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

ALB EXPRESS INC, Employer

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 591717, Hearing No. S0800176MW


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 that part of the ALJ's decision from the first paragraph on page 5 of the decision (the paragraph which begins, "Paragraph(3): Whether a separate business was maintained...") through to and including the fifth full paragraph on page 6 of the decision (the paragraph which begins, "Paragraph(10): Whether success or failure depended on the relationship of receipts to expenditures..."), and substitute therefor the following:
 

Paragraph (3): Whether a the individual maintains a separate business with his or her own office, equipment, materials and other facilities -- The ALJ found that this condition was not met as to any of the individuals whose status is at issue. ALB disagrees and argues that the condition was met.

In Gilbert v. LIRC and DWD UI Division, 2008 WI App 173, 315 Wis. 2d 726, 762 N.W.2d 671, the Court of Appeals said:

This criterion asks whether the worker has maintained a separate business with the features of an actual business... The statute requires an individual to own and maintain an office, equipment, materials and other facilities, which are typical indicators of an existing business.

Gilbert, ¶ ¶ 38, 41.  The court referred with evident approval to the commission's interpretation of this test, to the effect that its focus is on "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," and to the commission's view that the employer must prove all parts of the test articulated in this criterion to meet his or her burden of proof. Gilbert, ¶ 39. (1)

ALB's argument that this test was met is based on the claim that the individuals in questions possessed federal identification numbers, could pick and choose which jobs they wanted from ALB, and drove truck for other businesses other than ALB. These arguments all lack merit. For one, having a federal identification number is its own separate test under the statutes. Also, the assertion that the drivers could pick and chose which jobs they wanted from ALB is undercut by the testimony of ALB's witness that the drivers were required to take at least two jobs a month. Finally, there was no competent evidence that the drivers did similar work for others. Indeed, ALB's witness testified that she did not know if any of the individuals did similar driving work for anyone else. She also testified that she did not know if any of them had an office, or any facilities to store the truck in.

Particularly in light of ALB's failure to present any testimony from any of the drivers, there was no competent evidence that the drivers had their own offices, equipment, materials and other facilities, and no basis to find that they operated enterprises created and existing separate and apart from the relationship with ALB, maintained with their own resources. The commission finds that the evidence is insufficient to carry ALB's burden of proof on this condition. 
 

Paragraph (4): Whether the individual operates under contracts to perform specific services for specific amounts of money under which the individual controls the means and methods of performing such services -- The ALJ found that this condition was met as to all of the individuals whose status is at issue. He found multiple sequential contracts with the putative employer because the rates offered varied from assignment to assignment, and in each case there would be an offer of the assignment by the employer which the driver could accept or reject. DWD disagrees.

The commission finds the evidence bearing on this condition is so thin that ALB cannot be considered to have met its burden of proof.

ALB's witness established that when she made arrangements with customers to take loads, the customer would set a pay rate for the load - which might be mileage-based, or (if the run was under 200 miles) a fixed amount - and that she would then offer the job to a driver for something less than what the customer agreed to pay her, so as to make some money off the job. As an example, she testified that a customer might have a load going to Chicago for which it would pay ALB $400, and that she would then offer the load to a driver for $350, thus making $50 on the deal. Thus, from job to job, whatever a customer was willing to pay ALB for a load, was what ALB then had available out of which to pay a driver. The real question is, whether there is any evidence that any real negotiations took place between ALB and drivers within this context. On this question, the evidence is insufficient. The commission believes that the testimony by ALB's witness about the question of how much drivers were paid and how those amounts were determined, was vague. While the witness sometimes seems to be indicating that the amount paid to drivers differed from assignment to assignment, her testimony also seems to indicate that the reason for this variation was simply the variation in what customers were offering her.

The commission believes that the evidence is not sufficient to establish, to the required level of a preponderance, that negotiations were taking place between ALB and the drivers on separate assignments. Because it was ALB's burden to establish that the test was met, the consequences fall on it.

In addition, the contracts here had indications of control which are inconsistent with this condition. The contract contained a requirement that drivers make visual inspections of the truck on a daily basis and notify ALB "immediately" if there was damage to the truck. It also contained a requirement for prior approval from ALB for taking along any passengers. In addition, testimony by ALB's witness established that in practice there was a requirement that the drivers take at least two loads a month. These indications of control are inconsistent with this condition.
 

Paragraph (5): Whether the individual incurs the main expenses related to the services that he or she performs under contract -- The ALJ found that this condition was not met as to any of the individuals whose status is at issue. ALB argues that the condition was met.

The expense of the tractors obviously far outstrips expenses for fuel, lodging, maintenance, etc. The record establishes that the driving was done using tractors which were owned by and titled in ALB. ALB's argument rests on the claim that there was a purchase agreement by which the drivers were purchasing the trucks from ALB. However, the evidence offered by ALB was simply insufficient to establish that such arrangements were actually taking place.

The testimony by ALB's witness bearing on this condition, was inconsistent. When first asked whose equipment the drivers would use to drive a load, she testified that "they have their own equipment," that "they got to have a bobtail, which is a tractor," and that ALB did not pay for that equipment. She also testified that the drivers "owned the trucks." She then "clarified" that actually it was ALB that bought and held title to the trucks, but she asserted that there was an arrangement between ALB and the drivers that "I'll pay the bank and they'll [the driver] pay me, and they're going to have the title when the tractor is paid off." She asserted that the amount ALB held out of each driver's check to pay towards the supposed purchase of the truck, varied "all the time" depending on how much the driver made. This arrangement, ALB's witness testified, was not in writing, but was only verbal. In fact, as was pointed out in cross-examination, what was in writing (i.e., the "Contractor Operating Agreement"), made repeated reference to the driver driving "OUR" (i.e., ALB's) equipment, and says "We will furnish you a tractor and trailer." None of the drivers ever ended up acquiring a truck under this supposed arrangement. The inconsistency in this testimony makes the commission disinclined to credit it.

The only remaining issue regarding this condition arises from the assertion by ALB's witness that three specific drivers who provided services for it actually provided their own truck. Apart from the testimony of ALB's witness, there is no other evidence that these three owned their own trucks. Some doubt is cast on the testimony of ALB's witness on this, because she initially testified that even though they supposedly owned their own trucks, she had the same kind of contracts with them as she had with the other drivers, which contained repeated references to the driver performing services using "our" (i.e., ALB's) equipment. When this was pointed out to her, she testified that she "thought" she had different contracts for them, but she then revised that to say that she "did not know" and was "not sure" if she had different contracts for them, and she also said she did not believe she would be able to find such contracts. Again, the inconsistency in this testimony makes the commission disinclined to credit it. Because of this, the commission finds that ALB failed to carry its burden to prove by credible evidence that these three drivers actually owned their own tractors.
 

Paragraph (6): Whether 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 this condition was met as to all of the individuals whose status is at issue, because the drivers were not paid if they did not do the work. DWD argues, citing Quality Communication Specialists (LIRC, July 30, 2001) and Lifeplans, Inc. (LIRC, April 7, 2005), that there must be evidence establishing not only an obligation to do the work but an expectation that it will be done, as well as a penalty for not doing so. It asserts that there was no evidence that these truck drivers would be liable for the costs of any rework that had to be done as a result of their non-completion.

The commission agrees that the fact that the drivers might not be paid if they did not perform their services adequately, is not in and of itself sufficient to satisfy this standard.

That does not necessarily dispose of the question. There was some evidence having to do with specific obligations regarding liability for unsatisfactory work. ALB asserted that if services were not satisfactorily completed, in addition to not being paid for their work, drivers would be charged for the costs associated with successfully completing the job.

Indeed, the "Contractor Operating Agreement" which ALB asserted it had with the drivers provided that they agreed to be liable to ALB for damages arising from loss, damage or delay of cargo caused by the driver's negligent operation or acts, or failing to pick up or deliver loads, and that any monetary damages thus due to ALB could be deducted from monies due to the driver. However, Wis. Stat. § 108.02(12)(bm) requires that the employer show that sufficient factors are met "by contract and in fact" (emphasis added). Thus, it is important to look at the evidence as to how potential liability arising from poor performance was "in fact" handled.

ALB's witness testified that if a driver accepted a load but then didn't do it correctly, she would "charge them for the load". She also testified that if a driver caused damage to the load they would have to pay for that. On the other hand, when asked for an example of such charging, ALB's witness testified that once when a driver delivered a load late and the customer charged her a late fee for it, her response was that she didn't pay the driver. Then, though, she testified that she "charged that fee against" the driver.

ALB's witness also testified that the drivers had to have liability insurance "on the trucks;" however, she did not have copies of any evidence of such policies. In any event, it is not clear what she may have meant by saying "liability insurance 'on the trucks'." She testified that she did not know if the liability insurance she was referring to covered only their operation of the tractor. She also testified that ALB maintained liability insurance on the cargo. In addition, the "Contractor Operating Agreement" which ALB asserted it had with the drivers provided that ALB would maintain insurance coverage "for the protection of the public, physical damage insurance, cargo insurance, and any and all bobtail deadhead insurance".

While an obligation to carry liability insurance can satisfy this condition, the testimonial evidence here about drivers simply not being paid if there was a problem calls into question whether there was "in fact" (as opposed to "by contract") a real liability for failure to satisfactorily complete the services which went beyond non-payment. The commission finds that the evidence that the drivers had some degree of contractual liability was so called into question by the other testimony, that it cannot be considered to establish the fact to the necessary preponderance of the evidence.
 

Paragraph (7): Whether 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 this condition was met as to all of the individuals whose status is at issue. He found that the drivers received compensation for services performed on a "per-job" basis.

DWD disagrees. Its argument is based on language in Prince Cable, Inc. (LIRC Feb. 23, 2001) and Quality Communication Specialists, indicating that "per-job" means that 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 had been presumably arrived at by negotiation taking into account the particulars of the job contracted for. It argues that there was no sufficient evidence of "arms length" negotiation, and that where the job offer is on a "take it or leave it" basis, it is not "per-job", citing Prince Cable in support. In Prince Cable, the commission found this condition was not satisfied where there was "payment per task per assignment which is more like piecework and piece rate than not".

The commission finds this argument unconvincing. Here, there were distinct and separate work assignments, which differed in their details (i.e., where and how far). They might also vary in how the pay was computed (i.e., either a fixed amount for runs under 200 miles, or a mileage rate applied to a specific run with the mileage to be computed based on a standard program). In all cases, though, the effect was that the driver was paid a particular amount for the entire run. The commission concludes that this was "per job" pay. See, Ziebell v. Cox Auto Trader, (LIRC Jan. 4, 2008); Zoromski v. Cox Auto Trader (LIRC, Aug. 31, 2007) (individuals who worked as delivery drivers and who were paid by the route, were paid on a "per job" basis). 
 

Paragraph(8): Whether the individual may realize a profit or suffer a loss under contracts to perform such services -- The ALJ found that this condition was not met as to any of the individuals whose status is at issue.

ALB argued that the individuals would not be paid if they did not perform the services in an acceptable manner ,or if they did not finish the work, in which case they would be out all costs incurred during the attempt to complete the job. If a driver received no payment at all for the load, then the expenses that would have been incurred (fuel, and possibly lodging), would arguably be a loss with respect to that particular load. However, that does not necessarily resolve the question of the applicability of this condition.

This condition uses terms ("profit" and "loss") which have a specific technical meaning in the context of business bookkeeping and accounting. "Profit" and "loss" cannot be determined without reference to a specific period of time over which the determination is made. A business may have profitable months during the course of an unprofitable year, or have unprofitable months during the course of a profitable year. However, this condition does not ask whether the individual may realize a profit or suffer a loss on a monthly, or annual, or other periodic basis; it asks whether the individual may realize a profit or suffer a loss "under contracts to perform such services."

DWD argues that this condition looks not only for the possibility of profit or loss under a single contract or only with a single business, but instead the condition appears to address the overall situation of the alleged nonemployee including all contracts under which work was performed in the year at issue, citing T & D Coils, Inc. (LIRC, December 15, 1999). However, in more recent decisions the commission has suggested that the "profit or loss" test is to be applied to individual contracts which an individual enters into. Thus, in Janeck v. Start Renting (LIRC, Oct. 30, 2009), the commission said that this test

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).

If an individual provides services for the putative employer in a series of separate (and separately arrived at) contracts, then the basis over which the profit or loss question of condition 8 is to be assessed, should be such individual contracts. In such cases, if the individual would necessarily incur some expense in carrying out each individual contract, and also faced the possibility of receiving no payment under that contract in certain circumstances (such as if their performance was unsatisfactory in some respect), that would generate an operating "loss" with respect to that individual contract. In contrast, if the individual has a single, on-going contractual relationship with a putative employer under which there may be multiple work assignments offered but no real renegotiation of the material terms of the relationship, then there is only one "contract" and the basis over which the profit or loss question of condition 8 is to be assessed, should be that whole ongoing relationship.

As noted above, the commission found the evidence insufficient to prove that there was any genuine renegotiation of a new contractual relationship each time an assignment was offered. The reason for any variation in the amounts offered as pay for different work assignments was changes in the terms offered by customers, not any real re-negotiation of terms between ALB and its drivers. There was a single, on-going "contract to perform ... services" between ALB and its drivers, and thus the basis on which the "profit" or "loss" question of condition 8 should be analyzed, is that single, on-going contract. While it might be possible that a driver might incur expenses on an assignment and not receive any income from it due to circumstances such as unsatisfactory or late performance of that assignment, over the long run of the single, on-going contract between ALB and the drivers it is virtually inconceivable that a driver could sustain an absolute "loss". Therefore this condition is not met.
 

Paragraph(9): Whether the individual has recurring business liabilities or obligations -- The ALJ found that this condition was not met as to any of the individuals whose status is at issue. ALB disagrees, arguing that the individuals were "responsible for the loan payments for the trucks". However, as discussed above, the evidence of a genuine arrangement by which the drivers were buying the trucks was not persuasively proved. ALB also argues that the individuals carried their own insurance and paid self-employment tax. The ALJ found, however, that the record failed to establish this, and the commission agrees. ALB also argues that the individuals were responsible for on-going obligations for tools, phones, radios, fuel, tolls, food, and lodging associated with the services provided under the contracts. However, these expenses would for the most part only be incurred if an incoming-producing assignment was accepted. The evidence is insufficient to establish that this condition was met.
 

Paragraph(10): Whether the success or failure of the individual's business depends on the relationship of business receipts to expenditures -- The ALJ found that this condition was not met as to any of the individuals whose status is at issue. ALB disagrees and argues that the condition was met.

Like condition 8 (referencing "profit" and "loss") and condition 9 (referencing "liabilities"), this condition uses terms ("receipts") which if taken literally have a specific meaning in the context of business bookkeeping and accounting. "The relationship of business receipts to expenditures" is actually the determinant of, or a description of, operating profit or loss. Necessarily, though, this condition must be understood to mean something which is to some extent different from condition 8. The commission has adopted an understanding of condition 10 which relates more to an asset-based model of business valuation than an operating-profit-or-loss model. It has held that this criterion requires that a significant investment be put at risk and there be 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. Thomas Gronna, The Floor Guys, (LIRC Feb. 22, 2000).

Particularly because ALB failed to persuasively establish the existence of any real program through which drivers were buying tractors from it, it has not been shown that the drivers put any significant investment at risk. It appears that the primary activity of the drivers was a matter of providing labor with a small expense component (fuel, lodging, other run-incurred costs) carrying no significant risk of generating any overall loss, and this does not satisfy this condition. Kip Koth Co LLC (LIRC, April 8, 2003).

DECISION

The decision of the administrative law judge, as modified, is affirmed. Accordingly, ALB Express, Inc., Account No. 591717, is liable for unemployment insurance contributions in the amounts and for the periods set forth in the determination, together with accrued interest.

Dated and mailed March 29, 2010
albexpr . smd : 110 : 1  EE 410 EE 410.03 EE 410.05 EE 410.07  EE 410.08 EE 410.10

/s/ James T. Flynn, Chairperson

/s/ Robert Glaser, Commissioner

/s/ Ann L. Crump, Commissioner

cc:
Robert Hollman, CPA
Attorney Basil M. Loeb
Attorney Jorge Fuentes


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Footnotes:

(1)( Back ) In discussing whether this condition was met, the ALJ followed the five-factor analysis identified in Keeler v. LIRC, 154 Wis. 2d 626, 453 N.W.2d 902 (1990). That analysis was an interpretation of the "independently established trade, business or profession" language found in Wis. Stat. § 108.02(12)(b)2. as it existed prior to 1995 Act 118. When Keeler was decided, the "independently established" test was generally applicable to questions of whether an individual was an employee. However, it is now found only in Wis. Stat. § 108.02(12)(c), which applies only to loggers, truckers and employees of government units and non-profit organizations. The individuals at issue here are not within any of these categories, so § 108.02(12)(c) does not apply; this case is governed by Wis. Stat. § 108.02(12)(bm).

     The ALJ's reliance on Keeler suggests a view that the "independently established" test, and thus Keeler's five-factor analysis of that test, is incorporated within § 108.02(12)(bm)3.  The commission does not agree.  Neither it, nor any court, has so held.  In a published decision involving the current statute,  Gilbert v. LIRC and DWD UI Division, 2008 WI App 173, 315 Wis. 2d 726, 762 N.W.2d 671, the Court of Appeals discussed the interpretation and application of the § 108.02(12)(bm)3. "separate business with his or her own office, equipment, materials and other facilities" test, without any reference to Keeler. The decision of the commission in Gilbert, which the Court of Appeals found reasonable, also made no mention of Keeler. The commission will thus not apply the Keeler analysis here.

 


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