STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126
http://dwd.wisconsin.gov/lirc/

KELLY WAGNER, Petitioner

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 065419, Hearing No. S1300125AP


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:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Kelly Wagner is the owner of KND's Fire Pit Bar & Grill (hereinafter "KND's"), located in Campbellsport, Wisconsin. She acquired the business on April 1, 2012; it had been operated previously as a bar/restaurant called "Ella's Pub & Eatery," with five to ten employees.

Department records(1) indicate that an individual provided information to the department, as part of his unemployment benefits claim, that he had worked for one hour at KND's, and that about ten other employees had worked with him. As a result, the department initiated an investigation of KND's to determine whether KND's should be subject to the tax contribution liability of the Wisconsin unemployment insurance laws. A determination was issued by the department on February 19, 2013, finding that KND's owed contributions to the department in the amount of $659.17 for the second calendar quarter of 2012, $659.17 for the third calendar quarter of 2012, and $644.77 for the fourth calendar quarter of 2012. These amounts were estimated by the department. The determination also found that $50 penalties were due for failing to file wage reports in the third quarter of 2012 and the fourth quarter of 2012. The total liability was $2,063.11.

Ms. Wagner appealed the department's determination, contending that she had no employees working at KND's. At the hearing on her appeal, the department offered no evidence in the matter, other than an exhibit eight pages in length showing screen shots of KND's menu from the internet. There was no department witness, nor were there any other exhibits presented.

Ms. Wagner was the only witness at the hearing. She acknowledged that the menu was from KND's, but stated that she intended to reduce the offerings since she sold mainly hamburgers and pizzas. She stated that she had no employees to whom she issued payroll checks, so she had no payroll records to disclose to the department. She testified that she worked at KND's 96 hours per week, and her fianc�e worked there after work every weekday and on the weekends. Neither of them received pay for this work. She testified that her fianc�e's two minor children, aged 15 and 16, helped out when they were staying with him, and she might give them $5 or $10 a night when they did some clean-up work ("an hour here and an hour there"). She also testified that her sister and brother-in-law had helped out in the past, although not for the six months prior to the hearing. She said they were not paid, but if they wanted a pizza, she might give them one.

In response to questions, Ms. Wagner denied that the individual who had reported working at KND's had ever worked there, although she stated that he had come into KNB's looking for work several times. She testified that she had tried to reach him, but had been unsuccessful. Finally, she testified that she had obtained a worker's compensation policy because she was told that she needed one in case anyone, including family member, slipped and fell while working.

In her decision, the ALJ affirmed the department's determination. She found that there was sufficient evidence presented at the hearing by Ms. Wagner to establish that her fianc�e's children and her sister and brother-in-law had performed services at KND's for pay, consisting of cash and pizzas;(2) these individuals were KND's employees;(3) Ms. Wagner was required by law to maintain accurate work records for each individual employed and to provide the department with access to payroll records or other documentation of KND's actual wage disbursements for the calendar quarters at issue;(4) Ms. Wagner's failure to maintain such records and to provide the department with access to them justified the department's decision to estimate KND's contribution liability for the calendar quarters at issue.(5)

The commission does not disagree with the ALJ's general line of reasoning, and notes that these unemployment insurance laws serve many valuable purposes, including employer accountability. It also notes that most restaurants/taverns with such an extensive menu have at least several employees. Ms. Wagner herself testified that in its previous operations, the restaurant had five to ten employees.

However, the department is expected to have specific evidentiary support for its determinations and, in tax cases, to present evidence of that evidentiary support at hearings, including the written reports of department investigations or audits and, customarily, the testimony of the department representative who obtained that evidence. In this case, the department did neither. It presented no report of an investigation or of an audit, and did not even have a department witness present at the hearing to provide testimony about how it reached its conclusion that KND's owed contributions and penalties in the amount of $2,063.11 for the three calendar quarters at issue. The commission is unwilling to allow speculation, even when it appears to have merit, to replace direct, competent evidence presented at a hearing.

In addition, in a case in which a business insists that it has no employees, it is incumbent upon the department to rely on more than a menu to establish that the business has employees. Although Ms. Wagner may be mistaken in her assertion that she has no employees for unemployment insurance purposes, given the broad language contained in the unemployment insurance statute, her belief apparently informed her decision not to set up a payroll account or to maintain "work records." There was no evidence presented that the department made any effort to educate her about the reach of the unemployment insurance laws or her obligations under those laws, or that any department personnel ever visited KND's. The department presented no evidence of contacts with KND's.

Accordingly, the commission finds that the department has not established that KND's had employees in the calendar quarters at issue or that KND's failed to maintain necessary payroll records justifying the department's action in estimating its contribution liability, or that the contribution estimates made by the department were properly calculated.

DECISION

The decision of the administrative law judge is reversed(6). Accordingly, KND's is not liable for unemployment insurance contributions in the second, third, and fourth calendar quarters of 2012.

Dated and mailed September 13, 2013

BY THE COMMISSION:

/s/ Laurie R. McCallum, Chairperson

/s/ C. William Jordahl, Commissioner

/s/ David B. Falstad, Commissioner


kndfpit_srr . doc : 120 :

cc: ATTORNEY CHARLES SCHAEFER
DWD - UI DIVISION

KELLY WAGNER
KND'S FIRE PIT BAR & GRILL

 


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Footnotes:

(1)( Back ) The commission notes that this information is not in the hearing record. However, it is offered as background information to better understand the origination of the case.

(2)( Back ) As noted by the ALJ in her decision, the term "wages" is broadly defined, meaning "every form of remuneration payable . . .", and including "any payment in kind or other similar advantage received." Wis. Stat. §§108.02(26)(a) and (b)(1).

(3)( Back ) There is a statutory presumption that individuals who perform services for pay for any employing unit do so as "employees." Gilbert v. LIRC and DWD, 2008 WI App 173, 33, 315 Wis. 2d 726, 762 N.W.2d. 671.

(4)( Back ) Wis. Stat. § 108.21(1).

(5)( Back ) Wis. Stat. § 108.21(3).

(6)( Back ) The commission did not consult with the ALJ before deciding to reverse her decision because the commission's reversal of the decision is based not on the credibility or demeanor of the witness, but on the lack of competent evidence on the issue presented in the case.