Wisconsin Labor and Industry Review Commission --
Summary of Wisconsin Court Decision relating to Unemployment Insurance
Subject: Care & Comfort Associates, Inc. v. LIRC and DWD, Case No. 99 CV 169 (Jefferson Co. Cir. Ct., February 3, 2000)
Digest Codes: EE 410 EE 410.06
Care & Comfort Associates (C&C) was incorporated in August of 1996. C&C's president is a registered nurse. The only business activity engaged in by plaintiff was providing health care services on behalf of a single individual who, as a result of a motor vehicle accident, was a blind quadriplegic whose breathing was controlled by a ventilator. The incorporation of C&C was a precondition to being able to submit a bid to perform health care services on behalf of the individual because his insurance company refused to contract with individual nurses.
The individual required specific medications and services. Because of the complexity of the services, nurses were required to
provide or supervise all care. C&C contracted with the individual's family to
provide necessary health care services. C&C’s case manager handled the details
under that contract. The individual's private insurance company paid for the
services on a monthly basis.
C&C hired ten nurses in 1996 to perform the nursing services. It had written contracts with all of the nurses. Each signed their contract expecting to be independent contractors.
C&C's president estimated the costs of care a month in advance. An invoice in amount determined by her to be appropriate was then sent to the individual's insurer. It paid C&C which, in turn, paid the nurses. Each nurse was paid on an hourly basis at a rate specified by C&C. They each incurred expenses for vehicle maintenance, telephone use, professional certifications, malpractice insurance, continuing education and some medical equipment. If any of them failed to do their job duties adequately, they could be sued individually for their personal liability. C&C's president also performed nursing services on behalf of the individual and was compensated at the same hourly rate as the other nurses.
In addition to the who were paid by it, C&C also paid the individual's sister, who lived with him, to perform services as a certified nursing assistant. There was also a signed contract between her and C&C. She was also paid at a specified per hour rate determined by C&C, but that rate was less than that of the nurses because she had less formal health care training, less health care skills and always worked under the supervision of whichever registered nurse was on the premises.
DWD issued an initial determination that C&C had sufficient employees and had paid sufficient employee wages to be subject to Wisconsin’s UC law. It appealed and, following hearing, an ALJ held that a total of 12 individuals had performed services on behalf of C&C in 1996 as statutory employees for. Accordingly, the Administrative Law Judge affirmed the February 20, 1997, initial determination of the department in its entirety. On C&C's appeal, LIRC affirmed. C&C sought judicial review.
Held: In evaluating whether the nurses (and nursing assistant) are employees, a two pronged analysis is used. Transport Oil, Inc. v. Cummings, 54 Wis.2d 256 (1972). The first step is to determine whether an "employment" situation exists. §108.02(15) Stats. defines employment as any service performed for pay. That prong is met in this instance because the nurses and nurses assistant exchanged their time, knowledge and service for pay. Once that prong exists, the worker’s are presumed to be employees. That presumption is rebuttable by C&C under §108.02 Stats., by applying the two tests set forth in §108.02(12)(b)(1)(a) and (b) Stats.
The first statutory condition has been established by C&C, without dispute. The parties stipulate that all 12 workers filed business tax returns for the performance of health care service in 1995, the year before the matter at issue.
The second statutory condition requires C&C to establish 6 out of 8 additional statutory conditions in order to rebut the presumption that the workers were employees rather than independent contractors .
108.02(12)(b)(2)(a) Stats. [condition 3 under §108.02(12)(bm)] asks whether the individuals "maintain a separate business with his or her own office, equipment, materials and other facilities". The commission noted that the nurses (but not the assistant) had areas in their own homes where they processed paperwork related to their services. No medical services for the individual were performed in the nurses' homes. The individual was a blind quadriplegic whose breathing was controlled by a ventilator. His equipment was not provided by the nurses. They had stethoscopes, blood pressure cuffs and other small items of equipment which they brought with them to the individual's home.
The commission concluded that the home offices were not business offices because the nursing services were not performed there. The commission also concluded that because the heavy, complex and expensive machinery utilized to keep the individual breathing and permitting him to have some function was not provided by, rented or reimbursed for use by the nurses, and they did not give the individual services at their home offices, then they did not have a separate office with equipment, materials and facilities.
While due weight is to be afforded the commission’s determination, there is a more reasonable interpretation available, consistent with the purpose of the statute. When as here, individuals maintain separate physical work locations from the one in which they perform their work (here the individual’s home) and have offices, equipment, materials or facilities there which are not used at the alleged employer’s location, then they may still have separate business, even though there is other equipment used at the alleged employer’s location. Here, there was evidence that the nurses also provided services for other individuals. Therefore, rather than the conclusion reached by the commission, that there could be no separate business unless services were provided outside the home or unless equipment used in the individual’s home was owned by the nurses, the count concludes that there still could be, and, in fact, there is, a separate business even though the commission’s two tests are not met. Here, the fact that the nurses had separate offices and other clients, is sufficient for C&C to have met its burden concerning this test. Therefore, the commission’s determination that C&C did not meet this criteria is reversed.
§ 108.02(12)(b)(2)(b) Stats. [condition 4 under §108.02(12)(bm)] criteria provides, “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". C&C, by stipulation, satisfied the first part of this test. The nurses and assistant performed specific services for an established hourly rate. The commission determined that the second part was not established because the nurses had to attend an unpaid orientation under the supervision of the individual’s physician and had to demonstrate skills and learned knowledge after the individual’s preferences were demonstrated. Thus, the commission concluded that the workers did not control the means and method of performing services.
Even giving due weight to this determination, the court concludes that a more reasonable interpretation of the facts as applied consistent with the purpose of the statue is available. The nurses control the delivery of the “means and methods” of professional service while the means and methods of human care (assistance) were dictated by C&C. The nurse’s primary job is to deliver emergency nursing services when necessary. They are then only constrained by medical standards of care, within the scope of professional nursing care when delivering those services. The individual nurse selects the means and method of delivery of professional nursing services. Medical standards of care are not within the control of C&C, nor can C&C dictate those standards. The nurses may be individually sued for malpractice should they deviate from the standard of care and damage results.
Therefore, the commission’s conclusion is reversed as to the nurses but affirmed as to the assistant.
§ 108.02(12)(b)(2)(c) [condition 5 under §108.02(12)(bm)] provides; “The individual incurs the main expenses related to the services that he or she performs under contract.” The commission concluded that the only expenses incurred by the nurses or assistant were vehicle costs and cloths “specifically in connection” with their services. The commission identified the medical equipment as the main expenses related to the services.
The commission’s determination is much too narrow and is reversed even affording due weight. A more reasonable interpretation considers the education, experience and training the nurses provided. This training is not the unpaid orientation provided by C&C. Rather, it is the education and training needed to obtain the knowledge necessary to react to emergency medical events. C&C did not send the workers to school. It did not train them professionally in any meaningful sense. The nurses are not equipment technicians. The equipment is not the main expense related to the nursing service. It is separate and distinct from their function. While the commissions decision implies that the nurses are simply comfort and care givers, the reality is that the nurses are needed to provide medical services in an emergency even if no emergency condition ever arises. The main cost associated with the providing of nursing services is professional qualification and nursing experience. And, the nurses provided that expense, not C&C. Therefore, the workers incurred the main expenses related to their services.
§ 108.02(12)(a)(2)(d) [condition 6 under §108.02(12)(bm)] provides; “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 court affirms the commission’s determination that the nurses satisfied the criteria and that the assistant did not. The assistant was not ultimately responsible for her failures, the nurses were.
§ 108.02(12)(a)(2)(e) [condition 7 under §108.02(12)(bm)] provides; “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.” The commission here correctly concluded that no hourly basis payment provision such as the one here would meet this criteria. There was no element of free enterprise in bidding here, notwithstanding number of hours to be worked because number of hours worked did not invite comparison of bid. The commission is affirmed as to the nurses and assistant.
§ 108.02(12)(b)(2)(f) [condition 8 under §108.02(12)(bm)] provides; “the individual may realize a profit or suffer a loss under contracts to perform services.” Here, the nurses and the assistant are guaranteed wages for putting in time. There is no element of profit/loss in the performance of their services. The commission’s determination that the nurses and assistant did not satisfy the criteria is affirmed.
§ 108.02(12)(b)(2)(g) [condition 9 under §108.02(12)(bm)] provides; “The individual has recurring business liabilities or obligations.” The commission’s conclusion that the nurses did not meet this criteria is reversed. The conclusion that the assistant did not is affirmed. The commission's conclusion that the unreimbursed cost of malpractice insurance, maintenance licensure and certification etc. was not a business liability or obligation because under the 1st criteria no separate business existed, makes logical sense if one concludes no separate business existed. For the same logical reason, because the court concludes that a separate business existed, the criteria here is satisfied as well.
§ 108.02(12)(b)(2)(h) [condition 10 under §108.02(12)(bm)] provides; “The success or failure of the individuals business depends on the relationship of business receipts to expenditures.” The commission concluded that if no business existed, C&C could not satisfy this criteria. This court has concluded that a separate business existed. But, where, as, here, a worker works at an hourly rate, having no significant current expenditures, then it follows that their business’s success or failure cannot depend on the relationship of business receipts to expenditures, unless the expenditures (malpractice insurance, licensure, etc.) is significant. And, there is no evidence here that such expenditures, though they exist, are not of such significance that they effect profit for an hourly wage earner. This is true, even if past expenditures (cost of education) is significant.
Had there been a demonstration that the hourly bids were individually based on current costs (such as licensure/certification/malpractice insurance) the conclusion might be different.
Here, the success or failure of the business depends on professional competence and receipt of an hourly wage, not business economics (comparison of business receipts to expenditures). The legislature has determined that those workers that bear risk for relationship of business receipts to expenditures are eligible to meet the exemption criteria. The nurse/assistant in this case are not eligible to seek the exemption requirements.
In this case, given the nature of the professional services rendered, which was compensated at an hourly rate, and which wholly lacked competition or entrepreneurial enterprise, the satisfaction of 3 out of 8 criteria is virtually precluded. If employers employing professionals who provide them with professional services at an hourly rate at the employers location, and use equipment not owned by them at that location, want to make it possible to qualify those individuals as independent contractors, then they must address this issue to the legislature, not to the courts.
The commission’s decision that the nurses and nurses assistant performed their services in 1996 on behalf of C&C as employees for state unemployment tax purposes is affirmed.
Please note that this is a summary prepared by staff of the commission, not a verbatim reproduction of the court decision.
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