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

ANTHONY J ENDRES, Employee

FEDEX GROUND PACKAGE SYSTEM INC, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 06200751EC


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, the claimant has no base period wages available through the employer.

Dated and mailed November 3, 2006
endrean . usd : 115 : 1  ER 460  EE 409  EE 421

James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

MEMORANDUM OPINION

Briefly, the claimant (Endres) performed services as a FedEx package delivery driver in a defined geographical area (route).

Endres began performing these services in July of 2003. Shortly thereafter, after consulting an accountant, Endres formed Endres Companies, Inc., a subchapter S corporation. The claimant did not notify the putative employer (FedEx) that he had incorporated until approximately July of 2004.

Endres's relationship with FedEx was governed by an annual contract. The parties to the original contract were FedEx and Endres. Once Endres notified FedEx that he had formed a subchapter S corporation, the contract was amended. The parties to the amended contract were FedEx and Endres Companies, Inc. The central terms of this contract were not negotiated by the parties but instead imposed by FedEx. The contract was renewed annually.

Endres Companies, Inc., received payments for the delivery services performed by Endres from FedEx, paid Endres a salary for performing these services, and established an unemployment insurance account with the department based on the services performed by Endres. When the contract between Endres Companies, Inc., and FedEx was terminated in February of 2006, Endres applied for and received unemployment benefits from the Endres Companies, Inc. account.

Endres hired another driver (Bennett) to substitute for him on occasion at the rate of $225 per day. Endres determined this rate.

Wisconsin States § 108.03 provides that unemployment benefits "shall be paid to each unemployed and eligible employee from his or her employer's account..."

Wisconsin Statutes § 108.02(12(a) defines an employee as "any individual who is or has been performing services for pay for an employing unit, whether or not the individual is paid directly by the employing unit..."

Corporations are not "individuals" within the meaning of Wis. Stat. § 108.02(12)(a). Wisconsin Cheese Services, Inc. v. DILHR and LIRC, 108 Wis.2d 482, 322 N.W.2d 495 (Ct. App. 1982).

The corporate status of claimants has been disregarded if the putative employer, in order to avoid contributing to the unemployment insurance system, has induced a claimant, either expressly or constructively, to incorporate. Wisconsin Cheese, supra.

The administrative law judge (ALJ) credited the testimony offered by FedEx that the only advice it gave the claimant and its other delivery drivers was to retain the services of an attorney or an accountant in order to determine what type of business structure would best meet the claimant's needs.

The commission finds no persuasive basis in the record for overturning this credibility determination.

First, there were inconsistencies in the claimant's testimony in this regard. Endres first testified (see page 23 of synopsis) that FedEx "recommended" that he incorporate and provided him a list of accountants to perform this service for him, and, based on this, he "felt" that he had to incorporate in order to work as a delivery driver for FedEx. Endres later testified (see page 27 of synopsis) that he had been told that he could not work for FedEx unless he set up a corporation.

In addition, Endres's testimony that he had been told he could not work for FedEx unless he incorporated is not credible. The record shows not only that FedEx permitted Endres to perform services as a delivery driver for a year before it had reason to be aware that he had incorporated, but also that more than one-third of the FedEx delivery drivers working out of the same region as Endres had not incorporated. The Wisconsin Court of Appeals, in Wisconsin Cheese Services, Inc. v. DILHR and LIRC, 115 Wis.2d 573, 340 N.W.2d 908 (Ct. App. 1983) (1)   relied upon the fact that certain drivers had not incorporated to discredit LIRC's finding that the claimant drivers had been pressured to incorporate by threats that, if they did not, their contracts would be terminated.

Endres also appears to be arguing that he did not realize the implications of forming, and contracting with FedEx through, Endres Companies, but instead relied upon his accountant's advice that incorporating would work to his advantage. However, in the absence of evidence that FedEx improperly influenced the advice given by the accountant to Endres, the actions of the accountant are imputed to Endres. Here, the record does not show that FedEx selected the accountant, referred Endres to the accountant, or even had any contact with the accountant.

Finally, it has been held to violate sound public policy for individuals who have accepted the advantages derived from incorporating to be permitted to shed this legal status when it works to their disadvantage. See, e.g., Jonas v. State, 19 Wis. 2d 638, 644, 121 N.W.2d 235, 239 (1963) (those who create a corporation in order to enjoy the advantages flowing from its existence as a separate entity cannot ask that such existence be disregarded where it works to disadvantage them); Stebane Nash Co. v. Campbellsport Mutual Insurance Co., 27 Wis.2d 112, 133 N.W.2d 737 (1965); Rauch v. Officine Curioni, S.P.A et al., 179 Wis.2d 539, 508 N.W.2d 12 (Ct. App. 1993).

Endres has failed to establish that the corporate veil should be pierced here. As a result, Endres does not qualify as an employee within the meaning of Wis. Stat. § 108.02(12)(a).

The commission notes that certain of the information provided by the claimant in his briefs is not part of the hearing record and was not, as a result, considered by the commission in reaching its decision.

cc:
Attorney Joni M. Thome
Fedex Ground Package Systems, Inc.
Attorney Dean F. Kelley



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Footnotes:

(1)( Back ) This decision was issued after the Wisconsin Supreme Court, upon accepting Wisconsin Cheese Services, Inc. v. DILHR and LIRC, 108 Wis.2d 482, 322 N.W.2d 495 (Ct. App. 1982) for review, remanded the matter to the Wisconsin Court of Appeals.

 


uploaded 2006/11/06