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

SURE VALUE AUTO SALES INC, Employer

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 018271, Hearing Nos. S0500191MD, S0800027MD


An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development, after hearing conducted on May 10, 2006, issued a decision in Hearing No. S0500191MD on October 13, 2006. A timely petition for commission review of that decision was filed by the putative employer (Sure Value).

On February 12, 2007, the commission issued a decision affirming the ALJ's decision with modifications.

The commission's decision was appealed to the circuit court of Marathon County (1), which issued the following order, based on the parties' stipulation:

1. The findings and conclusions of the defendant, Labor and Industry Review Commission, (LIRC) in its February 12, 2007 decision that Mark Stillman did not meet the criteria of Wis. Stat. § 108.02(12)(bm)2. be vacated.

2. The findings and conclusions of LIRC that Mark Stillman performed his services for plaintiff during 2004 and 2005 as an employee be also vacated and set aside.

3. This matter be remanded to the defendant, LIRC, with the direction that further testimony be taken and received regarding whether Mark Stillman filed a self-employed or business income tax return based on services for plaintiff during 2005 and that after such testimony defendant, LIRC, issue a new decision in this matter or an amended decision concerning whether Mark Stillman met the criteria of Wis. Stat. § 108.02(12)(bm)2. and consequently whether his services for plaintiff were performed as an employee within the meaning of the Wisconsin Unemployment Insurance Law during 2005.

Consequently, the commission issued the following order on November 20, 2007:

The Labor and Industry Review Commission, pursuant to court order, hereby sets aside its decision of February 12, 2007, and remands this matter for further hearing, and for a decision, by an administrative law judge, relating solely to whether Mark Stillman met the criteria of Wis. Stat. § 108.02(12)(bm)2. in regard to the services he performed for Sure Value during 2005.

The remand hearing was conducted on February 26, 2008. As a result of this hearing, and pursuant to the commission's remand order, on March 13, 2008, an ALJ issued a decision in Hearing No. S0800027MD finding that Mark Stillman did not meet the criteria of Wis. Stat. § 108.02(12)(bm)2.

The commission has considered the positions of the parties, and it has reviewed the evidence submitted to the ALJ in both the original (May 10, 2006) and remand (February 26, 2008) hearings. Based on its review, the commission agrees with the decisions of the ALJ, and it adopts the findings and conclusion in those decisions as its own, except that it makes the following modifications to the decision in Hearing No. S0500191MD:

1. The third paragraph on page 6 of the ALJ's decision is deleted and the following substituted:

The evidence of record does not show that Mike Stillman warranted his repair work or otherwise was responsible for correcting any unsatisfactory work and, as a result, condition 6. is not satisfied as to him.

2. The final paragraph on page 6 of the ALJ's decision, which continues onto page 7, is deleted and the following substituted:

The cost of buyers' licenses incurred by Mark Stillman and Steve Bahr, as well as the utility-in-lieu-of-rent costs incurred by Mike Stillman, constitute continuing business liabilities or obligations within the meaning of condition 9.

3. The second and third full paragraphs on page 7 of the ALJ's decision are deleted and the following substituted:

The record does not show that either Mark Stillman or Steve Bahr had put a significant investment at risk with the potential for meaningful growth or potential loss, and, as a result, condition 10. is not satisfied as to them. In contrast, Mike Stillman's significant investment in tools, equipment, and parts, which could be put at risk if he did not attract sufficient repair business, satisfies condition 10.

DECISION

The decisions of the administrative law judge, as modified, are affirmed. Accordingly, this matter is remanded to the department to calculate Sure Value's liability for tax contributions and interest consistent with this decision.

Dated and mailed July 29, 2008
sureval . smd : 115 : EE 410 EE 410.01 EE 410.02

/s/ James T. Flynn, Chairperson

/s/ Robert Glaser, Commissioner

/s/ Ann L. Crump, Commissioner

MEMORANDUM OPINION


Briefly, various individuals provided services during 2004 and 2005 for the putative employer (Sure Value), a vehicle sales business. The evidence of record, however, only includes information as to four of these individuals (Mark Stillman, Mike Stillman, Steve Bahr, and Noah Khaslo).

Mark Stillman and Steve Bahr would identify used vehicles at auction, bring them to Sure Value's attention, purchase them on behalf of Sure Value, complete necessary repairs, advertise the vehicles, and split any profit or loss with Sure Value once the vehicle was sold.

Mike Stillman operated a vehicle repair shop in a building he effectively rented from Sure Value's owner by paying the electric bill and providing the heat, and spent about 10% of his time repairing vehicles for Sure Value.

The record shows that these individuals, within the meaning of Wis. Stat. § 108.02(12)(a), provided services for pay for Sure Value and, as a result, a presumption that they did so as employees is created. It is the putative employer's burden to rebut this presumption by showing that these individuals satisfied at least 7 of the 10 conditions set forth in Wis. Stat. § 108.02(12)(bm). See, Dane County Hockey Officials, UI Hearing No. S9800101MD (LIRC Feb. 22, 2000); Quality Communications Specialists, Inc., UI Hearing Nos. S0000094MW, etc. (LIRC July 30, 2001).

Noah Khaslo

Noah Khaslo drove vehicles to and from auctions for Sure Value, did not perform similar work for others, was reimbursed by Sure Value for his expenses, and was occasionally paid by Sure Value an amount exceeding these expenses.

There is insufficient evidence in the record to permit a meaningful analysis of Noah Khaslo's status as an employee or independent contractor and, as a result, the presumption that he provided services to Sure Value as an employee during the relevant time period has not been successfully rebutted.

Mark Stillman and Steve Bahr

Other than in regard to condition 2., Mark Stillman and Steve Bahr were similarly situated. As to this condition, the record shows that Steve Bahr filed a self-employment income tax return for 2005 (neither he nor Bahr performed services for the employer in 2004) which included payments he had received for services performed for Sure Value. Steve Bahr satisfied condition 2. as a result.

In contrast, the original self-employment income tax return filed by Mark Stillman for 2005 did not include payments he had received for services performed for Sure Value. Since the applicable statutory language (Wis. Stat. § 108.02(12)(bm)2.) requires that a qualifying return be filed "based on" services performed for the putative employer, condition 2. was not satisfied by Mark Stillman through this return.

At the remand hearing, Sure Value offered Mark Stillman's amended 2005 federal income tax return, which, in Schedule C, reflected the amount he had received from Sure Value during 2005. However, this return, although signed by Mark Stillman's H&R Block tax preparer, had not been signed or filed by Mark Stillman, the taxpayer. Condition 2.. requires that the business or self-employment income tax return have been filed with the federal internal revenue service and, since the record does not establish this in regard to Mark Stillman's amended 2005 return, condition 2. is not satisfied.

The record shows that neither Mark Stillman nor Steve Bahr held or applied for a FEIN and did not, as a result, satisfy condition 1. Although Sure Value's petition includes a handwritten statement in which Mark Stillman represents that he has a FEIN and sets forth its number, this is inconsistent with his sworn hearing testimony (see page 39 of synopsis) that he "did not have or apply for" a FEIN. The only explanation which would harmonize his hearing testimony and his handwritten statement is that he acquired this FEIN after the hearing.

Even though no time period or deadline is stated in the statutory language, by its use of the present tense, the most reasonable interpretation would be that any qualifying FEIN acquisition or application have certainly occurred no later than the date the hearing record is created, and probably no later than the department audit/adjudication or even the date the tax return for the relevant time period is completed or due(2). As a result, even if further hearing were appropriate to permit Sure Value the opportunity to offer evidence as to Mark Stillman's recent acquisition of a FEIN, which, in the commission's opinion, it is not, the fact that he made application and acquired the FEIN after the hearing record was closed would preclude a finding that he satisfied condition 1. for purposes of this matter.

Condition 3. was not satisfied as to either Mark Stillman or Steve Bahr. Neither of them testified that they maintained a separate office or even a separate space in their homes dedicated to a business purpose, that any tools or equipment they possessed were devoted to performing the services at issue, or that they performed similar services for other entities or advertised their availability for doing so.

Condition 4. requires multiple contracts for services performed outside the control of the putative employer. Both Mark Stillman and Steve Bahr negotiated at arm's length separate contracts with Sure Value for each vehicle purchase/sale, and both operated independently in performing their services under these contracts.

Although not specifically articulated in the hearing record, it is reasonably apparent that the "main expenses" related to the services performed under these contracts, for purposes of condition 5., would be the cost of driving to and from the vehicle auctions, repairing the vehicles, and advertising the vehicles for sale. These costs, other than those for vehicle insurance and certain licenses, were borne by Mark Stillman and Steve Bahr. Although Sure Value's insurance and license costs were not specified in the record, it would be a reasonable, if not necessary, conclusion that the relevant expenses of Mark Stillman and Steve Bahr significantly exceeded those of Sure Value, and that both met this condition as a result.

It is implicit from the evidence of record that, in addition to the factors mentioned by the ALJ in concluding that condition 6. was satisfied here, Mark Stillman and Steve Bahr effectively warranted their vehicle repair work and, during the limited warranty period following a vehicle's sale, shared financial responsibility with Sure Value for any warranty work required to be carried out.

In regard to condition 7. both Mark Stillman and Steve Bahr were paid by Sure Value for their services on a qualifying commission basis.

There is a very realistic possibility, within the meaning of condition 8., that both Mark Stillman and Steve Bahr could realize a profit or suffer a loss under their contracts with Sure Value, and, in fact, they had done both.

Mark Stillman and Steve Bahr satisfied condition 9. which requires recurring business liabilities or obligations. Both of them were responsible for purchasing and holding buyers' licenses. Even though these licenses cost only about $10 annually, it is not the cost of the continuing business obligation, but instead the fact of such obligation, which controls. See, Quality Communications Specialists, Inc., UI Hearing Nos. S0000094MW, etc. (LIRC July 30, 2001)("recurring business liabilities or obligations" test does not involve a quantitative comparison).

The commission has interpreted condition 10. as intending to examine the overall course of an individual's business, rather than the particular course of an individual service or an individual contract. See, Quality Communications Specialists, Inc., supra.; Harlan Mrochinski, UI Hearing No. S0100001WR (LIRC July 15, 2004)(condition 10. requires that a significant investment is put at risk and there is the potential for real success through the growth in the value of the investment and for real failure in the sense of actual loss of the investment). Here, the record does not show that either Mark Stillman or Steve Bahr had any significant investment, for example, in tools, equipment, facilities, or offices devoted solely to a business purpose, and their relatively small recurring expense for a buyer's license could be readily discontinued if they ceased performing services for Sure Value. As a result, they did not satisfy condition 10. See, Thomas Gronna (The Floor Guys), UI Hearing No. S9900063WU (LIRC Feb. 22, 2000).


To summarize, during the relevant time period, Mark Stillman was shown to satisfy only 6 of the 10 conditions and, as a result, performed services as an employee; and Steve Bahr was shown to satisfy 7 of the 10 conditions and, as a result, performed services as an independent contractor. Although it may seem incongruous for different results to be reached as to individuals with seemingly identical relationships with the putative employer, Mark Stillman, unlike Steve Bahr, failed to satisfy condition 2. because he failed to include his earnings from Sure Value in the Schedule C he filed for 2005, or to establish that he filed the amended 2005 return which included such earnings. As a result, given the statutory language at issue, the distinction is a proper one.

Mike Stillman

Mike Stillman, Mark's brother, performed repairs on vehicles, 10% of the time for Sure Value and 90% of the time for others.

There is no evidence that Mike Stillman held or applied for a FEIN, or that he filed self-employment income tax returns. As a result, the record does not show that conditions 1. or 2. were satisfied.

Mike Stillman had his own vehicle repair office/facility in which he used his own tools and equipment. The fact that he performed repair services for entities/individuals other than Sure Value further supports the existence of a separate business within the meaning of condition 3, i.e., an enterprise created and existing separate and apart from the relationship with the putative employer. See, Prince Cable, Inc., UI Hearing No. S9900227MW (LIRC Feb. 23, 2001).

Mike Stillman performed vehicle repair services pursuant to multiple contracts with Sure Value and with his other repair customers, and controlled the manner and method by which these repairs would be carried out. As a result, condition 4. is satisfied.

Mike Stillman incurred expenses for rent, tools and equipment, and parts, the main expenses related to the services he performed under contracts with his customers, including Sure Value, and therefore satisfied condition 5.

The record does not show that Mike Stillman was responsible for the satisfactory completion of the services he performed and was liable for any failure to satisfactorily complete such services within the meaning of condition 6. The ALJ apparently based her findings/conclusion in this regard on her knowledge of the typical practice in the vehicle repair industry. However, there is no evidence in the record as to the practice in the industry generally or as to Mike Stillman's practice in particular, and it would be inappropriate to base a finding/conclusion on conjecture only.

The record shows that Mike Stillman receives compensation for the vehicle repair services he performs on a per-job basis as required for condition 7.

The services performed by Mike Stillman satisfied condition 8., i.e., he could suffer a profit if the estimate he provided to a customer exceeded the cost of parts/rent/equipment expenses, or he could suffer a loss if the estimate did not cover such costs.

In regard to condition 9., Mike Stillman had continuing business obligations for the heat and electric utility costs he paid in lieu of rent.

Finally, Mike Stillman had a significant investment in facility-related costs, and in tools, equipment, and parts, which would be at risk if he did not attract enough repair business. As a result, condition 10. would be satisfied.

To summarize, Mike Stillman satisfied 7 of the ten conditions and, as a result, performed services as an independent contractor during the time period relevant here.

The commission finally notes that Sure Value relied upon facts in its petition which are not in the hearing record and which the commission may not, as a result, rely upon in reaching its decision.

 

cc: John Iwaszczenko Jr.



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Footnotes:

(1)( Back ) Sure Value Auto Sales, Inc. v. LIRC and DWD, Case No. 07-CV-241 (Wis. Cir. Ct. Marathon Co.)

(2)( Back ) Note that the department took this view as well in a 1998 ATD (In the Matter of Universal Strap, Inc., UI Hearing No. S98000284MW, Nov. 12, 1998)(retroactive application for a FEIN does not satisfy condition 1).

 


uploaded 2008/08/20