Account No. 101917, Hearing No. S9200097MW

The Department of Industry, Labor and Human Relations issued an initial determination in the above-captioned matter which found that Thomson Newspapers (Wisconsin), Inc. was liable for additional unemployment contributions, including interest, in the amount of $22,905.73.  Thomson Newspapers (Wisconsin), Inc. filed a timely appeal to an appeal tribunal. On July 27, 1993, the appeal tribunal issued a decision which found that Thomson Newspapers (Wisconsin), Inc., was not liable for additional contributions and resulting interest. The Department of Industry, Labor and Human Relations filed a timely petition for commission review of the appeal tribunal decision.

Based on the applicable law, records and evidence in this case, the commission makes the following:


Thomson Newspapers (Wisconsin), Inc., (hereafter employer) is a company engaged in the newspaper business. It publishes newspapers in Appleton, Fond du Lac, Manitowoc, Waukesha, West Bend and Wisconsin Rapids. The employer retained the services of bundle haulers as part of its distribution system. The Appleton paper at one time used newspaper distributors, but no longer does so. The only difference between bundle haulers and newspaper distributors is that the newspaper distributors also collected monies for the papers. Hereafter in this decision the term bundle hauler will also include the former classification of newspaper distributors.

The bundle haulers distribute newspapers to various points. Ninety percent of their deliveries are to drops on the street for motor carriers or foot carriers to pick up, or dropped at a carrier's home for the motor carrier or foot carrier to deliver to the ultimate consumer, i.e., the newspaper reader. Ten percent of the drops made by the bundle haulers are what the employer terms single copy outlets. These are drops to vending boxes (which may be in hospitals, nursing homes, etc.), drops to McDonald's where McDonald's has complimentary copies of the paper for its customers, or drops to commercial outlets such as supermarkets or gas stations which then resell the newspapers.

Bundle haulers pick up the newspapers at the employer's dock and then distribute them using their own vehicles. The bundle haulers can set their own order of distribution. They are expected to deliver the newspapers in good condition and on a timely basis. They are paid a set fee based on the number of bundles, the mileage and the estimated time to perform the route. They enter into written contracts with the employer which provide that the bundle hauler will provide his/her own vehicle and will be totally responsible for all expenses relating thereto. The contract provides that the employer is only interested in the results to be achieved, and the conduct and control of the work will lie solely with the bundle hauler. It also provides that they shall not be considered to be employes. The contract gives the bundle hauler the right to retain helpers or substitutes to render the services. Either party may cancel the contract on two weeks notice with or without cause. The bundle haulers are free to reject a particular delivery. If they do, one of the employer's conceded employee will make the delivery. The bundle haulers receive no fringe benefits and do not have taxes withheld from their pay. They are free to perform other delivery work, even for competitors.

Section 108.02 (15)(k)4, Stats., provides that "employment" as applied to work for any given employer . . . does not include service: "As an individual selling or distributing newspapers or magazines on the street or from house to house."

The employer argues that the bundle haulers at issue here fit within the exclusion set forth in 108.02 (15)(k)4, Stats. The employer maintains that the bundle haulers do distribute newspapers from house to house when they drop bundles off for foot and motor route carriers. The employer further maintains that the bundle haulers distribute newspapers "on the street" when they deliver newspapers to stores, vending machines, nursing homes, hospitals, and similar public places as well as drop points on the street for motor and foot carriers, since there is no other way to perform such activity other than "on the street." The department, on the other hand, maintains that dropping off newspapers to motor or foot carriers' homes does not constitute distribution of newspapers from "house to house" and that bundle handlers did not distribute newspapers "on the street" but rather "to the street."

As a general rule, tax exemption statutes are construed strictly against granting exemption since tax exemptions, deductions, and privileges are matters of legislative grace. Ladish v. DOR, 98 Wis. 2d 496, 502, 297 N.W.2d 56 (Ct. App. 1980). The burden of bringing the matter in question within terms of exemption is on the tax payer and any doubts are to be resolved in favor of taxation. Ladish, at p. 502. See also Pabst Brewing Co. v. Milwaukee, 125 Wis. 2d 437, 445, 373 N.W.2d 680 (Ct. App. 1985). The strict construction advanced by the department, in essence, is to read the statute to say that only distribution on the street or from house to house to the ultimate consumer falls within the exception. The commission agrees with such strict construction. The commission does not believe it was the intent or purpose of the exemption to encompass individuals such as the bundle haulers that do not deliver to the ultimate consumers. To interpret the exemption to encompass individuals such as the bundle haulers because they touch the street while distributing newspapers would make the exemption overly broad and encompass individuals not intended to be excluded from taxation. The phrase "on the street" means just that, an individual standing on the street distributing or selling newspapers. Delivery from "house to house" was intended to mean the house of the ultimate consumer, i.e., the newspaper reader.

The next issue to be decided is whether the bundle haulers performed services for the employer as independent contractors or employes under sec. 108.02 (12) , Stats.

First, the evidence established that the bundle haulers were in fact paid for services performed and therefore the department has satisfied its burden under sec. 108.02 (12)(a), Stats. Thus, it is the employer's burden to establish that the services were performed free from the employer's direction and control or right to direct or control and were performed in independently established trades, businesses or professions. The commission finds that the employer has satisfied its burden of establishing that the bundle haulers performed services for the employer free from the employer's direction and control or the right to direct and control those services. No direction and control was exercised or reserved other than general parameters, such as pick up times and delivery times, which insured the result for which the bundle haulers' services were retained. However, the commission finds that the employer has not satisfied its burden establishing that the bundle haulers at issue performed services in independently established trades, businesses or professions in which they were customarily engaged.

In Keeler v. LIRC, 154 Wis. 2d 626, 633-634 (Ct. App. 1990), the Wisconsin Court of Appeals adopted a method for addressing whether or not a worker's services are performed as part of an independently established trade, business or profession in which they are customarily engaged. These five factors are integration, advertising or holding out, entrepreneurial risk, economic dependence, and proprietary interest.

The services performed by the bundle haulers were integrated into employer's business. Regarding advertising or holding out, there is no evidence of traditional advertising such as newspaper advertisements or business cards. The only evidence of holding out must be inferred from the largely hearsay testimony of other business activity by bundle haulers in delivering newspapers for other employing units. However, how these other services were initiated, whether by individuals responding to want ads from the other newspapers or word of mouth communication of availability to perform services, is unknown. Further, the employer acknowledges that it has little if any knowledge regarding whether the bundle haulers advertised or held themselves out for hire to other employing units. The employer focuses on the fact that they were free to do so. However, the fact that they were free to work for others, including competitors, does not establish advertising or holding out.

There is little evidence of entrepreneurial risk in this case. The bundle haulers have not risked any capital investment. The commission has traditionally held that the potential of lost wages is insufficient to constitute entrepreneurial risk of a business undertaking.

Regarding economic dependence, the employer did not satisfy its burden of establishing that individual bundle haulers were not economically dependent on it. The employer argues that the individuals were free to perform services for others and that "the burden of opportunity" is on the individual contractor and it is the contractor who should assume the risk for his lack of enterprise. However, that is not the standard. The issue is not whether an individual had the opportunity to perform services for other employing units and failed to avail himself of that opportunity, but whether he in fact did perform services for other entities in an independent business. Graebel Moving & LIRC, 131 Wis. 2d 353, 357-358 (Ct. App. 1986). The employer has not established that the bundle haulers at issue were not economically dependent on it.

Finally, as to proprietary interest, the employer concedes that the contracts (Exhibits 3 through 8), do not permit the selling of routes. The employer maintains that the ability to sell routes has nothing to do with the sale of the contractor's independent business venture, which may be separate from the route but make up the right to independently perform hauling work. However, if the bundle hauler can not sell the route, there is no business existing independent from the employer as, absent the ability to sell routes, the only asset the bundle hauler has is his vehicle and there is no evidence any bundle hauler used his vehicle exclusively to perform services as a bundle hauler.

The commission therefore finds that the employer was liable for additional unemployment compensation contributions, including interest, in the amount $22,905.73, within the meaning of sec. 108.02 (12) and (15) (k)4, Stats.


The appeal tribunal decision is modified to conform with the foregoing findings and, as modified, is reversed. According, Thomson Newspapers (Wisconsin), Inc., is liable for additional unemployment compensation contributions, including interest, in the amount of $22,905.72.

Dated and mailed May 31, 1994
132 : CD3370  EE 411  EE 412   EE 420

/s/ Pamela I. Anderson, Chairman

/s/ Richard T. Kreul, Commissioner

/s/ James R. Meier, Commissioner


The commission did not consult with the administrative law judge regarding witness credibility or demeanor. The commission's reversal of the appeal tribunal decision does not involve a different assessment of witnesses credibility or demeanor. The appeal tribunal reasoned that had the Wisconsin exception intended to exclude delivery or' distribution other than to the ultimate consumer, the Wisconsin exclusion would have paralleled the federal exclusion. However, the commission does not find such reasoning compelling in light of the fact that the federal exclusion was not enacted until 19 years after the Wisconsin exclusion.

Attorney Jorge Fuentes
Enforcements Section

Attorney Jonathan T Swain
Lindner & Marsack SC

Appealed to Circuit Court.  Set aside and remanded February 13, 1995. Appealed to Court of Appeals. Circuit Court reversed and LIRC decision reinstated November 14, 1996 (unpublished). [Summary of Court of Appeals decision]

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

uploaded 2002/12/12