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

KIMBERLY T. COOK, Employee

FIRST CHOICE TALENT & MODELING AGENCY INC, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 08403011AP


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

Background -- The claimant worked full-time as an employee at Alta Resources performing data entry and customer service. After she was laid off from that job in 2008, she filed a claim for unemployment insurance benefits in week 43 of 2008 (the week ending October 25, 2008). At that time she informed the department that in addition to Alta Resources, she had previously performed services for pay for two other entities, one of them being First Choice Talent & Modeling Agency, Inc. (hereinafter "First Choice"), the putative employer herein. (1)

The information provided to the department did not indicate that the claimant had performed any services for pay for First Choice during her base period, which was the third calendar quarter of 2007 through the second calendar quarter of 2008. Thus, no issue was presented as to whether the claimant had received any pay from First Choice which would, if her services had been performed as an employee, be "base period wages" affecting her benefit rate. However, because of the possibility that the claimant might again perform services for First Choice, during her benefit year, in which case she would be required to report pay for such services if they were performed by her as an employee, the department investigated that question.

Based on its investigation, the department issued a determination that the claimant's services for First Choice were performed by her as an employee, and that she would therefore be required to report any such earnings which she might receive in the future, as they were earned, when making weekly benefit claims. The determination noted that it was issued under Wis. Stat. § 108.09 and only resolved an issue relating to the claimant's eligibility for benefits, and pursuant to Wis. Stat. § 108.101 would not be binding on any issue of whether First Choice was required to pay contributions (UI payroll taxes) on any amounts it paid to the claimant.

The department's determination in this case had no actual practical effect on any material interests of First Choice, in that there was no possibility of any charge being made against First Choice's UI account for benefits paid to the claimant since First Choice was not a "base period" employer, and in that the determination did not require First Choice to pay contributions (UI payroll taxes) on any amounts it paid to the claimant, and would not have been binding in any separate proceeding in which its UI tax liability might be at issue. Nevertheless, First Choice appealed the determination.

After a hearing at which First Choice appeared by its president and the claimant appeared in person, the administrative law judge issued an Appeal Tribunal Decision affirming the determination. First Choice then filed a petition for commission review of that decision.

The legal issue before the commission is whether the claimant provided services for First Choice as an employee or an independent contractor. As noted above, the only thing which will actually be decided by resolving this issue is whether the claimant will be required to report any future earnings she may receive from First Choice for providing similar services under similar circumstances as wages when making future weekly UI benefit claims. The decision will not affect First Choice's UI account balance, it will not require First Choice to pay UI taxes on any such amounts it may pay to the claimant in the future, and it will not be binding on the question of whether such taxes may be due.
 

Facts - First Choice is a talent and modeling agency. It makes arrangements with other businesses to provide models (also referred to as "talent") to perform demonstrations and promotions of those businesses' products in retail venues, and it maintains relationships with individuals who are interested in performing such services. When a business contacts First Choice about a demonstration or promotion, First Choice provides the business with information (including photographs) about models it has available to do the work, and when the business decides which model or models it would like to have do the work, First Choice contacts them and offers them the work. First Choice advises the model about the type of assignment, when and where they are to report, the wardrobe that the business wants the model to wear, and the pay for the assignment. The pay is generally on a per-hour basis, but it is sometimes on a per-job basis. The model is free to accept or reject the offered work, although if a model refused work too frequently, First Choice would probably stop offering them work. If the model agrees to do the work, he or she travels to the location where the demonstration is to be held and performs the services. The models are responsible for their own transportation expenses and for the wardrobe worn on the assignment. After the model performs the work, he or she then submits a voucher to First Choice, generally on a form provided by First Choice, confirming that the work was done and stating the number of hours worked. First Choice then sends an invoice to the business based on the hourly rate originally offered and the number of hours worked. When First Choice is paid by the business, it deducts 15% of the amount received as its fee, plus its postage expenses, and forwards the balance to the model.

The claimant filled out an on-line application to provide services for First Choice in 2006. She did not actually perform any such services until some time in mid-2008. She contacted First Choice in August, 2008 and indicated that she did not want to perform any more promotion assignments.

Additional facts relevant to the claimant's performance of services for First Choice are described below.
 

Discussion - In Wisconsin, the question of whether an individual providing services for another is doing so as an employee rather than as an independent contractor for purposes of the Unemployment Insurance Act, is governed by Wis. Stat. § 108.02(12), which provides in substance that an individual providing services for another for pay is presumed to be an employee unless it is proved that at least seven out of ten conditions, described in § 108.02(12)(bm), are met. The entity for which the services are performed bears the burden of proving that a sufficient number of the conditions are met.

First Choice argued that when the claimant submitted her application to provide services, she agreed with a disclaimer that she was self-employed. That agreement is not controlling or determinative of the issue involved. The conditions of eligibility of a claimant for unemployment benefits are not subject to private agreements. Roberts v. Ind. Comm., 11 Wis. 2d 399 (1957). In making a determination of employee or independent contractor status, the primary concern is what is actually done, and not what the contract says. The question of whether an individual is an employee is determined by the statutory provisions of Chapter 108 and not by common law concepts. Maloney v. Ind. Comm., 242 Wis. 165 (1943); Moorman Mfg. Co. v. Ind. Comm., 241 Wis. 200 (1942); National Guardian Life Ins. Co. v. Ind. Comm., 26 Wis. 2d 198 (1964); and Transport 0il, Inc. v. Cummings, 54 Wis. 2d 256 (1972).

The record establishes that the claimant has provided services for pay for First Choice. This creates a presumption of employee status. The issue then becomes whether First Choice established that a sufficient number of the conditions described in § 108.02(12)(bm)1.-10., are met. These conditions, and the evidence of record relevant to their applicability here, are discussed below.

1. The individual holds or has applied for an identification number with the federal internal revenue service - The claimant did not have and had not filed for a federal employer identification number. The petitioner argues that it is not mandatory with the state that a model applies for an FEIN and that the claimant did supply it with her social security number. The fact that it is not required that an individual have an FEIN does mean that this condition can be ignored. The commission has repeatedly held that having a social security number does not satisfy this condition. Kunst v. Energy Marketing Services (LIRC, July 31, 2008). This condition was not met.

2. The individual has filed business or self-employment income tax returns with the federal internal revenue service based on such services in the previous year or, in the case of a new business, in the year in which such services were first performed -- The claimant had not filed self-employment or business tax returns. The petitioner argues that while the claimant "may not have filed in the past" that should not make her its employee and should not "penalize" it. It argues that the claimant "is responsible for her own business under a self-employment status" and that it "cannot be held responsible for her lack of business protocol in filing necessary documentation". This argument is unpersuasive. The statute defines conditions, and asks whether they are met or not met. If they are not met, then they are not met. It is undisputed that the claimant did not filed self-employment or business tax returns. This condition was not met.

3. The individual maintains a separate business with his or her own office, equipment, materials and other facilities -- The focus of this condition is upon determining whether a separate business, i.e., an enterprise created and existing separate and apart from the relationship with the putative employer, is being maintained with the individual's own resources. Diane Egan/Health Exams Plus (LIRC, April 15, 2005). The petitioner argues that the claimant "listed her place of business" as her home. Basically, though, there was no evidence at all of anything like the kind of investment in an office, equipment, materials and other facilities applied to a separate business, nor indeed of any "business" as such. The claimant conceded she has no business name, no "office" other than her home, no "office equipment" other than her personal computer, no internet presence other than the pages she was allowed to maintain at no charge on the website of First Choice, and never bought clothes specifically to wear on an assignment. She conceded that she had never found any other modeling promotion work on her own apart from what she obtained through First Choice and the other similar entity for which she performed services, and those services were also found by the department to have been employment, a finding the commission has this day upheld. This condition was not met.

4. The individual operates under contracts to perform specific services for specific amounts of money and under which the individual controls the means and methods of performing such services - The only thing which can be pointed to as a contract here is the initial agreement entered into by the claimant on-line at First Choice's web site to perform services on the terms offered. Even where there is an initial agreement, this condition is not satisfied where, as here, there is simply nothing to suggest that the terms of their relationship ever change. The mere fact that there are work assignments given out on a regular basis does not amount to multiple serial contracts. Quality Communications Specialists (LIRC, July 30, 2001). Here, while the rates offered by the third-party product manufacturers who contracted with First Choice for promotions could change, the arrangement First Choice had with the claimant (and its other models) remained unchanged from what was agreed to when the relationship was established. This condition was not met.

5. The individual incurs the main expenses related to the services that he or she performs under contract - Applying this test requires a determination of what services are performed under the contract, what expenses are related to the performance of those services, which of those expenses are borne by the person whose status is at issue, and whether those expenses constitute the main expenses. Quality Communications Specialists, supra.

The ALJ found that the main expense related to the services performed is the claimant's wardrobe, and that she was responsible for her wardrobe so that this condition was met. The commission disagrees. While the claimant testified that she was responsible for her own wardrobe, she also testified that she never had to buy anything specific to wear to an assignment. From this, it can be inferred that the claimant was simply wearing clothes from her personal wardrobe. The expense to the claimant of purchasing and maintaining clothes in her personal wardrobe cannot be considered an expense related to the services performed for the employer, because it is an expense that she would incur in any event and that is not an expense of her activities as a model.

Apart from the matter of wardrobe, which is disposed of above, transportation was the only other expense the claimant asserted she had. The claimant's transportation expenses are appropriately considered to be expenses related to the services performed which are incurred by the claimant. However, it cannot be considered to have been established that these constituted the "main" expenses connected with the services provided. From the limited evidence as to exactly what was involved in staging and carrying out the promotions in which the claimant would have been performing services, it can be inferred that at a minimum there would be some expense incurred for the product samples used, and also for equipment necessary or attendant to the promotion (for example, tables, signs, etc.). (2)   These expenses were not quantified. Without evidence as to what that expense amounted to, it cannot be considered established that the claimant's transportation expenses (which were also not quantified) constituted the "main" expense overall. This condition was not shown to have been met.

6. The individual is responsible for the satisfactory completion of the services that he or she contracts to perform and is liable for a failure to satisfactorily complete the services -- The ALJ found that:

[a]lthough the claimant was unaware that she would be liable if she accepted the assignment, she could not complete the assignment, and a replacement could not be found, the employer's president testified credibly that this was the case.

On that basis, she found that this condition was met. The testimony of the employer's witness the ALJ was referring to was to this effect:

If the claimant agreed to do something for a client and then at the last minute she can't make it the client would charge us and we would charge the claimant for that expense. The client would charge us if they had other client lined up and then they were short.

She also testified that if the claimant didn't go to an assignment that she took and she didn't pay them First Choice would take her to court, and that if a client charged First Choice after having to send a model home the model would be liable. However, the claimant testified:

Ms. Bodart did not tell me that she would charge me if I didn't go to a job that I accepted with a client. This is the first I've heard of that. I was not aware that Ms. Bodart would try to get payment from the client if they cancelled.

She also testified that "nobody ever told me that I might be responsible for expenses if a replacement could not be found."

The commission recognizes that the ALJ expressly stated, that she found credible the testimony of the employer's witness in this regard. However, the ALJ also found that the claimant was "unaware" that she would be liable. Since the ALJ made this finding, it follows that she also found the claimant's testimony on that point to be credible. Thus, accepting all of the ALJ's findings, it is clear that the employer and the claimant had completely inconsistent understandings on this point. However, whether the claimant is actually liable for a failure to satisfactorily complete the services depends on whether there is a contract to that effect. A contract requires the assent of both parties. If the claimant was in fact "unaware" that she would be liable in this fashion, this means that there not was a meeting of the minds - a contract - with the employer to that effect. While the employer's witness may herself genuinely believe that the claimant would be liable in the circumstances she described, if there was never a contractual agreement to that with the claimant, she would not be found liable. In these circumstances, this condition was not met.

7. The individual receives compensation for services performed under a contract on a commission or per-job or competitive-bid basis and not on any other basis -- The ALJ found that the claimant was paid on an hourly basis. First Choice's witness testified to that effect, and the claimant agreed. No argument is raised about this in the petition. This condition was not met.

8. The individual may realize a profit or suffer a loss under contracts to perform such services -- This test asks whether a business faces both an actual possibility of making a profit, and an actual possibility of suffering a loss. Quality Communications Specialists, supra. The petitioner argues:

The success or failure of the individuals business depends on how they manage their bookings, time and finances THEREFORE she can suffer a loss

This is unpersuasive. There was no evidence the claimant had any capital or other kind of investment in her "business" - in other words, she did not buy anything to get started in it or to continue it. She could only suffer a loss if she accepted assignments involving travel expenses in excess of what she is paid. There was no indication that she ever had, and there was no basis in the record to even speculate that she would. No actual possibility of sustaining a business loss in this venture was established. This condition was not met.

9. The individual has recurring business liabilities, or obligations -- The claimant clearly had no recurring business liabilities or obligations. As has been noted above, the only significant expenses which could even be claimed to be related to the claimant's activities for First Choice, were transportation to jobs. However, this condition looks to whether there were the type of "overhead" expenses, of the kind real businesses have, which continue to accrue whether or not the business has work. Clear Choices Inc. (LIRC, October 26, 2005). This claimant has no significant expenses of that kind. She acknowledged in her testimony that if she didn't have any promotions or modeling assignments to do she would have no expenses. This condition was not met.

10. The success or failure of the individual's business depends on the relationship of business receipts to expenditures -- This test is intended to look at the overall course of an individual's purported "business". It contemplates that, as in any true business, there is a potential for success and also for failure in the relationship of business receipts to expenditures. Quality Communications Specialists, supra. Given all of the evidence here, the commission does not believe there is a serious potential for the claimant's overall activity here to "fail", as measured by an excess of expenditures over receipts, because there is no serious potential for overall expenditures to exceed overall receipts.

For all of the foregoing reasons, the commission concludes that the employer failed to prove that the claimant met at least 7 of the 10 conditions stated in Wis. Stat. § 108.02(12)(bm).

The commission therefore finds, for purposes of resolving the current benefit issue, that the claimant performed services for the employer as an "employee" within the meaning of Wis. Stat. § 108.02(12), and that any earnings for such services performed under similar circumstances would therefore be wages which she must report to the department when claiming benefits for any weeks in which such wages are earned.

DECISION

The decision of the administrative law judge is conformed to the foregoing findings and, as modified, is affirmed. Accordingly, the claimant's services for First Choice are performed by her as an employee for unemployment benefit purposes, and when making future weekly UI benefit claims the claimant must report any earnings she receives from First Choice for providing similar services under similar circumstances, as wages when earned.

Dated and mailed March 12, 2009
cookkfi . urr : 110 :   EE 406  EE 410.06

/s/ James T. Flynn, Chairperson

/s/ Robert Glaser, Commissioner

/s/ Ann L. Crump, Commissioner

 

Note: This decision is reproduced here as affected by a corrective amendment made on March 20, 2009.


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Footnotes:

(1)( Back ) This information is reflected in official department records, contained in the file in this matter, of which the commission takes notice. These elements of background fact are not in dispute and are not determinative of the ultimate issue presented in this case.

(2)( Back ) The fact that this expense might not have been borne by First Choice, but instead rather by a third party, is not relevant. Under this condition, the only relevant question is whether an expense was or was not borne by the claimant. Quality Communications Specialists, supra.

 


uploaded 2009/04/03