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

ARAMARK CORRECTIONAL SERVICES INC., Employer

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 119694, Hearing No. S0000040MD


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 agrees with the decision of the ALJ, and it adopts the findings and conclusion in that decision as its own.

DECISION

The decision of the administrative law judge is affirmed. Accordingly, Aramark Correctional Services, Inc. shall continue as of the reporting periods beginning January 1, 1999 to report the payroll incurred in its Wisconsin business activities under its individual unemployment insurance reserve account.

Dated and mailed April 28, 2003
ak-cs . ssd : 110 :    ER 460  ER 464  ER 470.01

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

/s/ James T. Flynn, Commissioner


MEMORANDUM OPINION

This case presents a question of which of two entities should report certain payroll for purposes of determining liability for unemployment insurance contributions. Specifically, the question is whether it should be Aramark Services Management of Wisconsin, Inc., or petitioner Aramark Correctional Services, Inc. ("ACS"), that reports the payroll of certain employees who perform the services which constitute the business activity of ACS -- payroll which was, prior to January 1, 1999, reported by ACS.

The question arose when Aramark Corporation, the parent corporation of ACS, decided to engage in an internal restructuring by which the employees of ACS were designated as being employees of a new corporation. That new corporation, Aramark Services Management of Wisconsin, Inc., advised the Division of Unemployment Insurance of the Department of Workforce Development that as of January 1, 1999, it would begin reporting the payroll of the employees involved, as its own, under its own, new unemployment insurance reserve account.

The department issued an Initial Determination on February 16, 2000, determining that Aramark Services Management of Wisconsin, Inc. could not report the payroll of the employees involved as its own, and that ACS would have to continue to report that payroll. A request for hearing was filed, and following notice and hearing at which ACS appeared by counsel and presented evidence, an administrative law judge for the department issued an Appeal Tribunal decision on October 21, 2002 which affirmed the Initial Determination. ACS filed a letter which was treated as a petition for commission review.

Based on its review of the evidence in the record, and after having considered the theories and arguments advanced by ACS and by the department, the commission finds itself in complete agreement with the decision of the administrative law judge that ACS must continue as of January 1, 1999 to report the payroll at issue here as its own, under its own unemployment insurance reserve account. The commission agrees with the administrative law judge's findings and conclusions that the persons involved here were providing services for, and were the employees of, ACS, for purposes of Wis. Stat. § 108.02(12)(a). The commission also agrees, that Aramark Services Management of Wisconsin, Inc. failed to present sufficient evidence to establish that it was an "Employee Service Company" within the meaning of Wis. Stat. § 108.02(12m). As the administrative law judge noted, the provisions of Wis. Stat. § 108.065(2) are not applicable because there was neither a claim of, nor evidence of, common employment by more than one corporation with payment through a "common paymaster". Aramark Services Management of Wisconsin, Inc. has not asserted that it was a successor to ACS under Wis. Stat. § 108.16(8), and the record would in any event not support such an assertion. Because the persons involved here were providing services for, and were the employees of, ACS, and because the record does not establish the applicability of any of the limited number of circumstances under which some other entity might be entitled to report the payroll at issue as its own, the decision of the administrative law judge was correct and must be affirmed.

NOTE: The letter which was treated as the petition for commission review, states that Aramark Correctional Services, Inc. "requests a rescheduled hearing before the Director's Representative to orally present objections to the Appeal Tribunal Decision". It also states, "[w]e reserve the right to amend this protest or, at a hearing or conference before the Director or his designee, present any facts, affidavits, arguments, briefs, or any other evidence regardless of whether or not asserted or alluded to in this protest". It also states that it apologizes "for any inconvenience experienced by the Director or Director's Representative due to our absence at the hearing on October 21, 2002", and that it "believe[s] that we may resolve any differences in opinion at a newly scheduled hearing".

It is not entirely clear what relief is being sought by this letter.  The references to "the Director's Representative" and "the Director", as well as the references to a "protest" and to the presentation of "objections" to the decision below, suggest some confusion about the applicable law.  Those terms are used in, and relate to the procedures followed under, the Illinois Unemployment Insurance Act, § 820 Ill. Comp. Stat. 405/100 et seq.,  see, § 820 Ill. Comp. Stat. 405/2200.

In Wisconsin, the procedures governing resolution of issues as to the status or liability of an employing unit are set forth in Wisconsin Statutes § 108.10. Pursuant to Wis. Stat. § 108.10(2), decisions of an administrative law judge acting as an Appeal Tribunal for the department may be appealed by filing a petition for review by the Labor and Industry Review Commission in the manner provided for in Wis. Stat. § 108.09(6), and the commission's authority to take action in such an appeal is as specified in that section. The commission's review is based upon the evidence previously submitted at hearing before the administrative law judge, without further hearing. Id.

While the commission has the authority, in its discretion, to order the taking of further evidence or to remand the matter to the department for further proceedings, see, Wis. Stat. § 108.09(6)(d), none of the circumstances under which it might be inclined to do so are present here.

Contrary to the suggestion raised by it appeal letter, the petitioner did appear at the hearing. As is evident from the Commission Review Notes, and as is indicated by the October 22, 2002 letter from the administrative law judge, an appearance was made on behalf of petitioner by Bill Kiesling, Assistant General Counsel. At the hearing, testimony was presented on behalf of the petitioner by two witnesses, one of whom (John Lorenc) is the person in whose name the appeal letter was signed.

Apart from its mistaken belief that it did not appear at the hearing, no other basis appears for granting further hearing to petitioner. There is no claim that there were any witnesses who petitioner wished to present on the day of hearing but who were unavailable. There is no claim that the administrative law judge precluded petitioner from offering any evidence at hearing which it now claims should have been allowed. There is no claim of newly discovered evidence which could not have been discovered prior to hearing with the exercise of reasonable diligence and which would justify a change in the result.

The commission therefore declines to exercise its authority to order further hearing in this matter.

Treating the appeal letter as including a request to present oral argument to the commission, that request is denied. Presentation of oral argument is discretionary in the commission. Wis. Admin. Code § LIRC 1.06. The commission considers oral argument to be unnecessary in this case, as the legal theories and arguments of the petitioner were clearly presented at the hearing and have been considered by the commission.

cc: 
Attorney Peter Zeeh
Attorney Bill Kiesling
John Medvedik


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The Appeal Tribunal Decision is reproduced here:

Hearing No. S0000040MD

In the matter of:
ARAMARK CORRECTIONAL SERVICES,
Account No. 119694,

 

Administrative Law Judge:
Robert C. Junceau, Jr.

 Dated and Mailed:
October 21, 2002

    
SIX DEPARTMENT DETERMINATIONS CORRESPONDING TO THE SIX HEARING NUMBERS ABOVE HELD: that Aramark Services Management of WI, Inc. ["ASMW"], was reporting the payroll of each of the six employer-appellants as of January 1, 1999, that ACMS was not an "employee service company" (employee leasing company or temporary help agency), and cannot report the payroll of the Aramark entity named in the determination, and that common paymaster provisions of the Wisconsin statutes do not apply. As a result, the employer-appellants must continue to report the payroll incurred in their Wisconsin business activities under their individual unemployment insurance reserve account. Adjustment forms were enclosed for the appellants to correct the contributions liability reports for 1999.

Based on the applicable records and evidence in this case, the appeal tribunal makes the following

FINDINGS OF FACT AND CONCLUSIONS OF LAW

All appellants and companies referenced here are either direct or indirect subsidiaries of Aramark Corp. of Philadelphia, PA. The six appellants include the following Aramark corporations: Correctional Services, Inc. (Hearing No. S0000040MD), Refreshment Services, Inc. (Hearing No. S0000041MD), Industrial Services, Inc. (Hearing No. S0000042MD), Educational Services, Inc. (Hearing No. S0000043MD), Educational Group, Inc. (S0000044MD), and Leisure Services Group, Inca (Hearing No. S0000045MD). Most of the appellants were incorporated in Delaware and none were incorporated in Wisconsin.

The appellants provide various services for clients through various operating agreements. Prior to January 1, 1999 each of the appellants reported its UI contribution liability for its own employees. Beginning January l, 1.999, however, another corporation, Aramark Services Management of Wisconsin ("ASMW"), reported contributions liability for all of the appellants' employees, collectively. The appellants claim to have transferred their employees to ASMW as of that date. Aramark created this arrangement to share employees within a geographic area in order to reduce the costs of training, and hiring. However, the appellants' existing business activities and assets were not transferred to ASMW and remained the same as before. There are no operating contracts between ASMW and the appellants but ASMW has a. subcontractor arrangement with the other Aramark entities.

The appellants claim that ASMW has employees that it hires and fires and who, during the periods under review, provided the labor in Wisconsin for the appellants. It does not provide labor for other entities. It has no management employees. That is apparently handled through the parent or another corporation in Philadelphia. A non-Wisconsin corporation supervises the employees' services performed for the appellants.

ASMW collects from the appellants a "service fee" for providing labor in excess of its payroll costs. The amount of the fee is based on the wages, withholding taxes, and the social security and unemployment insurance paid on the wages. An additional fee is also collected of about .03 % of these amounts, allowing ASMW to show a profit.

The evidence failed to establish whether ASMW negotiates the time or place or other conditions of the services. The employer's witnesses did not know who determines the amount of pay or whether labor unions are involved. ASMW can move a worker from place to place. A worker refusing to do so could jeopardize his or her employment. It was not established whether the non-Wisconsin entities have employees in Wisconsin.

The department determinations under appeal concluded that ASMW is not a statutory "employee service company" nor are the employees concurrently employed by two entities under "common paymaster" provisions of §108.065 of the Wisconsin UI law, below.

Appellants do not contest these specific findings. Rather, they argue only against the department disallowing ASMW to file as the employer responsible for the UI contributions in question. They cite the fact conceded by respondent that, based on the evidence presented, ASMW is not a statutory successor to the appellants' businesses.

Respondent argues that ASMW is merely a payroll facilitator rather than the true employer in this case because the employees continued to perform services for the appellants, who remained the employers respecting those services. Alternatively, respondent contends that, in line with the philosophy of contributions under the UI law to base tax rates on employers' experience ratings, or payment from their UI accounts, if deemed the employer, ASMW ought to report and pay contributions separately for each individual appellant based on its respective experience rating.

The issue for decision is whether the ASMW was the employer of the employees for whom it filed contribution reports beginning January 1, 1999, as appellants contend, rather than the appellants, as is respondent's view.

Since most of the appellants have overdrawn UI reserve account balances, the legal effect of ASMW being deemed the employer of all of the appellants' employees effective January 1, 1999 is that, as a new employer, ASMW would benefit from a tax rate more favorable than those applicable to the appellants based on their negative or unfavorable UI experience tax ratings.

Section 108.065 is the only UI provision regarding the choice of employer question. However, it is limited to employee service companies and common paymasters. It states:

(1) An employee service company is the employer of an individual who is engaged in employment performing services for a client or customer of the employee service company if the employee service company is taxed under the federal unemployment tax act (26 USC 3301 to 3311) on the basis of that employment.

(2) A corporation which pays wages to an employee who is concurrently employed by that corporation and one or more related corporations for work performed for the corporation which pays the wages and the related corporation or corporations is the employer of that employee. For purposes of this subsection, if 2 or more corporations are related corporations at any time during a quarter, they are related corporations during that entire quarter.

Section 108.02 (12m) defines an "employee service company" as follows:

(12m) EMPLOYEE SERVICE COMPANY. "Employee service company" means a leasing company or temporary help service which contracts with clients or customers to supply individuals to perform services for the client or customer and which, both under contract and in fact:

(a) Negotiates with clients or customers for such matters as time, place, type of work, working conditions, quality, and price of the services;

(b) Determines assignments or reassignments of individuals to its clients or customers, even if the individuals retain the right to refuse specific assignments;

(c) Sets the rate of pay of the individuals, whether or not through negotiation;

(d) Pays the individuals from its account or accounts; and hires and terminates individuals who perform services for the clients or customers.

There is no argument before this tribunal that ASMW is an employee service company and review of the facts compels the conclusion that, under the statutory definition, it is not. Since the appellants argue that the employer is ASMW and not the appellants, and because the facts do not show common employment, common paymaster provisions likewise do not apply.

Unfortunately, the Wisconsin UI law does not otherwise provide criteria in a "choice of employer" case. The choice of employer question outside the ambit of § 108.065 is resolved by reference to the statutory definition of "employee" in § 108.02 (12) and the cross-referent "employment" as defined in § 108.02 (15), regardless of whom actually pays the employee. The general test of for whom the services were performed is applicable here.

Section 108.02 (12) (a), Wis. Stats. provides that "employee" means any individual who is or has been performing services for an employing unit, in an employment, whether or not the individual is paid directly by such employing unit. Section 108.02 (15) (a) generally provides that "employment" means any service performed by an individual for pay.

The department sees the arrangement in this case as a payroll simplification strategy or device. This tribunal agrees. Although the appellants claim that ASMW hired, fired and directed the employees transferred to ASMW, competent evidence to that effect was lacking. The witnesses who testified as to these arrangements within the Aramark group were generally unfamiliar with the particulars of ASMW's putative hiring arrangements. Moreover, control and supervision of the employees was apparently by a non-Wisconsin management company within the Aramark group. This supervision was over services performed by employees in fulfillment of appellants' performance under their service contracts and under their direction and control. Thus, the employee services were performed for the appellants, not for ASMW. Since the statute allows for deviation from the performance of services test only in limited instances not met here, appellants are deemed the employer of the employees in question, and must report their wages individually.

The appeal tribunal therefore, finds that beginning with the reporting period corresponding to that beginning January 1, 1999, the appellants, not ASMW, were the employers of the employees who were the subject of the department determinations, within the meaning of Chapter 108 of the statutes.

DECISION

The department determinations are affirmed. Accordingly, the appellants shall continue as of the reporting periods beginning January 1, 1999 to report the payroll incurred in their Wisconsin business activities under their individual unemployment insurance reserve accounts.

APPEAL TRIBUNAL

/s/ Robert C. Junceau
Administrative Law Judge
 


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