ZULFIQAR ALI, Claimant

ACUTE CARE 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 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 first paragraph describing the department's determination with the following:

THE DEPARTMENT'S DETERMINATION HELD: that the claimant performed services for the employer as an employee in both 2010 and 2011, and that in the applicable base period the claimant was paid wages for those services totaling $55,382.56. As a result, those base period wages were included in the computation of the claimant's potential benefit eligibility.

2. Add the following after the first two paragraphs of the FINDINGS OF FACT and CONCLUSIONS OF LAW:

The claimant did not appear at the hearing and the only witness for Acute Care Inc., the assistant vice president and corporate counsel, had not met the claimant, and had no personal knowledge of the specifics of the claimant's services for Acute Care Inc. or his working circumstances. Acute Care Inc. prepared 1099 forms for the claimant for his work in 2010 and in 2011, and these forms included a federal identification number for the claimant. The parties entered into a physician agreement that included a provision entitled "Remuneration," that stated that for each hour of coverage, the claimant would be paid Acute Care Inc.'s prevailing rate per hour for that particular hospital; a provision entitled "Professional Liability Insurance," that stated that the claimant was responsible for keeping in force professional liability (malpractice) insurance; and a provision entitled "Indemnification," that stated that the claimant agreed to indemnify and hold Acute Care, Inc. harmless from any liability arising out of his performance of services. Payroll records admitted into the record established that professional liability insurance (malpractice) premium fees (at $1.88 an hour) were deducted from the claimant's pay, as was the cost of one medical course relating to advanced trauma life support that was required by the hospital in which the claimant was placed. These records also showed that the claimant was paid an hourly fee (that varied) for his services. The claimant could have another physician fill in for him, but that physician would have to be on Acute Care's roster.

3. Replace the second sentence of the decision paragraph with the following:

Accordingly, the wages paid to the claimant by the employer totaling $55,382.56 shall be included in the department's computation of the claimant's base period wages for determining potential benefit eligibility.

/s/ Laurie R. McCallum, Chairperson

/s/ C. William Jordahl, Commissioner

/s/ David B. Falstad, Commissioner

APPLICABLE LAW

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 Quality Communications Specialists Inc., UI Dec. Hearing Nos. S0000094MW, S0000095MW (LIRC July 30, 2001), and cases cited therein.

Therefore, since the record shows that the claimant performed services for Acute Care in 2010 for pay, Acute Care has the burden to rebut the presumption that he did so as a statutory employee. It must establish, therefore, that the claimant met seven of the ten conditions listed in the statute.

At the outset, 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). 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 claimant holds or has applied for an identification number with the federal internal revenue services, is met. Petitioner's witness presented an exhibit consisting of two 1099 forms prepared by Acute Care, one for the claimant's services in 2010 and the other for 2011, and each form contains an FEIN number for the claimant. Given that they are official documents that Acute Care would have supplied to the IRS, the commission considers them to have "circumstantial guarantees of trustworthiness." See Wis. Stat. § 908.03(24) (hearsay exceptions). Although the claimant was not present to provide testimony relating to an FEIN, the ALJ accepted these documents as evidence of an FEIN for purposes of the analysis of the 2010 wages, and the commission agrees with him.

Condition 2 - This condition, that the claimant has filed federal business or self-employment income tax returns based on such services in the previous year, or in the case of a new business in the year in which services are first performed, is not met. There was no evidence presented regarding this condition, and the petitioner makes no arguments in its brief relating to this condition.

Condition 3 - This condition, that the claimant maintains a separate business with his own office, equipment, materials and other facilities, is not met.

The petitioner argues that this condition is met(1), and cites the 2008 commission decision involving Acute Care in support of its argument. However, petitioner's reliance on that case is misplaced. As noted earlier, the physician who presented no testimony at the hearing was found by the commission to be Acute Care's employee, and the commission did not specifically address this condition in his case. In addition, the petitioner misunderstands the commission's analysis of this condition in the 2008 case. With respect to the physician who appeared at that hearing and presented testimony relating to this condition, there was evidence that he maintained a separate business office and used certain equipment of his own. The commission found that the physician's lack of "other facilities" (an element of this condition different from a separate office, equipment, and materials) would be consistent with the nature of the physician's business, and would not be dispositive for this condition. However, in the instant case, no evidence was provided that the claimant maintained a business office or used any of his equipment or materials in performing his services. Therefore, it is not the claimant's lack of "other facilities" that underlies the ALJ's finding that this condition 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 Acute Care, is being maintained with the claimant's own resources. Princess House, Inc. v. DILHR, 111 Wis. 2d 46, 330 N.W.2d 169 (1983). See also 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), and cases cited therein.

In this case, there was no evidence presented that the claimant had an office, whether at home or at another location, or that he used his own materials and equipment to perform his services for Acute Care. Nor was there evidence presented that the claimant had a separate business or that he performed services as a physician for any other business as an independent contractor.(2)

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 the evidence established that the claimant performed services for Acute Care after a competitive-bid process for various shifts, apparently arguing that the various shifts worked by the claimant were separately negotiated between the parties, thereby constituting multiple contracts. The commission disagrees.

In this case, the claimant had only one contract with Acute Care(3), and there was no evidence presented that he provided services as a physician for other businesses as an independent contractor. That one contract provided that his compensation would be hourly, based upon Acute Care's prevailing rate per hour for that particular hospital. The payroll records presented by Acute Care's witness at the hearing, Exhibit #5, showed the claimant's pay computed based upon an hourly rate multiplied by his hours worked. Acute Care's witness testified about physician compensation in general terms, at various times referring to an hourly rate, or a shift rate based upon the length of the shift, or a bidding process for uncovered shifts. This general testimony is outweighed, in the commission's view, by the other evidence supporting an hourly rate established in a manner determined by the parties' contract.

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., 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), and cases cited therein.

In addition, in VanPelt v. Quality Controlled Substances, UI Dec. Hearing No. 07200634EC (LIRC Aug. 31, 2007), the commission found that regardless of whether the relevant contract involved there was a single written contract between the company and the claimant, or multiple agreements created by the claimant's acceptance of specific jobs posted online, the "multiple job-specific agreements" with the company's retail clients were not negotiated at arm's length and, therefore, the multiple contracts requirement was not met.

Based upon the evidence presented at the hearing, the commission is persuaded that, as in Van Pelt, the claimant would either accept the shifts or decline them, but he would rely on his single, continuing relationship with Acute Care and single contract for the terms and conditions of his working relationship with Acute Care. Therefore, since the multiple contracts part of this condition is not met, it is unnecessary for the commission to determine whether the claimant controlled the means and methods of performing his services.

Condition 5 - This condition, that the claimant incurs the main expenses related to the services that he performs under contract, is not met.

The petitioner argues that the main expenses for providing physician emergency medical care relate to professional qualifications such as medical education, continuing medical education (CME), certifications, and medical experience, all incurred by the claimant. In support of that argument, the petitioner cites Care & Comfort Associates, Inc. v. LIRC and DWD, Case No. 99 CV 169 (Wis. Cir. Ct. Jefferson County Feb. 3, 2000), in which the circuit court, disagreeing with the commission, found that the main cost associated with providing nursing services is the cost to the nurses of obtaining their professional qualification and nursing experience.

Circuit court decisions may be considered for any persuasiveness that is found in their reasoning and logic. However, they are not binding judicial authority in other cases in the manner of reported decisions of courts of appeal. See generally Brandt v. LIRC, 160 Wis. 2d 353, 365, 466 N.W.2d 673 (Ct. App. 1991), aff'd, 166 Wis. 2d 623, 480 N.W.2d 494 (1992).

The commission did not agree with the reasoning of the circuit court in Care & Comfort Associates, Inc. in its ruling concerning application of the "main expenses" condition. However, it was not able to appeal that ruling because the ultimate decision of the circuit court in that case was in the commission's favor and, therefore, the commission was not aggrieved by the circuit court's decision, a prerequisite for appeal.

The commission has continued to find the reasoning of the circuit court in Care & Comfort Associates, Inc. on the "main expenses" condition to be unpersuasive. The commission has a long-standing interpretation of the statutory term "main expenses" that does not include the costs associated with obtaining an education and experience in a specialized field, such as medicine or nursing. See, e.g., Salvi v. Cullen, Weston, Pines & Bach LLP, UI Dec. Hearing No. 12004296MD (LIRC March 12, 2013) (rehabilitation physician found to be independent contractor and to incur main expenses of performing his services, including costs of reviewing medical records and preparing report, of maintaining his medical license and certification, and of continuing medical education); Johnson v. Medical Care Specialists Inc., UI Dec. Hearing No. 12604899MW (LIRC November 5, 2012) (radiologist found to be employee and, due to lack of quantification, not to incur main expenses of performing her services, her expenses being maintenance of her medical license, malpractice insurance, and supplies used to download ultrasound images, to provide dictated reports, and to review transcribed reports); Nations Carelink LLC, UI Dec. Hearing No. S0800037MD (LIRC Dec. 17, 2008) (nurse providing in-home health assessments found to be employee and to incur main expenses of performing her services, including equipment used to perform health assessments and costs of her travel); Lakeshore Mental Health Inc., UI Dec. Hearing No. S0600162AP (LIRC Nov. 30, 2007) (mental health therapists found to be employees and, due to lack of quantification, not to incur main expenses of performing their services, their expenses including costs to furnish their offices, malpractice insurance, and licensing and continuing education fees); O'Brien v. Angel Adams Inc., UI Dec. Hearing No. 07601554MW (LIRC July 9, 2007) (social worker/marriage and family therapist found to be employee and, due to lack of quantification, not to incur main expenses of performing his services, including travel costs, therapy aids, malpractice insurance, membership in association and continuing professional education); Diane Egan/Health Exams Plus Inc., UI Dec. Hearing No. S0300071JV (LIRC April 15, 2005) (health care workers performing health examinations of individuals in their homes found to be employees and to incur main expenses of performing their services, including all of the equipment used for examinations and travel expenses to individuals' homes).

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., UI Dec. Hearing No. S0600240MW (LIRC Oct. 23, 2008); 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, there was evidence that the claimant had expenses associated with performing his services for Acute Care as a physician, including medical malpractice (professional liability) insurance and medical courses required by the hospital in which he worked. His insurance was $1.88 per hour worked, and medical course he took was $600. Although he may have had additional expenses, these were not identified in the record, nor were costs for such expenses quantified. In addition, Acute Care and the hospitals in which he performed his services also had expenses related to the claimant's work, including administrative costs associated with the performance of his services and the costs of diagnostic machines, laboratory services, and other equipment and materials he used to perform his services. None of these expenses are quantified in the record, and it is not obvious that the claimant's expenses would necessarily exceed the expenses of Acute Care and the hospital in which the claimant worked.

Condition 6 - This condition, that the claimant is responsible for the satisfactory completion of his services and is liable for failure to satisfactorily complete the services, is met. The claimant was required by his contract with Acute Care to carry malpractice (professional liability) insurance and he did so, as established by Exhibit #5. The contract also included an indemnification/hold harmless provision in which the claimant agreed to indemnify and hold Acute Care harmless from all expenses, claims and liabilities arising out of his performance of services. The commission has held that such provisions may satisfy this condition. See, e.g., Nature's Pathways, LLC, UI Dec. Hearing No. S0800258AP (LIRC Feb. 5, 2010) (indemnification provision); Lakeshore Mental Health, Inc., previously cited (malpractice insurance).

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 not met.

The petitioner argues, citing the 2008 commission case involving Acute Care, that the claimant was paid on a per-job, competitive basis. However, in the 2008 case, the physician who appeared at the hearing provided testimony that he was paid by the shift, and Acute Care's witness testified that physicians typically bid on shifts with Acute Care choosing the lowest bid. The commission noted that a shift payment or a bid does not become an hourly rate simply because the shift payment or bid may be derived using an hourly amount multiplied by the number of hours in a typical shift.

However, in this case, the physician at issue did not testify that he was paid by the shift. In addition, although the hourly rates varied, the payroll records for the claimant (Exhibit #5) showed that he was paid an hourly rate multiplied by the number of hours he worked each day, supporting a finding that he was paid hourly, and not on a per-job or competitive-bid basis. Furthermore, the written contract supports this interpretation. On the second page of both contracts (Exhibit #4), provision 4 relates to "Remuneration" and states that for each hour of coverage, the physician's fee will be Acute Care's prevailing rate per hour for that particular hospital. Finally, the testimony of Acute Care's witness about the claimant's pay arrangement was inconsistent - that the claimant "would be told the amount he would be paid per shift," that the pay arrangement was based on the length of the shift, that the physicians "negotiate hourly wages, too," and that it is common for physicians to provide bids for uncovered shifts and the most cost effective option is chosen. The commission notes that his testimony could support several methods of compensation, and he did not indicate that he had direct, first-hand knowledge of the claimant's specific pay arrangement. Therefore, in the commission's view, given the undisputed contract and payroll records, the weight of the evidence points toward an hourly rate, not a rate per-job or a rate competitively bid. It has not been established that this condition is met.

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, pointing to the commission's 2008 case involving Acute Care in which this condition was found met for the physician who appeared at the hearing. However, in that case, the physician was paying costs for an office, as well as other costs, including malpractice insurance, that would continue even if he stopped providing services for Acute Care. The evidence in that case is very different from the evidence presented in the instant case. Here, there is no evidence that the claimant had a separate office, and the evidence established that his malpractice insurance costs were deducted by Acute Care from the income he earned each month performing services for Acute Care, these costs constituted a minimal amount compared to his hourly wage and would not be incurred if he was not performing work for Acute Care.

The test is whether, over the term of the contract between the claimant and Acute Care, 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); 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); Gustavson, cited previously.

In this case, the evidence presented does not indicate a realistic possibility of loss, because there is no "unpredictability inherent in the business enterprise", that risk of loss that exists in a real business, as described in Dane County Hockey Officials Association, Inc., UI Dec. Hearing No. S9800101MD (LIRC Feb. 22, 2000). Although the claimant might realize a profit by earning more than he had to spend for expenses, it is not likely that he would suffer a loss given that he was being paid an hourly rate for the services he performed and his expenses, although not quantified, do not appear to have been substantial compared to his earnings. In the absence of evidence of other expenses, it has not been shown that the claimant could suffer an actual loss during the term of his contract with Acute Care.

Condition 9 - This condition, that the claimant has recurring business liabilities and obligations, is not met.

The petitioner, again citing the commission's 2008 decision involving Acute Care, argues that this condition is met because the claimant had recurring business obligations to maintain his malpractice insurance, CME, and certifications. However, this condition requires proof of a cost of doing business that the claimant would incur even during a period of time that he was not performing work for Acute Care. See, e.g., Spencer Siding Inc., UI Dec. Hearing Nos. S0300142GB, etc. (LIRC June 2, 2006); Clear Choices Inc., UI Dec. Hearing Nos. 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 this case, the only expenses established by the record were all tied to the claimant's work for Acute Care and the particular hospital's requirements. No evidence was presented that he would be required to pay these expenses if he were not performing services for Acute Care at that particular hospital.

Condition 10 - This condition, that the success or failure of the claimant's business depends on the relationship of business receipts to expenditures, is not met.

The petitioner argues that this condition is met because the success of the claimant's business depended on whether he received sufficient pay "to eclipse his continuing expenses," citing the 2008 commission case involving Acute Care that found this condition met in that case. However, as noted previously, that case is quite different from this one, and the physician who appeared at that hearing had a considerable investment in a separate business as a physician. That has not been established in this case.

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. As noted in Dane County Hockey Officials, Inc., cited previously, in a genuine business there is a potential for success, in the sense of growth of the value of the investment, or for failure, in the sense of actual loss of the investment. The record does not reflect that the claimant had any investment that was at risk while performing services for Acute Care.

Therefore, under the law applicable to the claimant's services through December 31, 2010, only two of the ten conditions have been met (conditions 1 and 6). 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 he earned from Acute Care during that period of time shall be included in the department's computation of his 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 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(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 Quality Communications Specialists Inc., cited previously, and cases cited therein.

Since the record shows that the claimant performed services for Acute Care in 2011 for pay, Acute Care has the burden to rebut the presumption that he did so as a statutory employee. It must establish that the claimant operated free from its direction or control and that the claimant met at least 6 of the 9 conditions set forth in the statute.

In its petition for commission review, Acute Care asserts that, as to the 2011 law, the claimant performed his services free from Acute Care's direction and control. The commission agrees, as did the ALJ, and addresses the applicable factors below. Acute Care also argues that each of the nine conditions in the second part of the analysis, regarding economic independence/entrepreneurial risk, was also met. The commission disagrees, as noted in its analysis below.

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 performed 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. This factor is met. Given the claimant's education and previous experience, there was no need for Acute Care to require the claimant to follow instructions as to how to perform his services as a physician.

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. There was no evidence that the claimant received any training from Acute Care.

c. Personal performance - This factor looks at whether the individual is free from the requirement of personal performance of the services. This factor is not met. The petitioner's witness testified that the claimant could have someone else fill in for him, but that such person must be on their roster. It is not clear what qualifications Acute Care would require from a physician to be included on its roster, and given this express limitation, it cannot be found that the claimant was free from the requirement of personal performance of the services. See Schumacher v. Spar Marketing Services Inc., UI Dec. Hearing No. 11203182EC (LIRC March 21, 2012).

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 worked in a medical setting, and presumably followed the scheduling practices found within that setting. However, Acute Care played no role in establishing the manner, order, or sequence in which he performed his services.

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 make any oral or written reports to Acute Care.

No other factors were raised by Acute Care on the issue of whether the claimant was free from its control or direction, and the commission does not note any other relevant factors. Since four of five factors were met, Acute Care has established that the claimant performed his services free from 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, it is necessary to determine whether Acute Care 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

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 petitioner argues that this condition is met because the claimant advertised his services on another medical group's website. In support of its argument, the petitioner cites Exhibit #3, which it describes as a printout of the claimant's website advertisement for his medical services for the other business. The commission does not agree that this document establishes that the claimant held himself out as being in business. It does provide background information about the claimant, useful for those customers of the other medical business in choosing a physician. However, this document indicates that the claimant is a "board-certified internal medicine provider" for the other medical group. He is not holding himself out as being in his own business, which is what this condition contemplates. 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 petitioner argues that this condition is met because the claimant chose the locations in which he would perform his medical services, and it is unnecessary under this new law to establish that he had his own office. The commission agrees that the new law changed the "office" requirement to include a facility or location chosen by the individual. However, the commission does not agree that the claimant "chose" the location in which to perform his services. If he was going to provide services for Acute Care, it was necessary that he provide those services in the locations in which Acute Care operated. He could not provide such services in any other location, and did not have a real choice in the matter. Accordingly, since he did not have his own office or choose the location in which to perform his services, the first part of this two-part condition has not been established. However, even if it had been established, there was no evidence presented that he used his own equipment or materials in performing his services, the second part of the condition that is not addressed by the petitioner. This two-part condition is not met.

c. The individual operates under multiple contracts with one or more employing units to perform specific services.

The petitioner argues that this condition is met, asserting as it did about condition 4 in the old test, that each shift the claimant worked resulted from a negotiated new contract. The commission disagrees, noting that 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. This condition is not met.

d. The individual incurs the main expenses related to the services that he or she performs under contract.

The petitioner argues that this condition, identical to condition 5 under the old test, is met. However, the commission found that condition 5 under the old test was not met, and this condition warrants the same finding. 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.

The commission agrees with the petitioner that this condition is met. This condition replaces condition 6 of the old law - "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." In this case, the parties' agreement includes an indemnification provision that satisfies this condition. See Schumacher v. Spar Marketing Services, Inc., cited previously. The claimant was also required to obtain medical malpractice (professional liability) insurance, and he did so, a protection to him if he was sued (and 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.

The petitioner argues that this condition is met, asserting that the claimant's performance of emergency medical care does not directly relate to Acute Care's staffing of medical personnel because Acute Care does not perform medical services and does not supervise or review the claimant's treatment and diagnosis of patients. The commission does not agree.

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.

Clearly, in this case, the claimant, a physician, performed services that were integrated into the business of Acute Care, a staffing service for medical facilities that matches physicians with those medical facilities. The claimant's medical services were directly related to the specific business of Acute Care - staffing medical facilities with medical providers. This condition is not met.

g. The individual may realize a profit or suffer a loss under contracts to perform such services.

The petitioner, recognizing that this condition is identical to condition 8 under the old test, argues that this condition is met. However, the commission found that condition 8 under the old test was not met, and this condition warrants the same finding. This condition is not met.

h. The individual has recurring business liabilities or obligations.

The petitioner, recognizing that this condition is identical to condition 9 under the old test, argues that this condition is met. However, the commission found that condition 9 under the old test was not met, and this condition warrants the same finding. This condition is not met.

i. The individual is not economically dependent upon a particular employing unit with respect to the services being performed.

The petitioner argues that this condition is met because the claimant worked for a different medical group until a date after he ceased working for Acute Care. The commission does not agree, noting that there is no evidence in the record that he worked as a physician for other businesses not as an employee, but as an independent contractor.

This condition replaces condition 10 of the old law - "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., cited previously, 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. In this case, there is no evidence that the claimant performed services as a physician for other companies as an independent contractor or that he invested in equipment that would enable him to function as a physician independently. Therefore, if his relationship with Acute Care were to cease, there is no evidence that he would move on to perform these services independently for other entities, as there is no evidence in the record that he has done so in the past. This condition is not met.

In sum, only one of the nine conditions in the second part of the new test is met (condition e). Therefore, since the new Wis. Stat. § 108.02(12)(bm) requires that, first, the claimant be free from the control and direction of Acute Care, 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 his 2011 earnings from Acute Care shall be included in the department's computation of his base period wages.

cc: ATTORNEY MELINDA SCHWARTZ
MARK J GOLDSTEIN SC
8989 N PORT WASHINGTON RD STE 207
MILWAUKEE WI 53217

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(1)( Back ) The petitioner also notes that the synopsis of the hearing erroneously attributes to the petitioner's witness the use of the term "employee" in describing the claimant. The commission assures the petitioner that it is common for those who synopsize these hearings to use the term "employee" as a short-hand reference to the worker at issue (although the ALJ often does the same, noting the practice at the beginning of the hearing), and the commission attaches absolutely no legal significance to those references in its review.

(2)( Back ) Although Exhibits #1 and #3 indicate that the claimant worked for other entities as a physician, there is no evidence that such work was part of a separate business operated by the claimant, rather than as an employee of each entity. In addition, the commission notes that Exhibit #1, a physician chronological history form prepared by someone at Acute Care, included entries after the claimant ceased working at Acute Care. The person who prepared the document did not testify at the hearing, and the document appears to have been prepared (or completed) specifically for the hearing and not in the ordinary course of business. The document must be considered hearsay for which there is no corroboration, and such evidence cannot form the basis for specific findings of fact. See Wis. Admin. Code § DWD 140.16 and Wis. Stat. Chapter 908. Acute Care's witness testified that Exhibit #3 is a printout of information appearing on another medical group's website, providing professional and personal information about the claimant. The document was printed the day before the hearing, and Acute Care, during the hearing, attempted unsuccessfully to play a video recording from the website. After the hearing, Acute Care sent an email to the ALJ that does not appear to have been provided to the claimant, and asked the ALJ to take judicial notice of the web site. The ALJ referenced that ex parte communication in the note at the end of his decision, and did not consider it in making his decision. The commission, likewise, declines to consider that information. With the exception of Exhibit #3, whatever appears on the website is not part of the hearing record, upon which the commission relies in making its decision.

(3)( Back ) Although two contracts were admitted into the record, comprising Exhibit #4, the petitioner's witness who presented the documents did not know why there were two contracts. In addition, only one was signed by both parties, and the terms of both contracts appear to be the same.

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

(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.

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