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


KEITH R BERGEN, Claimant

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 97005597MD


On November 8, 1997, the Department of Workforce Development issued an initial determination which held that the claimant's work for Global Safety Management Services was not covered for unemployment compensation purposes. The claimant filed a timely request for hearing, and hearing was held on December 17, 1997 in Madison, Wisconsin before a department administrative law judge. On December 22, 1997, the administrative law judge issued an appeal tribunal decision affirming the initial determination. The claimant timely filed a petition for review, and the matter now is ready for disposition.

Based upon the applicable law and the records and other evidence in the case, the commission issues the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The claimant worked approximately seven months as a vice-president of sales and marketing for the employer, a consulting firm. His last day of work was September 26, 1997, and the issue is whether the compensation he received from the employer is wages for unemployment insurance purposes. The commission concludes that it is, and so reverses the appeal tribunal decision.

The employer, a consulting firm in the areas of safety and ergonomics, is a limited liability company established under the laws of the state of Wisconsin. The claimant has a 3.6 percent interest in the company and is one of five members thereof. The administrative law judge, in concluding that the claimant's compensation was not wages, reasoned that, for unemployment insurance purposes, limited liability companies are treated as partnerships (and that the claimant's compensation therefore was the equivalent of compensation as a partner in a partnership). There is no statutory basis upon which to conclude, however, that all members of a limited liability company are to be treated, for unemployment insurance purposes, as "owners" or "employers" in the same manner partners in a partnership are treated. At this point, the commission believes determination of "employer" status of a member of a limited liability company must be done on a case-by- case basis.

Recent precedent on this issue is Hoelzer v. Green Fields Golf Center, LLC, No. 97601714WK (LIRC, 9-17-97). In Hoelzer, the claimants each had a 50 percent ownership interest in their limited liability company. They set it up such that they received wages from the company and paid unemployment contributions on those wages. In finding the claimants eligible for unemployment insurance, the commission relied upon the statutory presumption of eligibility for benefits and the lack of a specific disqualifying statutory provision. The company treated the claimants' remuneration as wages; indeed, so did the department when it received unemployment contributions on the wages. For these reasons, the claimants' compensations in Hoelzer were found to be wages for unemployment insurance purposes.

In the present case, the claimant had only a miniscule ownership interest percentage in the company. More importantly, the employment contract between the claimant and the limited liability company treated the claimant as an employe. Although the record does not indicate that taxes and similar charges were actually withheld from the claimant's pay checks, provision 4 of the employment agreement requires the employer to do so. Provision 9 of the agreement concerns intellectual property rights, and reserves all right, title, and interest in all intellectual property created by the employe, to be the exclusive property of the employer.

Given the contractual agreement, the small ownership interest the claimant had in the company, and the lack of any specific statutory provision or case law disqualifying the claimant from eligibility, the commission believes the claimant's compensation is wages for unemployment insurance purposes, and so finds.

DECISION

The appeal tribunal decision is reversed. Accordingly, the claimant may establish a benefit year based upon compensation received from Global Safety Management Services. This matter is remanded to the Department of Workforce Development for further action on the claimant's application for unemployment insurance, consistent with this decision.

Dated and mailed: March 12, 1998
bergeke.urr : 105 : 1 ET 483.04

/s/ David B. Falstad, Chairman

/s/ Pamela I. Anderson, Commissioner

/s/ James A. Rutkowski, Commissioner

NOTE: The commission did not confer with the administrative law judge before determining to reverse the appeal tribunal decision in this case. Such conferral is required where credibility was a factor in the administrative law judge's factfinding, and the commission is considering reversing the appeal tribunal decision because of a differing assessment of credibility. Such is not the case here. The commission has accepted the facts found by the administrative law judge; as a matter of law, however, the commission concludes that there is no statutory basis upon which to automatically treat members of a limited liability company as partners in a partnership are treated and that the issue therefore requires analysis on a case-by-case basis.

cc:
ATTORNEY LAWRENCE BENSKY
LAFOLLETTE SINYKIN


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