ROBERT A JANECK, Employee

START RENTING INC, 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:

The face sheet of the decision should be modified to reflect that the employer did appear at the hearing.

The first sentence on page 3 of the decision, setting forth the definition of "employment," should be deleted.

The first full paragraph on page 4 of the decision is deleted and the following substituted:

The record shows that only conditions 1., 2., 4., and 5. are satisfied.

The decision of the administrative law judge, as modified, is affirmed. Accordingly, the employee must report wages earned for performing services for the employer as they are earned.

Dated and mailed October 30, 2009
janecro . umd : 115 : 5   EE 410   EE 410.02   EE 410.04a  EE 410.07   EE 410.08  EE 410.09

/s/ James T. Flynn, Chairperson

/s/ Robert Glaser, Commissioner

Ann L. Crump, Commissioner

The putative employer (Start Renting) is a distributor of free rental publications. The claimant (Janeck) delivered these publications to grocery stores and stands for Start Renting.

Janeck began performing these services for Start Renting in 1991 under an oral agreement, and, beginning in 2003, under a written agreement.

The commission has previously considered the status of Start Renting's delivery drivers.. In Start Renting, Inc., UI Hearing No. S0800059MD (LIRC May 15, 2009), the commission held that, for the four calendar quarters of 2006, and the first three calendar quarters of 2007, the subject delivery drivers performed services for Start Renting as employees, not independent contractors.

Wisconsin Statutes § § 108.02(12)(a) and (bm) state as follows, as relevant here:

(a) "Employee" means any individual who is or has been performing services for an employing unit, whether or not the individual is paid directly by such employing unit; except as provided in par. (b), (bm), (c), or (d)....

(bm) During the 4-year period beginning on January 1, 2000, with respect to contribution requirements, ...par. (a) does not apply to an individual performing services for an employing unit...if the employing unit satisfies the department that the individual meets 7 or more of the following conditions by contract and in fact:

1. The individual holds or has applied for an identification number with the federal internal revenue service.

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.

3. The individual maintains a separate business with his or her own office, equipment, materials and other facilities.

4. The individual operates under contracts to perform specific services for specific amounts of money and under which the individual controls the means and method of performing the services.

5. The individual incurs the main expenses related to the services that he or she performs under contract.

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.

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.

8. The individual may realize a profit or suffer a loss under contracts to perform services.

9. The individual has recurring business liabilities or obligations.

10. The success or failure of the individual's business depends on the relationship of business receipts to expenditures.

Wisconsin Statutes § 108.02(12)(a) creates a presumption that a person who provides services for pay is an employee, and it requires the entity for which the person is performing those services to bear the burden of proving that the person is not an employee. 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).

Since it is undisputed that Janeck performed services for pay for Start Renting, it is Start Renting's burden to rebut the presumption that he did so as an employee.

Commission review of a decision of an administrative law judge is not appellate in nature, but is instead a de novo decision-making process. Any petition for commission review from any party brings the entire case before the commission. See, Dane County Hockey Officials, supra. As a result, the commission is not limited in its review of this case to those aspects of the administrative law judge's decision challenged in the petition. See, Metalor Technologies USA, UI Hearing No. S0800045MD (LIRC Nov. 25, 2008).

The record shows that Janeck possesses a FEIN, as required to satisfy condition 1. Janeck argues to the commission that Start Renting forced him to acquire a FEIN as a condition of employment. However, in analyzing condition 1., the only question is whether an individual has applied for or possesses a FEIN. Consequently, the motivation for having done so is irrelevant.

The record shows that Janeck has filed a Schedule C every year since 1991, as required to satisfy condition 2. Janeck appears to be arguing that he had no choice because Start Renting issued him a 1099, not a W-2. However, again, the only question is whether business or self-employment tax returns have been filed, and the motivation for having done so is irrelevant.

The focus of condition 3. 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. Princess House, Inc., v. DILHR, 111 Wis. 2d 46, 330 N.W. 2d 169 (1983); Larson v. LIRC, 184 Wis. 2d 378, 516 N.W. 2d 456 (Ct. App. 1994). See, also, Lozon Remodeling, UI Hearing No. S9000079HA (LIRC Sept. 24, 1999). In Quality Communications Specialists, Inc., supra, the commission clarified that all parts of the test articulated in condition 3. must be met in order for the putative employer to satisfy its burden.

It is undisputed that Janeck used his own equipment, i.e., his own vehicle, to perform the subject services.

However, the record does not show that Janeck had a separate office or even a separate space in his home devoted primarily to a business purpose. See, Campbell v. Speedmark, UI Hearing No. 08002536MD (LIRC April 27, 2009). As a result, condition 3. is not satisfied.

Start Renting argues that, in Barnett v. Alternative Entertainment, Inc., UI Hearing No. 02003109WU (LIRC Oct. 29, 2002), the commission held that a putative employer can meet its burden to establish that condition 3. is satisfied "by demonstrating that the driver filed a Schedule C." However, this is not what the decision in Barnett holds. Instead, in that decision, the commission stated as one of the criteria it considered in determining whether Barnett had a separate office the fact that, on his Schedule C, he had "listed office expenses of $1,548." The record here does not show that Janeck deducted office expenses on the business tax returns he filed.

To satisfy condition 4., it must be established that Janeck operates under contracts to perform specific services for specific amounts of money, and that, under these contracts, he controls the means and method of performing the services.

Condition 4. requires multiple contracts. These may take the form of multiple contracts with separate entities, or multiple serial contracts with the putative employer if such contracts are shown to have been negotiated "at arm's length," with terms that will vary over time and will vary depending on the specific services covered by the contract. The existence of bona fide multiple contracts tends to show that the individual either has multiple customers, or that he/she has periodic opportunities for "arm's length" negotiation with the putative employer as to the conditions of their relationship, and that he/she is not dependent upon a single, continuing relationship that is subject to conditions dictated by a single employing unit. See, T-N-T Express LLC, UI Hearing Nos. S9700385, etc. (LIRC Feb. 22, 2000); Dane Co. Hockey Officials, supra.

Janeck argues, at least by implication, that his written contract with Start Renting does not satisfy condition 4. because it does not specify the rate of compensation, i.e., it does not constitute a contract for "specific amounts of money." However, the record establishes that there was agreement between Janeck and Start Renting specifying the amount to be paid per drop for each stand and the amount to be paid for each grocery store delivery. There is no requirement that a contract, or any of its provisions, be in writing, and the agreement between Janeck and Start Renting, part written and part oral, is cognizable as a contract "to perform specific services for specific amounts of money" within the meaning of condition 4. See, Start Renting, supra.

The record shows that Janeck performed services under a single contract with Start Renting, which was intended to be indefinite in duration, and the terms of which varied over time only in regard to the rate of compensation. See, Preferred Financial of Wisconsin, Inc., UI Hearing No. S0600240MW (LIRC Oct. 23, 2008); Barnett v. Alternative Entertainment, Inc., UI Hearing No. 02003109WU (LIRC Oct. 29, 2002) (condition 4. not satisfied by single contract with putative employer which was essentially renewed unchanged except for updated price structure).

However, the record also shows that Janeck had contracts to perform delivery driving services for two other entities, and this satisfies the multiple contracts requirement of condition 4.

Start Renting relies upon the circuit court decision in Evolution Technology Systems LLC v. LIRC, Case No. 07-CV-5825 (Wis. Cir. Ct. Milwaukee Co., March 6, 2008), to argue that "multiple contracts are not required" in order to satisfy condition 4. This argument was rejected by the commission in Start Renting, supra. First, the circuit court decision does not state this. Instead, the court states on page 18 of its decision that, "The Commission reasonably interpreted this condition to require multiple contracts." Moreover, although the court held that the record established the existence of multiple contracts, the facts on which the court relied, i.e., that each job performed pursuant to the umbrella agreement with the putative employer was separately negotiated and based upon a distinct offer and acceptance, are not present here.

It is a closer question whether Janeck controlled the means and method of providing the services for Start Renting, since the record does not show that the delivery schedule required by Start Renting resulted from deadlines imposed by its clients. However, the record does show that Janeck selected the delivery vehicle he utilized and determined how it was to be loaded, operated independently within the broad scheduling parameters established by Start Renting, and chose the roadways he followed. Under the circumstances present here, this would be sufficient to satisfy this aspect of condition 4.

Condition 4. is satisfied.

Applying condition 5. requires a determination of what services are performed under the contract, what expenses are related to the performance of these services, which of these expenses are borne by the person whose status is at issue, and whether these expenses constitute the main expense. Lozon Remodeling, supra.; Quality Communications Specialists, Inc., supra. This inquiry generally requires quantification of these expenses.

Given that Janeck bears the cost of operating and maintaining the vehicle he uses to make deliveries, it is apparent that the expenses he bears would necessarily exceed whatever administrative expenses were borne by Start Renting. See, Ziebell v. Cox Auto Trader, UI Hearing No. 07606213MW (LIRC Jan. 4, 2008); Start Renting, supra.. As a result, condition 5. is satisfied.

Janeck argues that, in addition to certain administrative costs borne by Start Renting, it also bears the cost of printing and storing the publications, and for purchasing and maintaining the stands. However, the contract between Janeck and Start Renting relates only to the transport and delivery of the publications, and costs for printing, storing, and displaying them would not be a cost related to the services performed under this contract within the meaning of condition 5.

In order to satisfy condition 6., Janeck is required to be responsible for the satisfactory completion of the services he performs, and liable for any failure to satisfactorily complete them. In applying this condition, the commission has considered, for example, whether there is an expectation that unsatisfactory or incomplete work will be remedied at the individual's expense, and a penalty imposed if it is not. See, Start Renting, supra. The failure to receive additional compensation for performing remedial work does not satisfy this condition because this circumstance is true as well of piecework employees.

The record shows that there was no expectation that Janeck would remedy any unsatisfactory work, and no penalty imposed if he failed to do so. In fact, Janeck was paid for a delivery even if he had not properly completed it, and the only consequence to him was a warning that his performance needed to improve. This is a classic employment paradigm, i.e., an employee performs unsatisfactorily and incurs no penalty other than a warning to improve.

Start Renting argues that, in Hauden & Scholl Builders Inc., UI Hearing No. S9700339MD (LIRC Aug. 31, 1998), the commission held that the ability to bring a legal action for damages for unsatisfactory work is sufficient alone to satisfy condition 6. However, although, in Hauden, the commission found that, if Jacobs, one of the individuals at issue, had refused to fix a problem, Hauden "could have sued to get the money," it did not rely upon this fact in concluding that Jacobs was responsible for satisfactorily completing the work he performed for Hauden.

Start Renting relies upon the commission's decision in a workers compensation case interpreting parallel statutory language, Floerchinger v. Nestle Transportation, WC Claim No. 2000-17699 (LIRC Aug. 15, 2001), to argue that the ability to sue for damages is sufficient to satisfy condition 6. As the commission held in Start Renting, supra.,, even if a holding in a workers compensation case were considered persuasive in an unemployment insurance case, the facts are distinguishable. In Floerchinger, there was a specific provision in the contract between the claimant and Nestle specifying the claimant's liability for an incomplete delivery. There is no comparable provision in the contract between Start Renting and Janeck here.

Condition 7. requires payment on a commission, per-job, or competitive-bid basis. It is undisputed that Janeck was not paid on a commission or competitive-bid basis.

Consistent with Start Renting, supra., the per-drop basis upon which Janeck was paid for certain of his deliveries is more akin to payment on a piecework basis than to payment on a per-job basis. Although the delivery drivers in Zoromski v. Cox Auto Trader, UI Hearing No. 07000466MD (LIRC Aug. 31, 2007), and Ziebell, supra., were held to have been compensated on a per-job basis, those drivers, in contrast to the driver here, were paid by the route, not by the drop. Since condition 7. requires that the individual be paid on a commission, per-job, or competitive-bid basis, and not on any other basis, even if the flat rate Janeck was paid for delivering to grocery stores could be considered payment on a per-job basis, the per-drop method of payment for his other deliveries prevents a conclusion that condition 7. is satisfied.

Start Renting, in its reply brief to the commission, prepared by its attorney, states that:

Mr. Janeck's brief regarding condition 7 consists entirely of further attempts to introduce testimony, and quotations from the decision under appeal. See J. Brief at 10-11....

Regarding the latter, he does not explain the relevance of the quoted sections, or otherwise develop his quotes into argument....The decision under appeal is not and cannot serve as legal authority for purposes of briefing an appeal of that decision.

What Janeck was quoting from, however, was the commission's decision in Start Renting, supra., proper authority here, not the ALJ's decision at issue. Counsel for Start Renting has misrepresented this circumstance to the commission.

Condition 8. examines whether, under an individual contract for a worker's services, there can be a profit (if the income received under that contract exceeds the expenses incurred in performing the contract), as well as whether there can be a loss under that contract (if the income received under that contract fails to cover the expenses incurred in performing the contract). It is arguable, as the commission concluded in Quality Communications Specialists, Inc., supra., that the receipt by Janeck of more in payments than he was required to spend performing services for Start Renting could constitute "realiz[ing] a profit...under contracts to perform services." However, since Janeck was essentially guaranteed payment if he performed the delivery services, it is difficult to envision how he could suffer a loss over the term of his contract with Start Renting. See, Dane County Hockey Officials, supra.; Zoromski, supra.; Ziebell, supra.; Start Renting, supra.

Start Renting argues, as it did unsuccessfully in Start Renting, supra,. that Janeck could realize a loss on a particular day, or during a period of time when gas prices were high or he needed to pay for repair to his vehicle. However, the proper inquiry is whether there is a realistic possibility that Janeck could realize a loss over the term of his contract with Start Renting, not whether he could realize a loss for a particular drop, day, week, or month. Since Janeck was guaranteed payment for every drop he completed, and, if his expenses became too high, could readily discontinue driving for Start Renting, condition 8. is not met.

Condition 9. requires proof of a cost of doing business which the worker would incur even during a period of time he was not performing work through the putative employer, such as the cost of an office lease, certain professional fees, or business liability insurance. The record does not show that Janeck had such expenses.

Start Renting argues that, since the statutory language does not specifically state that covered liabilities or obligations be incurred solely for a business purpose, the commission may not add this requirement. However, the statutory language refers to "business" liabilities or obligations, which has been consistently interpreted by the commission to refer to liabilities or obligations incurred solely for business purposes. See, e.g., Kunst v. Energy Marketing Services, UI Hearing No. 08400750AP (LIRC July 31, 2008); Start Renting, Inc., supra.; First Wisconsin Lending, Inc., UI Hearing No. S0600200MW (LIRC Jan. 30, 2009).

Finally, the commission has interpreted condition 10. as intending to examine the overall course of a worker's business. See, Quality Communications Specialists, Inc., supra. 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. See, Thomas Gronna, The Floor Guys, UI Hearing No. S9900063WU (LIRC Feb. 22, 2000); Acute Care, Inc., UI Hearing No. S0500090MD (LIRC Feb. 18, 2008). The record does not show that Janeck put a significant investment at risk, and, as a result, condition 10. is not satisfied.

In summary, the record shows that Janeck satisfied only conditions 1., 2., 4., and 5. Since Wis. Stat. § 108.02(12)(bm) requires that seven conditions be satisfied in order for a worker to be considered an independent contractor, the satisfaction of only four of the ten conditions compels the conclusion that Janeck performed services for Start Renting as an employee, not an independent contractor, during the time period at issue.

cc: Attorney David Minko

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