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

SPRECHER BUILDERS LLC, Employer
c/c DANIEL SPRECHER

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 573943, Hearing No. S0400075MD


An administrative law judge 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 administrative law judge. Based on its review, the commission agrees with the decision of the administrative law judge, and it adopts the findings and conclusion in that decision as its own, except that it makes the following modifications:

1. The first full paragraph on page 3 of the administrative law judge's FINDINGS OF FACT AND CONCLUSIONS OF LAW is deleted and the following paragraph is substituted therefor:

"To do the work each worker needed to provide his own tools, consisting of a level, ladder, saws, cords, and an air nailer. The employer routinely provided the building materials, including nails and lumber. The workers had to provide their own transportation and telephone, for which they received no reimbursement, and were directed to obtain their own liability insurance."

2. The third full paragraph (Test Three) on page 5 of the administrative law judge's FINDINGS OF FACT AND CONCLUSIONS OF LAW is deleted and the following paragraph is substituted therefor:

"Condition three requires that the individual maintain a separate business with his or her own office, equipment, materials or other facilities. Although the employer's witness testified that some of the named employees had business cards and business names and that he believed they performed work for others, the employer did not present any competent evidence to establish that they in fact maintained separate businesses, nor was it shown that any of the individuals in question had their own offices or other facilities, as required for the statutory factor to be met. Moreover, no firsthand evidence was presented as to the extent of their ownership of tools or other equipment, and it appears that much of the materials used by these workers was furnished by the employer. The employer failed to demonstrate that any of the eight named individuals met the statutory test."

3. The fifth full paragraph (Test Five) on page 5 of the administrative law judge's FINDINGS OF FACT AND CONCLUSIONS OF LAW is deleted and the following paragraph is substituted therefor:

"The employer's owner testified that the named individuals provided their own tools and transportation, which it contended were the main expenses related to the services performed. However, the employer could only speculate as to the expenses associated with providing those items. None of the individuals in question appeared at the hearing to explain what, if any, investment he had in tools or vehicles. Moreover, it was the employer who provided the building materials for the jobs, including nails and lumber, and there is no reason to presume that the expenses associated with these materials was minimal. It was therefore not established that any of the eight named workers incurred the main expenses related to the services performed."

4. The fourth full paragraph (Test Nine) on page 6 of the administrative law judge's FINDINGS OF FACT AND CONCLUSIONS OF LAW is deleted and the following paragraph is substituted therefor:

"The 9th test requires proof of a cost that would be incurred even during a period when the claimant was not performing services for the employer. The employer testified generally that it requires its workers to obtain liability insurance, but did not establish by competent evidence that the named workers actually held such insurance or retained it once they were no longer providing services for the employer. Further, there is nothing in the record to indicate whether the individuals in question had any vehicle expenses, telephone expenses or other recurring obligations associated with the performance of their carpentry services. The employer's speculation that they had such business liabilities or obligations is not sufficient to satisfy the statutory test."

5. The first four paragraphs on page 7 of the administrative law judge's FINDINGS OF FACT AND CONCLUSIONS OF LAW are deleted and the following paragraphs are substituted therefor:

"The employer demonstrated that seven of the eight named workers, Jason Alt, Nathan Beecher, Nathan Famiano, Jeremy Johnson, Josh Juergens, Todd Lawrence, and Gale Nelson, satisfied statutory tests 4, 6, and 7, and that Joseph Kamees additionally satisfied statutory test 1, because he provided a FEIN to the employer. However, to be considered independent contractors rather than employees, the law requires that the employer satisfy the department that the workers met 7 of the 10 enumerated statutory requirements.

"The appeal tribunal therefore finds that during the period covered by the determination the named employees each performed services for the employer as an employee, within the meaning of Wis. Stat. § 108.02(12)(a) and (bm)."

6. The DECISION paragraph is deleted and the following paragraph is substituted therefor:

"The department initial determination is reversed. Accordingly, the employer is liable for additional contributions for the services of Jason Alt, Nathan Beecher, Nathan Famiano, Jeremy Johnson, Josh Juergens, Todd Lawrence, Gale Nelson, and Joseph Kamees."


DECISION

The decision of the administrative law judge is modified in part and, as modified, is affirmed in part and reversed in part. Accordingly, the employer is liable for additional contributions for the services of Jason Alt, Nathan Beecher, Nathan Famiano, Jeremy Johnson, Josh Juergens, Todd Lawrence, Gale Nelson, and Joseph Kamees. This matter is remanded to the department for recomputation of the appellant's additional contribution liability consistent with this decision.

Dated and mailed June 30, 2006
spreche . smd : 164 : 8  EE 410

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner


MEMORANDUM OPINION

In the petition for commission review the employer argues that a self-employed business owner is not required to have a federal identification number. However, while it may be true that an FEIN is not required, the statute allows for flexibility with no one factor considered to be mandatory. If the employer can satisfy the department that seven of the remaining nine statutory factors have been satisfied, the individual will be considered self-employed notwithstanding the absence of an FEIN.

The employer also argues that it has spoken with these individuals and they did file self-employment taxes for the year in question. However, it was the employer's burden to demonstrate that the individuals in question filed self-employment taxes by presenting some evidence of this at the hearing. The commission is unable to base any findings on the employer's after-the-fact assertion that it has been told taxes were filed.

Next, the employer argues that the individual contractors could realize a profit based on the way they bid the job in that, if they bid the job expecting it to take three weeks and were able to complete it sooner, they would be able to start another job. However, this factor encompasses more than the simple possibility of being able to finish a job ahead of schedule. It contemplates an investment in the completion of the project on the part of the subcontractor. Where there is nothing in this record to indicate that the employees were subject to any genuine entrepreneurial risk, the commission agrees with the appeal tribunal that the employee's could not realize a profit or suffer a loss under contacts to perform services.

Finally, with respect to factor 10, the employer argues that damaged materials are the responsibility of the individual and can result in amounts not being paid. However, with the possible exception of a scenario in which a third party had to be hired to repair inadequate work because the worker responsible could not fix it himself, there is nothing in the record to establish that the named individuals would ever be paid less than what they contracted for. Moreover, factor 10 assumes the existence of a business with a significant investment that is put at risk, a matter which was simply not proved at the hearing. It is unclear whether any of the named workers faced the prospect of a significant period of time in which they could have business expenditures without receipts, nor was it established that there was any real potential for success or failure through the growth or loss of the value of their investments. The commission, therefore, agrees with the appeal tribunal that the employer did not demonstrate this statutory factor was met.

Based upon its independent review of the record, the commission disagrees with the appeal tribunal's assessment that those factors which require a showing of business investments, facilities, and equipment have been met. While the employer testified that workers had to have their own tools and speculated as to the possible value of the tools the individuals might own, the record contains no competent evidence to indicate whether any of the named individuals actually owned their own tools or to establish what type of investment in tools they may have had. The employer also had no firsthand knowledge as to whether any of the named individuals owned their own vehicles, nor could it establish whether the vehicles in question were personal vehicles used to drive to and from a job, as would be the case for most employees, or whether they were used more specifically in conjunction with the services performed. Similarly, while the employer made reference to telephone expenses, it was not established that any of the named individuals had telephone expenses specifically associated with their performance of carpentry and construction services. In addition, while the employer's owner testified that he directed the workers to obtain liability insurance, there is nothing in the record establishing that the named individuals actually purchased and maintained such policies, nor is there any evidence as to other recurring business expenses or obligations they may have had. Finally, the record is silent with respect to whether any of the named workers had their own offices or other facilities used in conjunction with a business. Under the circumstances, the commission finds no support in the record for a conclusion that factors 3, 5, or 9 were satisfied, and it has modified the appeal tribunal decision accordingly.

The result of these modifications is that Joseph Kamees, who was narrowly deemed to have performed his services in self-employment based upon the fact that he was the only worker shown to have had an FEIN, must now be considered an employee of the employer. While the commission recognizes that the employer's arguments on appeal were limited to the seven workers who were found to be employees, the commission's jurisdiction extends to all eight workers covered by the decision, and it is compelled to apply the law consistently to all of these individuals. Because the commission is unable to distinguish Mr. Kamees' situation from that of the other workers based upon this record, it has reversed the portion of the decision which found Mr. Kamees to be self-employed. The commission's reversal is as a matter of law, and does not depend upon any assessment of witness credibility. Therefore, no credibility conference with the administrative law judge was held.

cc: Michael J. Mathis


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uploaded 2006/07/03