Milwaukee Toy Company v. Industrial Commission of Wis.

Supreme Court of Wisconsin · 1931 · Corporations

203 Wis. 493 (1931)

Updated August 22, 2026

CorporationsWorkers' compensationCorporate entityEmployment relationshipcorporate fictionseparate corporate entitycontract of hireemployee status

Facts

Bayer had a controlling interest in the corporation and was appointed general manager by resolution of the board of directors. He then acted in that capacity and gave his full time to the company's affairs. The company also paid dividends, the secretary played a considerable role in conducting its affairs, and Bayer's sister and the secretary owned substantial interests in the company. At the time of the accident, Bayer was performing work commonly done by persons plainly within the compensation act, and in a small workforce most of his time appears to have been spent on tasks ordinarily done by employees.

Issue

Whether a person with a controlling interest in a corporation who is appointed general manager by board resolution and performs services for the corporation is an employee of the corporation under the workmen's compensation act. More specifically, the question is whether he was performing service for another under a contract of hire or was merely dealing with his own business through a corporate shell.

Rule

To qualify for compensation, the injured or deceased person must be performing service for another under a contract of hire, express or implied. A corporation is legally a separate entity and therefore can be 'another' for purposes of the statute, even when the alleged employee has a controlling interest in it; stock ownership and control are relevant but not decisive. The corporate entity will be disregarded only in limited circumstances, such as where applying the fiction would accomplish fraud, operate as constructive fraud, or defeat a strong equitable claim. A board resolution appointing a person to corporate employment, followed by service in that capacity, can create a contract of hire.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Madison, Wisconsin, North Lake Fixtures, Inc. is owned 94% by Daniel Kremer, who also serves as president. The board formally votes to appoint Daniel as operations manager at a weekly salary, and he spends each day supervising shipments, loading inventory, and repairing warehouse shelving alongside two floor workers until he is injured.

Is Daniel most likely an employee covered under the compensation statute?

Explanation. The majority treats the corporation as a separate legal entity capable of being 'another' under the statute. Control and stock ownership are relevant but not decisive. A person who controls the corporation may still be an employee if he is performing service for the corporation under a contract of hire. The rule does not turn solely on title, ownership, or whether he was doing manual labor at the moment of injury. (Derived from Milwaukee Toy Company v. Industrial Commission of Wis. (1931).)