In the matter of the contribution liability or
status, under chapter 108, Wis. Stats., of
JOHN SCHIMMER, Appellant
d/b/a JOHN SCHIMMER VEAL
An administrative law judge for the unemployment compensation division of the department of industry, labor and human relations issued a decision in this matter on April 27, 1993. A timely petition for commission review of that decision was filed by the department. The commission has considered the petition and the positions of the parties, and it has reviewed the evidence which was submitted to the administrative law judge.
Section 108.09(6)(b), Stats., applicable herein by virtue of sec. 108.10(3), Stats., provides that in any case before the commission for review, the commission may affirm, reverse, modify or set aside the decision on the basis of the evidence previously submitted, may order the taking of additional evidence as to such matters as it may direct, or may remand the matter to the department for further proceedings.
Based on its review, the commission has decided to exercise this authority to reverse the decision of the administrative law judge in this matter. On this basis, the commission now makes the following:
Prior to September 1990 John Schimmer ("Schimmer") operated a veal growing business as an unincorporated sole proprietor, doing business as "John Schimmer Veal." Schimmer was assigned UC Account No. 420887.
In January 1990 the department issued determinations that Schimmer was subject to the UC Act effective January 1, 1987 and that he had a contribution liability for calendar quarters 2/87 through 4/88. Schimmer appealed these determinations, asserting that individuals on the basis of whose services the contribution liability was determined were independent contractors rather than employes. However, the determinations were affirmed by an appeal tribunal. Schimmer then appealed to the commission.
In September 1990, while his appeal of the determinations of subjectivity and contribution liability were pending before the commission, Schimmer incorporated his business under the name "John Schimmer Veal, Inc." ("JSV, Inc."), and this newly-created entity was assigned UC Account No. 454172.
On November 23, 1990 the commission issued its decision, which affirmed the finding that the persons at issue were employes and not independent contractors. That decision was not appealed and has now become final.
On September 19, 1991, the department issued a determination of the contribution liability of Schimmer for calendar quarters 1/89 through 3/90, the seven calendar quarters which immediately followed the calendar quarters covered by the first contribution liability determination, and which immediately preceded Schimmer's incorporation. The contribution liability thus determined was in the amount of $15,605.41.
On October 1, 1991 the department issued a determination that JSV, Inc. was a mandatory successor to the UC account of Schimmer under sec. 108.16(8), Stats. and that the extent of the transfer was total. This determination of successorship and total transfer was not appealed and has become final. Thus, JSV, Inc. became jointly liable with Schimmer (in his individual capacity) for the contribution liability determined for Schimmer for calendar quarters 1/89 through 3/90.
JSV, Inc. filed a timely appeal of the October 1, 1991 determination of the contribution liability of Schimmer for calendar quarters 1/89 through 3/90. It asserted that certain individuals on the basis of whose services the contribution liability was determined were independent contractors rather than employes. (1) Whether this is so, is the issue to be determined herein.
The persons whose status was at issue in the first contribution liability case (covering calendar quarters 2/87 through 4/88, or April 1, 1987 through December 31, 1988) were what Schimmer refers to as "veal growers." The persons whose status is at issue in the case now before the commission for review (covering calendar quarters 1/89 through 3/90, or January 1, 1989 through September 30, 1990) are also "veal growers" for Schimmer. These veal growers either own or rent facilities suited to raising veal calves. Schimmer provides these persons with veal calves owned by him, and they then care for them in their facilities during the 16 or 17 week "cycle" required to bring them to market weight. Schimmer provides the growers with feed and medicine without charge. Schimmer also provides the growers with a weekly cash payment based on the number of calves kept during that week. At the end of the "cycle" Schimmer has the calves sold.
Schimmer and JSV, Inc. have neither proved nor even claimed that the relationship between Schimmer and his veal growers in the period of January 1, 1989 through September 30, 1990, was any different from the relationship between Schimmer and his veal growers in the immediately preceding period of April 1, 1987 through December 31, 1988 . One of the two growers who testified in this matter, and whose testimony Schimmer and JSV, Inc. stipulated could be taken as representative of all of the growers at issue, stated that he had been growing veal for Schimmer for 4 years and that his arrangement with John Schimmer Veal had always been the same. Additionally, substantial parts of the documentary evidence offered by JSV, Inc. herein are the same materials which Schimmer attempted unsuccessfully to submit to the commission in the previous case (and which were rejected because they had not been submitted to the administrative law judge and did not qualify as newly discovered evidence)
In view of the failure by Schimmer and JSV, Inc. to prove or even claim that there has been any legally significant change in the relationship between Schimmer and the growers since the period covered by the previous decision, the commission concludes that Schimmer and JSV, Inc. are collaterally estopped by the previous decision from claiming that the veal growers at issue herein performed their services other than as employes.
In the alternative, even if Schimmer and JSV. Inc. are not collaterally estopped from claiming that the veal growers at issue herein performed their services as independent contractors, the commission finds that the record is inadequate to carry their burden of proof on that point.
The contract entered into between Schimmer and the veal growers provides that Schimmer has the right to inspect and enter the growers' facility at reasonable times to determine the health and condition of the calves and that if Schimmer determines in his discretion that the calves are not being properly raised or that the facility is "no longer conducive for proper veal raising", Schimmer may remove the calves. Schimmer's representatives in fact visit the facilities of the growers as often as once a week and during the 16- to 17-week "cycle" they may spend as much as 25 to 30 hours at any one grower's facility. The absolute discretion Schimmer possesses to remove the calves lends significance to these inspections. When considered together with the fact that Schimmer provides not only the feed but also a feeding schedule as a "guideline," and a recommended group veterinary treatment plan and medications, it becomes apparent that Schimmer's degree of oversight is significant. Finally, one of the growers who Schimmer stipulated could be taken as representative of all of the growers, testified that it was "a requirement" that growers fill out a weekly report (Exh. 2, p. 21), which reports day by day on feed and medication application and other developments. Whether or not it is common for Schimmer to actually exercise this authority and enforce these requirements, it is clear that he has retained authority to do so. Based on this and the other evidence in the record, the commission finds as a matter of fact that the persons performing services for Schimmer as veal growers have not been free from the employing unit's control or direction over the performance of their services both under their contracts and in fact.
The commission also finds as a matter of fact that the persons performing services for Schimmer as veal growers have not performed those services in independently established trades, businesses or professions in which those individuals customarily engaged. Of the two veal growers who Schimmer stipulated could be treated as representative of all of those at issue, both had been raising veal calves exclusively for Schimmer, one for at least 4 years, the other for the entire course of her veal raising career. While they have capital investment in their facilities, that capital investment is not put at risk by their decision to raise veal calves for Schimmer. The significant capital investment, which is the one truly placed at risk by this activity, is the investment of cash in the purchase of calves, feed, and medications -- and this investment is made by Schimmer. If the calves bring less upon sale than it cost (in calf purchase price, feed and medication costs, and weekly payments to growers) to raise them, it is Schimmer who loses money, not the growers. Even in the event of such a loss, they will retain the weekly allotment which Schimmer paid them to raise his calves. That weekly allotment, which can be significant (in Sather's case, $3.25 per calf over a 17 week cycle for a barn with 200 calves would yield over $11,000), is in effect nothing more than payment for the growers' services, free from the risks of variation in the market price for veal. Based on this and on the other evidence in the record the commission makes its finding that Schimmer failed to shoulder the burden of proving the "independently established business" prong of the test for independent contractor status.
The department has agreed that certain payments made to Thomas Hansen which were treated as payment for services rendered in employment were actually in the nature of rent only. On this basis they will be ordered excluded.
The commission therefore finds that the individuals in the above-referenced audit, except for those explicitly noted as excluded, performed services for Schimmer as "employes" within the meaning of sec. 108.02(12), Stats.
The decision of the appeal tribunal is reversed. Accordingly, Schimmer and JSV, Inc. are liable for unemployment compensation contributions as more particularly set forth in the initial determination, except that no contributions are due on payments made to Thomas Hansen as described above. This matter is remanded to the department for redetermination of the amount of defined payroll and interest for the period in question based on the exclusion of the payments to Thomas Hansen.
Dated and mailed January 31, 1994
110 : cd5570 EE 412 EE 413 PC 770 PC 749
/s/ Pamela I. Anderson, Chairperson
/s/ Richard T. Kreul, Commissioner
/s/ James R. Meier, Commissioner
JSV, Inc. asserts that. collateral estoppel should not apply in this case because "the parties have changed" in that John Schimmer incorporated, because "the makeup of the growers have (sic) substantially changed", and because "the facts are substantially different from those of the prior decision" ( Brief of JSV, Inc., p. 3). It also argues that the department may not rely on collateral estoppel offensively. The commission finds these arguments unpersuasive.
John Schimmer was a party in the previous case. He is also a party in this case, as has been clearly indicated by the captions and notices which have been issued. It is appropriate for him to be a party in the present proceeding, since it concerns the contribution liability that exists for UC Account No. 420887, which is his UC account, established for his sole proprietorship. The fact that he has since incorporated does not relieve him of liability he incurred while he was doing business as a sole proprietor.
JSV, Inc. was not a party in the previous case, since it was not in existence at the time and since that case in any event concerned contribution liability for time periods predating the creation of JSV, Inc. However, JSV, Inc. was determined to be a successor to the UC account of John Schimmer, such that it also became jointly liable (with Schimmer) for contributions due thereunder. As a successor to Schimmer's UC account, JSV, Inc. is in privity with Schimmer. It is subject to preclusion by prior decisions affecting Schimmer to the same extent that Schimmer is. Because of this, the preclusiveness of the previous decision can be invoked by the department offensively.
The meaning of the claim that the "makeup" of the growers has substantially changed is not clear, but the commission will assume that what Schimmer was intending to argue was that some of the persons whose status was at issue in the last case are not involved here and, conversely, that there are also some veal growers whose status is at issue here who were not involved in the last case. The commission considers this turnover to be irrelevant in the circumstances presented here. Schimmer has neither proven nor even claimed that any new veal growers have a relationship with him which is of a different type from the relationships he had with the veal growers in the previous case, which were found to be relationships of employment.
The claim that the facts are substantially different from those of the prior decision is unpersuasive. It reflects a fundamental misapprehension of the significance of preclusion doctrines such as collateral estoppel. Schimmer is not actually claiming that the facts have changed. Rather, he is claiming that the real facts are different from those described in the first decision because the first decision was wrong. However, because he (and his privy, JSV, Inc.,) are bound by that first decision, he will not be heard to make this claim. He is bound to accept the finding, that the nature of the relationship he had with his growers during the period that decision covered was such that they did not perform their services free from his direction and control and such that they were not providing their services in an independently established trade, business or profession in which they customarily engaged. Whether these tests are met are questions of fact. Sears, Roebuck.. Co. v. DILHR, 90 Wis. 2d 736,744, 280 N.W.2d 240, 243 (1979) . Thus the facts are that up until the end of 1988 the veal growers were Schimmer's employes. Because he has not asserted that the nature of his relationship with the growers changed in any material way since the end of 1988, he cannot assert that the facts concerning their status are different.
The administrative law judge indicated, in a cover sheet appended to the synopsis of testimony which was prepared for the commission's review, that he did not consider credibility to be an issue in this case. The commission agrees. Its different findings on the ultimate factual questions, of whether the persons at issue were subject to the employer's direction and control and whether they provided services in an independently established trade, business or profession in which they customarily engaged, were not the product of any different assessment of any witnesses' credibility and for that reason it was not necessary for the commission to consult with the administrative law judge concerning his impressions of the credibility of witnesses based on observation of their demeanor.
cc:
George Jelich
Attorney Russ R Mueller
Attorney David P Jenkins
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