Advantage Research, Inc., Employer

The commission reverses the appeal tribunal decision. Accordingly, the employer is not liable for contributions based upon payments made to the study participants at issue.

Dated and mailed October 21, 2016

EE 409

BY THE COMMISSION:

/s/ Laurie R. McCallum, Chairperson

/s/ C. William Jordahl, Commissioner

/s/ David B. Falstad, Commissioner

Procedural Posture

This case is before the commission to consider the employer's liability for unemployment insurance contributions. An administrative law judge (ALJ) for the Unemployment Insurance Division of the Department of Workforce Development held a hearing and issued a decision. A timely petition for commission review was filed. The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted at the hearing. Based on its review, the commission makes the following:

Findings of Fact and Conclusion of Law

1. Advantage Research, Inc. (ARI) is a market research business which locates and refers market research participants to its clients.

2. ARI purchases lists of individuals from various vendors, advertises on Facebook or other social media outlets, or is provided lists of individual customers from certain of its clients; contacts these individuals; surveys those who respond to the contact as to demographic and other background information; and enters this information into ARI's research database.

3. When one of its clients requests participants for a study, ARI searches its research database for individuals satisfying the client's criteria, contacts the individuals who match the criteria and inquires whether they would be interested in participating in the study, informs those who respond in the affirmative how the study will be conducted, and provides the list of participants to the client.  ARI will confirm in writing, to those who agree to participate, the study details, such as the time and location. 

4. The client then conducts the study with the participants referred by ARI.  The client determines the demographic and other criteria the participants are required to satisfy, the type and design of the study, the time and location of the study, the length of the participation, the study questions or requested observations, and the means by which the participants communicate their opinions or observations.   The client furnishes the equipment or tools, and has the right to terminate the relationship with the study participant.

5. Participants receive a stipend for participating in a study.  The amount of the stipend is determined by, and paid by, the client, although ARI issues the check to the individual participant. This award is intended to offset amounts incurred by the participant for travel or child care, and to serve as an incentive to show up.  The average stipend is $100 for a two-hour study. 

6. It is unusual for an individual in the ARI database to ever participate in more than one study because the qualifications for a study are narrowly tailored.

7. Even if an individual were to qualify for more than one study, it is ARI's policy, and the industry standard, not to permit individuals to be a study participant on a regular basis.  The average length of time required between studies is six months. 

8.  ARI's clients conduct the following types of studies:

• Focus group—typically lasts one and one-half to two hours at client's location
• Telephone in-depth interview—typically lasts 20-40 minutes, client phones study participant
• In-person interview
• In-home interview
• Dial test—conducted in group setting at client location, study participants express opinions through rotation of dial for one hour, those whose answers match certain criteria invited to stay for focus group for another hour
• Usability test—participant observed while utilizing client product
• Telephone survey
• Online survey
• Product placement survey—participants pick up products, use them at home, and then complete survey
• Central location test—participants try out product at ARI or client location

9. The study participants do not perform services for, and are not employees of, ARI. 

10. ARI is not liable for contributions based upon the payments made to the study participants. 

Memorandum Opinion

Wisconsin Stat. § 108.02(12) defines “employee” as follows:

108.02(12)(a)(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…

 ARI argues that the contributions of the participants to the clients' studies do not constitute “services”; they are not performed “for” ARI; and the stipends do not constitute “pay.” 

 The stated purpose of the Unemployment Insurance program is stated as follows, in pertinent part, in Wis. Stat. § 108.01:

 (1) Unemployment in Wisconsin is recognized as an urgent public problem, gravely affecting the health, morals and welfare of the people of this state. The burdens resulting from irregular employment and reduced annual earnings fall directly on the unemployed worker and his or her family. The decreased and irregular purchasing power of wage earners in turn vitally affects the livelihood of farmers, merchants and manufacturers, results in a decreased demand for their products, and thus tends partially to paralyze the economic life of the entire state. In good times and in bad times unemployment is a heavy social cost, directly affecting many thousands of wage earners….

108.01(2) (2) The economic burdens resulting from unemployment should not only be shared more fairly, but should also be decreased and prevented as far as possible. A sound system of unemployment reserves, contributions and benefits should induce and reward steady operations by each employer, since the employer is in a better position than any other agency to share in and to reduce the social costs of its own irregular employment….

 Viewed in this context, it is questionable whether the loss of the sporadic and unpredictable payments at issue here would be the serious menace to health and welfare that the Legislature intended to protect against,[2] and whether, as a result, the activities of the individuals referred by ARI to its clients are properly considered “services” of an “employee” within the scope of Wis. Stat. § 108.02(12).

However, the commission need not resolve the issue of whether the study participants' activities fall within the scope of cognizable “services,” since, even if these activities constitute “services,” the record does not establish that these services are performed “for” ARI. 

As the commission stated in County of Door, UI Dec. Hearing No. S0500025AP (LIRC March 28, 2007), citing Acuity Mutual Ins. Co. v. Olivas, 298 Wis.2d 640, 726 N.W.2d 258 (2007), and Kress Packing v. Kottwitz, 61 Wis. 2d 175, 182, 212 N.W.2d 97 (1973):

…the most important consideration in resolving questions as to the identity of the entity for which services are being performed is the presence or absence of a right to control the details of the work.

The court in Kress detailed four secondary factors to consider:  (1) direct evidence of the exercise of the right of control; (2) method of payment of compensation; (3) furnishing of equipment or tools for the performance of the work; and (4) right to fire or terminate the employment relationship. 

The activity at issue here is the participation in research studies.  ARI functions as a referral service, i.e., it identifies potential study participants based upon the criteria supplied by its client, contacts these individuals to determine their interest in participating in the study, and communicates to the participants who express an interest basic logistical information such as study time and location as determined by the client.  The actual details of the study participation are determined by the client, e.g., the demographic and other criteria the participants are required to satisfy, the type and design of the study, the time and location of the study, the length of the participation, the study questions or requested observations, and the means by which the participants communicate their opinions or observations.   The client determines the amount of, and funds, the stipends; furnishes the equipment or tools; and has the right to terminate the relationship with the study participant.

Based upon the criteria articulated by the courts in Acuity Mutual and Kress, the clients, not ARI, have the right to control the details of the individuals' participation in research studies.[3]

Wisconsin Stat. § 108.065(1e), states as follows, in pertinent part:

   (1e) Except as provided in subs. (2) and (3), if there is more than one employing unit that has a relationship to an employee, the department shall determine which of the employing units is the employer of the employee by doing the following:

   108.065(1e)(a) (a) Considering an employing unit's right by contract and in fact to:

    1. Determine a prospective employee's qualifications to perform the services in question and to hire or discharge the employee.

   108.065(1e)(a)2. 2. Determine the details of the employee's pay including the amount of, method of, and frequency of changes in that pay.

    3. Train the employee and exercise direction and control over the performance of services by the employee and when and how they are to be performed.

   108.065(1e)(a)4. 4. Impose discipline upon the employee for rule or policy infractions or unsatisfactory performance.

   108.065(1e)(a)5. 5. Remove the employee from one job or assign the employee to a different job.

   108.065(1e)(a)6. 6. Require oral or written reports from the employee.

   108.065(1e)(a)7. 7. Evaluate the quantity and quality of the services provided by the employee.

   108.065(1e)(a)8. 8. Assign a substitute employee to perform the services of an employee if the employee is unavailable for work or is terminated from work.

   108.065(1e)(a)9. 9. Assign alternative work to the employee if the employee is removed from a particular job.

   108.065(1e)(b) (b) Considering which employing unit:

   108.065(1e)(b)1. 1. Benefits directly or indirectly from the services performed by the employee.

   108.065(1e)(b)2. 2. Maintains a pool of workers who are available to perform the services in question.

   108.065(1e)(b)3. 3. Is responsible for employee compliance with applicable regulatory laws and for enforcement of such compliance.

Here, the clients determine the qualifications of the study participants; determine their pay; provide training as to the tasks expected to be completed by study participants and oversight over the performance of these tasks; determine how and where the individuals are to participate in the studies; evaluate whether an individual's participation is unsatisfactory; have the ability to remove a participant from a study; elicit reports from the participants during the course of the study; and, if an individual who agreed to participate in a study becomes unavailable, have the ability to request and bring in another individual.  The clients, who conduct and then apply the results of the studies to their marketing and other business practices, also are the entities benefiting most directly from the activities of the study participants.

ARI maintains a pool of workers who are available to participate in studies, and has more control over the recruitment and hiring of the individuals than do the clients.

The record does not show that there are any workplace rules or policies, or  “regulatory laws” which would apply to the study participation at issue here. 

ARI's clients satisfy significantly more of the factors set out in Wis. Stat. §108.065(1e) than does ARI. 

Applying both the criteria set out by the courts in Acuity Mutual and Kress, supra., and the criteria set forth in Wis. Stat. § 108.065(1e), the individuals at issue perform their study participation activities for the clients, not for ARI, and, as a result, do not qualify as employees of ARI within the meaning of Wis. Stat. §108.02(12)(a).  As a result, ARI is not liable for contributions based upon the payments made to them for their study participation. 

Cases in which the commission has held that individuals engaging in market research activities were employees of the market research business are distinguishable on their facts. 

In User Testing, Inc., UI Dec. Hearing No. S1300292MW (LIRC Oct. 13, 2015), User Testing matched clients who were seeking feedback as to the usability of their websites with individuals who would function as testers of the websites.  The individuals were held to be employees of User Testing. In contrast with the case under consideration here, however, User Testing controlled the details of the work.  Specifically, it had a written agreement with testers which required various equipment, including a high speed broadband internet connection, a certain type of personal computer, a webcam, an email account, and a PayPal account; required the test to be completed within 30 minutes; determined the pay for each usability test; and could deny payment for unsatisfactory testing. 

In mystery shopper cases, the commission has held that the individuals were employees of the merchandising services businesses.  In contrast with the present case, the shoppers would typically enter into a written agreement in which the merchandising services business specified conditions of the continuing relationship including deadlines for completion of assignments, amount of compensation, and requirements for carrying insurance and providing equipment; and the business had the right to determine that the shopper's services were unsatisfactory and to terminate the contract.   See, e.g., Campbell v. Speedmark, UI Dec. Hearing No. 08002536MD (LIRC April 27,2009); Schumacher v. Spar Marketing, UI Dec. Hearing No. 11203183EC (LIRC March 21, 2012). 

The commission also considered whether ARI was operating as a temporary help company with the study participants as their temporary help employees. 

Wis. Stat. § 108.02 (24m) provides:

(24m) TEMPORARY HELP COMPANY. "Temporary help company" means an entity which contracts with a client to supply individuals to perform services for the client on a temporary basis to support or supplement the workforce of the client in situations such as personnel absences, temporary personnel shortages, and workload changes resulting from seasonal demands or special assignments or projects, and which, both under contract and in fact:

(a) Negotiates with clients or customers for such matters as time, place, type of work, working conditions, quality, and price of the services;

(b) Determines assignments or reassignments of individuals to its clients or customers, even if the individuals retain the right to refuse specific assignments;

(c) Sets the rate of pay of the individuals, whether or not through negotiation;

(d) Pays the individuals from its account or accounts; and

(e) Hires and terminates individuals who perform services for the clients or customers.

At least three of these criteria are not satisfied here.  ARI does not negotiate with its clients the details of the research study conditions, does not set the amount of the stipend, and does not terminate participants from a study.  As a result, ARI would not qualify as a temporary help company. 

The employer also argues that the results of the audit, and this proceeding, should be limited to seven calendar quarters, not eight; and that, even though the parties stipulated that out-of-state individuals would be removed from the list of ARI study participants, and that a specific double entry would be removed, the ALJ failed to note that in his decision, and the department failed to issue an amended decision as requested by the attorney for the employer.  However, given the commission's conclusion that ARI is not liable for contributions, these issues need not be addressed.    

Finally, the commission notes that it did not consult with the ALJ before reversing his decision because its reversal was not based upon a differing view as to the credibility of witnesses, but instead upon a differing interpretation of the relevant law.

uploaded 2016/12/29