BEFORE THE

C. W. BROWN PRINTING COMPANY, Employer

Pursuant to the timely petition for review filed in the above-captioned matter, the Commission has considered the petition and all relief requested. The Commission has reviewed the applicable records and finds that the Appeal Tribunal's findings of fact and conclusions of law are supported thereby. The Commission therefore adopts the findings and conclusions of the Appeal Tribunal as its own.

The decision of the Appeal Tribunal is affirmed. Accordingly, the carriers' wages are not considered taxable payroll for Wisconsin unemployment tax purposes and shall be excluded from payroll. This matter is remanded back to the Department Deputy for a redetermination of the contribution and interest due as a result of this decision.

Dated and mailed November 8, 1991
110 - CD1081   EE 411

/s/ Pamela I. Anderson, Chairman

/s/ Richard T. Kreul, Commissioner

The parties devote much of their argument to the question of whether the Administrative Law Judge applied the correct legal test to determine whether wages paid to the carriers in question were "subject to a tax" under the Federal Unemployment Tax Act (FUTA). Although the Commission is confident that he did so, it would also note that this argument is largely irrelevant at this point. The parties in fact agree for all intents and purposes on what the correct legal test is, and the Commission agrees with them. It is the "usual common law rules" test described in FUTA, Internal Revenue Code Section 3121 (d)(2), as further expanded on by regulations promulgated thereunder. As evidenced by their reliance on it in their arguments, the parties further agree, and the Commission agrees with them, that the 20 factor analysis developed and traditionally used by the IRS in determining employe status should be followed here to determine the question at issue. In reviewing the decision, the Commission has applied the legal standard which the parties agree upon.

It is not necessary to detail here the evidence bearing on each of those 20 factors and the conclusions appropriate under them, since as is apparent from the Department's failure to even argue them, a number of them indisputably weigh in favor of finding the carriers in question to be independent contractors. (1)  The Commission is satisfied, however, that even as to the other factors the same conclusion is generally applicable.

The Department argues that authority to direct and control existed in the form of the contractual requirement that the carriers deliver the publications "regularly, promptly on the day of publication, and in good condition to all points on such schedule", to provide door/tube delivery and satisfactorily service all customers, and to "work with customers for delivery of missed deliveries", and it argues as well that there was control of the order of performing services in the paper's control of the "route". These arguments confuse methods with results. "In general, if an individual is subject to the direction and control of another merely as to the results to be accomplished by the work: and not as to the means and methods for accomplishing the result, he is an independent contractor". 26 CFR section 31.3121 (d-1) (c2). In the newspaper delivery business, the timely delivery of papers to the right houses is the ultimate result sought to be achieved, not a "method" of achieving some result. See, Dillon v. Commissioner, 902 F. 2d 1406 (5th Circuit 1990).

The Department argues that the paper can "discharge" the carriers for unsatisfactory performance, and that the carriers can "quit" their "jobs" without liability, these being factors that suggest employe status. However, IRS guidelines recognize that an independent contractor may have its contract terminated for not producing a result that measures up to contract specifications, and that this is something different from the discharge of an employe. The fact that the paper can terminate a continuing contract in this case on four weeks notice for any reason seems to the Commission to be not significantly different from the fact that any party who typically returns to the same contractor to have a repeating task performed can decide for any reason not to continue to use that contractor for the next repetition of the job. The Department's argument that the carriers can "quit" without incurring any liability is simply wrong, resting as it does on the apparent assumption that the paper could have no remedy against the carrier for abandonment of the contract with less than the required four weeks notice, simply because no remedy is stated in the contract. This assumption is incorrect as a matter of contract law. Damages naturally flowing from such a breach -- certainly any excess costs incurred by the paper to obtain replacement delivery services, and possibly damages for loss of any subscribers or advertisers who cancel out of dissatisfaction at missed deliveries -- could be sued for. There is in this relationship a significant set of limitations of the carriers' right to abandon the relationship, and this is consistent with the carriers being independent contractors who have obliged themselves by contract to carry out certain tasks for the other party to the contract and who must either meet that obligation or face being required to make the other party whole for damages caused by their failure to do so.

There are a few factors out of the 20 according to which the carriers can be seen as having characteristics of employes: integration of activity with the paper's business, continuing relationship, lack of investment, and lack of risk of profit or loss. However, the Commission considers that the results obtained when analyzing the evidence according to these factors are anomalies reflecting more about the somewhat unique nature of the newspaper business than about the carriers. The absence of any necessity for significant investment and the concomitant absence of any real risk of "loss" or possibility of "profit" mainly reflects the extremely "low tech"/labor intensive nature of newspaper delivery. Certainly, the delivery of papers is integrated with the business of publishing them. However, integration is a factor significant to determination of status not in and of itself but because, as the IRS has recognized, it is considered likely to be indicative of the existence of direction and control. The theory is that when the success or continuation of a business depends to an appreciable degree on the performance of certain kinds of services, the people who perform these services will probably be subjected to a certain amount of control by the owner of the business as a matter of economic necessity. While this is perhaps true as a general matter, it is not a reliable assumption in the somewhat unique context of newspaper delivery. Particularly given the other evidence of the absence of any authority to direct and control the carriers, the fact of integration here is not considered significant enough by the Commission to outweigh the other factors.

The presence of a "continuing relationship" is also considered by the Commission to be primarily an artifact of the nature of the business involved here, rather than a reliable indicator of the extent of attachment between the carriers and the paper. The fact that the carriers (as exemplified by the testimony of James Johnson) may not actively hold themselves out as available to the public for general publication delivery services, is considered by the Commission to be of relatively little significance in view of the evidence of work for others, which demonstrates the availability as to which "holding out" would merely be a sign.

The Department has argued that an unreviewed Appeal Tribunal Decision in another case involving a carrier for this paper presents a persuasive resolution of the issue. The Commission does not find this argument persuasive.

There is no "scoring system" by which the results of the 20 factor analysis are to be judged: it is neither the case that a bare majority of factors resolved one way will decide the question, or that all must be resolved one way. They are simply factors to consider. Considering them as a whole, the Commission is satisfied that "under the usual common law rules", the carriers here are independent contractors. Therefore, wages paid them are not "subject to a tax" under FUTA, and those wages are therefore not taxable "payroll" under the Wisconsin Unemployment Compensation Act.

cc: 
David P. Jenkins, Attorney
Enforcements

Glenn Kelly, Director
Bureau of Legal Affairs

Jeffrey J. Kassell, Attorney
La Follette & Sinykin

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

(1)( Back ) The 20 factors are: (1) actual instruction or direction of worker, (2) training, (3) integration, (4) personal service, (5) use of assistants, (6) continuing relationship, (7) set hours, (8) full-time/part-time, (9) work on/off premises, (10) order of performing services, (11) regular reports, (12) payment basis, (13) payment of expenses, (14) furnishing of tools, (15) investment by worker, (16) possibility of profit or loss, (17) work for a number of persons, (18) availability of services to public, (19) right to discharge, (20) right to quit. The Commission considers that the Department has in effect conceded that as to (2), (4), (5), (7), (8), (9), (11), (12), (13), (14), and (17), the evidence is more consistent with the carriers being independent contractors.

uploaded 2001/12/05