LISKO & ERSPAMER SC, Employer

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:

In the fourth full paragraph on page three of the appeal tribunal decision, "Given this, the possibility of a profit or a loss existed." is deleted.

The decision of the administrative law judge, as modified, is affirmed. Accordingly, the appellant is liable for the payment of contributions based on wages paid to Laura Martinco.

Dated and mailed February 24, 2004
liskoer . smd : 105 : 1  EE 410  EE 410.04a   EE 410.08 EE 410.09

/s/ David B. Falstad, Chairman

/s/ James T. Flynn, Commissioner

/s/ Robert Glaser, Commissioner

The employer concedes that, with regard to services Ms. Martinco performed through the end of 1999, she was a statutory employee of the employer and not an independent contractor. The only issue therefore is whether, from the beginning of 2000 until early in 2001, Ms. Martinco's services for the employer were performed as an employee or as an independent contractor. The commission easily agrees with the administrative law judge's conclusion of employee status, and so has affirmed the appeal tribunal decision with slight modification.

There are ten criteria one examines, when determining whether an individual is performing services for a putative employer as an employee or as an independent contractor, and they are found at Wis. Stat. § 108.02(12)(bm). The first criterion is whether the individual holds or has applied for an FEIN. There is no question but that Ms. Martinco never has; she thus does not meet the first criterion.

The (bm)2 criterion is that an individual have filed business or self-employment income tax returns based on such services in the previous year. Ms. Martinco testified that she had filed Schedule C returns, beginning in 1999; she thus meets the second criterion.

The third criterion is that an individual maintain a separate business with his or her own office, equipment, materials, and other facilities. Ms. Martinco does not meet this criterion. She had no business location, rather working out of the personal computer at her home, a computer she had purchased several months before beginning her work for the employer. She did not advertise, and had no business name. Her primary work was as a full-time employee of the Jewish Home Care Center. The only outside work she did, apart from her work for the employer, was for acquaintances, for which she was reimbursed in the form of dinners or babysitting. This set of circumstances does not establish that Ms. Martinco had a business with office, equipment, materials, and other facilities.

The fourth criterion is that the individual perform specific services for specific amounts of money, pursuant to which the individual controls the means and methods of performing the services. The administrative law judge appears not to have specifically addressed this criterion, but the record indicates that Ms. Martinco met it. The commission has held that hourly pay meets the standard of performing services for specific amounts of money, and the employer went to great lengths at the hearing to establish that neither he nor any of Ms. Martinco's co-workers had the slightest understanding of what Ms. Martinco did, much less that any of them directed her in the means and method she used in her bookkeeping work.

The commission agrees with the administrative law judge that Ms. Martinco met the fifth criterion, that the individual incurs the main expenses related to the services that he or she performs under contract. The record indicates that Ms. Martinco incurred mileage expenses, as well as expenses related to paper and computer discs she used for her bookkeeping work. The record indicates that there really were no other expenses connected with the work. She thus must be deemed to have incurred the main expenses related to the services performed.

The administrative law judge properly found, though, that Ms. Martinco did not meet the sixth criterion, that the individual is responsible for satisfactory completion of the services and is liable for failure to satisfactorily complete them. The employer did not know what it would have done, had the employee "screwed up" the employer's trust accounts, for example. With regard to bookkeeping errors, the employer again did not know whether it would have held her financially responsible therefor. This evidence does not establish that Ms. Martinco was liable for failure to satisfactorily complete her work. While the employer in its brief attempted to argue that it had not been shown that Ms. Martinco was not liable for failure to satisfactorily complete the services, that is a not-too-subtle attempt by the employer to shift the burden of proof away from itself. It has long been the case that it is the putative employer's evidentiary burden to establish that the individual whose status is in issue meets the independent contractor criteria (not the department's burden to prove that the individual does not).

There also is no question but that Ms. Martinco does not meet the seventh criterion, that the individual receive compensation on a commission or per-job or competitive-bid basis and not on any other basis. She was paid by the hour.

The commission has modified the appeal tribunal decision, because the administrative law judge erroneously found that Ms. Martinco could realize a profit or loss under her contract to perform the bookkeeping services. This simply is not possible, given that she was paid hourly. Unless she were going to charge the employer for hours she did not actually work, there would be no profit connected with the business. The risk of loss refers to entrepreneurial risk, such as when someone makes a bid to perform a specific job, and the costs of the materials exceed the bid.

Ms. Martinco also does not meet the ninth criterion, that the individual have recurring business liabilities or obligations. Recurring expenses, such as paper and computer discs, are not the same as recurring liabilities or obligations. This criterion requires fixed expenses such as utilities, liability insurance, and rent.

Ms. Martinco also cannot be said to meet the final criterion, that the success or failure of the business be dependent on the relationship of business receipts to expenditures. The focus of this criterion is business receipts and expenditures, as distinguished from wages. Where, as here, the individual in question receives an hourly wage for all work performed for the putative employer, the individual is not subject to the vagaries of changing receipts and expenditures.

Ms. Martinco met, for the time period in question, only three of the ten factors for determining independent contractor status. The commission therefore has affirmed the appeal tribunal decision as modified.

NOTE: The employer, in its petition for review, asked for rehearing on the ground that the administrative law judge erroneously prohibited one of the employer's witnesses from testifying at the hearing in this case. The commission does not know what to make of this allegation, since the record establishes that the witness in question in fact did testify at the hearing. The record also establishes, finally, that the employer had full opportunity both to question that witness and to present any relevant evidence it wished.

cc: Attorney Peter W. Zeeh

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