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

MFC INC, Appellant

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 308083, Hearing No. S0000118MW


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. (1)

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

MFC, Inc., (hereafter referred to as "MFC") is a real estate brokerage business located in the city of Milwaukee. Robert Ringle (hereafter referred to as "agent") worked as an acknowledged "employee" until April 1, 1998. His duties included communicating with real estate sales agents, telemarketing to potential buyers and sellers of real estate, and special projects. After April 1, 1998, MFC considered the agent to be an independent contractor and did not pay unemployment insurance contributions on payments to him in the second quarter of 1998 continuing into the first quarter of 1999.

The agent performed his employee services for the employer in a building and rooms supplied by and paid for by MFC. After MFC sold the building the agent provided services in 1998 out of the basement of the building which was being rented by MFC. Later, the agent performed services for MFC at an apartment leased by the agent's friend. The agent did not pay rent on the apartment. The agent did not pay any of the expenses of the apartment, such as utilities, but voluntarily shared money with his friend. The agent made calls from the apartment's dining area. He used a dining table and chair and his friend's telephone. The agent does not own a telephone. He did not use a business name. He did not maintain a business bank account. He did not advertise as having his own business. MFC would not permit the agent to perform similar services for any other entity.

In order to perform services for MFC the agent needed multiple listing service books, pens, paper, and a telephone. MFC provided the agent with books containing the necessary information. Each Friday the agent made a report on his calls to MFC. The agent recorded the number of calls, buyers, sellers, and appointments made for salespeople for that week. MFC required the agent to provide such report. Each month the agent gave MFC a copy of his telephone bill. MFC checked the telephone bill to insure the agent was making 1500 calls per week. MFC was dissatisfied at times because it believed the agent was not making the minimum number of calls. The agent explained that calls that went unanswered did not appear on the bill. In mid year MFC cut the agent's salary because MFC did not believe he was making 1500 calls per week. The agent sustained a $870.00 "loss." The agent informed MFC he needed the $870.00 to cover expenses but received no additional sums.

The agent purchased pens, paper, rulers and a dictionary in order to perform services for MFC. The agent's main expense was use of a telephone. The agent used a portion of the income from MFC to pay his friend's telephone bill.

The agent performed his services under an agreement entered into on April 1, 1998. Exhibit 1, pp. 2-4. Under the agreement MFC paid the agent $378 per 1500 calls per week. The sum of $19,656 per year was payable at the rate of $378 per week. The agreement described the relationship between the parties as that of between a company and an independent contractor. An attachment to the agreement stated that MFC would provide lists of numbers. The attachment stated that the agent would provide a suitable phone, telemarketing services, list of calls (date, number of responses, response with names), and "phone bill copy of calls made of 6500 over first 170 call showing on bill each month." Exhibit 1, p. 3.

Under the agreement the agent agreed to "actively perform all required services on behalf of the Contractor on a basis, and in a manner, determined by mutual acceptance of the parties." Either party upon 15-days written notice could terminate the agreement. MFC terminated the agreement in accordance with the 15-day notice provision by letter dated January 22, 1999. Exhibit 1, p. 5. The agent has been unemployed since his relationship with MFC was terminated.

The agent did not file self-employment tax returns for the 1997 tax year. The agent obtained a FEIN in the second quarter of 1998. Exhibit 1, p. 1. The agent applied for the FEIN at MFC's request. MFC provided the agent with a 1099-MISC for 1998 reflecting income paid of $13,288.80. Exhibit 4. The agent submitted an unsigned income tax return for the 1998 tax year. Exhibit 3. The agent listed the income from MFC as "other income" on his 1040. He completed a self-employment tax form (Schedule SE). He again listed income from MFC and reported net earnings from self-employment of $12,752.43. He did not submit a Schedule C. He did not list any portion of the income from MFC as expenses.

MFC paid the agent at a rate of $378.00 a week. His services for pay satisfied the definition of "employment" in Wis. Stat. § 108.02(15)(a). The issue is whether the services of the agent were performed as an "employee" after April 1, 1998. If he was an "employee," MFC is liable for additional contributions and interest on wages paid to him.

In order for MFC to demonstrate services provided by the agent were as an independent contractor rather than as an employee, MFC must satisfy the department that:

1. The individual:

a. Holds or has applied for an employer identification number with the federal internal revenue service; or
b. Has filed business or self-employment income tax returns with the federal internal revenue service based on such services in the previous year; and

2. The individual meets 6 or more of the following conditions:

a. The individual maintains a separate business with his or her own office, equipment, materials and other facilities.
b. The individual operates under contracts to perform specific services for specific amounts of money and under which the individual controls the means and method of performing the services.
c. The individual incurs the main expenses related to the services that he or she performs under contract.
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.
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.
f. The individual may realize a profit or suffer a loss under contracts to perform services.
g. The individual has recurring business liabilities or obligations.
h. The success or failure of the individual's business depends on the relationship of business receipts to expenditures.

Wis. Stat. § 108.02(12)(b).

The agent obtained a FEIN in April of 1998. Therefore, MFC has satisfied Wis. Stat. § 108.02(12)(b)(1).

MFC did not establish that the agent maintained a separate business with his own office, equipment, materials, and other facilities. The agent did not rent or own the apartment where he performed the work.

The agent did not operate under contracts to perform specific services for specific amounts of money. The agent entered into a single open-ended contract.

MFC did not establish that the agent incurred the main expenses related to the services performed under the contract. Clearly both parties incurred some expenses. That the agent's biggest expense was the telephone bill did not establish that it was the main expense of performing telemarketing work. MFC provided the applicant with the necessary resources, such as multiple listing books. MFC did not provide any testimony with respect to the costs it incurred. MFC exercised control over the performance of services by making demands such as a weekly report of calls made and responses received.

MFC provided no evidence of any written or oral agreement that made the agent liable for failing to satisfactorily complete the services he performed for MFC. The consequence of failing to meet the MFC's standards was simply termination of the relationship. Further, while the agent testified that MFC reduced his pay because it did not believe he was meeting the 1500 call per week minimum, under the written agreement compensation could only be altered by mutual agreement of the parties.

The agent did not receive compensation under a contract on a commission or per-job or competitive bid basis. The written agreement paid the agent at the rate of $378 per week for making 1500 phone calls and the sum of $19,656.00 per year.

MFC did not establish that the agent could suffer a loss under the contract. The evidence was insufficient to demonstrate that it was possible for the agent's expenses to exceed his compensation.

There was no evidence that the agent had recurring business liabilities or obligations. The evidence did not show that the agent was legally obligated to provide payments to his friend for the telephone bill. There was no evidence that after the relationship terminated the agent had any continuing liabilities related to performing services in his own business.

MFC did not establish that there was a realistic prospect of any significant period in which the agent would have to make business expenditures without any receipts coming in.

The commission therefore finds that Robert Ringle was an employee of MFC, Inc., within the meaning of Wis. Stat. § 108.02(12)(a) and he was not excluded from the definition of employee under pars. (b), (c), or (d).

The commission further finds that MFC, Inc., is liable for payment of additional contributions and interest as stated on the department's determination within the meaning of Wis. Stat. § § 108.18 and 108.22.

DECISION

The decision of the administrative law judge is modified to conform to the foregoing and, as modified, is affirmed. Accordingly, MFC, Inc., is liable to pay the department $104.00 and additional interest to the date(s) of payment.

Dated and mailed August 6, 2001
mfcinc . srr : 132 : 1  EE 410 

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner


cc: Attorney Michael J. Mathis


[ Search UC Decisions ] - [ UC Digest - Main Index ] - [ UC Legal Resources ] - [ LIRC Home Page ]


Footnotes:

(1)( Back ) MFC did not explicitly appeal. Rather, the ATD was returned to the department containing the handwritten notation "REFUSED FOR FRAUD F.R.C.P. (9) (b) Date 5-29-01."  The returned ATD was treated as a petition for review.

 


uploaded 2001/08/07