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Resolution of factors as to whether an employment relationship or an independent contractor relationship was created is a question of law. Merely because employee and independent contractor status is each supported by certain factors does not bar entry of summary judgment. Whether a person is an employee depends on the common law of agency definition of employee.
Jewel A. Farlow (Farlow) graduated from law school in 1988. Wachovia Bank of North Carolina (Wachovia) subsequently employed her to represent it, while she was an associate in a Greensboro, North Carolina law firm. In February 1991, Farlow went into private practice in Greensboro, and she continued to keep Wachovia as a client. In 1993, Farlow and Wachovia discussed the possibility of Farlow working as in-house counsel for Wachovia to handle recovery and bankruptcy cases. On October 5, 1993, Farlow completed a Wachovia employee application form in which she disclosed that she was convicted of two counts of misdemeanor larceny in 1982. Those convictions made it unlawful for her to become an employee of Wachovia without Federal Deposit Insurance Corporation (FDIC) approval. Farlow was aware of this statute and knew that she could not become an employee unless Wachovia received a waiver from the FDIC. The parties nonetheless proceeded with their working relationship. After working at Wachovia for a period of months, Farlow complained about a sexually and racially hostile work environment. She was terminated, effective December 21, 1994. Upon termination, Farlow submitted a request for payment for her services while employed there. Wachovia paid part of the request. Farlow subsequently filed suit in North Carolina state court. The Complaint alleged four causes of action: 1) under Title VII of the Civil Rights Act of 1964, the creation of a racially and sexually hostile work environment and Title VII retaliation; 2) failure to pay wages due; 3) punitive damages; and 4) a request for injunctive relief. Wachovia removed the case to the Middle District of North Carolina based on federal question jurisdiction. Wachovia filed an answer, which denied that Farlow was an employee, and counterclaimed for a return of money paid to her. Farlow filed an answer to the counterclaim. Discovery was bifurcated to address initially Farlow's employment status. At the close of discovery, Wachovia filed a Motion for Summary Judgment, and on August 31, 2000, the district court dismissed her claims in entirety because she was not an employee. Farlow timely appealed.
Was there an employment relationship between Farlow and Wachovia?
The appellate court held that, while the parties may have intended to create an employment relationship in the future, the circumstances indicated that Farlow was an independent contractor and Title VII thus did not apply. No federal consent was obtained for Farlow to be employed despite her larceny convictions, and Farlow billed only for services rendered. Wachovia paid no employment taxes, Farlow described herself as self-employed on her tax returns, and the parties agreement labeled Farlow as an independent contractor. Most significantly, Wachovia exercised no control over the manner of Farlow’s work. However, the dismissal of Farlow’s state law claims constituted a decision on the merits, even though the district court did not consider the state claims on the merits; the district court was thus required to decide, remand, or dismiss without prejudice the state claims.