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

ROGER G WEGER, Employee

RURAL MUTUAL INSURANCE CO, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 08603489MW


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 makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The claimant performed services for about 20 years selling insurance for the employer, an insurance business. His last day of work was October 25, 2007 (week 43). Subsequently, he filed a claim for unemployment compensation benefits.

The issues presented include whether the claimant was eligible for certain unemployment compensation benefits which he eventually received, and if not, whether he is required to repay those benefits.
 

Benefit eligibility -- Whether a claimant is eligible for benefits under the Unemployment Compensation Act depends on, among other things, the amount of base period wages available to that claimant. Under Wis. Stat. § 108.02(4m)(a), "base period wages" are defined as:

[a]ll earnings for wage-earning service which are paid to an employee during his or her base period as a result of employment for an employer.

Whether a claimant has base period wages available to create benefit eligibility thus depends on, among other things, whether the claimant provided his or her base period services as an "employee."

In Wis. Stat. § 108.02 (12), the Act provides:

(a) "Employee" means 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, except as provided in par. (b), (bm), (c), (d), (dm), or (dn).

Given the date of his application for benefit, the claimant's base period was the third and fourth quarters of 2006 and the first and second quarters of 2007. During those quarters, the claimant did perform services for pay for Rural Mutual Insurance Company. However, under paragraph (d) of § 108.02 (12),

(d) Paragraph (a) does not apply to a contractor who, in fulfillment of a contract with an employing unit, employs any individual in employment for which the contractor is subject to the contribution or reimbursement provisions of this chapter.

The claimant employed an assistant, Lori, who answered the phone, filled out forms, and performed other assigned tasks related to the claimant's insurance sales activities. The claimant paid her approximately $1,000/month for these services. The claimant selected this assistant and decided how much to pay her. The claimant made withholding tax deductions off this assistant's pay, and he also paid unemployment taxes on her. On this basis, the commission finds and concludes that the claimant, in fulfillment of his contract with Rural Mutual, employed an individual in employment for which the claimant was subject to the contribution provisions of the UC Act, within the meaning of § 108.02(12)(d). Therefore, the claimant was not performing his base period services for Rural Mutual as an "employee" within the meaning of § 108.02(12)(a). Thus, the claimant had no base period wages, within the meaning of § 108.02(4m)(a), from Rural Mutual. Because he had no base period wages from any other employing unit, he had no eligibility for benefits under the UC Act.
 

Overpayment, waiver of recovery of overpayment - The claimant was paid benefits in the amount of $9,230 for weeks 44 through 47 of 2007 and weeks 1 through 22 of 2008. For the reasons described above, these were benefits for which the claimant was not eligible and to which he was not entitled, within the meaning of Wis. Stat. § 108.03(1).

In Wis. Stat. § 108.22(8)(c), the UC Act provides that recovery of benefits that were erroneously paid shall be waived if the overpayment was the result of a department error and was not the fault of any employer under § 108.04(13)(f) and the overpayment did not result from the fault of an employee as provided in § 108.04(13)(f) or because of a claimant's false statement or misrepresentation. To apply this provision it is necessary to determine what caused the overpayment in this case. This requires a review of the history of the claim.

As noted above, "base period wages" are defined as "all earnings for wage-earning service which are paid to an employee during his or her base period as a result of employment for an employer." This raises an issue not only as to whether the claimant provided his or her base period services as an "employee," but also as to whether the claimant provided his or her base period services in "employment". When this claim was first presented to the department, it issued a determination that the claimant's base period services were not performed in "employment," because they were in excluded employment under Wis. Stat. § 108.02(15)(k)6., which applies to insurance agents remunerated solely by commission. The claimant appealed. After hearing this appeal, an administrative law judge ("ALJ") held that the claimant's remuneration had not been solely by commission, because he had received some fixed-amount bonus payments which could not be considered "commissions". On that basis the ALJ concluded that the claimant's services performed for the employer "were covered under the Wisconsin unemployment insurance law, within the meaning of § 108.02(15)(k)6.", and that the claimant was eligible for benefits if otherwise qualified.

Rural Mutual petitioned for LIRC review from this ATD. While this petition for LIRC review was pending, the department issued another determination relating to the claimant. In his claim, he had indicated that he had been discharged; this caused the claim to be flagged with a separation issue. This issue was investigated and a determination was issued on it on February 22, 2008, concluding that the separation was not disqualifying.

No benefits had yet been paid to the claimant at this point. Then in early March, 2008, a number of checks were issued to the claimant, representing benefits for weeks 44-47 of 2007 and 1-9 of 2008.  (1) The department also continued to pay benefits to the claimant after that point.

As noted above, Rural Mutual had petitioned for LIRC review from the ALJ's decision which had held that the claimant's services had not been provided in excluded employment. In a decision issued on April 25, 2008, the commission affirmed that decision. However, it noted that the decision had been problematic because after arriving at its conclusion, it had simply reversed the determination, without recognizing that the analysis of the underlying base period wages issue also required review of the employee/independent contractor issue. The commission therefore remanded the matter to the department for a determination -- which to that point had not yet been made -- as to whether the claimant had performed his services for Rural Mutual as an "employee".

On remand, the department issued a determination on May 7, 2008 (in week 19 of 2008) that the claimant was an "employee" within the meaning of § 108.02(12), based on finding that not enough of the conditions stated in § 108.02(12)(bm) were satisfied. As noted above, the department was paying benefits to the claimant at this point. The department continued to pay benefits to the claimant after the point of this determination, for weeks through to week 22 of 2008.

Rural Mutual appealed the May 7 determination finding that the claimant was an "employee". After a hearing, another ALJ issued a decision on June 17, 2008 reversing that determination. However, this decision was not based of interpretation and application of subs. (12)(bm), as the determination had been, but instead on subs. (12)(d), relating to contractors with their own employees.

Most of the overpayment here resulted from the fact that the department began paying benefits to the claimant in early March, 2008, without ever having investigated or issued a determination on the issue of whether the claimant's services during his base period had been performed as an "employee" within the meaning of Wis. Stat. § 108.02(12). Benefits should not have been paid until that issue was resolved, because it affected the claimant's eligibility. That issue had been raised at that point, such that it should have been investigated. When the claimant first filed his claim, Rural Mutual filed a UCB-16 form asserting that the claimant was "an independent contractor ... (not employee status) paid on commissions" and "an independent contractor...paid on commissions...not an employee" (emphasis in original). Another employer Ucb-16 form was then filed, asserting that the claimant was "an independent career agent - not an employee." While these filings indicated the presence of an issue as to whether the claimant's base period services had been performed in "excluded employment" under § 108.02(15), they also clearly indicated that there was an issue as to whether the claimant had performed those services as an "employee" under § 108.02(12). These issues are legally separate and independent. The department recognized and investigated the former issue, but it did not recognize or investigate the latter issue. Had it done so, a correct determination that the claimant's base period services were not performed by him as an "employee" under § 108.02(12) would have avoided the erroneous payment of benefits which occurred. To pay benefits notwithstanding the fact that this determinative issue had not been resolved, was department error.

The payment of benefits to the claimant as just described was not the result of employer fault. As noted, the § 108.02(12) issue was raised in Ucb-16 forms filed with the department. In addition, there is nothing in the file indicating any fault on the part of the claimant, or any false statement or misrepresentation by the claimant, causing the department to miss the "employee" issue.

In addition, it should be noted that some of the overpayment also occurred as a result of a further department error. On April 25, 2008, the commission issued its previous decision in this matter noting that the issue of "employee" status under § 108.02(12) remained unresolved and remanding the matter to the department for it to investigate and issue a determination on that issue. On May 7, 2008 (in week 19 of 2008), the department issued its determination finding that the claimant was an "employee", thus allowing the payment of benefits to continue. However, as discussed above, the department's investigation and determination at this point had focused exclusively on the application of the tests in § 108.02(12)(bm). The department had not recognized, and had thus not investigated or issued a determination on, the additional relevant issue of whether the claimant was excepted from the definition of "employee" by virtue of § 108.02(12)(d). Those, too, are legally separate and independent issues. Again, benefits should not have been paid until the latter issue was resolved, because it affected the claimant's eligibility. That issue had also been raised at that point, such that it should have been investigated. In the "Claimant Statement" (form UCB-157) from the claimant, taken on May 1, 2008, the claimant stated to the department deputy that he incurred expenses for his business, "such as office expense, secretarial, office equipment, and some supplies". This indication that the claimant had "secretarial" expenses clearly raised a question about whether the claimant had a secretarial employee such that he would fall within § 108.02(12)(d), yet the department did not recognize or investigate that issue. Had it done so, a correct determination that the claimant's base period services were not performed by him as an "employee" because of the effect of § 108.02(12)(d) would have avoided the erroneous continuation of payment of benefits which occurred from that point through week 22. To pay benefits notwithstanding the fact that this determinative issue had not been resolved, was department error.

As noted above, the potential for an issue under § 108.02(12)(d) issue was raised in the "Claimant Statement" (form Ucb-157) from the claimant. Thus, there is no basis to find any fault on the part of the claimant, or any false statement or misrepresentation by the claimant, causing the department to miss the § 108.02(12)(d) issue. There is also nothing in the record indicating that the continued payment of benefits to the claimant as just described was the result of any employer fault. It does not appear that in any contacts between the deputy and the employer after the point at which the claimant had indicated that he had "secretarial" expenses, any information was requested by the deputy regarding whether claimant had his own employee(s), or that any inaccurate information in regard to that was provided by the employer to the deputy. 
 

Conclusion - For the foregoing reasons, the commission finds that the claimant was not an employee of the employer, within the meaning of Wis. Stat. § 108.02(12)(a) and (d) of the statutes.

The commission further finds that the claimant was paid benefits in the amount of $9,230 for weeks 44 through 47 of 2007 and weeks 1 through 22 of 2008, for which he was not eligible and to which he was not entitled, within the meaning of Wis. Stat. § 108.03(1).

The commission further finds that waiver of benefit recovery is required under Wis. Stat. § 108.22(8)(c), because the overpayment was not the fault of any employer under s. 108.04 (13)(f), did not result from the fault of the claimant as provided in s. 108.04 (13)(f) or because of the claimant's false statement or misrepresentation, and was the result of a departmental error.

DECISION

The decision of the administrative law judge is modified to conform with the foregoing and, as modified, is affirmed. Accordingly, the claimant was not an employee of the employer and there were no base period wages with that employer to be included in the computation of the claimant's potential benefit eligibility.

The initial Benefit Computation (Form UCB-700), issued on February 22, 2008, is set aside. If benefits become payable based on other employment, a new computation will be issued as to those benefit rights.

Recovery of the overpaid benefits in the amount of $9,230 is waived. The employee is not required to repay the overpaid benefits to the department, nor will the overpaid benefits be covered by any other means. The employer's account will be credited with the overpaid amount.

Dated and mailed October 28, 2008
wegerro . urr : 110 : 1  EE 416 EE 445 BR 335.01 Robert Hansen Trucking

/s/ James T. Flynn, Chairperson

/s/ Robert Glaser, Commissioner

/s/ Ann L. Crump, Commissioner

 

NOTE: The commission does not address the question of whether the claimant would appropriately be considered an employee of the employer under the tests of Wis. Stat. § 108.02(12)(bm), because the outcome under § 108.02(12)(d) is dispositive.


cc:
Dirk Smith
Attorney Norman D. Farnam
Attorney Dale Peterson



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Footnotes:

(1)( Back ) The missing weeks were a result of a suspension apparently arising from a failure of the claimant to meet the filing requirements in those weeks. This matter is not at issue here.


uploaded 2008/11/17