SHERRIE L SCHUMACHER, Claimant
SPAR MARKETING SERVICES INC, 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:
The claimant has performed services as a merchandiser for Spar Marketing Services Inc., (hereinafter "Spar" or "the petitioner"), a third party merchandising services business, since January 2010.
The issue is whether the claimant performed services for Spar as an employee during the base period of her unemployment benefits claim - the second, third, and fourth quarters of 2010 and the first quarter of 2011.
At the start of the working relationship, Spar and the claimant entered into an "Independent Merchandiser Agreement" that specified a variety of conditions of the relationship, including that the claimant would be responsible for maintaining appropriate general liability and workers compensation insurance as required by law or Spar would provide that coverage for a mandatory charge of 2.9% of the claimant's gross invoices; that the claimant would be solely responsible for any and all damages, injuries and claims of whatever nature related to or arising out of her performance, agreeing to indemnify Spar for the same; and that the claimant was free to subcontract projects to "qualified individuals."
The claimant was responsible for servicing a video rental box, primarily at one retail location although she also covered other locations when assigned those locations to substitute for another merchandiser. She obtained her work assignments weekly from a website maintained by Spar, with special instructions for the assignments, and was expected to accept the work that was assigned to her and to complete it within a deadline provided. She picked up an invoice in the box with the videos that was waiting for her at the retail location, and would make entries on the invoice indicating her placement of the specific DVDs in the rental box. She also returned the videos, via a delivery service with expenses prepaid, if the instructions directed her to do so. If she missed something or an assignment was not completed timely, her Spar supervisor would call or email her.
The claimant also received instructions from Spar's client (the video box business), as well as a brief on-line training, and she provided information to Spar and the client if a machine needed technical service. She did not provide reports, oral or written, to Spar on a regular basis, although she would notify Spar and the client if a machine needed repair or the retail store was having problems with a machine.
The claimant paid for her transportation costs, usually a total of 10 miles to and from her primary retail location, and she would sometimes take some spray cleaner and a towel to clean the rental box, but had no other expenses in performing the services. She was paid a set fee for each assignment. She did not have a federal employer identification number ("FEIN"). She did file self-employment income tax returns with the federal internal revenue service reporting her earnings from Spar in 2010, the first year she performed those services for them. She did not have a specific business location with office material and equipment, and did not hold herself out as a merchandiser. She used her personal computer to communicate with Spar, and had a personal printer to print off assignments, if necessary. She did not purchase general liability insurance coverage. Her principal source of income came from a merchandising job with a different company, for whom she worked as an acknowledged employee. She did not perform merchandising services for any other entities.
The claimant performed services for Spar in each of the calendar quarters of her base period, and was paid $430.30 in the second quarter of 2010, $438.30 in the third quarter of 2010, $427.24 in the fourth quarter of 2010, and $277.60 in the first quarter of 2011.
In its petition for commission review, Spar argues that a sufficient number of the statutory conditions were met for the claimant to be considered an independent contractor and not an employee under unemployment insurance law. The commission will address Spar's specific arguments in its analysis of each of the statutory conditions.
APPLICABLE LAW
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. Since the claimant's base period includes quarters in both 2010 and 2011, the analysis of the claimant's employment status while performing services for Spar is bifurcated, first, using the pre-2011 law; and second, using the 2011 law.
The commission notes that, in its interpretation of the new law, it has looked,
when appropriate, to the legislative history giving rise to the change in the
statute, specifically a report to the Unemployment Insurance Advisory Council(1) dated
June 25, 2009, by the committee appointed to study and to suggest changes to the
definition of "employee" under 108.02(12).(2)
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).
Certain provisions left unchanged and applicable both before and after December 31, 2010 are as follows:
Wisconsin Stat. § 108.02 states, in relevant provisions, as follows:
108.02 Definitions. As used in this chapter:
(4) BASE PERIOD. "Base period" means the period that is used to compute an employee's benefit rights under s. 108.06 . . .
(4m) BASE PERIOD WAGES. "Base period wages" means:
(a) All earnings for wage-earning service which are paid to an employee during his or her base period as a result of employment for an employer;
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 Dec. Hearing No. S9800101MD (LIRC Feb. 22, 2000); Quality Communications Specialists Inc., UI Dec. Hearing Nos. S0000094MW, etc. (LIRC July 30, 2001).
Therefore, since the record shows that the claimant performed services for Spar in 2010 for pay, Spar has the burden to rebut the presumption that she did so as a statutory employee. It must establish, therefore, that the claimant met seven of the ten conditions listed in the statute.
Throughout its petition for commission review, the petitioner cites to the parties' independent merchandiser agreement. However, the claimant's status as an independent contractor or a statutory employee is determined by statute, and not by the terms of a private agreement. Roberts v. Industrial Comm., 2 Wis. 2d 399, 86 N.W.2d 406 (1957). See also Knops v. Integrity Project Management, UI Hearing No. 06400323AP (LIRC May 12, 2006). In addition, the applicable statute requires that the statutory conditions must be met "by contract and in fact." Therefore, the specific factual circumstances of each case must be examined to determine whether the conditions are actually and genuinely met.
Of additional significance, the unemployment statute specifically states, at Wis. Stat. § 108.12, that "[n]o agreement by an employee to waive the employee's right to benefits or any other rights under this chapter shall be valid." In sum, the claimant's status as an independent contractor or an employee, for unemployment insurance purposes, is determined by statute, and not by any agreement or understanding between the parties.
Analysis of Conditions
Condition 1 - This condition, that the individual holds or has applied for an identification number with the federal internal revenue services, is not met. The petitioner argues that the claimant's completion of a W-9 request for a taxpayer
identification number establishes that this condition is met. However, that request for a taxpayer identification number ("TIN") utilizes the claimant's social security number as her TIN. The commission has held that the possession of a social security number, which the claimant used in this case, is not the same as holding an identification number with the federal internal revenue service.
See Kinney v. Spar Marketing Services, Inc., UI Dec. Hearing No. 11001359MW (LIRC Aug. 26, 2011);
MSI Services, Inc., UI Dec. Hearing No. S0600129AP (LIRC Sept. 5, 2008).
Condition 2 - This condition, that the claimant has filed business or self-employment income tax returns based on the services she provided for Spar, is met. Although the claimant's testimony on this condition was unclear, the ALJ concluded that she did file self-employment income tax returns, specifically a Schedule C, and the commission sees no compelling reason to dispute his conclusion.
Condition 3 - This condition, that the claimant maintains a separate business with her own office, equipment, materials and other facilities, is not met. The petitioner argues that this condition is met because the claimant does not utilize Spar offices and is responsible for her own equipment or materials, and the parties' agreement requires the claimant to maintain any required office, materials and supplies necessary to perform her services.
However, 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 Spar, 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); Campbell v. Speedmark, UI Dec. Hearing No. 08002536MD (LIRC April 27, 2009) (no evidence of a separate free-standing office of any kind, or a home office primarily for business purposes); Christman v. Cybrcollect Inc., UI Dec. 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 Dec. 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 (all factors in condition must be considered).
In this case, the claimant did not have a specific location with office materials and equipment to perform her services for Spar. She used her personal computer, printer and car. She did not do this kind of work for any other business as a contract employee.
In Campbell, cited above, the claimant (a mystery shopper) had a "computer room" in her home, but used that room primarily for personal purposes and for work for another business unrelated to mystery shopping, and would continue to have that room even if she did not perform mystery shopping services. She also had a car to transport herself to mystery shopping locations, but used that car for personal purposes and would still have expenses associated with the car even without the mystery shopping work. The commission noted that the space in her home and her car were not necessarily indicative of a separate business, since most individuals have a space in their homes that they can use to perform "office" functions connected to work they may be doing, and have a car they use to transport themselves. As the commission noted, "[o]wnership and use of such things for personal purposes is now so common, that in and of itself it simply cannot be taken as an indication that the individual is operating a separate business." Although in this case the claimant did not have a "computer room," the Campbell rationale applies.
Worth particular mention, in Gary Gilbert v. LIRC and DWD, 315 Wis. 2d 726, 748-750, 762 N.W.2d 671 (Ct. App. 2008), the court of appeals included an analysis of this condition in its decision, and noted that the statute requires an individual to own and maintain an office, equipment, materials, and other facilities, these being "typical indicators of an existing business." Id. at 750. The petitioner has not established that the statutory conditions were met in this case.
Condition 4 - This two-part condition, that the claimant operates 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. The petitioner argues that this condition is met because the ALJ found that Spar did not control the means and methods of work that the claimant was performing, and the claimant testified that she had multiple contracts with other firms.(3)
The petitioner is mistaken with regard to the issue of multiple contracts. The claimant testified that her primary job was as an acknowledged employee working as a merchandiser with another business. That kind of employment relationship, as an acknowledged employee, is not the kind of "contract" contemplated by this statutory provision. It does not lend support to an argument that the claimant has her own independently established business in which she provides services by contract to multiple customers or clients. In addition, as an acknowledged employee of the other merchandising business, the claimant does not control the means and methods of performing her services for that business. For these reasons, the commission has never accepted the proposition that employment as an employee with another business would satisfy this provision.
As noted in Gronna v. The Floor Guys, UI Dec. 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 Dec. Hearing No. S0600240MW (LIRC Oct. 23, 2008); Stark v. 3246 LLC, UI Dec. Hearing No. 07401621SH (LIRC Mar. 12, 2008); Zoromski v. Cox Auto Trader, UI Dec. 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 had only one contract with Spar, and her employment relationship as an employee with another business does not qualify as an additional contract. The multiple contracts requirement of this condition is not met, and since both parts of the condition must be met, it is not necessary to address the second part of this condition.
Condition 5 - This condition, that the claimant incurs the main expenses related to the services that she performs under contract, is not met. The petitioner argues that the condition is met because the claimant is responsible for all expenses related to executing her assignments, including general liability insurance, workers compensation insurance, materials, transportation, tools, etc. It cites to the commission case of John M Barnett, UI Dec. Hearing No. 02003109WU (LIRC Oct. 29, 2002), for the proposition that tools and a pager met the main expenses requirement "in a similar service-oriented case," and asserts that the focus is on the "main" expenses, and not on the "amount of" expenses.
However, in Barnett, the claimant (who performed installation and service work for a satellite dish business) invested in tools costing an estimated $600, coaxial fittings and cable, and a pager that cost $120 per year. The commission, noting that the satellite dish system itself was not an expense of services performed, found that the claimant incurred the main expenses for performing his services. That is a very different situation. Here, the claimant had no expenses for any materials, tools, or equipment to perform her services, other than an occasional paper towel and some spray cleaner, and her workers' compensation insurance costs and transportation costs were minimal. The two cases are clearly distinguishable.
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 Dec. Hearing No. S9000079HA (LIRC Sept. 24, 1999). In that regard, the commission has consistently held that, without a quantification of these expenses or an obvious conclusion as to the expenses borne by the respective parties, it must be found that condition 5 has not been met.
See, e.g., Goodwin v. Spar Marketing Services, Inc., UI Dec. Hearing Nos. 11003342EC, etc. (LIRC Dec. 1, 2011);
Kinney v. Spar Marketing Services, Inc., cited previously; Gustavson v. Carpenters Inc., UI Dec. Hearing No. 09400168AP (LIRC April 30, 2009);
Preferred Financial of Wisconsin, Inc, cited previously; Stark v. 3246, cited previously.
In this case, the claimant had expenses associated with her merchandising work, including workers' compensation insurance (taken out of her earnings), and travel expenses. However, Spar also had expenses, including administrative costs related to contracting with the claimant, providing her with her weekly assignments, employing a manager who was available to her for advice and assistance if necessary, processing her invoices, and compensating her for her services. In addition, online training was provided to her, as were detailed instructions each week, by either Spar or Spar's client, and the boxing and delivery expenses of returned DVDs were incurred by either Spar or Spar's client. None of these expenses were quantified in the record, and it is not obvious that the claimant's expenses would exceed those of Spar and its clients.
Condition 6 - 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 commission has consistently held that it is not simply the obligation to do re-work without additional pay which is the determining factor in condition 6, because this obligation is typical as well of piecework employees. See T & D Coils, Inc., UI Hearing No. S9800147MW (LIRC Dec. 15, 1999). However, the written agreement between the parties includes a liability and indemnification provision. The commission has held that such indemnification provisions may satisfy this condition. See, e.g., Nature's Pathways, LLC, UI Dec. Hearing No. S0800258AP (LIRC Feb. 5, 2010); MSI Services, Inc., cited previously.
Condition 7 - This condition, that the claimant is paid on a commission or per-job or competitive-bid basis, and not on any other basis,
is met. The claimant was paid on a set fee, per-job basis.
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 not met. The petitioner argues that this condition is met because the amount of loss faced by the claimant would not result solely from her expenses, but also from not being paid to re-do services not performed satisfactorily, and she could face a loss from poor business decisions such as subcontracting, accepting assignments that were far away, etc.
However, the test is whether, over the term of the contract between the claimant and Spar, there was a realistic possibility that the claimant could realize a profit or suffer a loss. See, e.g., Zabel v. Snyder's of Hanover, UI Dec. Hearing No. 10000988MD (LIRC Sept. 2, 2010) (even though claimant suffered losses during certain weeks, there was no realistic possibility of loss over term of agreement); Gustavson, cited previously. The test is not whether the claimant might suffer a loss on one assignment from being required to re-do services without additional payment, or from overpaying a subcontractor on an assignment or accepting an assignment far away with higher travel expenses. The test requires an assessment over the entire term of the contract. In addition, as noted in Alsheski v Codeworks, Inc., UI Dec. Hearing No. 09403672AP (LIRC Feb. 26, 2010), in assessing whether a realistic possibility of loss exists, the proper evaluation is whether there is a genuine business risk if the services are completed as contracted, and "not whether, given the universe of possibilities, something could occur that could result in a loss."
In this case, although the claimant could realize a profit in performing her services, it is not likely that she could suffer a loss over the term of the contract, given that she was guaranteed a fixed amount of compensation for each completed assignment and her expenses were minimal. In addition, as noted above, the proper test of profit and loss is based upon the individual successfully completing her services, and the claimant's assignments were all located close to her home and she never subcontracted her work.
Condition 9 - This condition, that the individual has recurring business liabilities and obligations, is not met. The petitioner argues that this condition is met because the claimant has a recurring obligation for liability and workers' compensation insurance, the definition of "recurring" being "to come up again for consideration" or "to occur again after an interval." The petitioner disputes that a recurring business obligation should be interpreted as one that continues even in the absence of services being performed. Again, the petitioner cites to the Barnett case, in which the commission found that the claimant's liability of $300 per year for liability insurance was sufficient to meet this condition.
The commission notes, however, that the claimant in this case did not purchase liability insurance. Had she done so, and the cost exceeded a de minimus amount, the commission would have found this condition met. That would be a recurring expense, one that would be ongoing even in the absence of services being performed. In this regard, the commission has consistently held that this condition requires proof of a cost of doing business that the claimant would incur even during a period of time that she was not performing the services at issue. See, e.g., Spencer Siding, UI Dec. Hearing No. S0300142GB, etc. (LIRC June 2, 2006); Clear Choices Inc., UI Dec. Hearing No. S0300202EC, etc. (LIRC Oct. 26, 2005) (expenses that are incurred regardless of the level of actual business activity); Gamble v. American Benefit LTD, UI Dec. Hearing No. 04004847MD (LIRC Feb. 15, 2005) ("overhead expenses that cannot be avoided by ceasing to perform services").
In addition, it is likely that liability insurance would be for business purposes only, another requirement of this condition. The commission has consistently held that such costs must be for business purposes alone or they do not qualify as business liabilities or obligations.
See, e.g., Goodwin v. Spar Marketing Services, Inc., cited previously;
Start Renting Inc., UI Dec. Hearing No. S0800059MD (LIRC May 15, 2009);
Kunst v. Energy Marketing Services, UI Dec. Hearing No. 08400750AP (LIRC July 31, 2008).
In this case, premiums for workers' compensation insurance were taken out of the claimant's earnings. If she did no work for Spar, she had no earnings and no recurring expenses for insurance. In addition, she had no business expenses during times in which she did not perform services for Spar.
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 petitioner argues that this condition is met because the claimant is liable for the expenses of project completion, per the parties' agreement, and if her expenses exceed her earnings the business would fail; and, as a service industry position, this business utilizes personal talents and skills rather than machinery and equipment.
However, the commission has interpreted this condition to require a significant investment that is put at risk, with the potential for real success in the growth and value of the investment or real failure in the sense of an actual loss of the investment. See Harlan Mrochinski, UI Dec. Hearing No. S0100001WR (LIRC July 15, 2004), citing Dane County Hockey Officials Association Inc., cited previously. See also Gustavson, cited previously (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 had no investment that was at risk while performing services for Spar.
Therefore, under the law applicable to the claimant's services through December 31, 2010, only three of the ten conditions have been met. 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 the wages she earned from Spar during that period of time shall be included in the department's computation of her base period wages.
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 six or more of nine specific conditions relating to economic independence and entrepreneurial risk.
Wisconsin Stat. 108.02(12)(a) was not substantively changed by the new law(4). 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., cited previously;
Quality Communications Specialists Inc., cited previously.
Since the record shows that the claimant performed services for Spar in 2011 for pay, Spar has the burden to rebut the presumption that she did so as a statutory employee. It must establish that the claimant operated free of its direction or control and that the claimant met at least six of the nine 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 factor looks at whether the individual is free from the employing unit's direction to comply with instructions concerning how to perform the services. This factor is not met. The claimant received ongoing instructions from Spar concerning how to do her job, including detailed instructions for each assignment. She also received regular advice and directions from her district market manager.
b. Training - This factor looks at whether the individual is free from training by the employing unit with respect to the services performed. This factor
is met. Other than a brief on-line training video at time of hire regarding the client's business, there was no training by Spar.
c. Personal performance - This condition looks at whether the individual is free from the requirement of personal performance of the services. There is little evidence in the record about this factor, other than the parties' agreement that provides that the claimant may subcontract with other "qualified individuals" to perform her services, and her testimony that someone could fill in for her. It is not clear what qualifications Spar would require from an individual with whom the claimant might want to subcontract, and given this express limitation, the commission finds that this factor
is not met.
d. Services at times or in a particular order or sequence - This factor 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. This factor
is met. The claimant had a window of time within which she could perform the work assigned to her, was not required to perform her services at particular times or in a particular order or sequence.
e. Oral or written reports - This factor looks at whether the individual is free from the requirement of making oral or written reports to the employing unit on a regular basis. This factor
is met. The claimant was not required to provide oral or written reports to Spar on a regular basis.
No other factors were raised by either party on the issue of whether the claimant was free from control or direction by Spar, and the commission does not note any other relevant factors. Since three of the five factors were met, the claimant is deemed to perform her services free of Spar's control or 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, it is necessary to look at whether Spar has established that six of the nine conditions in the second part of the test have been met.
Wis. Stat. § 108.02(12)(bm)2. - Economic independence and
entrepreneurial 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. In addition, two of the conditions (conditions e. and i.) are the same or substantively similar to the current conditions in the "employee" test applicable to non-profit and governmental organizations, and commission decisions and case law relating to those two conditions would be equally applicable in this context.
a. The individual advertises or otherwise affirmatively holds himself or herself out as being in business.
The petitioner argues that the claimant performs merchandising services for others, and due to the large number of merchandising companies in Wisconsin, she has numerous opportunities to perform these services. However, the opportunity for her to do the work does not mean that she advertises her services as a merchandiser or that she affirmatively holds herself out as being in a merchandising business. She does not do so, and the only other company for whom she performs merchandising services employs her as an employee, not as an operator of her own business. 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.
This is a two-part condition, and both parts must be met for the condition to be met. The petitioner argues that this part of the condition is met because Spar does not have a location where the claimant works from, and the claimant chooses to perform her services in a particular location by choosing any assignment offered.
The committee of the Unemployment Insurance Advisory Council, in its report on changes to the law, noted that a broadened concept of the traditional office was appropriate, given the mobility of many workers who do not maintain their own offices, such as writers and consultants who determine for themselves where they will perform their services. These workers would appear no less independent simply because they do not maintain their own offices.
However, in this case, the claimant is not a consultant or writer or someone who can perform her services in a location of her choice. Her services must be performed at a retail location that is chosen by Spar, and offered to her as an assignment. Accordingly, since the first part of this condition is not met, the condition is not met.
c. The individual operates under multiple contracts with one or more employing units to perform specific services.
This condition 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.
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 the condition is not met.
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." The parties' agreement included an indemnification provision, and the commission has held that such an indemnification provision satisfies this condition of the new test. See Bentheimer v. Bankers Life & Casualty Company, UI Dec. Hearing No. 10006546JV (LIRC Aug. 16, 2011). This condition is met.
f. The services performed by the individual do not directly relate to the employing unit retaining the services.
The petitioner argues that this condition is met because the claimant only performs merchandising services on a contractual basis, and does not perform any services relating to additional services provided by Spar, such as finance, accounting, IT, HR, etc.
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 a merchandiser, performed services that were integrated into the business of Spar, a third party merchandising company. Although Spar may have departments that perform functions necessary to the operations of a business, such as human resources, IT, and accounting, its own witness described the business as a "third party merchandising company." The claimant's services were directly related to the specific business of Spar, merchandising. 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 not met.
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.
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 Unemployment Insurance Advisory Council committee report states that "[f]or many years, economic independence has been acknowledged by the Commission and the courts as an important factor in the test applicable to government and nonprofit employers."
The economic dependence factor was addressed and interpreted in a published Court of Appeals decision,
Larson v. LIRC, 184 Wis. 2d 378, 392, 516 N.W.2d 456 (Ct. App. 1994), as follows:
[E]conomic dependence is not a matter of how much money an individual makes from one source or another. Instead, it refers to the survival of the individual's independently established business if the relationship with the putative employer ceases to exist.
The commission has relied on that reasoning in numerous subsequent cases. See, e.g.,
Williams v. MTEC, UI Dec. Hearing No. 07604021MW (LIRC Nov. 21, 2007) (instructor);
Eichman v. Wisconsin Technical College System Foundation, UI Dec. Hearing No. 06003528JV (LIRC Jan. 18, 2007) (emergency preparedness workshop presenter);
Ristau v. Fox Valley Symphony Orchestra Association Inc., UI Dec. Hearing No. 06401057AP (LIRC Aug. 23, 2006) (percussionist);
Seftar v. Waukesha Symphony Inc., UI Dec. Hearing No. 01609181WK (LIRC April 25, 2002) (bassoonist). In each of these cases, if the individual's relationship with the employing unit at issue ceased to exist, the individual's business would continue. The commission looked at the specialized skills and/or investment in equipment that the individual had, supporting an ability to perform specific services for others, as well as the fact that the individual did such work for others, demonstrating the independence of the individual's work from that of the employing unit at issue.
In addition, in other cases in which an individual has performed services for multiple entities, the commission has considered whether the individual performed such services as part of an independently established business rather than as an employee, recognizing that individuals may work as acknowledged employees, holding several part-time jobs, or a part-time job and a full-time job.
See, e.g., Lopez v. County of Richland, UI Dec. Hearing No. 09003995MD (LIRC Jan. 15, 2010) (Spanish interpreter);
Dexter-Dailey v. Independent Disability Services, UI Dec. Hearing No. 07002206JV (LIRC Nov. 2, 2007) (caregiver);
County of Door, UI Dec. Hearing No. S0500025AP (LIRC March 28, 2007) (caregiver);
Barman
v. Madison Metropolitan School District, UI Dec. Hearing No. 01005639MD
(LIRC Oct. 1, 2002) (sports referee).(5)
Accordingly, in interpreting the new law, the commission has taken an approach that recognizes these various rationales. For example, in
Bentheimer v. Bankers Life & Casualty, UI Dec. Hearing No. 10006546JV (LIRC Aug. 16, 2011), the claimant worked full-time for Bankers Life, an insurance company, and was clearly economically dependent on that business, as the commission found. Although she might move on to perform services for another insurance company if her relationship with Bankers Life ceased to exist, taking her skills and experience with her, she would not be doing so as an independently established business, but as an individual employee.
The commission notes that analysis of this condition must be made on a case-by-case basis, taking into consideration each claimant's circumstances and whether there are the characteristic signs of a viable independently established business. In this case, the claimant performed merchandising services for Spar and for another company as an employee. However, her work for the other company as an employee is not a factor in this condition, since it is not indicative that she maintains an independently established business. As to merchandising services that are not performed as an acknowledged employee, the claimant performs services only for Spar. If her relationship with Spar were to cease, there is no evidence that she would move on to perform these services independently for other entities, as she has not done so in the past. Accordingly, this condition is not met.
In sum, only one of the nine conditions in the second part of the new test is met. Therefore, since the new Wis. Stat. § 108.02(12)(bm) requires that, first, the claimant be free from the control and direction of Spar, 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, the claimant must be considered an employee, not an independent contractor, and her 2011 earnings from Spar shall be included in the department's computation of her base period wages.
The commission therefore finds that the claimant performed her services for Spar as an employee during the applicable base period quarters in 2010 and 2011.
BY THE COMMISSION:
/s/ Robert Glaser, Chairperson
/s/ Ann L. Crump, Commissioner
/s/ Laurie R. McCallum, Commissioner
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