STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

BERNARD J.  St JOHN, Applicant

THE LAST DETAIL, Employer

TOWER INSURANCE CO INC, Insurer

WORKER'S COMPENSATION DECISION
Claim No. 1995007051

An administrative law judge (ALJ) for the Worker's Compensation Division 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 order in that decision as its own.

ORDER

The findings and order of the administrative law judge are affirmed.

Dated and mailed February 28, 2000
stjohnb.wsd : 101 : 5   ND § 2.11

/s/ David B. Falstad, Chairman

/s/ Pamela I. Anderson, Commissioner

/s/ James A. Rutkowski, Commissioner

MEMORANDUM OPINION

The applicant is a construction worker. He was injured while "moonlighting" on a job he obtained through The Last Detail. The Last Detail is the trade name of a sole proprietorship operated by Jim Reed. The "moonlighting" job was roofing a garage, as part of a garage remodeling project, at a rental unit owned by Mr. Reed's in-laws where Mr. Reed was then residing. Mr. Reed arranged the remodeling project without pay as a favor to his in-laws.

The issue on appeal is whether or not the applicant is a covered employe of Mr. Reed for worker's compensation purposes. The applicant contends he is covered, either as a statutory employe under Wis. Stat. § 102.07(4) or as an independent contractor who is deemed a covered employe under Wis. Stat. § 102.07(8)(a). Mr. Reed contends neither section applies because when the applicant was injured he was not performing services for Mr. Reed in the course of Mr. Reed's trade, business, profession, or occupation.

The ALJ found that the applicant was an independent contractor, but one who is deemed as an employe for worker's compensation purposes under Wis. Stat. § 102.07(8)(a). Mr. Reed appeals.

Wisconsin Statute § 102.07 provides in part:

"102.07 Employe defined. `Employe' as used in this chapter means:

"(4) (a) Every person in the service of another under any contract of hire, express or implied, all helpers and assistants of employes, whether paid by the employer or employe, if employed with the knowledge, actual or constructive, of the employer, including minors, who shall have the same power of contracting as adult employes, but not including the following:

"1.Domestic servants.
"2. Any person whose employment is not in the course of a trade, business, profession or occupation of the employer, unless as to any of said classes, the employer has elected to include them.

"(b) Par. (a) 2. shall not operate to exclude an employe whose employment is in the course of any trade, business, profession or occupation of the employer, however casual, unusual, desultory or isolated the employer's trade, business, profession or occupation may be.

"(8) (a) Except as provided in par. (b), every independent contractor is, for the purpose of this chapter, an employe of any employer under this chapter for whom he or she is performing service in the course of the trade, business, profession or occupation of such employer at the time of the injury.

"(b) An independent contractor is not an employe of an employer for whom the independent contractor performs work or services if the independent contractor meets all of the following conditions:

"1. Maintains a separate business with his or her own office, equipment, materials and other facilities.
"2. Holds or has applied for a federal employer identification number with the federal internal revenue service or has filed business or self-employment income tax returns with the federal internal revenue service based on that work or service in the previous year.
"3. Operates under contracts to perform specific services or work for specific amounts of money and under which the independent contractor controls the means of performing the services or work.
"4. Incurs the main expenses related to the service or work that he or she performs under contract.
"5. Is responsible for the satisfactory completion of work or services that he or she contracts to perform and is liable for a failure to complete the work or service.
"6. Receives compensation for work or service performed under a contract on a commission or per job or competitive bid basis and not on any other basis.
"7. May realize a profit or suffer a loss under contracts to perform work or service.
"8. Has continuing or recurring business liabilities or obligations.
"9. The success or failure of the independent contractor's business depends on the relationship of business receipts to expenditures."

The ALJ's decision thoroughly discussed how he believed these statutory subsections interplay. Essentially, ALJ Landowski determined that the first inquiry was whether, under Wis. Stat. § 102.07(4), the applicant (i) worked under an express or implied contract of hire, (ii) in the service of another person, (iii) and the other person had the right to control the applicant's work.

It is this third element--the control element (1)--that decides whether the applicant is a "common law" employe whose status is examined under Wis. Stat. § 102.07(4), or a common law "independent contractor" whose status is examined under Wis. Stat. § 102.07(8). ALJ Landowski further explained that to analyze the control element, a subsidiary four-part test comes into play. This is the so-called Kress (2) test, which states the common law indicia used to determine whether a worker provides services as a "common law employe" whose work is controlled by the employer, or as a "common law independent contractor" whose work is not.

A common law independent contractor, ALJ Landowski reasoned, falls out of sub. (4) as a true employe-employer relationship is not established. However, an independent contractor who performs services for an employer in the course of the employer's trade, business, occupation or profession is picked up under sub. (8)(a) and covered just like an employe, unless the independent contractor meets the exception stated in sub. (8)(b).

The commission acknowledges that the analytic framework applied by ALJ Landowski in this case is reasonable. However, since ALJ Landowski wrote his decision, the court of appeals handed down a decision reaching a different conclusion about how Wis. Stat. § 102.07(4) and (8) interact. John Jarrett v. LIRC, case no. 99-1413 (Wis. Ct. App., January 25, 2000) (publication recommended.) (3)

In this case, the parties agree that the criteria set out in Wis. Stat. § 102.07(8)(b) do not apply to the applicant. Under Jarrett, then, the applicant is not an independent contractor, nor is he automatically excluded by virtue of that status from coverage. Instead, his possible status as a covered employe is considered under Wis. Stat. § 102.07(4).

Mr. Reed argues that under Wis. Stat. § 102.07(4), the applicant is not his employe because the services that the applicant performed were not performed for Reed himself, but for the Desotells. Alternatively, Mr. Reed argues the applicant's services were not employment in the course of Mr. Reed's trade, business, profession or occupation. (4)

In making these arguments, Mr. Reed portrays himself as a go-between, a middleman or broker, and that the applicant was really working for the Desotells. The commission is not convinced. Mr. Reed asked Mr. Jankowski if the applicant could work on the Desotell job, he negotiated the pay, and he told the applicant where the work was. Garage construction and roofing was the type of work Reed, through his sole proprietorship The Last Detail, did. The applicant had worked for Mr. Reed and Reed's business before, and it is clear from this testimony that he thought he was doing so again, regardless of whether Reed himself was going to be paid for the job. In addition, while it may have been that the Desotells would have paid the applicant had he finished the job, Wis. Stat. § 104.07(4) does not require the employer to pay the employe directly. In short, the commission concludes the ALJ properly concluded the applicant was performing services for Mr. Reed when he was injured.

Mr. Reed also asserts that the work was not done as part of his trade, business, profession or occupation. Again, the undisputed evidence is that garage construction was the type of work that Reed, through The Last Detail, held himself out for. This is not a case, such as that posited by Mr. Reed in his brief, where his son is claiming employe status when the two build a bird house together as a Cub Scout project.

Mr. Reed also notes a case defining a "trade" or "profession" as an occupation or employment habitually engaged in livelihood or gain. Cornelius v. Industrial Commission, 242 Wis. 183 (1943). Mr. Reed points out he did not make any profit or gain on the Desotell garage. However, the commission does not read Cornelius to require that the specific job for which a worker provides services generate a profit to the employer in order for the services to be in the course of the employer's trade or business.

Arguably, because Mr. Reed did not deal with his father-in-law at arms length (which is not unknown in family dealings), the Desotell garage project was not in the course of his business. However, the commission declines to read the "in the course of the employer's trade, business, profession, or occupation" language in Wis. Stat. § 102.07(4) to require arms length dealing between the putative employer and its customers. In that event, a worker could only determine if he was covered by inquiring into the employer's business dealings with its customers.

Reed finally points to two cases (5) for the proposition that when a worker does a project in the putative employer's own home, it is not in the course of the trade, business, profession, or occupation of that employer. One of the cases, Fotentot v. Traveler's Ins. Co., 286 So. 2d 889, 1970 La. App. LEXIS 5063 (La Ct. App, 1970), is not really on point. In that case, the homeowner was a farmer and the injured worker was a painter hired solely to paint the farmer's house. The homeowner was not a house-painting contractor, nor was the house even part of the farm operations.

Stephens v. Industrial Commission of Arizona, 26 Ariz. App. 1992, 547 P.2d 44, 1976 Ariz. App. LEXIS 808 (1976) is closer on the facts. There, the homeowner (O'Connor) was a real estate salesman. He hired a carpenter (Stephens) to construct his personal residence, a prefabricated home. The two also discussed future house building plans, as O'Connor had the idea he would build other pre-fabricated houses for speculative purposes.

Stephens asserted he performed his services on O'Connor's private home as part of O'Connor's house construction business, and not simply to O'Connor acting as a private individual. However, the court disagreed, finding that O'Connor was not an employer and not engaged in a trade, business, profession or occupation. Apparently, O'Connor's private home was the first he ever built, though he subsequently built one or two other homes. In addition, the facts of the case establish that O'Connor specifically negotiated the price with Stephens with the understanding the services would not be rendered as a part of a business.

Of course the homeowner in Stephens owned the property in question. In the case now before the commission, while Reed lived as a guest or temporary renter in the house on the lot where the garage was being remodeled, he did not own the residence; it was rental property owned by another.

Finally, the commission must be guided by the supreme court's repeated admonition:

"In cases where the evidence is evenly balanced and an inference may be drawn one way as easily as another, the scale should be turned in favor of the claimant, principally because it was the intent and purpose of the [Workers Compensation Act (WCA)] to bring border-line cases under it and to close up avenues of escape which would naturally be suggested to those seeking to avoid liability under the [WCA]."

Wisconsin Electric Power Co. v. LIRC, 226 Wis. 2d 778, 796 (1999) (quoting CBS v. LIRC, 219 Wis. 2d at 565, 582 (1998) (quoting City of Phillips v. DILHR, 56 Wis. 2d 569, 580 (1972))).

cc: ATTORNEY DAVID L CHRISTIAN
LAW OFFICE OF DAVID L CHRISTIAN

ATTORNEY ROBERT E NESEMANN
OLSON-NESEMANN

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Footnotes:

(1)( Back ) Citing Larson, ALJ Landowski states that this element has been "read into" the statute by the courts construing Wis. Stat. § 102.07(4).

(2)( Back ) Kress Packing Co. v. Kottwitz, 61 Wis. 2d 175, 182 (1973).

(3)( Back ) In Jarrett, the commission abandoned the Kress "common law" or "control" test for determining whether a worker is an independent contractor. Jarrett, slip, op. at 9. Instead, the commission held, only the factors set out in Wis. Stat. § 102.07(8)(b) are considered. If those factors are met, the person is an independent contractor and excluded from coverage under sub. (8)(b). If those factors do not apply, the worker is an "employe" (assuming the other requirements of Wis. Stat. § 102.07(4) apply), and not an independent contractor. In Mr. Jarrett's case, the effect of the commission's decision was to preclude consideration of whether the applicant was a "common law" independent contractor by application of the Kress standards. In other words, the inquiry ends, and the worker is found to be not covered, if the factors set out in Wis. Stat. § 102.07(8)(b) are met regardless of whether the worker might have been considered a "common law employe" by application of the Kress standards. The court of appeals approved the commission's construction of Wis. Stat. § 102.07(4) and (8) in Jarrett. In so doing, the court of appeals agreed that Wis. Stat. § 102.07(8)(b) was intended to provide the sole test for determining whether a worker is an independent contractor for the purposes of the workers compensation laws.

(4)( Back ) The commission notes that these two arguments would be the same regardless of whether they are considered under Wis. Stat. § 102.07(4) using the Jarrett analysis or under Wis. Stat. § 102.07(8)(a) using ALJ Landowski's analysis.

(5)( Back ) 4 Larson's Workers' Compensation Law § 72.01 et seq. (MB 1999).