STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)
ADVANCED ENGINES DEVELOPMENT CORP, Employer
UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 448634, Hearing No. S9800194MW
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:
On page three of the appeal tribunal decision, the first paragraph is deleted and the following is substituted therefor:
It is undisputed that Mr. Hirsch performed services for the appellant for pay during 1996 and 1997. Accordingly, he is presumed to be an employe of appellant, pursuant to Wis. Stat. § 108.02(12)(a).
The presumption of employe status may be rebutted by showing that both of the two conjunctive tests for independent contractor status in Wis. Stat. § § 108.02 (12)(b)1. and 2. are met.
Appellant met the first conjunctive test, provided at Wis. Stat. § 108.02(12)1. Appellant showed that during the relevant time periods, the alleged employe, Mr. Hirsch, held a federal employer identification number in his own name, and he filed business or self-employment federal income tax returns.
However, appellant did not show that the second, conjunctive, test for independent contractor status in Wis. Stat. § 108.02(12)(b)2. was met. In order to meet that test, it must be shown that an alleged employe performed the services in issue under at least six of the eight conditions listed in Wis. Stat. § § 108.02(12)(b)2. a.-h., set forth above.
The applicability of each of the eight criteria has been considered:
a. The individual maintains a separate business with his or her own office, equipment, materials and other facilities.
Mr. Hirsch contended that he maintains an office in his home, and that his wife helps him with billing and other administration for "N.R. Hirsch Engineering Management." Administrative notice is taken of a questionnaire that the department auditor relied upon. Therein, Mr. Hirsch stated that his home office consisted of a computer, printer and office supplies.
Appellant did not show that a business separate from that of the appellant was conducted or maintained during the time period in issue. Mr. Hirsch testified that his services for AED Corp. were performed on AED's premises, that he didn't use a computer and needed only paper and a pencil.
During the time period in issue, the allegedly separate business consisting of Mr. Hirsch d/b/a "N.R. Hirsch Engineering Management." did not perform any services for any company other than appellant. While some of these facts are also relevant to criteria other than a., they are clearly relevant to the "maintenance of a separate business" element in criterion a. The statutory language setting forth that element is not mere surplusage; the actual maintenance of a separate business is no less a requirement than the mere existence of an "office, equipment, materials and other facilities.".
Criterion a.--the first statutory condition-- was not met.
b. The individual operates under contracts to perform specific services for specific amounts of money and under which the individual controls the means and method of performing the services.
In applying this criterion, it is significant that, during the time in issue, Mr. Hirsch, d/b/a "N.R. Hirsch Engineering Management.," did not perform his services under multiple contracts. He had a continuing relationship with AED, acting as its president, hiring employes, and the like. He conceded that, during the time in issue, the only "client" or "customer" for whom he performed services in his capacity of d/b/a "N.R. Engineering Management" was the appellant, AED.
Criterion b. was not met.
c. The individual incurs the main expenses related to the services that he or she performs under contract.
Mr. Hirsch bore, at least temporarily, some expenses related to his performance of services for AED. He was reimbursed by AED for some of those expenses, as are many acknowledged employes.
The expenses that were permanently incurred by Mr. Hirsch were not shown to be the main expenses related to the services he performed for AED. It is reasonable to infer that the expenses incurred by AED in its operation of premises at which Mr. Hirsch performed most of his services constituted the main expenses within the meaning of the criterion.
Criterion c. was not met.
d. 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 criterion addresses potential liability to the ultimate customer; in this case, the various clients or customers to whom AED contracted to supply services. That was clearly Mr. Hirsch's understanding, as well. He testified, "Since the corporation [AED] has the purchase order, it is liable to make it right."
Criterion d. was not satisfied.
e. 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.
Mr. Hirsch performed services that included senior engineering, administrative management, and technical consulting duties. His management services were paid for on a monthly basis, in amounts depending on workload, and his engineering and other technical services were paid for at a rate [hourly] mutually agreed between Hirsch and AED. The appellant, AED, had the burden of establishing that the criterion was met. It was not shown that Hirsch was compensated on a commission basis, per-job basis, or competitive-bid basis.
Criterion e. was not met.
f. The individual may realize a profit or suffer a loss under contracts to perform services.
Mr. Hirsch, in his capacity as an individual performing services for AED, as distinguished from his capacity as sole shareholder of that corporation, was not in a position to realize a profit or suffer a loss based on his compensation arrangement with AED.
Criterion f. was not satisfied.
g. The individual has recurring business liabilities or obligations.
This criterion addresses the kinds of expenses that are regularly incurred by an ongoing business but not directly attributable to goods or services sold to a particular customer. Examples would include rent and utilities paid every month by a business such as AED Corp.
Mr. Hirsch contended that he has recurring business obligations when he performs services for AED in his capacity of d/b/a N.R. Hirsch Engineering Management. His testimony did not show that N.R. Hirsch Engineering Management had any significant recurring business liabilities or obligations separate from, or in addition to, the relatively minor personal expenses he attributed to his performance of services for AED. Moreover, most of those expenses were reimbursed by AED and were therefore ultimately incurred by AED rather than Mr. Hirsch either individually or d/b/a N.R. Hirsch Engineering Management.
Criterion g. was not met.
h. The success or failure of the individual's business depends on the relationship of business receipts to expenditures.
It was AED that had business receipts (payment from ultimate customers). It was also AED, as discussed above, that had recurring business liabilities and obligations; payment of these would constitute business expenditures within the meaning of criterion h.
Mr. Hirsch was paid regularly by AED on a monthly basis for some of his services for AED; for other services, AED paid him at an hourly rate. In his individual capacity, or d/b/a N.R. Hirsch Engineering Management, he had no significant entrepreneurial risk of not being paid for his services.
Criterion h. was not met.
The decision of the administrative law judge, as modified, is affirmed. Accordingly, the employer is liable for unemployment insurance contributions plus interest as set forth in the initial determination.
Dated and maile July 15, 1999
aedcorp.smd : 200 : 5 EE 410 EE 410.03
/s/ David B. Falstad, Chairman
/s/ Pamela I. Anderson, Commissioner
/s/ James A. Rutkowski, Commissioner
ATTORNEY PETER ZEEH
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