ROBERT W RABE, Employee

WILLIAM K TATGE, Employer

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, except that it makes the following modifications:

Under the administrative law judge's FINDINGS OF FACT AND CONCLUSIONS OF LAW, page 4, paragraph 2, substitute the following sentence, "Whether they met par. 2 cannot be determined by this record." with "Paragraph 2 was not met."

The decision of the administrative law judge, as modified, is affirmed. Accordingly, as of week 9 of 2005 Robert Rabe had base period wages from the employer usable in determining his benefit eligibility.

Dated and mailed November 10, 2005
raberob . umd : 135 : 1  EE 410

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

Robert Rabe performed services as an interior painter for the employer, who was a subcontractor working for a new home builder during the time in question. Mr. Rabe filed an initial claim for unemployment benefits on February 23, 2005 (week 9). During the UI base period applicable to that claim, Robert Rabe performed services for the putative employer for pay during the third quarter of 2004. There is no issue as to the correctness of the amount paid to Robert Rabe during the quarter in question.

Therefore, the issue to be decided is whether Mr. Rabe performed services for William Tatge as an independent contractor or as a statutory employee within the meaning of Wis. Stat. § 108.02 (12).

A two step analysis is used to determine whether an individual is an employee for unemployment insurance purposes. See Goldberg v. DILHR, 168 Wis. 2d 621, 625 (Ct. App. 1992). The first step is to determine whether the individual has been performing services for an employing unit, in an employment. Wis. Stat. § 108.02(12)(a). An "employment" is "any service . . . performed . . . for pay." Wis. Stat. § 108.02(15)(a). If this test is met, then the burden shifts to the employer to satisfy the department that the individual meets seven of the ten conditions found at Wis. Stat. § 108.02(12)(bm).

Once there is proof that an individual has been performing services for an employing unit for pay, as is the case here, the burden shifts to the putative employer, here the appellant, to establish that Robert Rabe is not a statutory employee within the meaning of Wis. Stat. § 108.02(12). Pursuant to Wis. Stat. § 108.02(12)(bm), the appellant, William Tatge is required to establish that Robert Rabe meets seven of the ten conditions outlined at Wis. Stat. § 108.02(12)(bm).

Condition one requires that the "individual holds or has applied for an identification number with the federal internal revenue service." The appellant contends that Robert Rabe holds his social security number as his identification number with the federal internal revenue service. Quoting a printout from the official IRS website, the appellant argues that a sole proprietor who does not have any employees and who does not file any excise or pension plan tax returns is the only business person who does not need an employer identification number (EIN). In this instance, the sole proprietor uses his or her social security number as a taxpayer identification number (TIN). See www.irs.gov/faqs/faq-kw67.html.

The commission recently addressed this similar issue in Angel Care, Inc. UI Hearing No. S0200141MW (LIRC December 30, 2004); Oil Equipment Co., Inc., UI Hearing No. S0300057MD (LIRC December 30, 2004). In both cases, the commission concluded that individuals who filed their self-employment income tax returns using their social security number as their taxpayer identification number (TIN) did not meet condition two because this condition requires holding or applying for an identification number with the federal internal revenue service. Robert Rabe did not meet this condition.

Condition two asks whether Robert Rabe has filed business or self-employment income tax returns with the federal internal revenue service based on such services in the previous year, here 2003. The year 2003 is significant since both Mr. Rabe and Mr. Tatge testified that Robert Rabe has worked as a painter as an independent contractor for the last 10 years. However, exhibit 3, a copy of Robert. Rabe's self-employment income tax return for 2004 does not satisfy this statutory condition. Consequently, the commission must conclude that the appellant failed to meet this condition.

Condition three requires that the individual maintain a "separate business with his or her own office, equipment, materials or other facilities." The appellant argues that Robert Rabe owned his own painting supplies, cell phone and truck, all items used for his own business purposes. However, this condition requires maintaining a separate business with an office, equipment, materials and other facilities. There is insufficient proof that Robert Rabe maintained an office or other facilities as required by the commission's interpretation of this condition announced in Quality Communications Specialist, Inc., UI Hearing Nos. S0000094MW, S0000095MW (LIRC July 30, 2001). Moreover much of the materials and some of the equipment used by Robert Rabe were furnished by William Tatge. Condition three was not met.

The ALJ however did find that William Tatge established that Robert Rabe met conditions four, five, six and, seven found at Wis. Stat.§ 108.02 (12)(bm). The commission will not disturb these findings as the record supports them.

Condition eight requires that the individual "may realize a profit or suffer a loss under contracts to perform services." In Quality Communications Specialists, Inc., supra, the commission held that this test asks "whether a business faces both an actual possibility of making a profit and an actual possibility of suffering a loss. Interpreted in this way it describes the situation which is faced by real business endeavors."

Mr. Tatge argues that the ALJ's finding in this regard is inconsistent with his finding in regard to condition six concerning the satisfactory completion of services. Mr. Tatge argues that if an individual is responsible for the satisfactory completion of services, such as absorbing the cost of redoing a project, this automatically constitutes a loss as this term is utilized in this statute. Applying the conditions in this manner would render the application of these separate conditions meaningless. Condition eight relates specifically to the proof of the possibility of a profit and a loss, not whether the individual is responsible for the satisfactory completion of the services under the contract. Satisfaction of condition six does not prove that condition eight has been satisfied, as is the case here.

Condition nine requires that the individual experience recurring business liabilities or obligations. Again, the appellant argues that since Robert Rabe incurred the main expenses in the performance of his services and because condition five was satisfied, condition nine has been met. Again, these are separate conditions and to apply them in the manner argued by the appellant would render their separateness meaningless. Arguing that the only recurring business liabilities a self-employed painter typically has is owning a ladder, paint brush, drop cloths, and a truck does not satisfy the detailed requirement of establishing business liabilities and obligations that a real business endeavor would incur. Condition nine has not been met.

Condition 10 requires that the success or failure of the individual's business depends on the relationship of business receipts to expenditures. The appellant argues that the ALJ's finding in this regard is inconsistent with his finding under condition six. The appellant argues that if an individual is responsible for the satisfactory completion of services his business expenditures would soon exceed his business receipts and his business would fail.

In Quality Communications Specialist, Inc., supra, the commission held that condition ten is "intended to look at the overall course of the person's business, and that it contemplates as in any true business whether there is a potential for success and also for failure in the relationship of business receipts to expenditures." Here, the appellant failed to meet this condition by failing to submit sufficient evidence regarding Robert Rabe's business receipts vis-á-via  his business expenditures. Arguing that a self-employed painter does not have many business expenditures or business receipts is insufficient to establish the essence of this condition which is the existence of a genuine business endeavor. The appellant has failed to produce substantial and credible evidence and as such condition 10 has not been met.

Therefore, the appellant failed to prove that Robert Rabe's services met 7 of the 10 conditions enumerated in Wis. Stat. § 108.02(12)(bm); specifically, conditions one, two, three, eight, nine, and ten were not met.

Consequently, Robert Rabe performed services for the appellant/employer during the time period in question within the meaning of Wis. Stat. § 108.02(12)(a) and (bm).

cc: Attorney Kraig A. Byron

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