KATHLEEN M BENTHEIMER, Respondent
BANKERS LIFE & CASUALTY COMPANY, Petitioner
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:
Bankers Life & Casualty Company (hereinafter "Bankers Life") provides and sells insurance products. The claimant contracted with Bankers Life to sell its insurance products. She had not sold insurance products prior to August 2010, when she began performing services for Bankers Life, and her services for Bankers Life continued as of the date of the hearing in this case, February 18, 2011.
The claimant does not possess, and has not applied for, an identification number with the federal internal revenue service. She has not filed, nor does she intend to file, business or self-employment income tax returns with the IRS. She performs her sales work at Bankers Life's office in Madison, Wisconsin, where she is provided with a desk, computer, office, office supplies, etc. She is paid on a commission basis. She operates under two contracts with Bankers Life, both prepared by Bankers Life and entered into on the same day, one as a representative and one as an agent. These contracts contain the terms and conditions of her working relationship with Bankers Life, including an indemnification provision that requires the claimant to hold harmless and indemnify Bankers Life from and against any claims, demands, penalties, suits or actions, and from all losses, costs, and expenses arising from her default in performance or the negligent performance of her services.
Bankers Life trained the claimant to sell its products and the training is ongoing. Bankers Life requires her to be at the office on specific days and for specific hours. The claimant's expenses include gasoline for her car, which is used to get to and from work and to make sales calls. She paid for business cards, designed and ordered by Bankers Life - containing the Bankers Life logo, address, and telephone number. She uses her personal cell phone, computer, and car to perform both business and personal work. She obtained an insurance license from the State of Wisconsin and paid for such license herself. She does not carry business or liability insurance.
The issues in this case are whether the claimant is an employee of, or independent contractor for, Bankers Life and whether the amounts earned by her from Bankers Life must be reported as earnings in her weekly unemployment claims.
In its brief in support of its petition for commission review, the petitioner, Bankers Life, asserts that the claimant is not an employee because she does not perform services for the business "in an employment" since she is an insurance agent paid entirely by commissions, and that is "excluded employment" under Wis. Stat. § 108.02(15)(k)6. However, this is a weekly wage reporting case, not a base period wages case that looks to earnings paid to an employee during her base period as a result of "employment" for an employer. In fact, in this case, the claimant's base period wages consist of the last two quarters of 2009 and the first two quarters of 2010, prior to the time she started working for Bankers Life.
In Kunst v. Energy Marketing Services, UI Hearing No. 08400750AP (LIRC July 31, 2008), in a similar case in which the issue related not to base period wages but to the weekly wage reporting requirement, the commission notes that the statutory definition of employee, as modified by 2005 Wisconsin Act 86, does not require that services be performed "in an employment." Instead, in order to be considered wages that must be reported when filing a weekly claim, payments for services must be made to an "eligible employee," Wis. Stat. § 108.05(3). The definition of "employee" in Wis. Stat. § 108.02(12)(a) provides that "any individual who is or has been performing services for pay for an employing unit . . .," is an employee unless, for example, found to be an independent contractor, or a sole proprietor, or a partner in a partnership. Therefore, as relevant here, the claimant is required to report payments she received for services performed as an insurance agent for the petitioner in her weekly claims unless she is determined to be an independent contractor under Wis. Stat. § 108.02(12)(bm).
The commission notes that this is not a case involving the issue of Bankers Life's liability for contributions. It only affects the amount of benefits for which the claimant is eligible. In the hearing, she testified that she has been reporting her wages from the petitioner in her weekly claims.
Substantive changes were made to the statutory definition of "employee" in Wisconsin unemployment insurance law by 2009 Wisconsin Act 287, enacted on May 12, 2010, and applicable to services performed after December 31, 2010. The claimant performed services for Bankers Life both before and after this date. Therefore, the analysis of the claimant's employment status while performing services for Bankers Life is bifurcated, first, using the applicable pre-2011 law; and second, using the applicable 2011 law to determine whether wages earned in those weeks must be reported on her weekly wage claims.
Certain provisions left unchanged and applicable both before and after December 31, 2010 are as follows:
108.02 Definitions. As used in this chapter:
(11) ELIGIBILITY. An employee shall be deemed "eligible" for benefits for any given week of the employee's unemployment unless the employee is disqualified by a specific provision of this chapter from receiving benefits for such week of unemployment, and shall be deemed "ineligible" for any week to which such a disqualification applies.
(14m) EMPLOYING UNIT. "Employing unit" means any person who employs one or more individuals.
(20) PARTIAL UNEMPLOYMENT. An employee is "partially unemployed" in any week for which he or she earns some wages and is eligible for some benefits under s. 108.05(3).
(26) WAGES. Unless the department otherwise specifies by rule:
(a) "Wages" means every form of remuneration payable, directly or indirectly, for a given period, or payable within a given period if this basis is permitted or prescribed by the department, by an employing unit to an individual for personal services. . . .
Wis. Stat. § 108.05 states, as relevant here, as follows:
(3) BENEFITS FOR PARTIAL UNEMPLOYMENT. (a) Except as provided in pars. (b), (c), and (d), if an eligible employee earns wages in a given week, the first $30 of the wages shall be disregarded and the employee's applicable weekly benefit payment shall be reduced by 67% of the remaining amount, except that no such employee is eligible for benefits if the employee's benefit payment would be less than $5 for any week. . . .
Definition of "employee" under law applicable to services performed through December 31, 2010
Wis. Stat. § 108.02(12) provides, in relevant part, as follows:
(a) "Employee" means any individual who is or has been performing services for pay for an employing unit, whether or not the individual is paid directly by the employing unit, except as provided in par. (b), (bm), (c), (d), (dm) or (dn). . . .
(bm) During the period beginning on January 1, 2000, with respect to contribution requirements, and during the period beginning on April 2, 2000, with respect to benefit eligibility, par. (a) does not apply to an individual performing services for an employing unit other than a government unit or nonprofit organization in a capacity other than as a logger or trucker, 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 methods of performing such 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 such 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. . . .
(e) This subsection shall be used in determining an employing unit's liability under the contribution provisions of this chapter, and shall likewise be used in determining the status of claimants under the benefit provisions of this chapter.
Wisconsin Stat. § 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 Association, Inc., UI Hearing No. S9800101MD (LIRC Feb. 22, 2000); Quality Communications Specialists Inc., UI Hearing Nos. S0000094MW, etc. (LIRC July 30, 2001). Since the record shows that the claimant performed services for Bankers Life in 2010 for pay, Bankers Life has the burden to rebut the presumption that she did so as a statutory employee. It must establish, therefore, that the claimant met 7 of the 10 conditions listed in the statute.
Analysis of Conditions
Condition 1 - The claimant has no FEIN number, nor has she applied for one. This condition is not met.
Condition 2 - The claimant has not filed federal business income tax returns related to her work as an insurance agent and does not intend to do so. This condition is not met.
Condition 3 - This condition, that the claimant maintains a separate business with her own office, equipment, materials and other facilities, is not met.
The focus of this condition is to determine whether a separate business, one created and existing separate and apart from the claimant's relationship with Bankers Life, is being maintained with the claimant's own resources. See, e.g., Princess House, Inc. v. DILHR, 111 Wis. 2d 46, 330 N.W.2d 169 (1983); Christman v. Cybrcollect Inc., UI Hearing No. 06201682EC (LIRC Feb. 9, 2007) (although claimant had separate office, materials and equipment for work with Cybrcollect, record did not show she performed or even sought similar work with other entities or had an enterprise existing separate and apart from her work for Cybrcollect); Ronald Smith dba Smith Field Service, UI Hearing No. S0300197MD (LIRC Mar. 29, 2006) (although offices and equipment were maintained at claimants' own expense at their homes, the central inquiry is whether the activity engaged in by the claimant is genuinely separate from the activity of the putative employer); Quality Communications Specialists Inc., cited previously.
A separate business enterprise does not exist in this case. The claimant does not perform insurance agent services for any other entities, she does not have her own separate business or office, and she performs most of her work at the petitioner's office (an insurance business), where she has an office, desk, computer, office supplies and office staff supplied by the petitioner.
Condition 4 - This condition, that the claimant operate under contracts to perform specific services for specific amounts of money and under which the claimant controls the means and methods of performing such services, is not met.
This condition requires multiple contracts. As noted in Gronna v. The Floor Guys, UI Hearing No. S9900063WU (LIRC Feb. 22, 2000), the requirement of multiple contracts is based on sound legislative policy, as it "tends to show that an individual is not dependent upon a single, continuing relationship that is subject to conditions dictated by a single employing unit." The commission has consistently stated that this requirement may be satisfied by multiple contracts with separate entities or by multiple serial contracts with a putative employer if it is established that those contracts 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. See, e.g., Preferred Financial of Wisconsin, Inc., UI Hearing No. S0600240MW (LIRC Oct. 23, 2008); Stark v. 3246 LLC, UI Hearing No. 07401621SH (LIRC Mar. 12, 2008); Zoromski v. Cox Auto Trader, UI Hearing No. 07000466MD (LIRC Aug. 31, 2007) (single, continuing relationship with conditions dictated by putative employer does not satisfy the multiple contracts requirement).
In this case, the claimant did not perform services as an insurance agent or representative for any business other than Bankers Life. With regard to her services for Bankers Life, she entered into two written contracts with Bankers Life on the same day, one as a representative and one as an agent. Both contracts were prepared by Bankers Life and contain the terms and conditions of a single ongoing working relationship, one in which the claimant functions as both a representative and an agent of Bankers Life.
In addition, the claimant does not control the means and methods of performing her insurance work. She has been trained by the petitioner in the performance of her job, and that training is ongoing and mandatory. In addition, she is required to maintain certain office hours at the petitioner's office location, to use the petitioner's brochures in selling the products, and to use business cards that were designed and ordered by the petitioner.
Condition 5 - This condition, that the claimant incur the main expenses related to the services that she performs under contract, is not met. 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. See, e.g., Preferred Financial of Wisconsin, Inc., cited previously; J Lozon Remodeling, UI Hearing No. S9000079HA (LIRC Sept. 24, 1999).
The only expenses that the claimant has in performing her work (other than commuting expenses that are typical of most employment relationships) are vehicle expenses for making sales calls, the purchase of business cards, and the cost of her insurance license. The petitioner is responsible for all of her office expenses, including all materials and equipment, as well as administrative costs associated with marketing and selling the insurance product by her. These expenses are obviously higher than the claimant's expenses.
Condition 6 - The commission believes that this condition, that the claimant is responsible for the satisfactory completion of her services and is liable for failure to satisfactorily complete the services, is met. The agreement between the claimant and Bankers Life includes an indemnification provision that requires the claimant to hold harmless and indemnify Bankers Life from and against any claims, demands, penalties, suits or actions, and from all losses, costs and expenses arising from her default in performance or the negligent performance of her services. The commission has found such indemnity provisions to satisfy condition 6. See, e.g., Nature's Pathways, LLC, UI Hearing No. S0800258AP (LIRC Feb. 5, 2010); Nations Carelink, LLC, UI Hearing No. S0800037MD (LIRC, Dec. 17, 2008); MSI Services, Inc., UI Hearing No. S0600129AP (LIRC Sept. 5, 2008); Zoromski v. Cox Auto Trader, UI Hearing No. 07000466MD (LIRC Aug. 31, 2007).
Although it could be argued that even though the written agreement contains this indemnification provision, it is not enforced in fact. There was no testimony by the petitioner about this provision and the petitioner's brief does not mention it. In addition, the claimant has no liability insurance, and indicates that she is not liable for anything that goes wrong, but that Bankers Life has insurance for that kind of situation. However, there is no evidence in the record as to the terms of the employer's liability insurance. Therefore, it is not possible to conclude that it would operate to nullify the indemnification provision in the agreement between the claimant and Bankers Life, or that Bankers Life would choose not to enforce the indemnity provision in its agreement with the claimant at some point in the future.
Condition 7 - This condition, that the claimant is paid on a commission or per-job or competitive-bid basis, is met. The claimant is paid solely by commission.
Condition 8 - This condition, that the claimant may realize a profit (income received under the contract exceeds expenses incurred in performing the contract) or suffer a loss (income received under the contract fails to exceed expenses incurred in performing the contract), is met. It is possible that the claimant could earn more in commissions than she paid in driving to and from sales calls and in her business card and license expenses, and could realize a profit. It is also possible that, since she is only paid if she sells the insurance product, her costs could exceed her commissions, and she could suffer a loss. See, e.g., Preferred Financial of Wisconsin, Inc., cited previously; Roth v. World Financial Group Inc., UI Hearing No. 07002934MD (LIRC Jan. 10, 2008); Quality Communications Specialists, Inc., cited previously.
Condition 9 - This condition, that the individual has recurring business liabilities and obligations, is not met. This condition requires proof of a cost of doing business as an insurance agent that the claimant would incur even during a period of time that she was not performing work for Bankers Life. In this case, the only recurring business obligations that the claimant has are her licensing fees as an insurance agent. Although the record is poor on the details of these costs, presumably this is not a one-time cost, but is a recurring business obligation to keep the license current.
In Preferred Financial of Wisconsin Inc., cited previously, the commission held that loan originators' annual licensing fees satisfy this condition. Subsequently, however, in MDP Maximize Dealer Performance Ltd, UI Hearing No. S0700135EC (LIRC Dec. 11, 2009), the commission looked at whether the necessary licensure expense for selling cars ($14 for a license lasting 4 to 5 years) was sufficient to satisfy this condition, and concluded that it did not. In its analysis, the commission concluded that the application of this condition in Preferred Financial of Wisconsin, Inc. had gone too far in allowing an insignificant licensing expense ($100 per year) to satisfy this condition. Given that there is no evidence in the record of what the claimant's licensing fee costs are, the commission finds that this condition has not been met. *
Condition 10 - This condition, that the success or failure of the individual's business depends on the relationship of business receipts to expenditures, is not met. The commission has interpreted this condition to require a significant investment that is put at risk. See, e.g., Gustavson v. Carpenters Inc., UI Hearing No. 09400168AP (LIRC April 30, 2009)(carpentry tools and fax machine not the types of business investments with attendant entrepreneurial risk contemplated by condition 10); Quality Communications Specialists, Inc., cited previously (relatively small recurring expenditures could be readily discontinued if the flow of work ceased). The claimant does not have a significant investment that is at risk. She has no durable property investments, and any licensing costs she has could easily be discontinued if she was no longer working as an insurance agent.
Therefore, under the law applicable to the claimant's services through December 31, 2010, only three of the ten conditions have been met (6, 7, and 8). Since the law applicable at that time requires that seven conditions be satisfied for an individual to be considered an independent contractor, the claimant must be considered an employee and not an independent contractor for these services, and must report wages earned from Bankers Life during that period of time on her weekly unemployment claims.
Definition of "employee" under law applicable to services performed after December 31, 2010
Wis. Stat. § 108.02(12) provides, in relevant part, as follows:
(a) "Employee" means any individual who is or has been performing services for pay for an employing unit, whether or not the individual is paid directly by the employing unit, except as provided in par. (bm), (c), (d), (dm) or (dn).
(bm) Paragraph (a) does not apply to an individual performing services for an employing unit other than a government unit or nonprofit organization in a capacity other than as a logger or trucker, if the employing unit satisfies the department that the individual meets the conditions specified in subds. 1. and 2., by contract and in fact:
1. The services of the individual are performed free from control or direction by the employing unit over the performance of his or her services. In determining whether services of an individual are performed free from control or direction, the department may consider the following nonexclusive factors:
a. Whether the individual is required to comply with instructions concerning how to perform the services.
b. Whether the individual receives training from the employing unit with respect to the services performed.
c. Whether the individual is required to personally perform the services.
d. Whether the services of the individual are required to be performed at times or in a particular order or sequence established by the employing unit.
e. Whether the individual is required to make oral or written reports to the employing unit on a regular basis.
2. The individual meets 6 or more of the following conditions:
a. The individual advertises or otherwise affirmatively holds himself or herself out as being in business.
b. The individual maintains his or her own office or performs most of the services in a facility or location chosen by the individual and uses his or her own equipment or materials in performing the services.
c. The individual operates under multiple contracts with one or more employing units to perform specific services.
d. The individual incurs the main expenses related to the services that he or she performs under contract.
e. The individual is obligated to redo unsatisfactory work for no additional compensation or is subject to a monetary penalty for unsatisfactory work.
f. The services performed by the individual do not directly relate to the employing unit retaining the services.
g. The individual may realize a profit or suffer a loss under contracts to perform such services.
h. The individual has recurring business liabilities or obligations.
i. The individual is not economically dependent upon a particular employing unit with respect to the services being performed.
(e) This subsection shall be used in determining an employing unit's liability under the contribution provisions of this chapter, and shall likewise be used in determining the status of claimants under the benefit provisions of this chapter.
This new test involves first, an analysis of whether the claimant's services are performed free from control or direction by the employing unit, and second, whether the claimant meets 6 or more of 9 specific conditions relating to economic independence and entrepeneurial risk.
Wisconsin Stat. 108.02(12)(a) was not substantively changed by the new law(1). It still creates a presumption that a person who provides services for pay is an employee, and it still 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 Association, Inc., UI Hearing No. S9800101MD (LIRC Feb. 22, 2000); Quality Communications Specialists Inc., UI Hearing Nos. S0000094MW, etc. (LIRC July 30, 2001).
Since the record shows that the claimant has performed services for Bankers Life in 2011 for pay, Bankers Life has the burden to rebut the presumption that she does so as a statutory employee. It must establish that the claimant operates free of its direction or control and that the claimant meets at least 6 of the 9 conditions set forth in the statute.
Analysis of Conditions
The first part of the test provides five important statutory factors to consider, although these factors are not the only factors that may be considered in determining whether the claimant performs her services free from the control or direction of the employing unit. Each factor is a separate indicator of an employing unit's exercise of direction or control over the claimant, none of them are essential in any case, and each factor may be weighted differently depending upon the facts of each case.
Wis. Stat. § 108.02(12)(bm)1. - Freedom from control or direction by the employing unit
a. Instructions - This condition looks at whether the individual is free from the employing unit's direction to comply with instructions concerning how to perform the services. Although the record is sparse on this issue, there is evidence that the claimant follows rules set up by Bankers Life as to how to perform her services as an insurance agent. The written agreement between the parties states that the claimant agrees to abide by all policies, practices and procedures adopted by Bankers Life, including subsequent amendments related to the conduct of its business. She is required to attend meetings at the Bankers Life office two mornings a week, as well as at least one sales training meeting a week. She must use Bankers Life approved items, such as business cards, brochures, and other sales items. This factor is
not met.
b. Training - This condition looks at whether the individual is free from training by the employing unit with respect to the services performed. The claimant has attended, and continues to attend, training classes at Bankers Life to learn the products, and she has received training in the field from senior agents with Bankers Life in how to sell products to customers. At the time of the hearing, she had another agent shadowing her and noted that new agents usually work with another agent for the first three or four months of work.
It could be argued that most of this training has been provided by other agents, and not by Bankers Life management. This position prevailed in Princess House, Inc. v. DILHR, 111 Wis. 2d 46, 330 N.W.2d 169 (1983), where the Wisconsin Supreme Court found(2) that the dealers at issue were free from supervision by the employing unit even though they attended training sessions and pep meetings. This finding was grounded in the facts that the sessions were set up and conducted by unit or area organizers, with no direct evidence of involvement by Princess House management.
In this case, the record is not clear as to who set up and conducted the training sessions. The claimant believed this training was performed by Bankers Life, and without evidence to the contrary, the commission finds that this factor is not met.
c. Personal performance - This condition looks at whether the individual is free from the requirement of personal performance of the services. The written agreement between Bankers Life and the claimant does not permit the claimant to assign her "rights and duties" under the agreement to another person without the prior written consent of Bankers Life. Otherwise, there was no evidence presented on this issue. In the absence of evidence to the contrary, the commission finds that this factor is not met.
d. Services at times or in a particular order or sequence - This condition looks at whether the individual is free from the requirement of performing services at times or in a particular order or sequence established by the employing unit. The claimant is required to be at Bankers Life offices on certain days of the week, for certain hours on each day, and to attend meetings scheduled by Bankers Life. The commission finds that this factor is not met.
e. Oral or written reports - This condition looks at whether the individual is free from the requirement of making oral or written reports to the employing unit on a regular basis. There was no evidence presented on this issue, so a finding cannot be made either way.
No other factors were raised by either party on the issue of whether the claimant has been, and will continue to be, free from control or direction by Bankers Life, and the commission does not note any other relevant factors. Therefore, Bankers Life has not established that the claimant performs her services free of its control or its direction.
Accordingly, since both parts of the statutory test must be satisfied for an individual to be considered an independent contractor rather than an employee, the claimant must be deemed to be an employee of Bankers Life. Nevertheless, in the interests of a complete analysis under the new law, the commission has also looked at whether Bankers Life has established that 6 of the 9 conditions in the second part of the test have been met.
Wis. Stat. § 108.02(12)(bm)2. - Economic independence and entrepeneurial risk
The commission notes that several of these conditions, in whole or in part, are the same as conditions contained in the previous law. The analysis in the earlier part of this decision relating to services performed by the claimant in 2010 would, therefore, be applicable for these unchanged conditions, as would the commission decisions and case law relating to these conditions under previous law.
a. The individual advertises or otherwise affirmatively holds himself or herself out as being in business.
The claimant does not advertise her services as an insurance agent or representative nor does she hold herself out as being in business as an insurance agent or representative. Bankers Life required that she purchase business cards showing that she is an insurance agent for Bankers Life, and the content and design of the cards were dictated by Bankers Life. This condition is not met.
b. The individual maintains his or her own office or performs most of the services in a facility or location chosen by the individual and uses his or her own equipment or materials in performing the services.
The claimant does not maintain an office for business purposes, and she performs most of her services in an office at Bankers Life or at the homes of clients. She uses her personal computer for business purposes on occasion, but also uses the computer at the office, particularly if documents must be printed out. All materials, other than her pen, and other equipment that she uses as an insurance agent are supplied by Bankers Life. This condition is not met.
c. The individual operates under multiple contracts with one or more employing units to perform specific services.
This factor is similar to condition 4 under the old test, retaining the first part of that condition relating to multiple contracts, but not the second part, and warrants the same finding, that the condition is not met. See discussion of condition 4 of the old test.
d. The individual incurs the main expenses related to the services that he or she performs under contract.
This condition is identical to condition 5 under the old test, and warrants the same finding - that this condition is not met. See discussion of condition 5 of the old test.
e. The individual is obligated to redo unsatisfactory work for no additional compensation or is subject to a monetary penalty for unsatisfactory work.
This condition replaces condition 6 of the old law that read - "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." There was no evidence that the claimant is obligated to redo unsatisfactory work for no additional compensation, so it must be determined whether she is subject to a monetary penalty for unsatisfactory work. The commission notes that the language of this criterion has changed from the old language, including that the term "liable" has been omitted and the term "monetary penalty" has been added.
Under the old test (see discussion of condition 6 of the old test), the commission found that this condition was met in this case because the agreement between the claimant and Bankers Life includes an indemnification provision that requires the claimant to hold harmless and to indemnify Bankers Life from and against any claims, demands, penalties, suits or action, and from all losses, costs, and expenses arising from her default in performance or the negligent performance of her services. As noted in discussion of condition 6 of the old test, such indemnification provisions have been found to satisfy condition 6 of the old test by the commission.
However, given the changes in the new law, the question arises as to whether the indemnification provision in the parties' agreement would still satisfy the criterion of this condition, specifically whether it would subject the claimant to a "monetary penalty". The term "monetary penalty" is not defined in the new law. Therefore, to interpret the meaning of this new language, the commission looks to the rules of statutory construction.
Generally, if the language of a statute is clear, it is unnecessary to look outside the statute in order to determine its meaning. Its plain meaning controls, and statutory language is customarily given its common, ordinary, and accepted meaning. Wis. Stat. Sec. 990.01(1), relating to the construction of laws, states:
GENERAL RULE. All words and phrases shall be construed according to common and approved usage; but technical words and phrases and others that have a peculiar meaning in the law shall be construed according to such meaning.
In determining the common and accepted meaning of statutory language, it is appropriate to look to dictionary definitions. See Xerox Corporation v. Wisconsin Department of Revenue, 321 Wis. 2d 181, 215, 772 N.W.2d 677 (Ct. App. 2009). The word "monetary" needs no interpretation, describing the penalty as one involving money. However, the word "penalty" is susceptible to various interpretations. Black's Law Dictionary(3) lists several definitions of the word "penalty," including "an extra charge against a party who violates a contractual provision." It also cites to a legal treatise on damages that states that a penalty is a fixed sum that a party agrees to pay or forfeit in case of a breach. Webster's Third New International Dictionary(4) also has several definitions of the word, including "the suffering or the sum to be forfeited to which a person subjects himself by covenant or agreement in case of nonfulfillment of stipulations . . ." The American Heritage Dictionary includes a more general definition of the word "penalty" involving the concept of "disadvantage or painful consequences resulting from an action or condition."(5)
The commission notes that the indemnification agreement does not require the claimant to pay a fixed and certain sum of money to remedy unsatisfactory work, but has a much broader sweep of potential monetary consequences to the claimant. If that narrow definition of "penalty" is adopted, it would appear that the indemnification provision does not subject the claimant to a monetary penalty under this provision and the condition is not met.
On the other hand, there are more general definitions to the term, indicating a disadvantage or painful consequence, in this case of a monetary nature. If this more general definition of "penalty" is adopted, the indemnification provision, with its potential for a wide range of adverse monetary consequences, would clearly satisfy this condition.
It is, then, necessary to attempt to determine what the drafters of the new law meant by this term. In so doing, it is appropriate to look to the legislative history giving rise to the change in the statute, specifically a report to the Unemployment Insurance Advisory Council(6) dated June 25, 2009, by the committee appointed to study and to suggest changes to the definition of "employee" under 108.02(12).(7) See Milwaukee County v. DILHR, 80 Wis. 2d 445, 259 N.W.2d 118 (1977) (Wisconsin Supreme Court looks to Advisory Council comments made in conjunction with recommended law changes to determine or to clarify legislative intent), citing Western Printing & Lithographing Co. v. Industrial Comm., 260 Wis. 124, 130, 50 N.W.2d 410 (1951).
The committee in its report notes that the old condition 6 has been a useful criteria, but that the old language invited controversy over the proper interpretation of the phrase "liable for failure to satisfactorily complete the services". The committee stated that the proposed changes made to this condition "best reflect[s] the decisions by the Commission and limit[s] the range of doubt and controversy in the future."
Given that the legislative intent of the change to this condition was, in part, to "reflect decisions by the Commission," it is noteworthy that in prior decisions construing condition 6 under the old law, the commission has used the term "penalty" generally to include a variety of adverse pecuniary consequences, and not simply a fixed sum. The commission has consistently held that it was not simply the obligation to do re-work without additional compensation which determined whether the condition was met, but that an expectation that it would be done as well as a penalty for not doing so was also required. For example, in Zolicoffer v. Zoe Engineering, LLC, UI Hearing No. 09608424MW (LIRC March 19, 2010), the commission described the penalty required under the condition as consisting of "something more than not being called upon by the putative employer to perform work for it in the future." In Marv Mews & Sons, Inc., UI Hearing No. S0800184MW (LIRC, March 24, 2009), the commission noted that the subject workers "suffered the penalty of having part of the cost of leasing equpment, hiring workers, and purchasing materials to do the re-work deducted from their share of corporate profits." In Thomas J. Harris, UI Hearing Nos. S0400220HA, etc. (LIRC June 15, 2006), the commission found that the penalty to workers for repairing defects in their work included that they were expected to pay for repair/replacement materials. In Diane M. Egan, UI Hearing No. S0300071JV (LIRC April 15, 2005), the commission found condition 6 met because if workers failed to remedy their work without additional pay, they would be penalized by non-payment of the underlying exam fee. In Quale & Associates, Inc., UI Hearing No. S0200201MW (LIRC Nov. 19, 2004), the commission found the requisite penalty in a worker's "liability for the cost of re-work if performed by a third party."
Accordingly, given that the term "monetary penalty" is not defined in the statute, that it has various dictionary definitions including those of a general nature, that the commission has broadly construed the term "penalty" in its analysis of the corresponding condition in the previous law, and that the legislative history indicates a continuing agreement with the commisson's interpretation of the condition, the commission concludes that the potentially adverse pecuniary consequences to the claimant as a result of agreeing to indemnify Banker Life from financial losses attributable to her qualify as a "monetary penalty," as that term is used in this condition.(8) This condition is met.
f. The services performed by the individual do not directly relate to the employing unit retaining the services.
This condition is a factor relating to "integration" of the individual's services into the kind of work done by the employing unit. The committee of the Unemployment Insurance Advisory Council notes in its report that it is one of the factors currently used by the courts and the commission for government and nonprofit employers, citing the case of Keeler v. LIRC, 154 Wis. 2d 626, 631 (Ct. App. 1990). In Keeler, the Court of Appeals gave an example of the integration concept - a tinsmith was called upon to repair the gutter of a company engaged in a business unrelated to the repair or manufacture of gutters. Since the tinsmith's activities were totally unrelated to the business of the company retaining his services, his services were not "integrated" into the alleged employer's business, and were considered to be a factor evidencing an independent business.
In this case, the claimant, as an insurance agent, performed services that were integrated into the business of Bankers Life, an insurance company. Therefore, this condition is not met.
g. The individual may realize a profit or suffer a loss under contracts to perform such services.
This condition is identical to condition 8 under the old test, and warrants the same finding - that this condition is met. See discussion of condition 8 of the old test.
h. The individual has recurring business liabilities or obligations.
This condition is identical to condition 9 under the old test, and warrants the same finding - that this condition is not met. See discussion of condition 9 of the old test.
i. The individual is not economically dependent upon a particular employing unit with respect to the services being performed.
This condition replaces condition 10 under the old test - "The success or failure of the individual's business depends on the relationship of business receipts to expenditures". The new condition focuses on the economic dependence of the individual. In this case, the claimant is entirely economically dependent on Bankers Life. She performs services as an insurance agent for Bankers Life on a full-time basis, and does not provide such services for any other business. This condition is not met.
In sum, only two of the nine conditions in the second part of the new test are met. Therefore, since the new Wis. Stat. § 108.02(12)(bm) requires that, first, the claimant be free from the control and direction of Bankers Life; and second, that at least six of the nine conditions in the second part of the test be met for the claimant to be considered an independent contractor, and neither is met, the claimant must be considered an employee, not an independent contractor, and must continue to report her wages earned from Bankers Life on her weekly unemployment claims.
The decision of the administrative law judge, as modified, is affirmed. Accordingly, the claimant has performed, and continues to perform, services for Bankers Life & Casualty Company as a statutory employee, and wages earned for performing these services must be reported by the claimant as they are earned.
Dated and Mailed August 16, 2011
BY THE COMMISSION:
/s/ Robert Glaser, Chairperson
/s/ Ann L. Crump, Commissioner
/s/ Laurie R. McCallum, Commissioner
benthk3 : 120 : 5 : EE 408 : EE 410 : EE 450
cc:
Bankers Life & Casualty Company (Chicago, IL)
Bankers Life & Casualty Company (Janesville, WI)
Attorney William Hays Weissman
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