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


ED BRISTOL ADVERTISING INC, Appellant

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Hearing No. S9500228MW, Account No. 067446


An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Industry, Labor and Human Relations 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 the applicable law, records and evidence in this case, the commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The appellant is an advertising and printing business. Ed Bristol is the president of the corporation; his wife, Gloria, is the secretary and treasurer of the corporation; and their son Mark is the corporate vice president.

The issue to be decided is whether Mark Bristol had a direct or indirect substantial ownership interest in the corporation for purposes of excluding him from employe status for the appellant.

Sec. 108.02(15)(L), Stats., provides as follows:

"(L) `Employment' includes an individual's service for an employer organized as a corporation in which the individual is a principal officer and has a direct or indirect ownership interest, except as provided in s. 108.025.

Sec. 108.025, Stats., provides as follows:

"(1) In this section, `principal officer' means an individual named as a principal officer in the corporation's most recent annual report or, if that information is not current, an individual holding an office described in the corporation's most recent annual report as a principal officer.

"(6) A principal officer has a `direct or indirect substantial ownership' interest in a corporation under this section if 25% or more of the ownership interest, however designated or evidenced, in the corporation is owned or controlled, directly or indirectly, by the officer."

Ed Bristol Advertising, Inc. paid its $25 filing fee to the Wisconsin Secretary of State, and filed a Wisconsin Domestic Corporation Annual Report on September 30, 1994, for the report year commencing July 1, 1994, and ending June 30, 1995. The report lists Mark Bristol as the appellant's vice president, and also as a member of the appellant's board of directors.

Ed Bristol is the sole owner of the appellant's corporation stock. Three years ago, in anticipation of a divorce between Mark Bristol and his wife, a business decision was made to deny Mark Bristol ownership of any and all corporate stock so that the stock could not be included among Mark Bristol's assets during negotiations concerning his divorce settlement. Ed oversees the business. He does paper buying. He is involved in the whole company, in employment and equipment buying.

Mark is responsible for total sales of the business. He hires and fires sales representatives. He works in the art department and in the print shop. He is concerned with production of jobs, and puts together direct mail. He signs the checks and authorizes overtime.

It has never been necessary for him to sign for a loan, however he has just filed an application for a loan. The corporation pays him a salary plus profits and bonus. He gets half of the profit and his parents get the other half. He takes the business profit in the form of a bonus. Neither he nor his parents get dividends.

He is in charge of every phase of the business. He is involved in all the decision making of the financial and administrative aspects of the business. He is involved in the daily operations of the business, coordinates sales strategies to insure delivery and service. He is in charge of the art room, print shop and orders paper. He has full authority over all workers except his father. The overall performance of the company is under his jurisdiction.

The commission believes that Mark Bristol owns or controls at least 25 percent of the ownership of the corporation, as he has the ability to hire and discharge workers, sign checks and has filed a loan application. The arrangement between Mark and his parents is that they split the business profits. Whether it is inequitable to allow Mark to take the corporate exclusion because he is not a stockholder because he did not want his wife to have a claim to his family business, does not seem, to the commission, to be a relevant factor in the determination of his ownership or control of the company. The exclusion benefits only the corporation, it does not benefit Mark Bristol as an individual. The fact that Mark Bristol would forego an individual benefit in order to provide a benefit to the company suggests to the commission that he does indeed own or control at least 25 percent of the business.

The commission has previously examined whether an individual had an ownership interest under sec. 108.04(1)(g), Stats., even though that individual owned no stock. In Donald F. Zitzner, Commission Decision November 27, 19991, affirmed by Dane County Circuit Court Case Nos. 91-CV-4968 and 91-CV-4969, November 13, 1992, the commission considered that although the mother was the sole stockholder, she only performed clerical tasks while the claimant and his brother directed the work on a daily basis. "His ownership interest was evidenced by, among other things, the control he exercised over the performance of work and his authority to make personnel decisions. The claimant played a significant and crucial role in the day-to-day business of the corporation by virtue of such activities."  In Linse v. LIRC and Tom/Jerry's Auto Body Inc., where brothers who conveyed stock to a friend, for no consideration, and without payment of gift tax, but where the brothers continued to operate and control the business, the court held that the absence of stock ownership was insufficient to determine whether the statute applies, and in each case the commission must determine whether ownership or control exists in reality.

In this case, the commission determines that in reality, Mark Bristol does have a direct or indirect substantial ownership in Ed Bristol Advertising, Inc., for purposes of excluding himself from employe status for the appellant, within the meaning of sec. 108.02(15)(L), Stats.

DECISION

The decision of the administrative law judge is reversed. Accordingly, Ed Bristol Advertising, Inc., does not owe contributions and interest for the first quarter of 1993 and the first quarter of 1994.

Dated and mailed: June 21, 1996
bristed.srr : 145 : 6  EE 405

/s/ Pamela I. Anderson, Chairman

/s/ Richard T. Kreul, Commissioner

/s/ David B. Falstad, Commissioner

MEMORANDUM OPINION

The commission did not discuss witness credibility and demeanor with the ALJ as this was primarily a legal issue and the facts of the case were not in dispute.

cc: DONALD A BRISTOL CPA

ATTORNEY DAVID JENKINS
ENFORCEMENTS SECTION


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