STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)


STEPHEN P DAY, Employee

MANIER/FOX VALLEY INSURANCE, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 00402954AP


On September 7, 2000, the Department of Workforce Development issued an initial determination which held that the employee's services for the employer were not covered by the Wisconsin Unemployment Compensation Law. The employee filed a timely request for hearing on the adverse determination, and hearing was held on October 30, 2000 in Appleton, Wisconsin before a department administrative law judge. On October 31, 2000, the administrative law judge issued an appeal tribunal decision modifying and affirming the initial determination. On February 27, 2001, the Department of Workforce Development petitioned the commission for review of the appeal tribunal decision on the ground of mistake pursuant to Wis. Stat. § 108.09(6)(c).

By authority granted in Wis. Stat. § 108.09(6)(c), the commission grants the department's petition and issues the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The employer is an insurance agency incorporated in the State of Wisconsin in 1991. The employee purchased 30.91% of the employer's stock in June of 1998. He subsequently signed documents on the employer's behalf as the vice-president. The employee and the employer entered into an agreement in July of 1998 providing that the employer would purchase the employee's stock in the corporation in twenty-four equal payments made over a two-year period. As of the hearing date, the employee owned between 24% and 25% of the corporate stock. The employee owned less than 25% of the stock as of August 27, 1999.

Department records show that the employee initiated a claim for unemployment benefits in the calendar week beginning July 30, 2000 (week 32). The employee is listed as the vice-president of the corporation in the employer's annual report for Wisconsin domestic corporations for 1999 and 2000. The employer elected to file a notice of exclusion to exclude the services of all its principal officers who have a substantial ownership interest in the corporation for all years since 1994.

The initial issue to be decided is whether the employee was a "principal officer" of the employer. Under section 108.025 of the Wisconsin statutes, a "principal officer":

Means an individual named as a principal officer in the corporation's most recent annual report or, if that information is not current, an individual holding an office described in the corporation's most recent annual report as a principal officer.

The employee contended that he was not a principal officer in the legal sense but that the title was bestowed on him, essentially to indicate that he was second in command of the business. This contention cannot be sustained. As previously indicated, the employee is listed as the vice-president on the employer's two most recent annual reports to the state. Accordingly, the employee was a "principal officer," within the meaning of the aforementioned statute.

The next issue to be decided is whether, as a "principal officer," the employee's services were excluded from employment for unemployment benefit purposes. The commission concludes that they should not be excluded, and so reverses the appeal tribunal decision.

Wisconsin Stat. § 108.025 provides, in part, as follows:

Coverage of Certain Corporate Officers. (1) In this section, "principal officer" means an individual named as a principal officer in the corporation's most recent annual report or, if that information is not current, an individual holding an office described in the corporation's most recent annual report as a principal officer.

(2) If an employer having no annual payroll for the calendar year preceding an election or an employer having an annual payroll of less than the amount specified in s. 108.18(9) which establishes separate solvency contribution rates for the calendar year preceding an election files a notice of election, in the manner prescribed by the department, to exclude the service of all of its principal officers who have a direct or indirect substantial ownership interest in the corporation, employment does not include the service of those officers.

(6) A principal officer has a direct or indirect substantial ownership interest in a corporation under this section if 25% or more of the ownership interest, however designated or evidenced, in the corporation is owned or controlled, directly or indirectly, by the officer.

Department testimony established that the employer has consistently elected to exclude its principal officers from coverage, beginning in April of 1994. As the vice-president of the employer, the employee must be deemed a principal officer. Based upon Wis. Stat. § 108.025(6), however, the employee cannot be deemed to have substantial ownership interest in the corporation, since he has just under the requisite 25 percent ownership interest necessary to constitute substantial ownership interest under that statute. Accordingly, the employee's services for the employer are excluded for unemployment benefit purposes only through August 27, 1999. The employee's services for the employer beginning August 28, 1999, are covered employment for purposes of the Unemployment Compensation Law.


DECISION

The appeal tribunal decision is affirmed in part and reversed in part. Accordingly, the employee's services for the employer, beginning August 28, 1999, constitute covered employment for unemployment insurance purposes. The employee therefore is eligible to establish a benefit year based on his claim filed on August 2, 2000 (week 32), if he is otherwise eligible.

Dated and mailed March 26, 2001
dayst . urr : 105 : 8  ET 483.04  PC 740

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

NOTE: The commission did not confer with the administrative law judge before determining to reverse the appeal tribunal decision in this matter. The commission has accepted all of the factual findings made by the administrative law judge. The commission's reversal is based upon the definition of substantial ownership interest found in Wis. Stat. § 108.025(6), which is not a matter of credibility.

Department records indicate that the employee earned $7,552.96 in work for the employer in the third quarter of 1999. Of the 92 calendar days in that quarter, pursuant to the commission's decision 58 of them are not "covered" while 34 of them are. On a straight percentage basis, the employee would have "covered" wages of approximately $2,791.31 for the time period from August 28, 1999 through the end of the quarter. The commission only suggests this calculation; the department, if it has a more precise method for calculating the portion of third quarter wages which are covered, is free to use that method.


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