## Facts

- Jerry Black, Raymond Brown, John Hamilton, and Harold Udovich worked as truck drivers and dockworkers for Central States Xpress, Inc. (CSX) under a collective bargaining agreement (CBA) requiring arbitration of wage disputes and purporting to bind successors.
- CSX lacked workers’ compensation coverage and entered a March 17, 1996 service agreement with Employee Solutions, Inc. (ESI), under which ESI would provide workers’ compensation coverage and process payroll, and would “hire” CSX employees and “lease” them back to CSX.
- ESI processed payroll using CSX-provided earnings data, calculated deductions and net pay, issued checks bearing both CSX and ESI names, and sent checks to CSX for distribution.
- CSX was required to reimburse ESI for payroll amounts plus a service fee, but CSX failed to pay ESI’s invoices.
- On May 3, 1996, ESI terminated the service agreement; that same day CSX ceased operations and filed Chapter 7 bankruptcy.
- The employees filed wage and benefit claims in CSX’s bankruptcy, but the estate lacked sufficient assets to pay them.
- The employees sued ESI under the Indiana Wage Payment Statute, Ind. Code § 22-2-5-1 et seq., alleging ESI was their employer and liable for unpaid wages.

## Issues

1. Whether ESI qualified as an “employer” under the Indiana Wage Payment Statute, such that it could be held liable for CSX employees’ unpaid wages.

## Decision

- The Indiana Court of Appeals affirmed summary judgment for ESI.
- The court held ESI was not an “employer” under the common-law right-to-control test incorporated into the Wage Payment Statute.
- The case was remanded with instructions consistent with the affirmance.

## Legal Principles

- For Indiana Wage Payment Statute liability, “employer” is determined by a common-law employment (master–servant) test focused on the right to control the manner and means of the worker’s performance.
- Contractual labels describing an entity as an “employer” do not control statutory employer status; the controlling inquiry is actual or retained control over day-to-day work.
- Administrative functions—such as payroll processing and procuring workers’ compensation coverage—do not, without supervisory authority over work performance, make a payroll/leasing company an employer for wage-payment liability.
- Factors relevant to employer status include hiring and firing authority, supervision and direction of work, control over work rules and conditions, wage-setting authority, and allocation of business risk.

## Conclusion

Because ESI’s role was limited to payroll processing and workers’ compensation administration and it did not control, or possess the right to control, the employees’ day-to-day work, ESI was not their employer under Indiana’s Wage Payment Statute and could not be held liable for their unpaid wages after CSX’s bankruptcy.


Black v. Employee Solutions, Inc., 725 N.E.2d 138 (Ind. Ct. App. 2000)