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

MARCAS LLC, Employer

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 896433, Hearing No. S0900128GB


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 fifth paragraph of the FINDINGS OF FACT and CONCLUSIONS OF LAW section is deleted.

The third sentence of the sixth paragraph of the FINDINGS OF FACT and CONCLUSIONS OF LAW section is deleted.

In the quotation of Wis. Stat. § 108.02(12)(a) on page 2 of the decision, the words "in an employment" are deleted.

The first paragraph of the analysis of condition 7. on page 6 of the decision is modified to read as follows:

Jaskolski was not paid on a commission, per job, or competitive-bid basis.

The first paragraph of the analysis of condition 8. on page 6 of the decision is modified to read as follows:

There is no evidence that Jaskolski could have realized a profit or suffered a loss in performing services for Marcas LLC.

DECISION

The decision of the administrative law judge, as modified, is affirmed. Accordingly, Marcus LLC was an employer subject to the Wisconsin unemployment insurance law as of January 1, 2006.

Dated and mailed January 13, 2010
marcasl . smd : 115 : 5 EE 409 EE 410 ER 450

/s/ James T. Flynn, Chairperson

/s/ Robert Glaser, Commissioner

/s/ Ann L. Crump, Commissioner

MEMORANDUM OPINION


The individual at issue (Jaskolski) performed real estate appraisal services for the putative employer (Marcas) beginning in 2006 and ending in 2008.

The record shows that the relationship was very short on specifics and written records.

Employee or independent contractor

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).

Marcas first argues, at least by implication, that Jaskolski did not perform services for Marcas for pay, but instead, because they were friends, Marcas paid Jaskolski's school tuition, books, and gas and vehicle maintenance costs; paid for his beer and cigarettes; and gave him an occasional ten or twenty dollars in spending money.

The record shows, however, that these payments were not an act of pure altruism on the part of Marcas, but instead resulted from Jaskolski's performance of real estate appraisal services under the direction of Mark Kurth, the owner of Marcas.

Payment for services subsumes all forms of remuneration, including in-kind payments, e.g., tuition and books, as well as reimbursement of expenses. See, Trongard v. Merton Veterinary Clinic, Inc., UI Hearing No. 06601432WK (LIRC Nov. 2, 2006); Prosch v. Bankers Life & Casualty, UI Hearing No. 05001155MD (LIRC Nov. 8, 2005).

Since the record establishes that Jaskolski performed services for Marcas for pay during the time period relevant here, it is Marcas's burden to rebut the presumption that Jaskolski did so as a statutory employee.


The record shows that Jaskolski satisfied only condition 2., i.e., he filed a self-employment income tax return in the proper years.


Otherwise:

The record does not show that Jaskolski ever possessed or applied for a FEIN, as required by condition 1. Although there is reference in the record to the use by Jaskolski of a Social Security number, this would not satisfy this condition. See, Angel Care, UI Hearing No. S0200141MW (LIRC Dec. 30, 2004); Rabe v. Tatge, UI Hearing No. 05003125 (LIRC Nov. 10, 2005).

The record does not show that Jaskolski had a separate business office, as required to satisfy condition 3., but instead shows that he used Marcas's office and office equipment to perform appraisal work.

Condition 4. requires both the existence of multiple contracts, and the control by Jaskolski of the means and method of providing the subject appraisal services. The record shows instead that there was a single oral agreement between Jaskolski and Marcas, and no agreements for appraisal services between Jaskolski and any other entities; and that Marcas closely directed the services provided by Jaskolski.

Any expenses incurred by Jaskolski in providing appraisal services were paid by Marcas, no Jaskolski, so condition 5. is not satisfied.

 The record does not show that there was any consequence to Jaskolski if he did not perform the appraisal services satisfactorily, which prevents a conclusion that condition 6. is satisfied.

Condition 7. requires that the individual be compensated on a commission, per-job, or competitive-bid basis, and not on any other basis. The record does not show that Jaskolski was compensated on any of the enumerated bases.

Since Marcas reimbursed all of Jaskolski's expenses, the record does not show that it was a realistic possibility that Jaskolski could sustain a loss over the term of his agreement with Marcas, as required by condition 8.

The record does not show that Jaskolski had any recurring business expenses within the meaning of condition 9., or, in fact, any business expenses at all.

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). The record does not show that Jaskolski put any investment at risk.

In summary, only condition 2. is satisfied. 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 one of the ten conditions compels the conclusion that Jaskolski performed services for Marcas during the relevant time period as an employee, not an independent contractor.

Statutory employer

The next questions then are whether and when Marcas became a covered employer.

These questions are difficult because Marcas did not keep a record of its expenditures, and Jaskolski did not keep a record of his income.

The only written records even referenced in the hearing record are those setting forth the dollar amount of withdrawals from a Marcas business bank account, and the 2006 and 2007 tax returns filed by Marcas and Jaskolski. On Marcas's tax returns, at least for 2006 and 2007, the total amount of withdrawals from this account apparently was entered as Marcas's annual expenditure for contract labor services. The record shows that Jaskolski, who utilized the same tax preparer as Marcas, simply instructed the preparer to use this figure as the amount of his annual income from Marcas.

By default, in the absence of other written records, the department auditor relied upon the amounts stated in these tax documents to determine the amounts paid by Marcas to Jaskolski during the years at issue.

Marcas argued at hearing and in its petition that these figures could not accurately represent Jaskolski's annual income from Marcas because Marcas used this account to pay individuals other than Jaskolski as well. Marcas further argued at hearing and in its petition that, had it been permitted to call all of its witnesses at hearing, the amounts it paid to these other individuals could have been established.

Wisconsin Statutes § 108.21 states as follows, as relevant here:

108.21 Record and audit of payrolls.

(1) Every employing unit which employs one or more individuals to perform work in this state shall keep an accurate work record for each individual employed by it, including full name, address and social security number, which will permit determination of the weekly wages earned by each such individual, the wages paid within each quarter to that individual... Each such employing unit shall permit any authorized representative of the department to examine, at any reasonable time, the work record and any other records which may show any wages paid by the employing unit,...regardless of the format in which such a record is maintained.... Each such employing unit shall furnish to the department upon demand a sworn statement of the information contained in any such record.

(2) The findings of any such authorized representative of the department, based on examination of the records of any such employing unit and embodied in an audit report mailed to the employing unit, shall constitute a determination within the meaning of s. 108.10.

(3) If any such employing unit fails to keep adequate work records under this section or fails to file the reports required by this chapter or required by the department under this chapter, the employing unit's contribution liability with respect to the period for which such records are lacking or deficient or for which such reports have not been filed may be estimated by the department in a determination made under s. 108.10.

It was Marcas's responsibility, within the meaning of Wis. Stat. § 108.21, to maintain accurate records of Jaskolski's compensation, not Jaskolski's responsibility to maintain accurate records of his income. Under the circumstances present here, any dispute as to the amounts paid to Jaskolski should be resolved against Marcas.

In its petition, Marcas specifies for the first time the breakdown of the $10,500 amount from 2006, and the $8,900 amount from 2007, entered on its tax returns for those years. First, these specifics, if they in fact exist now, necessarily existed prior to the date of the hearing, and Marcas was required to have provided them at that time in order to rely upon them now. In addition, the figures provided by Marcas in its petition do not in fact add up to the 2006 and 2007 expenditure amounts, i.e., the figures provided in the petition for 2006 total $11,000, not $10,500; and the figures provided in the petition for 2007 total $9,900, not $8,900.

It should also be noted that:

In its petition, Marcas states that, in 2008, it paid nothing to Jaskolski, but, in its hearing testimony, Marcas indicated it paid Jaskolski $500 in 2008.
In its petition, Marcas represents that the total amount expended in 2006 was $7,200, but, in its petition, provides expenditure amounts for 2006 totaling $11,000, and, in its 2006 tax return, stated this amount as $10,500.
In its petition, for the first time, Marcas indicates that it paid Steve Kurth $2,500 in 2006 and $600 in 2007. However, in his hearing testimony, Steve Kurth did not provide a dollar amount for any of the payments he received from Marcas, testifying only that Marcas paid certain of his car expenses, including gas, maintenance, and insurance. The record also shows that Marcas paid Steve Kurth's tuition and books, and Marcas testified that tuition was $425 and books $100.

Marcas further argues that the ALJ erred in excluding the testimony of certain individuals it attempted to call as hearing witnesses. Marcas explains that these individuals would have testified as to amounts Marcas paid to them in 2006 and 2007.

However, this testimony would only have been relevant if the record in fact established that Jaskolski and these individuals were paid only by means of withdrawals from the single business account from which the annual contract labor expenditure figures were derived. The record does not establish this.

Moreover, according to the record, the ALJ excluded the testimony of the following individuals: Joseph Hengrillis, Derek Dusha, Justin Kroening, and John Brozyna. In its petition, Marcas does not reference Joseph Hengrillis, and represents that the other witnesses would have testified as follows:

Derek Dusha-paid $500 in 2006, and $800 in 2007

Justin Kroening--$2500 in 2006, and $500 in 2007

John Brozyna--$1500 in 2007

The 2006 figures would not be useful here because the employee concedes, and the ALJ found, that only $4,000 of the $10,500 expenditure figure for 2006 is attributable to Jaskolski.

For 2007, even if the record supported a finding that all of the payments to these individuals and to Jaskolski were made from the single business account, which, as discussed above, it does not, and this testimony had been permitted, it would have reduced the 2007 total of $8,900 by only $2,800, resulting in only a small reduction in Marcas's unemployment insurance tax liability for that year.

Wisconsin Statutes § 108.02(13)(e) provides as follows, as relevant here:

(e) Any other employing unit, except a government unit, shall become an employer as of the beginning of any calendar year if the employing unit:
108.02(13)(e)1.

1. Paid or incurred liability to pay wages for employment which totaled $1,500 or more during any quarter in either that year or the preceding calendar year; or
108.02(13)(e)2.

2. Employed at least one individual in some employment in each of 20 or more calendar weeks in either that year or the preceding calendar year, whether or not the same individual was in employment in each such week and whether or not such weeks were consecutive; except that

Here, the department and the ALJ, in the absence of written records setting forth the breakdown of payments from Marcas to Jaskolski, apportioned the payment totals among the final three quarters of 2006, the four quarters of 2007, and the first three quarters of 2008, consistent with the testimony of both Marcas and Jaskolski, that, in 2006, Jaskolski started performing services for Marcas around May, which increased in the final two quarters of the year, and performed services continuously until mid-2008.

This apportionment is consistent with the record, and establishes that Marcas paid Jaskolski $1,500 in the third and fourth quarters of 2006. Consequently, by operation of Wis. Stat. § 108.02(13)(e)1., Marcas became a covered employer on January 1, 2006.

cc: Attorney Michael J. Mathis, Bureau of Legal Affairs

 


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