MARY E. SCHAEFER, Complainant


ELMER J. SOMMERS, Respondent B

ERD Case No. 9150335, EEOC Case No. 26G910569

An administrative law judge (ALJ) for the Equal Rights Division of the Department of Industry, Labor and Human Relations issued a decision dismissing the complainant's complaint of alleged sexual harassment in the above-captioned matter on September 1, 1992. Complainant filed a timely petition for commission review, and both parties submitted written arguments.

Based upon a review of the record in its entirety, and for reasons set forth in the attached memorandum opinion, the Labor and Industry Review Commission issues the following:


The decision of the administrative law judge is set aside and the matter is remanded to the Equal Rights Division for further proceedings.

Dated and mailed June 10, 1993

/s/ Pamela I. Anderson, Chairman

/s/ Richard T. Kreul, Commissioner

/s/ James R. Meier, Commissioner


This case involves a petition for commission review of the ALJ's decision granting respondent E. J. Sommers' pre-hearing motion request for dismissal of Mary Schaefer's complaint on the ground that there was no employer/ employe relationship within the meaning of the Fair Employment Act and therefore no subject matter jurisdiction by the department. Schaefer's complaint, which was filed with the department on February 6, 1991, alleges that the respondents, E. J. Sommers, individually and doing business as New Berlin Realty, Inc., had sexually harassed her during her employment and then terminated such employment because of her refusal to have a sexual relationship with E. J. Sommers.

The commission has previously held that an ALJ, in appropriate circumstances, may dismiss a complaint prior to hearing where it appears that even if what is claimed by a complainant is true, a decision in favor of the respondent is nevertheless required as a matter of law. Alvey v. Briggs & Stratton (LIRC, 11/27/91); Olson v. Lilly Research Laboratories (LIRC, 6/25/92). In Alvey and Olson, the commission noted that making such an analysis should involve simply looking at what the complaint alleges, and to any other assertions of the complainant which provide an indication of the nature of the claim. In this case, Schaefer's factual assertions regarding her relationship with the respondents appear by way of deposition testimony that she gave in connection with a civil action she has filed in Waukesha County Circuit Court titled Schaefer v. New Berlin Realty, Inc., et al., Case No. 91-CV-0349, her memorandum in opposition to Sommers' motion to dismiss filed with the ALJ and written arguments to the commission following the ALJ's dismissal of her complaint.

The factual assertions of Schaefer can be summarized as follows:

Schaefer is a licensed real estate broker. Elmer J. Sommers is an owner and developer of real estate. Agreeing that she would market real estate for Sommers, they entered into an employment contract dated May 30, 1986, listing E. J. Sommers, doing business as E. J. Sommers New Berlin Realty, as employer and she as employe. Included amongst the terms of the employment contract was the requirement that she "devote her full working time to said employment, shall manage and conduct the business of a real estate brokerage firm, said firm to be located at 4056 South 56th Street, Milwaukee, Wisconsin 53220." The employment contract also set forth specific duties, including the duty to "hire, train and supervise salespersons, man employer's model homes at all appropriate times, promote the sale of new homes for the employer and to man sales stations located at or near subdivisions being developed by the employer." The employment contract also provided that Schaefer was to be paid $30,000 per year for her services in semi-monthly installments on the 1st and 15th of each month, and that fees and commission realized from the sales of various properties, depending upon the nature of the sales, were to be paid in whole or in part to Schaefer and applied against her $30, 000 per year salary. For instance, for sales involving "In House Listings and The Sale of a Speculative House Built by Employer," 70 percent of the fee was to be paid to Schaefer and the remaining 30 percent was to go to E. J. Sommers. Further, Schaefer asserts that while the employment contract purported to be of limited duration (one year), she and the respondent continued to follow the terms and provisions of the employment contract, and to maintain the employer/employe relationship through her termination in 1990. In this regard, Schaefer asserts that at the time she was terminated, she was involved in the sales and marketing of Sommerset Gardens, a subdivision located in New Berlin, Wisconsin and owned by the Sommers Estates Company, of which E. J. Sommers is a joint owner. Schaefer asserts that she commenced activities related to the development of Sommerset Gardens in 1987; that the first sale of a lot in Sommerset Gardens occurred in July 1989, and that she continued to market these lots pursuant to the terms of the employment contract as modified by agreement (fees on lot sales increased from five percent to ten percent) until her employment was terminated.

Attached to Schaefer's memorandum in opposition to the respondent's motion to dismiss was a copy of a joint venture agreement dated November 3, 1987, between E. J. Sommers, Kateri Investments and John T. Carr, which she contends provides evidence of her continued employment. This joint venture agreement sets forth the agreement between the above-named individuals to enter into a joint venture partnership for the purpose of buying, developing and selling certain land described therein. Paragraph 8 of the agreement states that the joint venture shall be denominated "Sommers Estates Company." Referencing paragraph 6 of this agreement, Schaefer points out that the agreement provides in part that "the joint venture shall list the resulting lots for sale with ELMER J. SOMMERS NEW BERLIN REALTY . . ." Schaefer cites this paragraph as evidence: of the contemplation by both she and respondent that she would continue to be employed by E. J. Sommers because at the time of the joint venture agreement, she was the only real estate broker, licensed by the state of Wisconsin and employed by E. J. Sommers Realty, because her employment continued with respect to the sales of lots in Sommerset Gardens pursuant to the terms of the employment contract dated May 30, 1986 (as subsequently modified), because despite the date "expiration" of the employment contract she continued to act pursuant to the terms of the employment agreement as the listing broker for the properties in Sommerset Gardens at the instance of Elmer Sommers, and because she prepared the advertising materials and commenced the marketing of the properties in Sommerset Gardens.

Schaefer further asserts that the fact that the employment relationship between herself and E. J. Sommers was intended to be continued was confirmed in a meeting held at the offices of Attorney Alfred Drosen on or about October 4, 1988. Schaefer asserts that the purpose of this meeting was to discuss her employment status with respect to Sommerset Gardens and concerns that she had relative to the "sharing" of commissions between herself, a licensed real estate broker, and E.J. Sommers, an unlicensed individual. Schaefer asserts that based upon said meeting, Attorney Drosen, at the request of herself and Elmer Sommers, caused the formation of New Berlin Realty, Inc., a Wisconsin corporation. Schaefer asserts that when the corporation was formed by Drosen he specifically instructed both Sommers and her to follow the terms of the employment contract as they had up until the formation of the corporation. Schaefer asserts that the purpose of the formation of New Berlin Realty, Inc., was to protect her real estate broker's license, not to affect the essence of the employment relationship which had been established between herself and Sommers. Schaefer asserts that her duties, activities and conduct following the formation of New Berlin Realty, Inc. remained identical to that which existed pursuant to the terms of the employment contract, that is, continued dominion and control over her by E. J. Sommers.

In granting Sommers' motion to dismiss, the ALJ held that while Schaefer contended an employment relationship continued between herself and New Berlin Realty after the expiration of the employment contract in 1987, Schaefer has admitted that she became the vice president and secretary of New Berlin Realty, Inc. in October 1988, admitted that she owned 50 percent of the shares of the stock of the corporation, and further, admitted at a discovery deposition in her civil action against New Berlin Realty, Inc., et al., that: she was not an employe of either of the E. J. Sommers or New Berlin Realty, Inc. Further, the ALJ analogized Schaefer's situation as "equal owner of a corporation" with the situation in Wheeler v. Hurdman, 825 F.2d 257, 44 FEP Cases 707 (10th Cir. 1987), a case which presented the issue of whether a partner in an accounting firm was an employe for purposes of Title VII and other federal anti-discrimination statutes, and therefore, like the court in Wheeler, rejected application of the hybrid common law/economic realities test for determining whether or not an employer/employe relationship existed between the parties. (1)

While the ALJ labels Schaefer and E. J. Sommers as "equal owners and shareholders of a closely held corporation," assertions made by Schaefer indicate that neither she nor Sommers ever intended that she become an "owner" of the corporation, and that she in fact was not an "owner." For example, Schaefer asserts that prior to the formation of the corporation, the employment relationship between her and Elmer Sommers which provided for the sharing of real estate commissions was determined by Attorney Drosen to be in violation of Wisconsin law, and that New Berlin Realty, Inc. was created to prevent further violation of Wisconsin law regarding the splitting of real estate commissions between licensed and unlicensed persons and to prevent the loss of Schaefer's real estate license; that the corporation of which she was "an owner" was formed for no other reason; that neither Schaefer or Sommers put any cash as payment for their shares of stock in the corporation, but instead listed furniture: and the computer (apparently from New Berlin Realty) as payment; that subsequent to the formation of New Berlin Realty, Inc., Schaefer, as the designated broker and only salesperson for New Berlin Realty, Inc. continued to act under and pursuant to the terms of the employment contract; and that the duties, activities and conduct of Schaefer following the formation of New Berlin Realty, Inc. remained identical to that which existed pursuant to the terms of the employment contract, that is, continued dominion and control over Schaefer by Sommers.

Chapter 452, Wis. Stats., regarding real estate practice, appears to support Schaefer's assertions about the sharing of commissions and the reason for the formulation of New Berlin Realty, Inc. Specifically, sec. 452.19, Stats., provides as follows:

"Fee-Splitting. No licensed broker . . may pay a fee or a commission or any part thereof for performing any act specified in this chapter or as compensation for a referral or as a finder's fee to any person who is not licensed or registered under this chapter or who is not regularly and lawfully engaged in the real estate brokerage . . . business in another state, a territory or possession of the United States or a foreign country." (emphasis supplied)

Section 452.12(2), Stats., provides:

"(2) CORPORATIONS; PARTNERSHIPS. (a) A license may be issued to a corporation if the corporation has at least one officer licensed as a broker. The license issued to the corporation entitles each officer of the corporation who is a licensed broker to act as a broker on behalf of the corporation."

The ALJ has also placed great reliance on the fact that Schaefer admitted, under oath, at a discovery deposition taken in connection with the case of Schaefer v. New Berlin Realty, Inc., et al., that she was not an employe of E.J. Sommers or New Berlin Realty, Inc. Schaefer asserts that at best, she was confused with respect to her status, and points to page 16 of the deposition testimony in question, which shows that when asked whether she was both an owner and employe of the company, she responded that she didn't know if she was an employe or not. Schaefer argues that she is not a lawyer and does not have sufficient legal expertise to determine as a matter of law the essence of her relationship with the respondents. The commission declines to bind Schaefer to statements concerning legal conclusions made in her deposition testimony and which she was not qualified to make.

Additionally, the commission questions the analogy the ALJ seeks to draw between Schaefer's situation and that presented in Wheeler. First of all, it was the unique nature of partnerships themselves which caused the court to find it inappropriate to apply the right to control and economic realities tests. For example, in addition to finding that many of the economic reality factors would be useless in the partnership context, the court stated as follows:

"The central problem with the approach by Wheeler and the EEOC, however, is that it either ignores or relegates to insignificance the economic reality of partnership status itself. We view that as a fatal flaw. Status as a general partner carries important economic reality as well.. Employes do not assume the risks of loss and liabilities of their employers; partners do. It is no small thing to be exposed to unlimited liability, to be personally at risk for a partner's mistakes, and to have one's share of profits always conditionally conditioned upon the outcome of claims, suits, and obligations generated by another partner . . . . Other common characteristics of partnership are profit sharing; contributions to capital; part ownership of partnership assets, including a share of assets in dissolution of the enterprise; and the right to share in management subject to agreement among the partners. These are economic realities and no definition of 'employee' is co-extensive. Additionally, as previously indicated, an entirely different body of statutes and case law applies to partners and partnerships, conferring rights and imposing obligations wholly foreign to, for instance, a corporate employe. When individuals combined to carry on business as partners all these factors introduce complexities and economic realities which are not consonant with employee status."

Nothing in the instant case lends itself to a construction of Schaefer's relationship with the respondents as one of a partner in a partnership.

Secondly, assuming for purposes of argument that Schaefer was an owner of the corporation, courts have found that major stockholders, directors and officers of corporations can also be employes. This fact was noted in Wheeler where the court stated as follows:

"Owners in other contexts can be employees. See Goldberg v. Whitaker House Coop., 366 U.S. 28, 15 WH Cases 31 (1961) (members/owners of a knitting cooperative considered employees); Zimmerman v. North American Signal Co., 704 F.2d 347, 31 FEP Cases 634 (7th Cir. 1983) (corporate vice-president and shareholder considered employee); EEOC v. First Catholic Slovic Ladies Assn., 694 F.2d 1068, 30 FEP Cases 819 (6th Cir. 1982) (officers-directors considered employees), cert. denied, 464 U.S. 18, 32 FEP Cases 1672 (1983); Hoy v. Progress Pattern Co., 217 F.2d 701, 12 WH Cases 354 (6th Cir. 1954) (shareholder, vice president, director and chairman of board considered employee) . . . ." Wheeler, 44 FEP Cases at 716.

Thus, even assuming some "ownership" status in the sense that Schaefer was a shareholder, officer and director of New Berlin Realty, Inc., would not automatically preclude a determination that she was also an employe.

The commission thus concludes that it was error to dismiss Schaefer's complaint and that this matter must be remanded for further proceedings to determine whether or not an employer-employee relationship existed between Schaefer and the respondents.

In remanding the matter, the commission recognizes that "As generally defined, a broker is an agent who, for a commission or brokerage fee, bargains or carries on negotiations in behalf of his principal as an intermediary between the latter and third persons in transacting business relative to the acquisition of contractual rights, or to the sale or purchase of any form of property, real or personal, the custody of which is not entrusted to him for the purpose of discharging his agency. . ;" 12 Am.Jur.2d Brokers § 1 (1964), and that "As to his physical activities a broker is an independent contractor." Id. at § 3. The commission would also note, however, that real estate brokers have been found to be employer despite the above generalizations. For instance, in Golden v. A.P. Orleans. Inc., 681 F. Supp. 1100, 46 FEP Cases 1477 (D.C. Pay. 1988), a real estate broker who worked for a developer under a contract that specifically classified her as an independent contractor was found to be an employe under the Age Discrimination in Employment Act because the developer controlled her daily activities, sales work was at the core of the company's business and because it treated her as an independent contractor only when such treatment served its own purposes. In Golden, examining the control over the daily work activities of the plaintiff, the court noted that her work hours were set by the company, she received memoranda periodically containing specific performance procedures mandated. by the company, she was supervised by an area sales manager, was required to attend weekly sales meetings, was required to submit reports on her daily activities, and that the manner in which the sales transactions were to be conducted was strictly regulated by the management. Similarly, complainant Schaefer herein argues that Elmer J. Sommers controlled her activity as follows: Sommers attended each open house with her; Sommers had authority to approve or reject all advertising materials; Sommers was present at the time all offers to purchase for properties were drafted; Sommers attended all real estate closings; Schaefer exclusively sold only the property of Sommers and for the prices dictated. by Sommers; Schaefer was prohibited from selling properties for any other person or company; that Sommers had full supervision over her in her employment activities; and that Sommers scheduled appointments for her. Also, as further evidence of an employment relationship, Schaefer makes the following additional assertions: that she and the respondent had a long-term relationship which is indicative of an employer/employe relationship; that Sommers provided the work location (i.e., 4056 South 56th Street, Milwaukee, Wisconsin and 4500 South Sunnyslope Road, New Berlin, and all equipment furnished therein, including but not limited to all office supplies, advertising bills, office equipment, legal and accounting fees and health insurance; that as part of said employment, she was provided free housing at 4500 South Sunnyslope Road; that Sommers paid the cost for all real estate broker licensing fees, multiple listing service dues and the Waukesha Board of Realtor fees; that the sale and marketing of real estate was an integral part of the business of respondent; that when terminated, Schaefer's employment was only terminated, respondent did not seek her resignation as a director and officer of New Berlin Realty, Inc., and/or a dissolution or liquidation of her proprietary interests in said company; that the company ceased operations upon complainant's termination and she reaped no further benefits as the result of her continued position of director or shareholder, said termination resulting simply in a separation with respect to her obligations and duties relating to the respondent company, New Berlin Realty, Inc. The commission acknowledges that Sommers has taken issue with the above assertions listed by Schaefer as indicating an employer/ employe relationship. However, in evaluating the respondent's motion to dismiss, the commission will look only at what Schaefer alleges, accepting such assertions as true for the purposes of evaluating the respondent's motion to dismiss..

Finally, it should also be noted that Schaefer has cited the case of Eklund v. Tomah-Mauston Broadcasting Co. (LIRC, 9/19/86), for the proposition that even if she is found to be an independent contractor rather than an employe, she is still covered by the Act. In Eklund, however, the commission's statement that independent contractors were covered under the Act constituted dicta as it was not essential to the commission's decision, the commission having already found that Eklund was in fact an employe. Moreover, the recent decision of Moore v. LIRC and American Family Insurance Co. , case #92-2127 (Ct. App. 3/30/93), effectively holds that independent contractors are not covered under the Wisconsin Fair Employment Act. In Moore, after concluding that the WFEA and Title VII used the same standard in determining whether an individual is an employe, the court affirmed the commission's dismissal of Moore's ERD complaint on res judicata grounds in view of the fact that it had already been held in his federal court action against American Family that he was not an employe of the company, but rather an independent contractor.


John P. Buckley
Martin J. Greenberg

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(1)( Back ) The hybrid common-law/economic realities test is one of three tests the courts have developed for analyzing whether an individual is an employe for Title VII purposes. This test entails consideration of a number of circumstances relating to the work relationship, with the most important factor being the extent of the employer's right to control the means and manner of the employe's performance. Spirides v. Reinhardt, 613 F.2d 826, 20 FEP Cases 141 (D.C. Cir. 1979). The two other tests include the traditional common-law test which simply focuses on the employer's right to control the manner and means by which the work is performed, and the economic realities test, which considers individuals employes if they as a matter of economic reality, are dependent upon the business to which they render service. The trend of the courts is to apply the hybrid common-law/economic realities test for determining employe status. Frankel v. Bally, Inc., 987 F.2d 86, 61 FEP Cases 218 (2nd Cir. 1993).

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