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

STANLEY JAMES, Applicant

B & P DRYWALL, Employer

HERITAGE MUTUAL INSURANCE CO, Insurer

WORKER'S COMPENSATION DECISION
Claim No. 1999-051348

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 makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Facts.

The applicant is a drywall hanger. He occasionally also does carpentry or does remodeling work; in early 1999 he did some remodeling work for a tavern. His primary source of income, however, is from drywall hanging, which he has done for several businesses or individuals over the last several years.

The applicant was injured when he fell into a basement on a construction site on September 1, 1999, fracturing his heels. At the time, he was hanging drywall for B & P Drywall, a business owned by Bruce Pecore. Pecore, in turn, had gotten the job from Verhagen Drywall (hereafter Verhagen). Verhagen does drywall subcontracting and employs his own drywall finishers and tapers, but hires out the drywall hanging.

The business arrangement between Verhagen, Pecore and the hangers is summarized beginning at page 60 of the transcript. When Verhagen has a house ready to have drywall hung, he contacts Pecore. There is no bidding process, Verhagen just tells Pecore what he will pay per square foot, using what Pecore describes as an average standard rate per square foot of drywall hung.

Pecore then either does the work himself, or arranges for individuals like the applicant to do the work. Sometimes Pecore calls the hangers, sometimes they call him looking for work. Pecore takes two or three cents off the top of the payment he gets from Verhagen, then gives the rest to the individuals who actually do the hanging.

According to the applicant, the square foot rate paid varied from job to job, as some types of hanging work was more difficult than others, though he was not sure of the arrangement. Pecore indicated he usually got about 15 cents per square foot and passed 12 to 13 cents to the hangers. In any event, the amount the hangers actually got depended on the number of square feet involved and the per square foot rate.

According to the applicant, he never knew either of these figures before starting a job for Pecore. The applicant testified that someone else measured the square feet involved, and Pecore "took care of" how much the hangers were paid by the square foot. Pecore did not dispute this when he testified. He said he would tell the workers the square foot rate if he knew what it was (transcript, page 65), which of course indicates both that he did not always tell the workers and that the rate in fact varied.

Pecore testified that Verhagen would sometimes "gouge" Pecore by unilaterally deducting money from his payment for uncompleted or unsatisfactory work. If the amount of the gouging was trivial, Pecore would absorb it from his cut; if it was significant, he would pass it along to the hangers.

The applicant testified that the workers would turn in their footage on Wednesday, and be paid on Friday. The checks were in gross amount (no deductions were made for taxes), and were drawn from B & P Drywall's account.

According to the applicant, when he arrived at a job site, he would sometimes hang the drywall with a fellow named Reynold Ketchenago (a/k/a Renne), who Pecore admits was his statutory employe. On other occasions, the applicant would contact a fellow named Pete Otradovic to work with him. On other occasions, apparently, Pecore would contact Otradovic who would contact the applicant. Transcript, page 36.

The applicant testified alternatively that Pecore would give him and Otradovic separate checks (transcript, page 34) and that Pecore would give a single check to the applicant which the applicant would split it with Otradovic (transcript, page 57). It appeared that it might indeed have happened both ways, as in 1997 the applicant's taxes show an $11,000 deduction reflecting amounts paid to Otradovic (transcript, page 57 and exhibit 1) (1), while in 1998 no such deduction was shown.

On occasion, the applicant also hired his brother, Mousey, to clear out scrap from job sites for him. Pecore was aware Mousey was helping out, but he never paid him directly. According to the applicant, the most he paid Mousey in any one month was $100. (Transcript, 49-50.)

The applicant supplied his own hammers, T-squares, drywall knife, power cords, tape measure, and screwgun. He claims could fit get all of his tools in single five gallon bucket. Sometimes he bought drywall screws for a job, though the applicant testified that Pecore normally supplied the nails. The applicant did not supplied the drywall. According to Pecore, Verhagen or the general contractor supplied the drywall.

The hangers would also use ladders and scaffolding to hang drywall; often they would just find this lying around the jobsite left by the general contractor or other workers. The applicant himself did not supply ladders or scaffolding at a job site. (2) The applicant testified that Pecore would supply scaffolding and, on rare occasions, a drywall lift. Pecore denied supplying them however.

The applicant does not have a home office, a room in his home he uses for business purposes, a business phone line, a business card, or any kind of contact list. He has no office equipment like a fax machine or computer. He has no regular business expenses such as utility or lease expense. He never deals directly with general contractors. He did have some kind of insurance for part of 1999, but indicated that he got this at Pecore's behest and Pecore's company, B & P Drywall, is named in some capacity on the form. (Transcript, pages 22-24; respondent's exhibit 2.)

As noted above, the applicant hung drywall for several different outfits. Some issued him IRS form 1099s; others, like Town and Country issued W-2s. Indeed, Town and Country issued both 1099s and W-2s, depending on whether it was a union job or not. The applicant has a federal employer identification number, for which he apparently applied when he contemplated starting a partnership that never materialized. He does file a "Schedule C" statement of business income or loss form with his federal taxes.

The applicant testified that he received checks from Pecore in 1999 that were between $700 and $1,000 per week; he thought $900 was an average. (Transcript, page 13.) Seven hundred dollars per week, of course, would work out to $35,000 per year-assuming the applicant could work year round. In 1999, the applicant's gross income was $16,791. In 1998, his gross income was about $22,000, half of which paid to Otradovic.

Pecore admitted paying the applicant by checks drawn from B & P Drywall's account, though it is not clear that he admits paying the applicant $700 per week. (Transcript, page 68.) Pecore went on to testify that the normal average for a drywall hanger was at most $450-500 per week. Indeed, Pecore testified that he paid his admitted employe, Ketchenago, $12.00 per hour and that union scale was $15 per hour. (Transcript, pages 59-60.) This would work out to $480 and $600 per week, respectively, assuming a 40-hour week. Pecore's observation was that the applicant generally worked less than a 40-hour week.

2. The applicant as "covered employe" or "excluded independent contractor"

The first issue in this case is whether applicant is Pecore's employe. (3) This involves two related questions: (a) Is the applicant an excluded independent contractor under Wis. Stat. § 102.07(8); and (b) Is the applicant himself an employer, and therefore excluded under Wis. Stat. § 102.07(8m)?

The applicable statutes provide as follows:

"102.07(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.

"(8m) An employer who is subject to this chapter is not an employe of another employer for whom the first employer performs work or service in the course of the other employer's trade, business, profession or occupation."

The presiding ALJ correctly rejected the contention that the applicant is not himself a subject employer, and thus excluded from the definition of "employe" under Wis. Stat. § 102.07(8m). The commission notes initially that the respondent does not raise Wis. Stat. § 102.07(8m) on appeal, either in its petition or its brief. Moreover, no one but Mousey is even arguably an employe of the applicant. Mr. Otradovic and Ms. Pyatsrowit were more like partners who would contact one another about job opportunities, and divide the payments when they were paid by Pecore (or other subcontractors) with one check. At most, the applicant paid Mousey $300 in any calendar quarter, well below the $500 floor for "covered employer" status under Wis. Stat. § 102.04(1(b)2.

This leaves the question of the applicant's status as an excluded independent contractor under Wis. Stat. § 102.04(8)(b). In order to be an excluded independent contractor, the worker must meet all of the conditions set out in Wis. Stat. § 102.07(8)(b)1-9. In other words, if only one of the nine conditions does not apply, the applicant is a covered employe under Wis. Stat. § 102.07(8)(a). Again, the presiding ALJ concluded that the applicant did not meet all the conditions under Wis. Stat. § 102.04(8)(b).

The first condition requires the worker to "maintain a separate business with his or her own office, equipment, materials and other facilities." The phrase "office, equipment, materials and other facilities" is conjunctive, not disjunctive. The commission reads this to mean that, at a minimum the applicant must maintain some space somewhere that resembles an office or "facility." The commission has held that a formal office is not required for a truck driver who maintained his own truck, and who kept his records (including DOT logbooks) and the truck at his home. Jarrett v. B&D Motors, Inc., WC claim no. 96041644 (LIRC, March 12, 1998), affirmed Jarrett v. LIRC, 2000 WI App. 46, 19-20, 233 Wis. 2d 174, ¶¶187- 88 (Ct. App. 2000). However, in the case now before the commission, the applicant simply kept some tools and drywall nails at his home. There is no evidence he maintains any records for anything other than income tax purposes (which even statutory employes must do.) If the first condition has any meaning, it would not make the applicant's home and tools into "a separate business with his own office, equipment, materials and other facilities" under these facts. The commission concludes that the first condition does apply to the applicant.

The second condition requires the worker to either have a federal employer identification number or file an IRS 1040 Schedule C. The applicant filed a schedule C in 1998 and 1999; he meets this requirement.

The third condition requires the worker to operate under contracts to perform specific services or work both for specific amounts of money and under which the independent contractor controls the means of performing the services or work. The record indicates that the oral contracts the applicant had with Pecore did not specify amounts of money, or even the square foot rate on which the amount could be calculated. The commission concludes that this condition does not apply to the applicant.

The fourth condition requires the worker to incur the main expenses related to the service or work that he or she performs under contract. This condition is a little problematic. The ALJ, noting that the applicant did not pay for the drywall, concluded the applicant did not incur the main expense of the operation. The respondent asserts that the point of the contract is not to actually procure and install the drywall, but only to install it. Thus, the respondent asserts, the only real expense other than the drywall screws are the wear and tear on the tools and equipment and the labor expense. Viewed in this light, the applicant did incur the main expenses of the operation.

The commission is not certain it may accept the respondent's view of the facts, however. In comparison with expenses of the truck driver in Jarrett who was responsible for the considerable expenses (including fuel, maintenance, road repairs, and road taxes) of operating the truck he owned, the expenses of the applicant in this case are quite trivial. One might also conclude that an "independent contractor" involved in home construction who incurs no expense other than his own labor may be the very type worker meant to be covered employe under Wis. Stat. § 102.07(8)(b)4. However, it is not necessary to resolve whether the applicant actually meets this condition.

The fifth condition is that the worker 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. The applicability of this condition is not perfectly clear either. Neither Verhagen nor any general contractor ever contacts the applicant about the work. On the other hand, Pecore testified credibly that Verhagen gouges him for allegedly unsatisfactory work, and that he passes the gouging along to the workers, at least when the gouging is deep enough.

The sixth condition is that the worker 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. The applicant is paid on a per job basis. This condition is met.

The seventh condition is that the worker may realize a profit or suffer a loss under contracts to perform work or service. Under the arrangement he has with Pecore, the applicant cannot realistically be expected to incur a loss. If he shows up and works he gets paid. If he does a poor job, he may get paid less, but that is not the same as operating at a loss. This condition does not apply.

The eighth condition requires that the worker have continuing or recurring business liabilities or obligations. The applicant has no office expense. The commission cannot conclude that the cost of maintaining tools rises to a "continuing business liability or obligation." The commission concludes that this condition does not apply either.

The ninth condition is that the success or failure of the worker's business must depend on the relationship of business receipts to expenditures. The applicant really has no business expenditures, again except for the minor expenses related to his tools, to speak of. Those expenses do not really play a role in the success or failure of the applicant's business.

In sum, the commission concludes that the first, third, seventh, eighth, and ninth conditions under Wis. Stat. § 102.07(8)(b) do not apply to the applicant. The fourth and fifth conditions may be debatable, but only one condition need not apply for the applicant to fall outside the definition of an excluded independent contractor. Thus, the applicant is not an excluded independent contractor under Wis. Stat. § 102.07(8)(b). (4)

3. Average weekly wage.

The final issue is the amount applicant's average weekly wage.

As noted above, the applicant testified he received weekly checks of between $700 and $1,000, and thought $900 was about average. Pecore testified that on average a drywall hanger was paid $450 to $500 per week, and that the applicant seemed to him to work less than average, often only 4 to 6 hours per day. Pecore testified also he paid Ketchenago $12.00 per hour and that union scale was $15.00 per hour (which of course is $480 and $600 respectively for a 40-hour week.) The commission concludes, once more, that the ALJ correctly found the applicant's average weekly wage under Wis. Stat. § 102.11(1)(a) to be $700.

In affirming the ALJ's conclusion, the commission does not simply disregard Mr. Pecore's testimony. The commission appreciates that the applicant reported only about $17,000 gross in earnings in 1998. In 1997, he got $22,000, but then paid half to Otradovic. One might be tempted to reconcile the conflict in testimony by saying that the applicant got weekly checks approximating $900, but then split it with Otradovic so that he himself only earned the $450 that Pecore estimate was average. However, the ALJ noted that the applicant's tax records show he only split his proceeds with Otradovic in 1997; his 1998 records do not show a division. The ALJ declined to speculate that the applicant was in effect double-paid in 1999.

Beyond this, while Pecore could have provided information about how many weeks the applicant worked in 1999, or brought in the relevant checks, he did not. Pecore would probably have been in a better position to prove with documents what had been paid to the applicant on a weekly basis, as the checks drawn on B & P Drywall's account would have been returned to him. The applicant testified, without contradiction, that he sought this information from Pecore, and Pecore did not provide it. Transcript, page 12. In cases like this, while the applicant has the burden of proving his wage, the commission follows the principal that a trier of fact may draw an adverse inference when a party in possession of evidence fails to produce the evidence and fails to offer an explanation for failing to produce it. See 2 Wigmore, Evidence § 285, at 162 (3d ed. 1940); Wisconsin Worker's Compensation Uninsured Employees Fund v. Urban Artifacts, Inc., case no. 99-2413, (Wis. Ct. App., May 9, 2000), affirming Robert Wilson v. Urban Artifacts, WC claim no. 1998000072 (LIRC, February 24, 1999).

4. Award.

The parties do not dispute the nature and extent of disability, or the respondent's liability for a medical expenses, at least at the time of the hearing. The applicant was temporarily disabled from the date of injury (September 1, 1999) through the date of hearing (February 3, 2000), a period of 22 weeks and one day. At the weekly rate of $466.67 (two-thirds of $700), the applicant is entitled to $10,344.52.

The applicant agreed to payment of an attorney fee under Wis. Stat. § 102.26. Accordingly, the fee is set at twenty percent of the amount awarded hereunder, or $2,068.90. The fee shall be deducted from the applicant's award, and paid within 30 days. The remainder, $8,275.62, shall be paid to the applicant within 30 days.

According to exhibit E, G and H the applicant incurred the following reasonable and necessary medical expense to cure and relieve the effects of his work injury: $422 from Orthopedic Specialists, all of which is outstanding; $2,329.94 from Shawano Medical Center, all of which is outstanding; $319.10 from Wisconsin Orthopedic, all of which is outstanding; and $129 from Radiology Associates/Appleton, all of which is outstanding. The respondent is liable for the payment of these amounts under Wis. Stat. § 102.42(1).

The applicant had apparently not yet reached an end of healing as of the date of hearing. Accordingly, the commission's order is left interlocutory to permit future orders on additional disability compensation and medical expense, and other issues as appropriate.

The applicant has an outstanding for application for hearing on bad faith and delayed payment, which will be the subject of a further hearing.

INTERLOCUTORY ORDER

The findings and order of the administrative law judge are modified to conform to the foregoing and, as modified, are affirmed. Within 30 days from the date of this order, the employer and its insurer shall pay all of the following:

1. To the applicant, Stanley R. James, Eight thousand two hundred seventy-five dollars and sixty-two cents ($8,275.62) in disability compensation.

2. To the applicant's attorney, Stuart Spaude, Two thousand sixty-eight dollars and ninety cents ($2,068.90) in attorney fees.

3. To Orthopedic Specialists, Four hundred twenty-two dollars and no cents ($422.00) in medical treatment expense.

4. To Shawano Medical Center, Two thousand three hundred twenty-nine dollars and ninety-four cents ($2,329.94) in medical treatment expense.

5. To Wisconsin Orthopedic, Three hundred nineteen dollars and ten cents ($319.10) in medical treatment expense.

6. To Radiology Associates/Appleton, One hundred twenty-nine dollars and no cents ($129.00) in medical treatment expense.

Jurisdiction is reserved for further findings and orders as are warranted under this decision.

Dated and mailed July 28, 2000
jamesst.wrr : 101 : 6  ND § 2.13  § 4.5

/s/ David B. Falstad, Chairman

/s/ Pamela I. Anderson, Commissioner

/s/ James A. Rutkowski, Commissioner

cc: ATTORNEY STUART J SPAUDE
BOLLENBECK ROWLAND SPAUDE & FYFE SC

ATTORNEY JEFFREY J STRANDE
PIEHLER & STRANDE SC

Appealed to Circuit Court. Affirmed April 26, 2001.  Appealed to Court of Appeals. Affirmed in unpublished (per curiam) decision, May 7, 2002.

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Footnotes:

(1)( Back ) The applicant had a similar arrangement with a woman named Lee Pyatsrowit, with whom he worked for another drywall subcontractor. Sometimes the applicant would get the check and pay Lee, sometimes vice versa. Transcript, page 55.

(2)( Back ) The applicant owned a stepladder, but testified he had no way to bring it jobsites.

(3)( Back ) This case does not involve the related issue of whether Pecore is a covered employer; he has other workers he admits are "employes" and carries WC insurer for them.

(4)( Back ) Although the commission believes the evidence clearly shows that the applicant is not an excluded independent contractor under Wis. Stat. § 102.07(8)(b), it notes 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)).