LYNETTE S GAMBLE, Claimant

AMERICAN BENEFIT LTD, 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 by the Department of Workforce Development. 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:

The claimant performed services selling insurance starting on May 11, 2004, and continuing to the present for the employer, a business that sells life and health insurance.

The issue to be decided is whether the claimant, starting in week 34 of 2004 when she initiated an unemployment benefit claim, was an "employee" of the employer. If she is deemed to have been working as an "employee," the wages received from the employer during a week she claims unemployment benefits must be reported as wages earned during the week. Such reported wages have the potential to reduce the amount of benefits paid for a week.

Wisconsin Statutes § § 108.02(12)(a) and (bm) state as follows, as relevant here:

(a) "Employee" means any individual who is or has been performing services for an employing unit, in an employment, whether or not the individual is paid directly by such employing unit; except as provided in par. (b), (bm), (c), or (d).

(bm) During the period beginning on January 1, 2000, with respect to contribution requirements, and during the period beginning on April 2, 2000, with respect to benefit eligibility, par. (a) does not apply to an individual performing services for an employing unit...if the employing unit satisfies the department that the individual meets 7 or more of the following conditions by contract and in fact:

1. The individual holds or has applied for an identification number with the federal internal revenue service.

2. The individual has filed business or self-employment income tax returns with the federal internal revenue service based on such services in the previous year or, in the case of a new business, in the year in which such services were first performed.

3. The individual maintains a separate business with his or her own office, equipment, materials and other facilities.

4. 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.

5. The individual incurs the main expenses related to the services that he or she performs under contract.

6. 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.

7. 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.

8. The individual may realize a profit or suffer a loss under contracts to perform services.

9. The individual has recurring business liabilities or obligations.

10. The success or failure of the individual's business depends on the relationship of business receipts to expenditures.

Wisconsin Statutes § 108.02(12)(a) creates a presumption that a person who provides services for pay is an employee, and it requires the entity paying them for those services to bear the burden of proving that they are not employees. See, Dane County Hockey Officials, UI Dec. Hearing No. S9800101MD (LIRC Feb. 22, 2000); Quality Communications Specialists, Inc., UI Dec. Hearing Nos. S0000094MW, etc. (LIRC July 30, 2001).

The claimant performed services selling insurance for the employer. The employer paid the claimant a commission based on the type of product sold by the claimant. Therefore, it is the employer's burden to establish that the claimant met 7 of the 10 conditions set forth above. The commission finds that the employer failed to meet its burden.

The claimant did not hold and did not apply for an identification number with the Federal Internal Revenue Service. The claimant did complete a W-9 form to provide the employer with the claimant's social security number so that the employer could report monies paid to the claimant. This was not an application by the claimant to the IRS for an identification number. A form SS-4 is used to obtain an employer identification number from the IRS. The employer failed to establish that condition 1. was satisfied.

The claimant did not plan to file and had not filed self-employment tax returns or business tax returns with the IRS based on her services for the employer. Condition 2. is not satisfied simply because the employer considers the claimant to be an independent contractor and issues a 1099 Form to the claimant. The employer failed to establish that condition 2. was satisfied.

The claimant did not maintain a separate business with her own office either in her home or at the employer's premises. The claimant's equipment consisted of a cell phone and her vehicle, neither of which was shown to have been used solely for business purposes. The employer failed to establish that condition 3. was satisfied.

The claimant worked under a single contract with the employer. The claimant did not contract with other entities to perform services similar to services performed for the employer. There was no evidence that the claimant operated under multiple contracts with the employer that were negotiated at arm's length. The employer failed to establish that condition 4. was satisfied.

The evidence established that the claimant had significant expenses each month of $1,000. The record indicates that the employer may not have incurred expenses in one year equal to the expenses incurred by the employee in one month. The record supports a finding that the claimant incurred the main expenses related to performing services. The employer established that condition 5. was satisfied.

It is not enough that the employer may expect the employee to correct errors made. The evidence must indicate that the employee was legally obligated to satisfactorily perform her services. There is no indication that the employee would be liable for failing to satisfactorily complete services. The employer failed to establish that condition 6. was satisfied.

The evidence is undisputed that the claimant was paid by commission only. The employer established that condition 7. was satisfied.

The significant expenses incurred by the employee support a finding that she could realize a profit and suffer a loss in performing the services at issue. The employer has established that condition 8. was satisfied.

The claimant does not have the type of recurring business liabilities that the commission has considered necessary to meet this condition such as overhead expenses that cannot be avoided by ceasing to perform services. The employer failed to establish that condition 9. was satisfied.

Finally, the claimant did not demonstrate that she had a significant investment in any business that could be subject to growth or loss. The employer failed to establish that condition 10. was satisfied.

The commission therefore finds that as of week 34 of 2004, the claimant performed services for the employer as an employee within the meaning of Wis. Stat. § 108.04(12)(bm), and must report wages earned from the employer when earned for purposes of determining benefit entitlement.

The decision of the administrative law judge is reversed. Accordingly, the claimant is required to report wages from the employer as they are earned. The commission remands this matter to the department to determine whether the claimant has been overpaid benefits as a result of this decision and whether benefit recovery is required based on departmental error.

Dated and mailed February 15, 2005
gamblly . urr : 132 : 1 : EE 410

James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

The commission did not consult with the ALJ regarding witness demeanor. The commission's reversal is not based on the credibility of the witness but because it has reached a different legal conclusion when applying to the law to the facts.

cc:
Attorney Ross A. Seymour
Gregory Frigo

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uploaded 2005/02/22