STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)
PRINCE CABLE INC, Employer
UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 114093, Hearing No. S9900227MW
An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.
The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. LATE APPEAL
On August 2, 1999, the department's initial determination was mailed to the appellant's
address of record in New Castle, Delaware. The last day to appeal was August 23, 1999. The
appellant's appeal was received at the UI Division's Bureau of Tax and Accounting on
August 30, 1999. The appeal was postmarked August 27, 1999. Consequently, the appellant's
appeal was late.
The issue for review is whether the appeal was filed late for a reason beyond the appellant's control.
Even though the appellant's corporate headquarters are located in New Castle, Delaware, the appellant maintained an office in Glendale, Wisconsin. The department conducted an audit for the years 1996 and 1997 at the appellant's local attorney's office in downtown Milwaukee. During the course of the department's audit, the department's auditor sent the appellant's local attorney, Martin Greenberg and the appellant's local project manager, relevant correspondence, including the audit proposals. The relevant initial determination, however, was sent only to the appellant's headquarters, its address of record, in New Castle, Delaware.
By happenstance, Attorney Greenberg happened to reach a department representative on August 27, 1999 (the last day to file an appeal for the 1996 quarters initial determination, and was told that the time had already expired for the appeal deadline for the initial determination involving the 1997 quarters. On behalf of the appellant, Attorney Greenberg filed a late hearing request.
The department does not dispute the fact that Attorney Greenberg and the local project manager were not sent copies of the initial determination. Rather it was the auditor's testimony at the hearing as well as the department's argument on appeal that the initial determination was sent to the address of record, in this case the appellant's address at New Castle, Delaware. The controller who normally receives the initial determination and all relevant state tax papers did not appear at the hearing. The ALJ therefore concluded that the appellant failed to establish that its initial determination was filed late for a reason beyond its control.
Notwithstanding the ALJ's reasoning, the commission concludes that the department's failure to send a copy of the initial determination to Attorney Greenberg provides the appellant with a reason beyond its control for having failed to file a timely hearing request and appeal. As the attorney of record, Attorney Greenberg should have been "carbon copied," thereby making the appellant's presumed reliance on Attorney Greenberg reasonable in view of his representation of Prince beginning with the audit. Had Attorney Greenberg been "carbon copied" the appellant in all likelihood would have timely appealed. The department's failure to notify the attorney of record, in this case, warrants a review of the hearing on the merits.
In the interest of administrative economy, the commission chooses not to remand the matter to ALJ Lund for the issuance of an appeal tribunal decision on the merits of the 1997 quarters. This is so because the parties agreed to incorporate the hearing record of S9900227MW into hearing No S9900249MW. No additional testimony was taken. The record before the commission therefore serves as a sufficient basis to make the following findings of fact and conclusions of law.
2. Merits of the 1997 Quarters.
The appellant, Prince Cable, Inc., (Prince) was retained by Time Warner Cable on a contractual basis to provide cable installation to the City of Milwaukee. The contractual relationship between the Time Warner Cable and Prince began in 1994. As a result, Prince began to hire cable installers as well as cable collectors (of money and boxes) to perform cable installation work on behalf of its client, Time Warner.
Prince contends the various cable installers and collectors were independent contractors and not its statutory employees. The department auditor, Michelle Zelton, issued her purposed audits for 1996 and 1997 on June 22, 1999, after conducting an extensive audit at Prince's local attorney's office in downtown Milwaukee. Although Prince is headquartered in New Castle, Delaware, it maintained a principle office in Glendale, Wisconsin because of its contract with Time Warner. During the course of her audit, Ms. Zelton sent Prince's local attorney, Martin Greenberg and Prince's Project Manager, Russell Skorik, relevant correspondence, including her audit proposals.
The issue is whether specific cable installers and collectors who performed services for the appellant in 1996 were independent contractors or statutory employees of the appellant.
Specifically, the services of Charles Purpero who worked for the appellant as a cable box and bill collector, Adam Hamm who worked as a cable box collector, Felix Barrientos and Jose Gonzales, Sr., who worked as cable television installers for the appellant will be considered. These individuals meet the mandatory test set forth in Wis. Stat. § 108.02(12)(b)1 by either possessing or applying for a federal employer identification number (FEIN) or having filed business or self- employment income tax returns with the IRS based on such services in the previous year.
While it is undisputed that the appellant issued 1099s in 1996 and 1997 for all of the named individuals, it was not established that Jose Gonzales, Jr. who performed work as an installer for the appellant in 1996 either had or applied for a FEIN or had filed business or self-employment income tax returns in 1995. The department's attorney also argued that other named individuals, Glenn Claus, Steven Hedges, Craig Lemke, James Rodgers and Florin Sandrau did not meet the mandatory test under the statute since there was no proof of either an FEIN or relevant tax forms for the previous year. The commission agrees. Although the appellant argues that all of the named installers meet the mandatory test the appellant failed to produce evidence of either FEINs or self-employment taxes for the previous year for the individuals named above. Furthermore, the appellant's proof of 1099 returns for the named individuals does not establish the requirements set forth in the mandatory test. Therefore, the following discussion concerns only Charles Purpero, Adam Hamm, Felix Barrientos and Jose Gonzales, Sr.
These individuals can be placed into two groups: those who installed cable and those who collected cable boxes, for expediency purposes all the individuals will be referred to as installers. As mentioned, Prince had a contractual relationship with Time Warner to install television cable for the City of Milwaukee.
At the hearing, Prince contends that the named individuals were independent contractors who worked on a per job basis. The contractors obtained work assignments and jobs each day from a dispatcher who worked for Prince. The jobs were geographically listed and were not assigned to any particular contractor but whoever arrived at the office on a first come first serve basis. The contractors had a right to refuse work. The amount of work, the time of work, and the methodology and manner in which the work was undertaken was also under the discretion of the installers. Prince did not provide any specific training or manuals to these individuals. On the other hand, some of the more experienced installers did train new installers and received additional compensation from Prince for this training. Although Prince did not require its installers to wear shirts or any uniforms bearing its insignia, Time Warner required such. The men were able to rent the uniforms from Prince. Time Warner also required that signs be placed on their trucks indicating "Time Warner Cable" and that they wear identification badges indicating that they were cable installers for Time Warner and/or Prince.
Before commencing any form of work, the installer had to execute an agreement with Prince that covered subjects such as pay per job, obtaining various types of insurance and Prince's right to deduct any amount from the installer's invoice for uncompleted or unsatisfactory service.
The contractors were free to hire assistants or helpers to get their jobs done. Time Warner furnished the materials, which the installers used to install the cable. The installers and cable box collectors generally owned their own trucks, paid for their own worker's compensation, auto and personal liability insurance, clip board, pencils, pens, pads, cell phone, and file cabinets. Prince personnel did not accompany any of the installers to their jobs but did retain the right to deduct any amount of compensation from a job that was not done or not done satisfactorily.
Because these individuals met the mandatory test set forth at Wis. Stat. § 108.02(12)(b)1, these individuals must meet six or more of the eight criteria found at Wis. Stat. § 108.02(12)(b)2 in order to be considered an independent contractor.
Criterion a. The individual maintains a separate business with his or her own office, equipment, materials and other facilities.
In T & D Coils, Inc., Hearing No.S9800147MW, (LIRC December 15, 1999), the commission quoting J Lozon Remodeling, Hearing No. S9000079HA (LIRC September 24, 1999) held that the focus of this criterion is upon "determining whether a separate business is being maintained with the individual's own resources." Therefore, the mere presence or utilization of one type of resource; e.g., home office, does not mandate a finding that a separate business is being maintained. The appellant argues that it provides no office and that as a precondition of its agreement (that all its independent contractors are required to sign), the installers must maintain their own separate offices. The installers however did not maintain offices as a separate business with their own resources, especially since Time Warner provided the materials for installation. Also the installers performed services only for Prince during the relevant time period.
The appellant also argues that the putative employer may be able to show that an individual maintains a separate business by means of "other facilities" such as the cleaner in Struck & Irwin Fence Inc., Hearing No. S9700192MD, (LIRC October 30, 1998). Although the installers can be likened to the cleaner in Struck, in that their services must be performed at other locations, the appellant failed to establish that the individuals maintained separate businesses with their own resources for the reasons discussed above. Under the circumstances, it was not shown that these men had separate businesses apart from their services for the appellant. Criterion a is not satisfied.
Criterion b. The individual operates under contracts to perform specific services for specific amounts of money and under which the individual controls the means and the method of performing the services.
The appellant argues that these individuals signed agreements with Prince to do specific work for a specific amount of money and that these agreements were multiple serial contracts to perform specific services. In addition, the appellant argues that the individuals controlled their time, methodology and means of the performance of their services since Prince merely obtained their services on behalf of its client, Time Warner.
In T & D Coils, Inc., the commission held that in examining this criterion the existence of multiple contracts tends to show that an individual is not dependent upon a single, continuing relationship subject to conditions dictated by a putative employer. Rather the threshold requirement of multiple contracts can be satisfied, in the view of the commission, either by proof of multiple serial contracts or multiple contemporaneous contracts. Multiple contracts that an individual enters into with multiple business entities are most indicative of that individual's economic independence from a particular putative employer. However, multiple serial or contemporaneous contracts with a particular putative employer may also satisfy the criterion if the contracts are shown to have been negotiated "at arms length." In genuine independent contractor relationships, the commission noted, negotiations would typically result in terms that will vary over time and vary depending on specific services covered by the contract. See also Dane County Hockey Officials Association, Inc., Hearing No. S9800101MD, (LIRC February 22, 2000).
Here, there was no proof of other contracts for cable installation with other businesses or that the installers negotiated with Prince regarding fees. Prince informed these individuals how much they would be paid per job by the type of tasks they performed at a customer's home. Consequently, there was no negotiation between Prince and the installers. While the employer offers a unique argument that the day-to-day assignments by Prince's dispatcher created multiple serial contracts or multiple contemporaneous contracts, this characterization fails to accurately describe the actual relationship between the installers and Prince as noted above.
In regard to the other component of this criterion, that is, the means and method of performing the services, the commission concludes that these individuals did not totally control their methods and manner of performing their services. Most importantly, if work was not done satisfactorily, the appellant withheld payment, per its agreement between it and the installers. Additionally, uniforms and badges were worn and signs were affixed to the installers' trucks indicating Time Warner and/or Prince Cable. Criterion b therefore is not satisfied.
Criterion c. The individual incurs the main expenses related to the services that he or she performs under contract.
The appellant argues that all expenses were the complete responsibility of the cable installers and collectors and that they agreed per their signed agreement to indemnify Prince for any such losses. Under John Lozon Remodeling, Hearing No. S9000079HA, (LIRC, September 24, 1999), the appellant argues that the commission must determine the specific services actually performed and the expenses related to the performance of services to determine which of the related expenses were borne by the alleged contractor. Here, the appellant argues that the installers incurred all expenses, except materials that were provided for installation by Time Warner. Prince argues that it did not incur any significant expenses for the work the installers produced for Prince.
While it is true that the installers bore the cost of their personal insurance, the upkeep and maintenance of their vehicles, cell phone; and minimal office supplies, the installers were not responsible for the principle expenses as reflected in the materials or supplies that were needed to perform their services. For example, the installers did not pay for the cable boxes, or wire necessary to perform the services. Additionally, Prince bore the main expense of its dispatcher and its domicile office in Glendale, Wisconsin. Under these circumstances, it has not been shown that the installers incurred the main expenses related to their services they performed under contract. Criterion c is not satisfied.
Criterion d. The individual is responsible for the satisfactory completion of the services that he or she contracts to perform and is liable for a failure to satisfactorily complete the services.
The appellant argues that per its agreement, the installers were responsible for the time to correct unsatisfactory work, and that such failure could and did result in deductions of pay for specific tasks that were not performed to customer satisfaction. The appellant argues that the commission has held that the ability to require rework without additional compensation satisfies this criterion.
Here, the individuals were responsible for the satisfactory completions of the services that they contracted to perform and were liable for the failure to satisfactorily complete the services. The commission concludes that criterion d is satisfied.
Criterion e. The individual receives compensation for services performed under a contract on a commission or per-job or competitive- bid basis and not on any other basis.
In T & D Coils, the commission noted that this criterion presents an expressly exclusive list of remuneration that can satisfy this criterion. This is so, because the underlying policy of the criterion is to clearly differentiate between workers who are economically dependent upon a putative employer and individuals who are relatively independent since the latter accept risks that are characteristic of entrepreneurs and independent contractors.
For example, commission basis workers accept the risk of payment based upon their services. A per job worker puts at risk his or her time and effort and perhaps unreimbursed expenses with the intention of doing the job with sufficient efficiency that the remuneration will exceed that which could be earned at time-based wages in another situation. A piece rate worker who has a continuing employment relationship with an employing unit that provides work on an ongoing basis and a remuneration at a previously fixed piece rate accepts far less risk and still has the economic incentive or opportunity to earn more than he or she might earn if paid on an hourly basis. Such an individual however is at risk of unemployment if his or her single employing unit becomes unable or unwilling to continue providing work.
The department argues that these individuals were not paid per-job even though their agreement referred to the work assignments as such. Rather the department argues that the installers were paid a specified fee, per task performed at each assignment, thereby making the method of payment piecework rather than payment per job.
In Cosgrove Construction, Inc., Hearing No. S9800017MD, (LIRC, June 30, 1999), the commission found that this criterion was not met because the individuals worked on a piecerate basis with their total remuneration being calculated by the employer and dependent upon the square footage of the residence to be cleaned. In Thomas Gronna, Hearing No. S9900063WU, (LIRC, February 22, 2000), the carpet installers were paid by the yard even though each assignment or job entailed a different number of yards. The appellant argues that this type of remuneration reflects a per job or competitive bid basis. However, in Gronna, it was shown that the per-yard remuneration was not subject to negotiation or competition. Here, the cable installers either could take or leave the assignment when offered and did not negotiate prices or fees with Prince Cable. After careful review, the commission concludes that the agreement does not reflect payment per job as argued by the appellant. Rather the agreement reflects payment per task per assignment which is more like piecework and piecerate than not. Criterion e is not satisfied.
Criterion f. The individual may realize a profit or suffer a loss under contracts to perform services.
The appellant argues that there is no guarantee as to the amount of work each installer could be offered and that his profit or loss depended on the amount of expenses he incurred relating to the performance of services. Therefore, the appellant argues that these individuals could experience either a profit or a loss and that entrepreneurial risks existed by the very nature of their agreements.
Citing T & D Coils, the commission notes that this criterion addresses the overall situation of an alleged independent contractor, including all contracts under which work was performed in the year in issue. The commission further notes that the term "may" as found in this criterion indicates the possibility of a profit or a loss, not a probability or an actual profit or loss.
The commission also addressed this criterion in detail in Dane County Hockey, where the commission noted that general "out-of-pocket" expenses such as maintaining a car do not translate into a business loss when an individual decides not to show up for work anymore as a teacher or store clerk. Quoting Dane County Hockey, "In a real business, genuine risk of loss frequently accompanies contracts to provide particular services not because a person makes a choice not to do anything at all, but because of the unpredictability inherent in the business enterprise." In other words, the loss or profit is not based on the absence of the performance of service should an installer refuse an assignment but rather whether the installer may realize a profit or loss based on the performance of his installation services. The facts present do not show the possibility of a profit or loss in any entrepreneurial sense contemplated by this statutory criterion. Therefore criterion f is not satisfied
Criterion g. Individual has recurring business liabilities or obligations.
The appellant argues that the installers owned their vehicles and paid for insurance, and cell phones, at their own expense. The appellant further argues that this criterion is satisfied if the contract has a cost of doing business that would continue regardless of whether the individual had customers or revenue in a given period.
Here, the commission looks to whether an alleged independent contractor has recurring business liabilities or obligations, or what the commission commonly refers to as "overhead." See Dane County Hockey. Examples might be monthly rent for a place of business, or the cost of investment associated with the outright ownership of the expense of equipment that might, at times be idle. Here, it was found that the installers had to pay for their own vehicles, vehicle maintenance, as well as their own insurance and cell phones. These expenses are all recurring in nature and are incurred regardless of the level of the installers' business activities. Criterion g is satisfied.
Criterion h. The success or failure of the individual's business depends on the relationship of business receipts to expenditures.
The appellant argues that an individual's success at earning a living depends on his performance of a substantial amount of work. Plus the installers' overhead expenses could affect the success or failure of their business and that their success was their own responsibility and their own business.
In Dane County Hockey Officials, the commission expressed that this test contemplates the existence of a genuine business endeavor; "In an entrepreneurial sense, a significant investment is put at risk and there is thus the potential for real success such as the growth in value of the investment or real failure in the sense of an actual loss in the investment." Here there was insufficient proof of any such "success" or "failure". The installers received piecerate compensation(determined per task) for any assignment taken, subject to reduction for unsatisfactory performance, leaving the commission to conclude that there is no proof of a genuine business endeavor. Criterion h is not satisfied.
In summary, the commission concludes that only criterion d and criterion g were satisfied. Consequently, the installers are statutory employees of the appellant within the meaning of Wis. Stat. § 108.02(12).
The appeal tribunal decision is reversed. Hearing Record S. 9900249MW was reviewed and served as the basis of the commission's findings of fact and conclusions of law. The initial determination remains in effect. Accordingly, Prince Cable, Inc., is liable to pay the department $13,353.00, and additional interest to the date or dates of payment.
Dated and mailed February 23, 2001
princca.srr : 135 : 1 PC 711 PC 711 EE 410 EE 410.03 EE 410.04a EE 410.05 EE 410.06 EE 410.07 EE 410.09
/s/ David B. Falstad, Chairman
/s/ James A. Rutkowski, Commissioner
PAMELA I. ANDERSON, COMMISSIONER (dissenting):
I am unable to agree with the result reached by the majority herein and I dissent. I do not believe that the late appeal was for a reason beyond the employer's control. The employer address of record for the entire time period was 44A Southgate Blvd., New Castle, Delaware. The project manager for the employer who was in Wisconsin testified "In August '99, I had daily contact with the corporate office in Delaware. I was not out of the office or on vacation in August '99. No one at the Delaware office informed me of the determination. These liability findings would be handled at the corporate level. I don't know why the corporate office didn't file an appeal." Again he testified "Around 8/6/99, I directed you to write Michelle Zelten, Exhibit 3, to meet with her to discuss her audit proposals."
The project manager admitted "I was present when Michelle Zelten was looking at the employer's records. I don't recall if I asked her for a copy of any determination that would be sent to the Glendale address."
Michelle Zelten testified "I don't remember being told that this address changed or that a determination should be issued to a different address. The payroll records were not kept at the Glendale location. I contacted Kelly Roux in Delaware, the Accounting Manager. I contacted her to get the records together. We didn't discuss a determination mailing address. I don't remember meeting with anyone from the employer regarding my proposed audit adjustments before the determination was issued. I did receive a call from Attorney Greenberg about the proposed audit adjustment in mid-August. I referred him to Madison because I believe the initial determination had already been issued. I was on maternity leave from 6/12 to 8/8. I wasn't available. I didn't have my answering machine take messages. It said I was on maternity leave.I do not send determinations. Madison sends determinations. From 6/21 to 8/6, because I wasn't in the office, I wouldn't have any record of any phone calls."
The employer must clearly have known that Michelle Zelten was pregnant when they met with her. Attorney Greenberg should have known she was likely to miss work when the baby was born. The June 21, 1999 letter from Michelle Zelten to Attorney Greenberg (Ex. 2) clearly states that "In a few weeks the employer will be receiving the final results of the audit." After receiving that letter, Attorney Greenberg waited until he was directed to contact her by Russ Skorik and then he wrote to meet with her to discuss her preliminary findings. He did state in the letter "I understand you are out on maternity leave." He does not follow up with anyone else in the department which a reasonable person who was not even an attorney would have done to see if the determination was in fact out, until August 27, 1999.
From Exhibit 6 we know that Attorney Greenberg took the June 21, 1999 letter to be an initial determination which could be appealed. We also know that he was out of the country until July 6, 1999. There is no indication of a follow up when he returned until Russ Skorik called him to have him set up a meeting with Michelle Zelten.
Attorney Greenberg did not testify at the hearing but attempts to do so in his brief where he says he called Michelle Zelten "on numerous occasions and left messages on her answering machine." His letter to Zelten does not confirm in any fashion that he made numerous attempts to call her, it only recognizes that she was on maternity leave. He also testifies in his brief that both he and Russ Skorik asked Michelle to send them copies of the decision. Skorik does not support his recollection and neither does Zelten. He also continues to believe her letter of June 21, 1999, was an initial determination even though she mentions the employer will be receiving the final results of the audit. If Attorney Greenberg had wanted to submit testimony at the hearing he should have arranged for someone else to represent the employer and he should have testified under oath subject to cross-examination.
The attorney should have known that an initial determination would be issued after June 21 and he knew that his contact, Michelle Zelten was out on maternity leave but he did not follow through. The record did not contain any testimony from people who handled the mail in Delaware to establish in any fashion that the employer did not in fact get the two determinations. I do not believe that the attorney for the employer was mislead in any way and he knew the decisions were coming out so he could have appealed.
For all these reasons, I would dismiss the case as late and not for a reason beyond the employer's control. I do agree with the majority that the cable installer and collectors were statutory employees in both 1996 and 1997.
Pamela I. Anderson, Commissioner
cc: ATTORNEY PETER ZEEH
LAW OFFICES OF MARTIN J GREENBERG
[ Search UC Decisions ] - [ UC Digest - Main Index ] - [ UC Legal Resources ] - [ LIRC Home Page ]