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

TERRY W RIECK, Claimant

DIRECT LINE COMMUNICATIONS INC, Appellant

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 01001418LX


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

The claimant began performing services for the appellant during the spring of 1998. (1)   The appellant is a corporation, which is a wholly owned subsidiary of an umbrella corporation, which holds the contract from a telephone communications carrier, for burying telephone cable of customers of the telephone company. The claimant performed the services of laying the cable. He last performed those duties in July of 2000.

Prior to performing services for the appellant, the claimant performed essentially the same services as an employee for a separate employer that held the contract for installing the telephone cable for the in-state telephone company. When that entity no longer held the contract, it was taken over by the appellant. The claimant initially was an acknowledged employee of the appellant.

The claimant filed self-employment income tax returns with the internal revenue service for 1998 and 1999. He did not file a self-employment income tax return with the internal revenue service for 2000. He did not apply for or obtain a federal employer identification number during the time he performed services for the appellant.

The claimant did not perform services pursuant to a written contract. Throughout the time he performed services for the appellant, the claimant received job location and other information via a fax machine in his home. He owned the computer and fax machine in his residence. His wife also used the computer for personal business. The claimant owned a pick-up truck with which he pulled the cable trenching machine and the trailer used in performing his services. The appellant owned the trencher and trailer and "loaned" them at no cost to the claimant. The trencher costs about $30,000. The claimant owned some minor tools for the performance of the manual labor, such as a shovel. The appellant furnished other necessary items, such as wrenches, a splice kit, boring rods, drill bits, testing equipment and a rolling wheel. The claimant paid for the gas to run the trenching machine but if, for example, the trencher needed a new tire, the appellant would supply the tire. The claimant estimated his fuel costs to be $100 to $120 per week.

The appellant required that the claimant provide his own liability insurance including a contractor's umbrella policy. The claimant's liability insurance cost about $2,000 per year. His truck insurance was $800 per year. Claimant was required to have worker's compensation coverage for any individual he employed. He did not employ any other individuals or helpers in order to perform his job. He took out a liability policy on April 1, 2000, at a cost of $3,000. When the premium ran out he was not able to afford to renew the policy.

If the claimant did not perform services to the appellant's standards either he or another subcontractor would have to fix the problem. The claimant never had to go back and fix a job. He repaired work done by other subcontractors and was paid for doing so. The claimant would not be paid to go back and fix work that had not been done to the telephone company's standards. If the installation was not performed within the telephone company's time frame the claimant would be penalized. If the work was performed within a certain window the claimant received a $10 bonus.

The claimant was paid based on the length or distance of cable he installed on a per-foot basis. The manner in which he installed the cable, either by trenching machine or by hand, dictated the per-foot rate at which he was compensated. He was paid an hourly wage, $15 or $18 per hour, for other associated work such as repair or maintenance on the trenching machine or pick-up and delivery of parts. A third party supplied the cable itself. The claimant was never told that if he supplied all his own equipment he could be paid at a higher price. The appellant withheld 3% of the claimant's check in case the claimant caused property damage. If a claim was made the appellant used the withheld monies to pay the claim. Any money remaining at the end of the year was returned to the claimant. Prior to 1999 the claimant received three bills for property damage. He received no property damage bills after 1999. The claimant also risked not being paid for a "dry run," which is when the claimant went to the job site but was unable to perform the service for some reason.

In 2000, the claimant was paid about $30,000, but only worked until July 19, 2000. The amount the claimant made depended on how far he had to travel to the job sites, the distance between jobs, and the number of jobs performed. The aforementioned factors made it possible to lose money performing services for the appellant. The claimant never lost money performing services for the appellant.

The claimant stopped performing services for the appellant after informing the individual who assigned him work that he could no longer afford to pay for the required insurance. Upon receiving that information, the appellant picked up the trenching machine which had been parked outside the claimant's residence.

The claimant's first job after performing services for the appellant was as an employee of an insurance company.

The issue is whether the claimant performed services in the calendar years 1999 and 2000 as an employee of the appellant or as an independent contractor.

With respect to benefit eligibility under ch. 108, for benefit years beginning on or after April 2, 2000, Wis. Stat. § 108.02(12)(bm) provides that an individual who provides services for an employing unit is performing those services as an employee, unless the employing unit satisfies the department that the individual's services, by contract and in fact, meet 7 of 10 statutory criteria.

1. The individual holds or has applied for an identification number with the federal internal revenue service.

The appellant concedes that condition 1. was not satisfied.

2. The individual has filed business or self-employment income tax returns with the federal internal revenue service based on such services in the previous year or, in the case of a new business, in the year in which such services were first performed.

The claimant filed self-employment income tax returns with the federal internal revenue service based on services performed for the appellant in 1998 and 1999, the years previous to the years at issue.

The appellant has established that condition 2. was satisfied.

3. The individual maintains a separate business with his or her own office, equipment, materials and other facilities.

The claimant did have some space in his home containing office equipment such as a computer and fax machine. He also owned a few tools. However, the appellant did not establish that the claimant had a business "separate" from the appellant's business. The claimant had performed the same services for the appellant as an employee. He had performed the same services for another entity as an employee just prior to his relationship with the appellant. He did not perform similar services for any other entity. Further, during the winter the appellant took back its machines and tools that the claimant used to perform the services. The claimant had no business that survived the end of his relationship with the appellant.

The appellant has not established that condition 3. was satisfied.

4. 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.

The appellant maintained that the claimant signed a contract every year. The appellant introduced a contract allegedly containing the claimant's signature and dated January 1, 1999. The claimant denied that the contract contained his signature. The commission credits the claimant's testimony. While the appellant maintained that the claimant had to sign a contract each year or he would not be paid, at all three hearings the only contract the appellant introduced was the one purportedly signed by the claimant on January 1, 1999.

The claimant did receive direction such as where the work needed to be done and when it needed to be done. The appellant also set deadlines for performance of services. The appellant passed on to the claimant the standards set by the company with whom it contracted. Such standards included the depth at which the cable had to be buried. The appellant also inspected the work to insure compliance with the contract the appellant has with the telephone company including checking for depth, footage measurement accuracy, quality of wirework, and overall neatness.

The appellant has not established that condition 4. was satisfied.

5. The individual incurs the main expenses related to the services that he or she performs under contract.

The greatest expense related to the services performed by the claimant was for the diesel powered trenching machine, which cost about $30,000. The appellant also provided other associated equipment and tools to the claimant, at no cost to the claimant, including a trailer to haul the trencher, equipment to test the lines, pliers, wrenches, splice kit tools, boring rods, drill bits, and tires for the machine. The appellant bore the expense of upkeep of the equipment provided to the claimant.

The appellant has not established that condition 5. was satisfied.

6. 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 claimant carried liability insurance. If he failed to finish a job to certain standards he would have to fix it or the appellant would send someone to fix it. The claimant did not receive additional pay for rework. The appellant withheld 3% of the claimant's weekly check in order to satisfy potential property damage claims. The withheld amount was returned to the claimant at the end of the year. If damage occurred the appellant paid the bill and deducted it from the withheld amount. The claimant would be assessed a penalty if he failed to complete a job on time.

The appellant has established that condition 6. was satisfied.

7. 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.

The claimant was paid based on the length of cable he installed on a per-foot basis. However, the appellant also paid him an hourly rate for other services such as repair and maintenance of the machinery that he used and pick up and delivery of parts. Condition 7. requires that compensation be on a commission, per-job, or competitive bid basis "and not on any other basis." The hourly compensation in this case constituted a basis other than one permitted under the statute.

The appellant has not established that condition 7. was satisfied.

8. The individual may realize a profit or suffer a loss under contracts to perform services.

The claimant could realize a profit performing services for the appellant. It appears possible that his expenses, though not as great as the appellant's expenses, could have exceeded his income, thus causing a loss. (2)   Factors such as the distance he had to travel to a job site, the distances between sites, and the number of jobs he performed affected his earnings. Further, if he failed to complete a job by the deadline set he could be penalized.

The appellant has established that condition 8. was satisfied.

9. The individual has recurring business liabilities or obligations.

The claimant had a recurring liability -- insurance.

The appellant has established that condition 9. was satisfied.

10. The success or failure of the individual's business depends on the relationship of business receipts to expenditures.

The claimant was not engaging in services for the appellant as a hobby. The inability to afford the cost of liability insurance caused the claimant to cease performing services for the appellant.

The appellant has established that condition 10. was satisfied.

Conditions 2., 6., 8., 9., and 10. have been satisfied. The appellant has established only 5 of the 10 conditions listed in Wis. Stat. § 108.02(12)(bm). The appellant has not met its burden of establishing that the claimant performed services for it as an independent contractor.

The commission therefore finds that the claimant performed service for the appellant as an employee in an employment and in his applicable base period as set forth in the initial determination, within the meaning of Wis. Stat. § § 108.02(12) and 108.02(26).

DECISION

The decision of the administrative law judge is modified to conform to the foregoing findings and, as modified, is affirmed. Accordingly, the amounts paid to the claimant by the appellant during the fourth quarter of 1999, and the first, second, and third quarters of 2000, shall be included in the department's computation of the claimant's base period wages for purposes of computing potential benefit eligibility. This case is remanded to the department to determine the amount of those wages paid and for computation of the applicable weekly benefit rate and maximum eligibility, unless otherwise resolved.

Dated and mailed March 12, 2002
rieckte . urr : 132 : 1 : EE 410 EE 410.03   EE 410.07

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

/s/ Laurie R. McCallum, Commissioner

MEMORANDUM OPINION

The commission does not credit the appellant's testimony that the claimant signed a written contract each year he performed services. The commission finds, based on the record, that the claimant's signature does not appear on the contract submitted at the hearing. The commission finds that the claimant's testimony in general was credible. For example, the commission credited the claimant's testimony that he was paid an hourly rate for certain services. On the other hand, the commission did not credit the appellant's testimony that the claimant rather than the appellant supplied various tools used to perform services for the appellant.

cc: Attorney Charles R. Shedlak

 


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Footnotes:

(1)( Back ) The ALJ took administrative notice of the records, exhibits and testimony from two other hearing involving the parties: S0000063MD and 00001089LX. The appellant initially raised a notice of hearing issue but indicated that the ALJ taking administrative notice of prior hearings solved its notice problem.

(2)( Back ) The ALJ found that this condition could not be met because the appellant did not establish that the claimant's services were performed pursuant to a written contract. However, there is no requirement that services be performed under a "written" contract. 


uploaded 2002/03/15