ALBERT ROHLAND, Claimant

Go2 IT GROUP, 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 agrees with the decision of the ALJ, and it adopts the findings and conclusion in that decision as its own, except that it makes the following modifications:

1.     Replace the second to last sentence of the second paragraph of the FINDINGS OF FACT and CONCLUSIONS OF LAW with the following:

The claimant was paid by the hour for his services.

2.     Replace the fifth and sixth sentences of the third paragraph of the FINDINGS OF FACT and CONCLUSIONS OF LAW with the following:

The claimant used his own equipment, including needle nose pliers and zip tie cutters, to perform his services, but the client for whom he performed the vast majority of his services provided the supplies he used in the work. The claimant paid his travel expenses to and from client locations, but for the major client, he stayed overnight at the project location, in a hotel and with a friend's family. None of these expenses were quantified.

3.     Replace the last two sentences in the third paragraph of the FINDINGS OF FACT and CONCLUSIONS OF LAW with the following:

In prior years, the claimant had worked for clients of companies similar to the employing unit, and always received W-2 tax forms from them rather than 1099 forms.

4.     Replace the sixth full paragraph on page 4 of the FINDINGS OF FACT and CONCLUSIONS OF LAW with the following:

The fourth factor was not met. There was no quantification of expenses and it was not obvious that the claimant's expenses were the main expenses related to the services that the claimant performed.

5.     Replace the ninth full paragraph on page 4 of the FINDINGS OF FACT and CONCLUSIONS OF LAW with the following:

The seventh factor was not met. Although the claimant might earn a profit in performing his services, it was not likely that he would suffer a loss given that he was paid an hourly rate, could select his assignments, and his expenses were not substantial.

The decision of the administrative law judge, as modified, is affirmed. Accordingly, the wages paid to the claimant by Go2 IT Group shall be reported to the department as they are earned. Wages the claimant earns based on work for Go2 IT Group may be used to determine future benefit entitlement.

Dated and mailed February 14, 2013

BY THE COMMISSION:

/s/ Robert Glaser, Chairperson

/s/ Ann L. Crump, Commissioner

The claimant performed services as an IT specialist, installing computers for clients of Go2 IT Group (hereinafter "Go2 IT" or "petitioner"), a staffing agency. He began performing those services in May of 2012. The department's determination found that he performed those services for Go2 IT as an employee, and was required to report those wages on his weekly claims for unemployment benefits. Go2 IT appealed that determination and, after a hearing, an ALJ affirmed the department's determination. Go2 IT has petitioned for commission review of the ALJ's decision.

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. This case relates to whether the claimant, as of May of 2011, has been performing services as an employee for Go2 IT. Therefore, the analysis of the claimant's employment status will use the applicable 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 in the law were left unchanged and are applicable both before and after December 31, 2010. These provisions include specific conditions from the old law that were considered by the committee to remain useful and were retained in the new law, as well as the general provisions that are cited below:

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 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 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 entrepreneurial risk.

Wisconsin Stat. § 108.02(12)(a) was not substantively changed by the new law(3). 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 Dec. Hearing No. S9800101MD (LIRC Feb. 22, 2000); Quality Communications Specialists Inc., UI Dec. Hearing Nos. S0000094MW, S0000095MW (LIRC July 30, 2001).

Go2 IT does not dispute that the claimant has performed services for pay for Go2 IT since May of 2012, as the record establishes. Therefore, Go2 IT has the burden to rebut the presumption that he has done so as a statutory employee. It must establish that the claimant operates free of its control or direction, and that the claimant meets at least 6 of the 9 conditions set forth in the statute.

The commission notes that 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 Dec. Hearing No. 06400323AP (LIRC May 12, 2006).

Furthermore, the statutory provision at issue, Wis. Stat. § 108.02(12)(bm), specifically states that an employing unit must meet six or more of the criteria "by contract and in fact". In other words, a contract (or agreement) between the parties is not sufficient alone to establish that independent contractor criteria are met - and a hearing in which questions are asked and employment circumstances described is the proper setting to determine the actual facts of the employment.

Finally, 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, regardless of the words used to describe the nature of the document.

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 his 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. In this case, the claimant received no instructions from Go2 IT as to how to perform the specific tasks required, once he received the necessary product information. Accordingly, the commission finds that this factor is met.

b. Training - This factor looks at whether the individual is free from training by the employing unit with respect to the services performed. Here, the evidence demonstrated that the claimant received no training from Go2 IT in how to perform his services. This factor is met.

c. Personal performance - This factor looks at whether the individual is free from the requirement of personal performance of the services. The parties' agreement permitted the claimant to employ others to perform the work for him. Accordingly, this factor is 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. In performing the services, the claimant was not required by Go2 IT to perform asssigned tasks at a particular time or in a particular order or sequence. This factor is met.

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. The claimant was not required to make any reports, oral or written, to Go2 IT. His submission of invoices to Go2 IT once the work was done is not the kind of regular report this factor contemplates. This factor is met.

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 Go2 IT and the commission does not note any other relevant factors. Given that the above five factors have been met, the commission finds that the claimant performs his services free of control or direction by Go2 IT. 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 determine whether Go2 IT 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 entrepreneurial risk

Several of these conditions, in whole or in part, are the same as conditions contained in the previous law. As noted previously, the committee recommending the changes in the law chose not to change these particular provisions due to their continuing relevance and usefulness. Accordingly, the commission decisions and case law relating to these conditions under the previous law would retain their applicability. In addition, two of the conditions (conditions f. 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 claimant did not advertise his services, nor did he hold himself out as being in business. He had no business cards or a business name. He posted his resume on several websites in hopes of obtaining employment, not to advertise his own business. Accordingly, the commission finds that 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 two-part condition requires that an individual maintain his own office or choose where to perform his services, and that he use his own equipment or materials in performing the services. In its petition for commission review, Go2 IT argues that this factor is met because the claimant used his own tools, equipment, and materials, and the jobs had to be done at the client locations. The commission disagrees. The statutory language is clear. In order for this condition to be met, both parts of the condition must be met, and the first part requires that the claimant maintain his own office or perform most of his services in a facility he chooses. In this case, the claimant does not have his own office, nor does he choose where to perform his services. Therefore, this 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.

As noted in Thomas Gronna dba 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 Preferred Financial of Wisconsin, Inc., UI Dec. Hearing No. S0600240MW (LIRC Oct. 23, 2008).

In this case, the claimant was not required to take projects offered to him by Go2 IT, and he signed a separate written contract for each project that he accepted. The commission agrees with the ALJ that this condition is 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. 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., Gustavson v. Carpenters Inc., UI Dec. Hearing No. 09400168AP (LIRC April 30, 2009); Preferred Financial of Wisconsin, Inc, cited previously.

In this case, although the claimant clearly has some expenses associated with the assignments, the evidence does not establish that these expenses are significant, consisting primarily of travel expenses, some lodging, and maintenance of tools. Go2 IT also has expenses, including administrative costs related to the parties' four agreements, coordination of the specific assignments with its clients, and compensating the claimant for his services. In addition, the major client for whom the claimant performed services provided all of the necessary supplies for the performance of his services. Since these expenses are not quantified in the record and it is not obvious that the claimant's expenses would necessarily exceed those of Go2 It and its clients, this 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 claimant testified that if he made a mistake, he would be required to redo the work at his own expense. In addition, there is an indemnification provision in the parties' agreement, and that also satisfies this condition. See Bentheimer v. Bankers Life & Casualty, UI Dec. Hearing No. 10006546JV (LIRC Aug. 16, 2011). Accordingly, 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 this 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.

Go2 IT argues in its petition that this condition is met because its business is to locate resources capable of performing a particular job, and not to personally perform computer related services. The commission disagrees. As its name indicates, a major part of Go2 IT's business is to provide IT specialists to its clients. In this case, the claimant, as an IT specialist, performs services that are integrated into, and directly related to, the business of Go2 IT, a business that, among other things, provides IT specialists to clients. Accordingly, 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, which requires a finding that an individual 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).

The test is whether, over the term of the agreement between the claimant and Go2 IT, there is 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); Alsheski v. Codeworks, Inc., UI Dec. Hearing No. 09403672AP (LIRC Feb. 26, 2010) (proper test is whether there is a realistic possibility of loss if individual successfully completes services).

Although the claimant might realize a profit by earning more than he had to spend in expenses, it is not likely that he would suffer a loss given that he was paid an hourly amount for each assignment, he could select the assignments he performed, including the travel distance and lodging requirements, and his expenses were not substantial.(4) As noted in Quality Communications Specialists, Inc., cited previously, there is no realistic prospect of experiencing a loss under a contract when fixed, predictable expenses are more than offset by the income that is earned providing services. 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 requires proof of a cost of doing business that the claimant would incur even during a period of time he was not performing work for Go2 IT. Go2 IT argues in its petition that this condition is met because the claimant agreed in the parties' agreement that he had liability insurance. However, that is not correct. The agreement states that the claimant is not entitled to any benefits from Go2 IT, including liability insurance, and that he has various responsibilities to any employees he may have. In addition, he agreed to indemnify Go2 IT from claims arising out of his services. However, there is no provision in the agreement requiring him to obtain liability insurance, and he testified that he had none. He had no business expenses that he would incur if he was not performing services for Go2 IT. Therefore, 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., Schumacher v. Spar Marketing Services, Inc., UI Dec. Hearing No. 11203182EC (LIRC March 21, 2012), and other cases cited therein. In four of those cases - involving, respectively, an instructor, an emergency preparedness workshop presenter, a percussionist, and a bassoonist - 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 contrast, 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., Schumacher v. Spar Marketing Services, Inc., cited previously, and cases cited therein involving, respectively, a Spanish interpreter, a caregiver, and a 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, cited previously, 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. This case is closer than many, given that the claimant has performed IT services for other entities. However, the credible evidence established that he received W-2 tax forms in each of these jobs, indicating that he was considered an employee in these positions. Although he testified that he was referred to as a contract worker, that appears to have related to the duration of his employment(6), and not to his employment status. There was no evidence presented that the claimant had obtained separate contracts as an IT specialist through a business of his own. He received W2 tax forms from every company for whom he worked, and considered himself to be an employee. If his relationship with Go2 IT were to cease, although he might become associated with other IT staffing agencies in the same capacity, there is no evidence that he would move on to perform these services independently for other entities, rather than as an employee, as there is no evidence that he has done so in the past. Therefore, the commission concludes that, as this condition is defined, the claimant was economically dependent upon Go2 IT with respect to his services as an IT specialist. This condition is not met.

In sum, only two of the conditions in the second part of the new test (c and e) are met. Therefore, although the claimant is free of Go2 IT's control or direction, the second part of the test, analyzing conditions relating to economic independence and entrepreneurial risk and requiring at least six of the nine conditions to be met for the claimant to be considered an independent contractor, is not met. Therefore, the claimant must be considered an employee, not an independent contractor, must report his wages earned from Go2 IT on his weekly unemployment claims, and these wages may be used to determine future benefit entitlement.

[ Search UC Decisions ] - [ UC Digest - Main Index ] - [ UC Legal Resources ] - [ LIRC Home Page ]

(1)( Back ) This advisory council exists as a part of the original unemployment compensation law enacted in Wisconsin in 1932. It is made up of an equal number of members of labor and management, with a nonvoting department representative as its chairperson. The council meets regularly, and is charged with submitting recommended changes in the unemployment insurance law to the Wisconsin legislature. See Wis. Stat. §15.227(3).

(2)( Back ) The committee's suggestions for changes to § 108.02(12)(bm) were adopted in the new law.

(3)( Back ) The only change in its language is the omission of obsolete subparagraph (b).

(4)( Back ) The commission notes that the claimant testified that he thought that he could suffer a loss. However, he did not explain why he thought that was possible and, given the payment arrangement, the commission concludes that it was not realistically possible for him to suffer a loss over the term of the agreement if he performed the work successfully.

(5)( Back ) In Wenzel v. School District of Stratford, UI Dec. Hearing No. 08202476EC (LIRC Mar. 26, 2009), the commission looked at the income earned by the individual from the employing unit at issue and compared it to income earned from his primary source of income in determining economic (in)dependence. The commission found that Wenzel had little or no economic dependence on the employer for the work he was engaged in because his pay as a referee was incidental to his primary source of income, and that this was more consistent with Wenzel being an independent contractor than an employee. This economic dependence analysis in Wenzel is at odds with the court of appeals' decision in Larson; however, this was harmless error as the commission ultimately found that Wenzel's work as a referee was as an employee and not as an independent contractor. The commission is bound by and follows Larson in its analysis of the economic dependence factor.

(6)( Back ) For example, he testified that he had an 18-month contract when he worked for Xerox through a staffing agency, Manpower.

rohlaal:120:9  EE 450 PC 749 EE 450.01 EE 450.02a EE 450.02b EE 450.02c EE 450.02 EE 450.02g EE 450.02h EE 450.02i

uploaded 2014/02/07