Legal Memorandum: Availability of the Exclusive Remedy Defense

Issue: Under the laws of Michigan, in a workers’ compensation matter, when is the "exclusive remedy" defense available to a corporate affiliate of the defendant?

The seminal Michigan case on the issue of the availability of the exclusive remedy immunity to the employer’s corporate affiliate Wells v Firestone Tire & Rubber Co, 421 Mich 641; 364 NW2d 670 (1984).  In Wells, the Michigan Supreme Court first considered the issue in a third-party action against the plaintiff’s employer’s parent corporation for on-the-job injuries caused by an allegedly defective product.  The plaintiff’s employer was a wholly owned subsidiary of the defendant.  Id., 421 Mich at 645; 364 NW2d at 671.  To determine whether the plaintiff’s action against the parent was barred, the supreme court looked to whether the parties had an employment relationship.  Id., 421 Mich at 646; 364 NW2d at 672.  The court held that the "economic reality test" determined this issue.  Id., 421 Mich at 647-48; 364 NW2d at 672-73.  It also ruled that the appeals court had correctly applied the test by analyzing issues of control of the worker, payment of wages, discipline, hiring and firing—the entire employment situation—to determine that, on balance, the parent was the employer and summary judgment was proper.  Id., 421 Mich at 650; 364 NW2d at 674.  "In evaluating all the circumstances, courts analyze the employment situation in relation to the statutory scheme of [the] worker’s compensation law with the goal of preserving and securing the rights and privileges of all the parties.  No one factor controls."  James, 583 NW2d at 915.

The Wells court further ruled that the resulting "reverse-piercing" of the corporation must be analyzed […]