SOUTH EAST CABLE LLC, Employer
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, except that it makes the following modifications:
Delete the last four paragraphs of the "NOTE" and substitute therefor the following:
Par. 3 requires a showing that the individual maintains a separate business with his or her own office, equipment, materials and other facilities. This requirement was not met. This test looks at the question of whether the person "maintains a separate business", the term "separate" clearly being intended to focus on the question of whether the activity the person engages in is genuinely separate from the activity of the putative employer, and the term "business" clearly being intended to focus on the question of whether the manner of engaging in the activity is characteristic of the way a business operates as distinct from the patterns typical of an employment relationship. It is critical under this test whether the person involved has a separate business apart from the appellant's business. Here, where the individuals did not operate under business names, did not hold themselves out as businesses, did not solicit other business on their own, and did not perform similar work for other entities, it cannot be concluded that the individuals performed their services as part of a "separate business."
Par. 4 requires a showing that 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 requirement that the individual operates under "contracts" is not met where the individual provides services for only one entity, and does not negotiate and re-negotiate rates with that entity, but simply accepts what is given as the going rate for the services in question, and provides those services in the course of a continuing relationship the terms of which do not vary over time. Here, there was no showing of multiple contracts sufficient to satisfy this condition. In addition, the requirement that the individuals control the means and methods of the work was not met, as they were trained in how to do the work and instructed as to how to act and what to wear.
Par. 7 requires a showing that 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. This requirement was not met. The method by which the individuals were paid, on a fixed rate for each assignment, consisting of a visit to a home and work on the connections in that home, was not "per-job" pay within the meaning of this condition. In reference to a "per job" payment, the legislature clearly intended a situation in which an independent business person enters into a contract to do an entire job of some kind for which a price is set, and for which the price has presumably been arrived at by the parties' negotiation for the job contracted for. The individuals had no negotiation power in the price paid per job and were not able to change the price per job through negotiation.
Because the requirements of pars. 1, 3, 4 and 7 were not met, the overall requirement of § 108.02(12)(bm) that at least 7 of the 10 conditions be met, was not satisfied.
The decision of the administrative law judge, as modified, is affirmed. Accordingly, South East Cable LLC, Account No. 256251, is liable for unemployment insurance contributions, based on services provided by the individuals named herein above for the periods described, other than Charles Pupero, in the amounts and for the periods set forth in the determination, together with interest and fees that have accrued thereon.
Dated and mailed October 7, 2009
southea . smd : 110 : PC 729 EE 410 EE 410.03 EE 410.06 EE 410.07
/s/ James T. Flynn, Chairperson
/s/ Robert Glaser, Commissioner
/s/ Ann L. Crump, Commissioner
This case presents questions about the application of the doctrine of issue preclusion, from a previous and now-final administrative decision on an employer's liability for unemployment insurance tax contributions, in a subsequent case involving that same question with respect to that same employer.
Procedural history - This case began with a department determination that South East Cable LLC ("South East") was an employer subject to the UI Act, effective January 1, 2001, based on a finding that certain individuals performed services for it in calendar 2001 as "employees" within the meaning of the Act. South East appealed, and after a hearing, an ALJ for the department issued a decision affirming the determination. South East appealed that decision, and on October 29, 2003 the commission issued a decision affirming the ALJ's decision. South East Cable LLC, Hrg. No. S0100165MD (LIRC, October 29, 2003). The commission's decision then became final when South East failed to timely commence an action for judicial review. (1)
In 2004, the department issued another determination finding that South East was liable for UI tax contributions on certain amounts it paid to a number of individuals (including those whose services were the subject of the earlier case) in 2001, 2002 and 2003 and the first two calendar quarters of 2004, for services which those individuals were found to have provided as employees. South East appealed that decision. Initially, an ALJ for the department issued a decision affirming the determination solely on the basis of application of the doctrine of issue preclusion, without allowing South East any opportunity to present evidence at a hearing. South East appealed that decision. In its decision on that appeal, the commission agreed that there was potential applicability of issue preclusion from the 2003 commission decision, but it held that whether it was actually appropriate to apply issue preclusion would turn on the question of whether services in later years were similar to and performed under similar circumstances as the services on which the earlier decision was based, and that South East was entitled to an opportunity for hearing on that question. On that basis it set aside the ALJ's decision and remanded the matter for hearing and new decision. South East Cable LLC, Hrg. No. S0400261MW (LIRC, April 10, 2008).
Following a hearing held on December 8, 2008 at which South East appeared with counsel and presented evidence, an ALJ issued a decision on December 16, 2008 which affirmed the department's determination based on the application of the doctrine of issue preclusion. The ALJ found that the record established that all of the individuals at issue in the case performed services similar to those performed during 2001 and that those services were performed under similar circumstances. The ALJ also included a note expressing his view that South East had in any event not shown that enough of the conditions in Wis. Stat. § 108.02(12)(bm) were met. South East filed a petition for review.
Thus, what is currently before the commission is an appeal of the December 16, 2008 ALJ decision, which affirmed the 2004 determination covering 2001, 2002 and 2003 and the first two calendar quarters of 2004.
Discussion -- The ALJ correctly noted that the commission's 2008 decision in this matter articulated some guiding principles on the application of issue preclusion in this case. Specifically, the commission decided that the now-final 2003 commission decision had issue preclusion effect as to services performed in 2001 by the six individuals named in that case. It also decided that the 2003 decision could have issue preclusion effect as to services in subsequent years by those individuals, and also as to services performed by other individuals in the years at issue her, if those services were similar to the services performed by the named individuals in 2001 and if such services were performed under similar circumstances. South East Cable LLC (LIRC, April 10, 2008).
Based on its review of the record, including a complete transcript of the testimony, the commission is satisfied that the weight of the credible evidence clearly supports the ALJ's decision that all of the individuals at issue here did in fact perform services which were similar to those performed by the individuals addressed in the now-final 2003 commission decision, and that those services were performed under similar circumstances.
For one thing, the employer's counsel conceded that the services being performed were similar, and indicated that South East chose to rest on the contention that they were performed under different circumstances.
In addition, there was substantial evidence as to the similarity across the years of the circumstances surrounding the performance of these services. Thus, during all of the years at issue there was no change with regard to how the individuals got work orders and whether they could decline such work orders, and whether the individuals ever had Federal Employer Identification Numbers (they didn't). There was no change with regard to the fact that the individuals performed their services exclusively for South East, that none ever contracted with other companies to do this kind of work, and that none ever held themselves out or tried to solicit similar work from others. There was no change during all the years in question with regard to the individuals' use of an automobile which they provided. The same rules also applied with regard to the individuals wearing a badge identifying them as a Time Warner Cable contractor and with regard to dress and grooming rules, the individuals were subject to the same requirement that they carry workers compensation insurance and automobile insurance and liability insurance, and the individuals were given the same training by South East on such things as how to fill out the work orders and how to handle themselves on the job.
In addition, South East's owner made a number of general concessions that the manner in which the services were performed was the same over the years in question. He testified that the operation in 2001 was identical to what's been happening since then, that the circumstances of the specific named individuals didn't change in future years, and that the system was exactly the same for everybody who had ever worked for him. He testified that nothing had really changed since 2001, and that he could not think of any way the arrangement and the circumstances of the individuals were different than they were in 2001.
In its petition for review, South East repeats arguments it made when the matter was previously pending before the commission last year, that issue preclusion can only apply when an issue has been litigated in circuit court, and that Amtronix Industries Ltd. v. LIRC, 115 Wis. 2d 108, 339 N.W.2d 802 (Ct. App.) supports the conclusion that issue preclusion should not be applied. The commission disagrees with these arguments, for reasons already stated in its previous decision. South East Cable LLC (LIRC, April 10, 2008).
For the foregoing reasons, the commission agrees with and affirms the ALJ's decision that the individuals at issue must be considered to have been "employees" within the meaning of the UI Act, during the relevant time periods.
NOTE: Although the ALJ rested his decision on application of issue preclusion, in an attached note he added a discussion of the merits of the employee/independent contractor question, noting his opinion that the conditions described in § 108.02(12)(bm)1. (federal employee identification number), 3. (separate business), 4. (contracts and control of means and methods), and 6. (liability for completion), were not met. For the reasons described below, the commission has modified this part of the ALJ's decision.
Regarding condition 6., the ALJ said:
Par. (6) has not been satisfied. The contractors, while perhaps not getting paid as many employees might expect, are not subject to liquidated damages or other penalties for not completing work.
Thus, the ALJ seemed to focus exclusively on the question of whether the individuals would have some liability for not completing a job. However, this is not the sole focus of this condition. The commission has held on a number of occasions that the fact that an individual was required to and did carry their own individual liability insurance, supported a decision that condition 6. was met. Care & Comfort Assoc. (LIRC, April 30, 1999), Acute Care Inc. (LIRC, Feb. 15, 2008), Shane Roth v. World Financial Group (LIRC, Jan. 10, 2008), O'Brien v. Angel Adams, Inc (LIRC July 9, 2007), Lakeshore Mental Health (LIRC, Nov. 30, 2007). Here, there was evidence that the individuals working for South East were required to carry liability insurance. When asked to describe this insurance, South East's witness indicated that it was "liability for the converter equipment", in case the equipment is damaged or stolen. He also testified that the individual bore the cost of lost or damaged equipment. In addition, South East's insurance agent testified that the liability insurance the individuals carried also would cover situations such as someone tripping over a cable box the individual had laid on the floor in some customer's home in the course of a call to remove equipment .
For the foregoing reasons, the commission does not agree with the ALJ's rationale and result on condition 6.
However, the commission arrives at the same ultimate conclusion -- that at least four of the statutory conditions were not met -- because it is persuaded that condition 7. was not met.
Condition 7. looks to whether the individual receives compensation on a commission or per-job or competitive-bid basis. In Quality Communications Specialists, Inc. (LIRC, Jul. 30, 2001), the commission found in a very similar context ( "connecting, disconnecting, servicing and checking the connections between cable television lines and individual cable television subscribers' homes"), that pay on a fixed rate for each assignment, consisting of a visit to a home and work on the connections in that home, was not "per-job" pay within the meaning of condition 7. The commission reasoned:
QCS argues that the department was in error to characterize the pay system here as involving "piecework". According to QCS, "piecework" involves the production or processing of multiple similar items, and it argues that this is not the same as the work done by its tap auditors, who did not produce or process any items but who were paid by individual codes for individual tasks established by contract. The commission does not agree with this argument. The work the tap auditors did was precisely the processing of multiple similar items. The items were the cable taps they worked on; the processing was the creation or removal or modification of connections and the marking of the connections and recording of data about them. The substantial similarity of each individual task is attested to by the standardized rate of pay "per unit". This is closely equivalent to a typical "piecework" situation.
More to the point, though, given that the pay system here was not "commission" or "competitive bid", the remaining question is not whether the pay system here was or was not "piecework"; it is whether the pay system was "per job". The commission believes that it was not. By referring to a "per job" payment basis, the legislature clearly had in mind a situation in which an independent businessperson enters into a contract to do an entire job of some kind for which a price is then set, the price presumably having been arrived at by the parties' negotiation taking into account the particulars of the job contracted for. In this case, the tap auditors are simply doing one task, over and over again, and being paid according to the number of times they do it. The price per task does not change, and no separate contract is entered into for each task.
The commission has also reasoned, in another cable case, relying on the principles first articulated in Quality Communications Services, that where an individual has no negotiation power in the price that is paid per job and is not able to change the price per job through negotiation, condition 7. is also not met. Hanks v. Americable Media Group (LIRC, April 28, 2004). It was clear from the record here that the uniform pricing system followed by South East, involving a fixed dollar amount for each specific piece of equipment recovered, was determined unilaterally by South East, was the same for everybody, and was never individually (or, for that matter, collectively) negotiated with the individuals providing the services. (2)
Attorney Mark S. Tishberg
Bureau of Legal Affairs
Appealed to circuit court. Affirmed, July 1, 2010. [Summary of Circuit Court decision]
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(1)( Back ) See, Order Denying Plaintiff's Motion To Vacate And Set Aside Dismissal, issued June 7, 2004 in South East Cable LLC v. Wis. Labor and Industry Review Comm. and Wis. Dept. of Workforce Development, Case No. 03-CV-10523, Milw. Co. Cir. Ct.. A copy of this Order is contained in the hearing file as Appendix D to the department's brief to the ALJ in Hrg. No. S0400261MW.
(2)( Back ) This is consistent with the finding made in the original 2003 ATD, which was that "[t]he owner set the rate of pay per piece".