing favorably Darden in a Title VII case).2

Thus, the question of whether an individual is an employee turns on “the hiring party’s right to control the manner and means by which the product is accomplished.” Darden, 503 U.S. at 323, 112 S.Ct. 1344 (quotation omitted). As the Court summarized in Darden:

Among the other factors relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.

Id. at 323-24, 112 S.Ct. 1344 (quotation omitted).

Brown contends that a number of these factors suggests that she was an employee of Craftmatic. However, we conclude that the District Court correctly determined that Brown was an independent contractor, not an employee. Although Brown notes that Craftmatic’s standard practice was to assign appointments to its sales representatives, such representatives could also schedule their own appointments. Brown also notes that Craftmatic made recommendations to its sales representatives regarding appropriate statements to prospective customers, but Craftmatic merely barred its representatives from making false or misleading statements. Otherwise, Craftmatic provided only recommendations regarding how the sales process should proceed and not “a canned script.” App. at 373. We agree with the District Court that these controls were “the minimum that a corporation needs to *181maintain the quality of its product and services, and consistency in its business practices,” and therefore should not be sufficient to transform Brown into an employee. App. at 13.

Moreover, the Darden factors in then-totality suggest that Brown was not an employee of Craftmatie. Brown had to provide her own equipment for sales appointments (except for a massage demonstration tool and a DVD for which she was required to pay a deposit), her own office supplies, and her own means of transportation to appointments. Craftmatie provided Brown with no office space and paid her on a commission basis only. Brown was also required to pay for her own expenses, including liability insurance, and was responsible for payment of all taxes arising from her work. Brown was permitted to negotiate price on her sales (within certain limits) and to solicit customers on her own. Finally, Craftmatie could only assign Brown sales appointments and no other work.

Our conclusion that Brown was not an employee of Craftmatie is reinforced by the terms of the parties’ “Independent Contractor Agreement,” which clearly provided that the sales representative was an independent contractor. “The agreement, while not dispositive of the plaintiffs employment status, is strong evidence that she was an independent contractor.” Holtzman v. World Book Co., Inc., 174 F.Supp.2d 251, 256 (E.D.Pa.2001); see also Adcock v. Chrysler Corp., 166 F.3d 1290, 1293 (9th Cir.1999).

In sum, Brown was not an employee of Craftmatie for purposes of Title VII or the PHRA. Therefore, her termination did not fall within the protections of either statute.

B. Section 1981 Claims

At the threshold, we must determine whether Brown’s claims pursuant to section 1981, like her claims under Title VII and the PHRA, are barred because of her status as an independent contractor. Although we have not previously decided the issue, at least three of our sister courts of appeals have held that an independent contractor may bring a discrimination claim under section 1981 against the entity with which she contracted. See Taylor v. ADS, Inc., 327 F.3d 579, 581 (7th Cir.2003); Webster v. Fulton County, 283 F.3d 1254, 1257 (11th Cir.2002); Danco, Inc. v. Wal-Mart Stores, Inc., 178 F.3d 8, 13-14 (1st Cir.1999).

The text of section 1981 provides that “all persons ... shall have the same right ... to make and enforce contracts ... as is enjoyed by white citizens.” 42 U.S.C. § 1981(a) (emphasis added).3 Thus, section 1981 “does not limit itself, or even refer, to employment contracts but embraces all contracts and therefore includes contracts by which a[n] ... independent contractor ... provides service to another.” Danco, 178 F.3d at 14. We thus agree with the decisions that hold that an independent contractor may bring a cause of action under section 1981 for discrimination occurring within the scope of the independent contractor relationship.

Turning to the merits of Brown’s section 1981 claims, we have previously held that the' substantive elements of a claim under section 1981 are generally identical to the *182elements of an employment discrimination claim under Title VII. See Schurr v. Resorts Int'l Hotel, Inc., 196 F.3d 486, 499 (3d Cir.1999). Here, Brown’s primary claim is that Craftmatic’s decision to terminate her independent contractor status resulted from a racially discriminatory motive and therefore was improper under either the Price Waterhouse mixed-motives analysis or the McDonnell Douglas pretext analysis.4 The District Court rejected Brown’s claims under both theories because, even assuming that Brown produced direct evidence of racial animus that was causally connected to her termination, Craftmatie demonstrated that it would have made the same decision regardless of her race.

We focus on the mixed-motives analysis under Price Waterhouse. This court has held that Justice O’Connor’s concurring opinion “represents the holding of the fragmented Court” in that ease. Fakete v. Aetna, Inc., 308 F.3d 335, 337 n. 2 (3d Cir.2002). Accordingly, if the plaintiff shows “by direct evidence that an illegitimate criterion was a substantial factor in the [employment] decision,” the burden shifts to the defendant “to convince the trier of fact that it is more likely than not that the decision would have been the same absent consideration of the illegitimate factor.” Price Waterhouse, 490 U.S. at 276, 109 S.Ct. 1775 (O’Connor, J., concurring).5

*183Thus, Brown must first present “direct evidence of discrimination,” which this court has defined as “evidence sufficient to allow the jury to find that the decision makers placed substantial negative reliance on [the plaintiffs race] in reaching their decision to fire [her].” Fakete, 308 F.3d at 338. Here, the District Court assumed that Brown had presented such direct evidence based on the incident between Brown and Morris.

Indeed, taking the evidence in the light must favorable to Brown, the record shows that after Brown refused to shake Morris’ hand during their interaction on the third day of training, Morris stated, “Well, you ain’t nothing but the N word,” App. at 329, and responded in the affirmative when Brown asked him if he was calling her a “nigga,” App. at 329-30. These were not simply “stray remarks.” Price Waterhouse, 490 U.S. at 277, 109 S.Ct. 1775 (O’Connor, J., concurring). Within minutes of the incident, Morris, who was the recruiting manager for Craftmatic, told Brown that if he had any say in the matter she would not be permitted to work for Craftmatic and reported the incident to Girty, Craftmatic’s owner. Girty then decided, upon Morris’ recommendation, to terminate Craftmatic’s contractual relationship with Brown without ever speaking to Brown or to the other trainees who were present during the incident. As we have explained, “one form of evidence sufficient to shift the burden of persuasion under Price Waterhouse is statements of a person involved in the decisionmaking process that reflect a discriminatory or retaliatory animus of the type complained of in the suit, even if the statements are not made at the same time as the adverse employment decision, and thus constitute only circumstantial evidence that an impermissible motive substantially motivated the decision.” Fakete, 308 F.3d at 339.

Thus, Craftmatic was entitled to summary judgment only if it proved “that if [race] had not been part of the process, its [termination] decision concerning [Brown’s contract] would nonetheless have been the same.” Price Waterhouse, 490 U.S. at 279, 109 S.Ct. 1775 (O’Connor, J., concurring). Significantly, “proving that the same decision would have been justified ... is not the same as proving that the same decision would have been made.” Id. at 252, 109 S.Ct. 1775.

The District Court concluded that Craftmatic satisfied its burden, but several elements of the Court’s reasoning are problematic. First, it noted that Girty, the ultimate decisionmaker regarding Brown’s termination, decided to terminate her contract after speaking to Pesta, Craftmatic’s training manager, and that Pesta, “who is alleged to have no racial animus against Brown, ... agreed that Brown should not be permitted to act as a sales representative.” App. at 18. However, in his deposition, Girty stated that Pesta did not provide him with any information that led to his decision to terminate Brown’s contract. Thus, Craftmatic cannot rely on Pesta’s *184views regarding the advisability of retaining Brown as a sales representative as evidence that Girty would have made the same decision regardless of Brown’s race.

Next, the District Court noted that Girty was concerned “that Brown, who admittedly does not like to drive in unfamiliar places, could not perform the job of a traveling sales representative.” App. at 17. There are several problems with Craftmatic’s reliance on this evidence as proof that Girty would have made the same decision regardless of Brown’s race. Most importantly, Morris and Pesta were aware that Brown did not like to drive in unfamiliar places prior to the incident between Morris and Brown. Indeed, Morris was made aware of Brown’s driving preferences during their initial phone conversation but still invited Brown to attend the training sessions. Similarly, Pesta, despite his knowledge of her driving preferences, entered into the Independent Contractor Agreement with Brown on behalf of Craftmatic. Indeed, Pesta testified at his deposition that the “fact that [Brown] came in on a bus in and of itself didn’t have any bearing” on whether Brown was a good sales representative candidate and that Brown informed him that she had a car. App. at 378-79. Thus, a reasonable jury could infer that neither Morris nor Pesta would have recommended termination of Brown’s contract to Girty because of her preference against driving in unfamiliar places. Their conduct prior to the incident suggests that they believed that Brown could serve as a sales representative notwithstanding that preference.

The District Court also concluded that, “[h]ad Morris uttered no racial slurs during the argument, but reported the same incident to Girty, Girty would have been equally concerned with Brown’s attitude and behavior.” App. at 17. However, a fact finder could view the significance of Morris’ comments as evidence that Morris’ recommendation to Girty that Brown’s contract be terminated was motivated by racial animus. Thus, as Brown argues, the question is “not whether the same decision would have been made had Morris not made the comments to [Brown,] but rather, would the same decision have been made if [Brown’s] race was taken out of the equation.” Appellant’s Br. at 38.

Indeed, the District Court essentially concluded that Craftmatic was entitled to terminate Brown’s contract because, following what were at the very least racially insensitive remarks, she engaged in a heated verbal altercation with Morris. Although the District Court was surely correct that Girty “would be justifiably concerned that one of [his sales representatives] would participate in a heated verbal exchange” with a customer, a fact finder may conclude that the incident between Morris and Brown could not legitimately form the basis for such a concern given Morris’ discriminatory comments. Nothing in the record suggests that Brown would have conducted herself as she did but for Morris’ comments.6

Finally, although the District Court did not rely on this ground, Craftmatic contends that we may affirm the summary judgment order because Pesta recommended to Girty that Brown’s contract be *185terminated in light of her failure to complete her training assignments. However, as noted above, Girty stated at his deposition that Pesta did not give him any information on which he based the decision to terminate Brown’s contract, but rather that he (Girty) made the decision based entirely on his discussion with Morris. Indeed, Girty further stated that Pesta later told him that Brown had completed her assignments and that he did not have any problems with her work. Thus, Craftmatic cannot rely on this evidence to demonstrate it would have made the decision to terminate Brown’s contract regardless of her race.

It is important that we emphasize that we are not holding that Brown has proven her case of racial discrimination. What she has shown is that there are disputed facts and inferences on issues material to the disposition. We conclude that the District Court erred in granting Craftmatic summary judgment on Brown’s section 1981 claim that her termination was motivated by racial animus because there remain questions for a jury regarding whether Craftmatic would have terminated Brown’s contract absent consideration of her race.7 We will therefore reverse the District Court’s grant of summary judgment as to the section 1981 claim and remand for further proceedings.

IV.

For the above-stated reasons, we will affirm the District Court’s summary judgment order as to all of Brown’s claims under Title VII and the PHRA as well as her section 1981 claims for a hostile work environment and retaliation. We will reverse the District Court’s summary-judgment order as to Brown’s claim under section 1981 that Craftmatic’s termination of her contract was motivated by impermissible racial animus.