                     United States Court of Appeals,

                                   Fifth Circuit.

                                   No. 95-11017.

                 Eunice SCHWEITZER, Plaintiff-Appellee,

                                          v.

  ADVANCED TELEMARKETING CORPORATION, Advanced Telemarketing of
Texas Corporation and NRP, Inc., Defendants-Appellants.

                                   Jan. 31, 1997.

Appeal from the United States District Court for the Northern
District of Texas.

Before JONES, DUHÉ and EMILIO M. GARZA, Circuit Judges.

     DUHÉ, Circuit Judge:

     Edith      Schweitzer    sued     Appellants       Advanced   Telemarketing

Corporation      ("ATC")     and     NRP,       Inc.   ("NRP")   under   the   Age

Discrimination in Employment Act ("ADEA").                    The district court

entered judgment on a jury verdict in Ms. Schweitzer's favor and

denied the defendants' motions for judgment as a matter of law or,

in the alternative, for a new trial.               ATC and NRP appeal, alleging

Ms. Schweitzer produced insufficient evidence to show either age

discrimination or that ATC and NRP constitute a single employer,

and that the district court made evidentiary errors and incorrectly

charged   the    jury.       We    hold     the    district   court   erroneously

instructed the jury, and reverse the judgment and remand for a new

trial.

                                   I. Background

     ATC, a subsidiary of NRP, provides clients with telemarketing

services of two types.            Outbound service is sales oriented, with


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employees making calls to solicit orders.            Inbound service focuses

on employees answering calls to take orders or provide customer

service. Clients contract with ATC to provide the desired service.

ATC's need for employees is contingent on clients' demand for

telemarketing, and may fluctuate greatly.

       ATC has no written, uniform policy for workforce reduction,

allowing its different departments to independently decide how to

carry out reductions in force.              The outbound department uses

performance evaluations of employees' work to choose whom to

retain, while the inbound department relies on employee seniority.

Appellee Eunice Schweitzer began working at ATC in 1985 as a sales

representative,    and     eventually      reached    the    rank     of   senior

supervisor.    In the summer of 1992, the department she worked in

was reduced, and Ms. Schweitzer was transferred to the GTE Customer

Service Department as a supervisor.

       The GTE Department was an inbound department responsible for

taking orders for GTE services and responding to GTE customers who

called in with problems.      In August and September of 1992, the GTE

Customer Service Department chose to reduce its work force because

of a significant reduction in call volume.            To effectuate the lay

off,    the   department    retained       those   employees    with       greater

seniority, and laid off employees with less.                Ms. Schweitzer was

one of those employees laid off in September 1992.                  She sued NRP

and ATC alleging age discrimination under 29 U.S.C. § 621 et seq.

       NRP moved for summary judgment, arguing it could not as a

matter of law be considered a single entity with ATC, and thus an


                                       2
employer of Ms. Schweitzer.        The district court denied both this

motion   and   a   subsequent    motion      for    summary   judgment    by   all

defendants that Ms. Schweitzer could not prevail on a claim of age

discrimination.

     At trial, the court instructed the jury on determining when

two separate entities might be considered a single employer.                   The

defendants objected to portions of the charge.                The jury returned

a verdict in favor of Ms. Schweitzer, finding that ATC violated the

ADEA by discriminating against Ms. Schweitzer because of her age,

that ATC did so knowingly and recklessly, and that ATC and NRP were

a single employer of Ms. Schweitzer.

     Evidence revealed that: the three members of the ATC Board of

Directors all sat on the NRP board, NRP had a 99.5% share of ATC

stock, NRP guaranteed ATC's line of credit, and ATC had a negative

net worth until it achieved a positive cash balance in 1994.

Testimony also showed, however, that NRP provided no human resource

functions   or     policy   direction   to    ATC    and   had   no   operational

involvement with ATC.        ATC employees were solely responsible for

decisions regarding the hiring, firing or reduction in force of

personnel at ATC.      Indeed, the vice president of ATC testified NRP

was unlikely to know when ATC was forced to reduce staff, and was

never involved in making such decisions involving personnel.

                            II. Jury Instruction

     ATC and NRP assert the district court erred in instructing the

jury on the circumstances in which NRP and ATC could be found to be

a "single employer," so that NRP would be liable with ATC for ATC's


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decision to lay off Ms. Schweitzer.

A. Standard of Review

       We employ the standard of review discussed in F.D.I.C. v.

Mijalis, 15 F.3d 1314 (5th Cir.1994):

      First, the challenger must demonstrate that the charge as a
      whole creates "substantial and ineradicable doubt whether the
      jury has been properly guided in its deliberations." Second,
      even if the jury instructions were erroneous, we will not
      reverse if we determine, based upon the entire record, that
      the challenged instruction could not have affected the outcome
      of the case.

Id. at 1318, citing Bender v. Brumley, 1 F.3d 271, 276 (5th

Cir.1993) (citations omitted).              If the party complaining of an

incorrect jury instruction on appeal proposed another instruction

to   the   district   court,    their   proposed    instruction    must   have

correctly stated the law.        Mooney v. Aramco Services Co., 54 F.3d

1207, 1216 (5th Cir.1995).          In short, the critical issues are

whether it was correct to instruct the jury with the objected to

instructions and, if incorrect, was the error harmless?             Bender, 1

F.3d at 277.

B. The "Single Employer" Test

       In civil rights actions, "superficially distinct entities may

be exposed to liability upon a finding they represent a single,

integrated enterprise:         a single employer."     Trevino v. Celanese

Corp., 701 F.2d 397, 404 (5th Cir.1983).            Trevino set out a four

part formula to determine when a parent corporation should be

considered the employer of a subsidiary's employee.               The formula

focuses on actual control of employees by the parent company.              The

Trevino test has been used repeatedly in both this circuit and


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others to ascertain when distinct entities may be considered

integrated as a single employer.            Garcia v. Elf Atochem North

America, 28 F.3d 446, 450 (5th Cir.1994);           Chaiffetz v. Robertson

Research Holding, Ltd., 798 F.2d 731, 735 (5th Cir.1986).

     Trevino 's four part test considers (1) interrelation of

operations;    (2) centralized control of labor relations;                 (3)

common management;   and (4) common ownership or financial control.

Trevino, 701 F.2d at 404.        The second of these factors has

traditionally been most important, with courts refining their

analysis to the single question, "What entity made the final

decisions   regarding   employment       matters   related   to   the   person

claiming discrimination?"      Id., quoting Odriozola v. Superior

Cosmetic Distribs., Inc., 531 F.Supp. 1070, 1076 (D.P.R.1982);

Chaiffetz, 798 F.2d at 735.

     Other Fifth Circuit cases have utilized a "hybrid economic

realities/common law control test" to resolve when companies will

be considered single employers in ADEA suits.                Barrow v. New

Orleans S.S. Ass'n, 10 F.3d 292, 296 (5th Cir.1994), Deal v. State

Farm County Mut. Ins. Co. of Texas, 5 F.3d 117, 118 (5th Cir.1993).

The hybrid test was first used in the context of determining if a

worker employed as an independent contractor should be considered

the employee of an entity for the purposes of Title VII.            Mares v.

Marsh, 777 F.2d 1066 (5th Cir.1985).         It was then extended to ADEA

cases in Fields v. Hallsville Independent School District, 906 F.2d

1017 (5th Cir.1990).

     While the hybrid test has been used to resolve single employer


                                     5
disputes in ADEA cases, Trevino was the original test used in this

circuit to determine if separate, related business entities could

together be considered the employer of a civil rights plaintiff.

The hybrid test developed as a means of determining when plaintiffs

could     be   considered   employees       of   business   entities,   not   to

ascertain if different entities were so integrated as to constitute

a single employer of that plaintiff.

         Trevino and the hybrid test are very similar, since under the

hybrid test, "the right to control an employee's conduct is the

most important component...."1          Deal, 5 F.3d at 118.      However, we

hold that while the Trevino and hybrid tests are similar, and will

frequently yield the same results, the tests should not be used

interchangeably.       Rather, the hybrid test should be used as an

initial inquiry to resolve, if need be, whether a plaintiff is an

employee of the defendant (or one of the defendants, in a multi

defendant case) for the purposes of Title VII.2              If the plaintiff

is found to be an employee of one of the defendants under the

     1
        The Deal court gave the details of the hybrid test:

               When examining the control component, we have focused on
               whether the alleged employer has the right to hire and
               fire the employee, the right to supervise the employee,
               and the right to set the employee's work schedule. The
               economic realities component of out test has focused on
               whether the alleged employer paid the employee's salary,
               withheld taxes, provided benefits, and set the terms and
               conditions of employment.

     Deal, 5 F.3d at 119 (citations omitted).
    2
     Such an inquiry would be necessary, for example, to determine
whether an independent contractor has a sufficiently close
relationship to a defendant that the defendant should be liable to
the contractor for its conduct.

                                        6
hybrid test, but questions remain whether a second (or additional)

defendant is sufficiently connected to the employer-defendant so as

to be considered a single employer, a Trevino analysis should be

conducted.   The Trevino analysis will establish if the second or

additional defendant is also an employer of the plaintiff.

     Since neither ATC nor NRP disputed that Ms. Schweitzer was an

employee of ATC for the purposes of the ADEA, there was no need for

the district court to instruct on the hybrid test.   In this case,

the Trevino test was the proper analysis to determine if ATC and

NRP were a single employer.

C. The District Court's Instruction

     The district court defined "employer" under the ADEA for the

jury, informing them what they needed to find for ATC and NRP to

represent a single employer.   Appellants ATC and NRP proposed an

instruction based on the Trevino test, requesting the court to

instruct the jury:

     An employer is one who directs work assignments and determines
     the hours, means and manner of performance of work. Separate
     corporate entities may be treated as a single employer when
     they are interrelated in matters relating to employment or
     share centralized control of labor relations. The critical
     question is the following:       what entity made the final
     decisions regarding employment matters related to the person
     claiming discrimination?

The district court rejected this proposed charge and instead gave

the jury the following instruction:

     You are instructed that ATC was the employer of the Plaintiff.
     Plaintiff contends that ATC and NRP, Inc. should be treated as
     a single employer.      Under some circumstances, separate
     corporate entities may be treated as a single employer. They
     may be treated as a single employer where disregard of the
     corporate form is necessary to prevent fraud, illegality, or
     injustice, or where recognition of the separate corporate

                                7
     entity would defeat public policy. Among the factors which
     you may consider in determining whether ATC and NRP should be
     treated as a single employer of the Plaintiff are the
     following:

          1. The interrelation of operations;

          2. Common officers and directors;

          3. Centralized control of labor relations;

          4. Common ownership or financial control of the employer
     and the corporation;

          5. Financing of a subsidiary corporation by the parent
     corporation;

          6.    The     subsidiary    corporation's     inadequate
     capitalization.

          Your determination of whether the two corporations are a
     single employer should not be based upon any single factor.
     For you to find that ATC and NRP were a single employer, you
     must determine that there was such domination of the finances,
     policies, and practices of ATC by NRP, that ATC had no
     separate mind, will, or existence of its own and is but a
     business conduit of NRP. The mere ownership of substantially
     all of the stock of ATC by NRP is not sufficient to establish
     such liability.

D. Analysis

     The district court erred in not following the Trevino test to

determine single employer status. The district court's instruction

did not focus on control of labor relations but instead on a

multitude of other factors.    None of the four Trevino factors

concentrates on common financing, capitalization, or officers.

Trevino instructs us to focus on the control a parent company

exercises over the employment decisions of its subsidiary.

     As well, the district court's charge was far too broad. Since

it allowed the jury to pick and choose from various components of

different tests to make its determination, the jury made a skewed


                                8
finding   that    NRP   and   ATC    were   a   single    employer.    Evidence

irrelevant to single employer status, such as stock control and

common financing, became important.             Evidence that was central to

finding a single employer relationship, namely involvement in the

daily employment decisions of ATC, was disregarded in favor of this

unimportant information.

     Since   we     agree     with    Appellants'        contention   the   jury

instruction was incorrect and reverse on those grounds, we do not

address the remaining arguments.

     Judgment is REVERSED, and the case is REMANDED for a new

trial.




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