CLEAR CHOICES INC, 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 makes the following:

Clear Choices, Inc. (hereinafter appellant) is a Wisconsin corporation operating a business as an authorized independent retailer of satellite TV equipment and services. The business was incorporated in 1997.

Prior to 2001, appellant had become a covered employer for unemployment insurance tax purposes, and it reported its office staff and salespeople as employees for state unemployment insurance tax purposes. Appellant also paid other persons for services they performed installing the equipment (dishes and receivers) used in satellite TV systems; it did not report these persons as employees. During the period from January 1, 2001 through March 31, 2003, 13 persons performed equipment installation services for appellant for pay. ⁽¹⁾   The issue for decision in this case is whether these individuals performed those installation services as employees of the appellant or as independent contractors.

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 for which the person is performing those services to bear the burden of proving that they are not employees. Wis. Tennis Officials, Inc. (LIRC, Feb. 28, 2005), Health Exams Plus, Inc. (LIRC, April 15, 2005). It is not disputed that the persons whose status is at issue herein performed services for appellant for pay during the time periods in question. They are therefore presumptively employees of appellant, and appellant bears the burden of proving that they performed those services as independent contractors. To meet this burden as to any of the individuals who performed installation services for pay, the appellant must prove that the individual meets, by contract and in fact, seven or more of the ten conditions stated in Wis. Stat. § 108.02(12)(bm). These conditions, and the state of the evidence in the record bearing on them, are described below.  
  

1. The individual holds or has applied for an identification number with the federal internal revenue service -- As to eight of the individuals whose status is at issue (Knowlton, McGary, Schultz, Simet, Walsh, Laterell, Simpson, LaCrosse), there was no evidence whatsoever on the question of whether they held or had applied for an identification number with the federal internal revenue service (a federal employer identification number, or "FEIN"). Therefore, as to those individuals, appellant has clearly not met its burden of establishing that this condition was met.

While appellant's witness testified that the other individuals at issue (Anderson, George, Pakan, Koehn, Lade) had federal employer identification numbers, the commission finds the testimony of appellant's witness on this point to be neither persuasive not reliable. For one thing, the appellant's witness did not indicate when these individuals supposedly received their FEINs. More significantly, this testimony was clearly hearsay, and it was not subject to any exception to the rule against hearsay in Ch. 908. This hearsay evidence was uncorroborated by any other evidence, such as copies of tax returns or other documents evidencing the FEINs. The commission concludes that this testimony was insufficient to carry the appellant's burden with respect to these 5 individuals.

The only other testimony concerning FEINs was provided by Pakan and Koehn, who each testified that they applied for and received FEINs in 2002. While the commission has some doubts about the reliability of this testimony  ⁽²⁾,  it accepts it as minimally sufficient to meet the appellant's burden of proof as to this element for these two individuals, as to services performed in 2002 and 2003.

The commission concludes that the evidence offered at hearing was sufficient to carry the appellant's burden of proof as to this condition only with respect to Pakan and Koehn for 2002 and 2003, and that as to Pakan's services in 2001, and the other individuals at issue, this condition was not shown to have been met.  
 

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 -- The appellant's witness acknowledged that he did not know if any of the persons at issue filed federal business tax returns. The only individual installers who appeared at the hearing, Pakan and Koehn, both stated that they did not file any kind of tax returns. Appellant concedes in its brief that the evidence does not establish that this condition was met as to any of the other persons at issue. Therefore, appellant has clearly not met its burden of establishing that this condition was satisfied as to any of the individuals whose status is at issue. 
  

3. The individual maintains a separate business with his or her own office, equipment, materials and other facilities -- Only two of the individuals whose status was at issue were present at the hearing in this matter. There was no stipulation that their situations as described in their testimony could be considered representative of the other installers who did not testify, nor was there any sort of ruling by the Appeal Tribunal that the testimony of those two individuals could be taken as representative of all of the others. In the absence of such a stipulation or ruling, it is necessary that sufficient proof be presented as to each individual whose status is at issue. See, T-N-T Express LLC (LIRC, Feb. 22, 2000).

With respect to the eleven individuals whose status was at issue and who were not present at the hearing, there was little evidence that they had anything in the way of a business office or equipment. The only evidence of any significance offered in this regard by appellant's witness was the evidence that there was a set of tools that were effectively required by the nature of the work, and that the installers owned such tools and vehicles which they used to transport themselves and their tools to sites where they did their work. The appellant's witness also testified that some of the individuals had done satellite TV installation work previously and that some performed similar work for others while working for him. However, having some materials and tools does not necessarily establish that one is in a separate business, nor does performing similar services for others. In discussing the proper application of this "separate business" condition in Tammy Loberger / Alex Logan Wholesale Flooring (LIRC, June 30, 1999), the commission said:

While each [individual] owned hand tools and a vehicle used in performing installations, there was no showing that they had equipment dedicated to the operation of a place of business; e.g., office furniture, office equipment, merchandise displays and the like. While both of the installers who testified performed installation services for flooring companies other than Ms. Loberger's company, that fact does not establish that either witness "maintain[ed] a . . . business," because the other companies may in fact also be employers of the individuals. A worker can be an employe of more than one employer at the same time. [This criterion] was not satisfied on this record.

Even with respect to the two installers who were at the hearing, Pakan and Koehn, their testimony was inadequate to make a finding in the appellant's favor on this condition in regard to them. Pakan clearly had no "office" or office equipment dedicated to his "business". Although he testified initially that he had a "home office" consisting of a computer and files and that he had a FAX machine, he subsequently testified that he did not in fact use either the computer or the FAX machine in connection with his satellite TV installation activities, calling into question the overall veracity of his initial claim that he had a "home office". He did not have a business name or a business bank account, nor did he advertise. Koehn testified to nothing significant that could be construed as being an office or equipment; he merely indicated that he did what paperwork he needed to do in his vehicle or at his home. He had no business bank account during the years at issue, and he did not advertise.

The commission concludes that the evidence offered at hearing was insufficient to carry the appellant's burden of proof as to this condition with respect to any of the individuals whose status was at issue.  
 

4. The individual operates under contracts to perform specific services for specific amounts of money and under which the individual controls the means and methods of performing such services -- This test requires a showing of multiple contracts. The existence of multiple contracts tends to show that an individual is not dependent upon a single, continuing relationship subject to conditions dictated by a single entity. Multiple contracts that an individual enters into with multiple business entities are most indicative of that individual's economic independence from a particular putative employer; multiple serial or contemporaneous contracts with a particular putative employer may also satisfy the criterion if the contracts are shown to have been negotiated "at arm's length." In genuine independent contractor relationships, negotiation will typically result in terms that will vary over time and will vary depending on the specific services covered by a contract. T & D Coils, Inc. (LIRC, Dec. 15, 1999). The test is therefore not met in cases in which the individual provides services for only one entity, and does not negotiate and re-negotiate rates with that entity, but simply accepts what is given as the going rate for the services in question, and provides those services in the course of a continuing relationship the terms of which do not vary over time. Dane Co. Hockey Officials (LIRC, February 22, 2000).

Here, the individuals whose status was at issue performed their services pursuant to written contracts with appellant that had a term of one year. Only three of those individuals had worked for the appellant for more than one year, so as to most a series of contracts with the appellant was not established. It also appears clear that there was no real negotiation (or re-negotiation, in the case of the few individuals who worked for appellant under more than one annual contract). The contracts were standard, form contracts, did not set out a particular rate for the services contracted for, and in fact expressly reserved to the appellant the right to unilaterally change the rates paid for the services. Such a situation, the commission finds, is like that described in Dane Co. Hockey Officials, in which the person providing the services does not negotiate and re-negotiate rates with the putative employer but simply accepts what is given as the going rate for the services in question and provides those services in the course of a continuing relationship the terms of which do not vary over time.

While the requirement for multiple contracts might be found to be met even in such a case, where the individual also performed services for other entities under other contracts, the evidence as to these installers providing services for others was unpersuasive and carried insufficient weight, in the commission's view, to support a finding in the appellant's favor on this condition. The fact that the installers are free to do outside work under their contract with the appellant, does not prove that they in fact do so. The testimony by the appellant's witness that he knew of some outside work done by some of the installers, was clearly hearsay. That hearsay was also uncorroborated by any sort of independent or documentary evidence.

In addition, the commission agrees with the department that whether or not the "operates under contracts" element of this condition was met, the "under which the individual controls the means and methods of performing such services" element of this condition cannot be considered to have been met. The contract under which the services are provided states that the installer "agrees to perform work . . . in a manner compliant with the 'Quality of Standards' addendum, the 'Understanding of Customer Service' addendum and the 'Policies and Procedures' addendum", all of which were stated to be appended to the contract. On its face, this element of the contract seems to provide for the exact opposite of what the statutory condition contemplates. From the titles applied to these addenda, it is clear that under the contract in effect here, means and methods of performing the services were controlled by the appellant.

Furthermore, whether or not this contractual right of control is in fact exercised by appellant on a day-to-day basis is not determinative. The statute expressly requires that the putative employer must prove that relevant conditions are met "by contract and in fact". Wis. Stat. § 108.02(12)(bm) (emphasis added). As applied to this condition, this means that the individual must control the means and methods of performing services not only in fact, but also under the language of the applicable contract. Here, the applicable contract purports to reserve a significant right of control of "means and methods" to the appellant.

For the foregoing reasons, the commission concludes that the evidence offered at hearing was insufficient to carry the appellant's burden of proof as to this condition with respect to any of the individuals whose status was at issue.  
 

5. The individual incurs the main expenses related to the services that he or she performs under contract -- The expenses related to the services performed in this case include expenses for a range of small parts and materials (including such things as screws, fittings, connectors, wire, cable, and other items) necessary to the installation of the satellite dishes and receivers. The installers are required to provide, and thus incur the expense of, these materials. These materials cost around $20 per installation.

The expenses related to the services performed can also be considered to include certain costs related to the tools needed to do the work, and to the vehicle used in doing the work.

The "expense" related to a set of necessary tools is not the initial purchase price of the tools, but the expense (if any) of maintaining them and of their periodic replacement necessitated by the wear and tear inflicted on them by the work involved. The evidence in the record here as to the overall expense of this nature associated with tools was not fully developed, but it did persuade the commission that there was something in the area of at least $300 in tool and equipment replacement expenses that could be anticipated each year related to the use of those tools and equipment in providing the services in question.

In view of the fact that the vehicles used are apparently the installer's personal vehicles, it is clearly inappropriate to consider all of the vehicle expenses, including depreciation, as being attributable to the performance of services under the contract. Some vehicle expenses, such as insurance, would be incurred whether the vehicle was used in a business or not. However, many of the expenses connected with a vehicle -- such as gasoline, tire wear, and general depreciation for use -- are directly related to mileage. Even though the testimony of Pakan about the number of miles he drove per week in connection with installations (500-1500) miles cannot be automatically ascribed to the other installers as well, it does tend to confirm what could be inferred from the general evidence about the installers' responsibility for their own transportation, which is that there would be a not insubstantial vehicle-mileage-related expense.

The ALJ reasoned that the main expenses of the services performed were the cost of the satellite dishes and receivers, and she concluded that because these pieces of equipment were provided by the satellite TV network, this condition was not met as to the individuals here. The department argues that this approach is supported by Quality Communications Specialists (LIRC, July 30, 2001). The appellant argues that the dishes and receivers themselves are not part of the expense connected with the service of installing them.

The department's argument based on Quality Communications Specialists is not persuasive. In that case, involving cable TV installation services, it was determined that that the "main expense" associated with the services being performed was a hand-held computer which the cable installers needed to use in order to be able to set up and record the service installation. This is not analogous to the satellite dishes and receivers themselves, which are not tools used in an installation, but are the installed item itself. This precise issue was addressed in Barnett v. Alternative Entertainment, Inc. (LIRC, Oct. 29, 2002), in which the commission held, in a case involving the status of a satellite TV installer, that the cost of the satellite TV system itself was not an expense related to the services performed in installing that system. In so holding, the commission relied on Lozon Remodeling (LIRC Sep. 24, 1999), a siding installer case, in which the commission held that the cost of siding was not an expense of the installation of that siding within the meaning of this condition.

The commission therefore finds and concludes that the main expenses related to the services performed in this case include expenses for a range of small parts and materials necessary to the installation of the satellite dishes and receivers, expenses for replacement of necessary tools as required by the wear and tear on them as a result of their use in the installation, and vehicle-mileage-related expense connected with the installers' use of their own vehicles. All of those expenses are borne by the installer. For the foregoing reasons, the commission concludes that the evidence offered at hearing was sufficient to carry the appellant's burden of proof as to this condition with respect to the individuals whose status was at issue.  
  

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 -- The department conceded that this condition was met, and the ALJ so found. The finding is supported by evidence in the record that if an installer did not properly perform an installation, and appellant had to pay a different installer to take appropriate corrective action, appellant would deduct the amount paid to the installer who took the corrective action from the compensation otherwise payable to the first installer. The evidence offered at hearing carried the appellant's burden of proof as to this condition.  
 

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 -- This condition requires that the services in question be compensated either on a commission, "per-job" or competitive-bid basis. The ALJ found simply that "The amount of compensation was set by appellant. Condition seven is not satisfied". This perfunctory analysis is insufficient. As appellant argues, the condition does not relate to who "sets" the compensation. However, the outcome arrived at by the ALJ is correct. As the department argues, it is clear the installers were not compensated on either a commission or competitive-bid basis and thus the only question is whether they were paid on a "per-job" basis. The commission agrees with the position of the department that the payment system here was not "per-job". As the commission held in Quality Communications, by referring to a "per-job" payment basis the legislature clearly had in mind a situation in which an independent businessperson enters into a contract to do an entire job of some kind for which a price is then set, the price presumably having been arrived at by the parties' negotiation taking into account the particulars of the job contracted for. In Quality Communications, the commission found that this condition was not met where the individuals at issue were simply doing one task, over and over again, and being paid according to the number of times they do it, with no separate contract entered into for each task. That is precisely what is happening here. The installers were not entering into separately-contracted-for "jobs" within the meaning of this provision, each time they went to do an installation. They were performing a task which their year-long contract with appellant anticipated they would do over and over during the course of the contract, with the agreement being that that they would be paid a fixed amount for each time they performed that particular task. This is not "per-job" compensation as that term is used in this condition.

For the foregoing reasons, the commission concludes that the evidence offered at hearing was insufficient to carry the appellant's burden of proof as to this condition with respect to any of the individuals whose status was at issue.  
 

8. The individual may realize a profit or suffer a loss under contracts to perform such services -- In Quality Communications, the commission discussed the question of how this condition, which looks to whether the individuals at issue could realize a profit or suffer a loss under contracts to perform the services in question, is to be distinguished from the 10th condition, which looks to whether the success or failure of the individual's business depends on the relationship of business receipts to expenditures. The commission concluded that the 8th condition looks at the potential for profit or loss arising under particular individual contracts which a person enters into in the course of their business, while the 10th condition looks at the overall course of the person's business, which presumably involves a number of different contracts with different parties, or at least a number of separately-negotiated sequential contracts with a single party.

Appellant argues that there are a number of ways an installer could lose money on a particular installation. However, as noted above this condition is intended to look at the possible outcomes under entire contracts that the individuals enter into -- and these installers were not working under separate contracts for each individual installation, but rather under single, fixed-term year-long agreements which would involve many, many installations. To apply the 8th condition as it is intended requires looking at the question of what outcomes would be possible under such year-long contracts. This test asks whether under any particular contract a business faces both an actual possibility of making a profit, and an actual possibility of suffering a loss. Quality Communications. The fact that it would be theoretically possible for an installer to lose money on a single individual installation, does not necessarily prove that over the course of a year-long contract for installation services there would be a realistic possibility that the individual could suffer an overall loss, which is one of the elements required by this condition. Given the evidence as to the number of installations typically made available to an installer, the remuneration paid to them for such installations, and the expenses and potential liabilities attached, the commission is not persuaded that there would be any reasonable possibility of an installer's annual contract with appellant resulting in an absolute loss for the year. Therefore, the commission concludes that the evidence offered at hearing was insufficient to carry the appellant's burden of proof as to this condition with respect to any of the individuals whose status was at issue.  
 

9. The individual has recurring business liabilities or obligations -- This condition asks whether the individual at issue had recurring business liabilities or obligations. This condition is concerned with "overhead expenses that cannot be avoided by ceasing to perform services". Gamble v. American Benefit LTD (LIRC, Feb. 15, 2005). Liabilities or obligations that might satisfy this condition would be things such as monthly rent for a place of business, regular payments on a financed purchase of equipment, or the regular depreciation of equipment that unavoidably declines in value over time irrespective of the level of actual use or wear and tear. Such expenses are all recurring in nature and are incurred whatever the level of actual business activity. Dane Co. Hockey Officials (LIRC, Feb. 22, 2000). Thus, expenses such as parts and materials necessary to installations, and vehicle-mileage-related expenses related to installations, are not the kind of "business liability or obligation" looked to under this condition, since they only accrue if the individual is performing work under the contract and do not regularly recur when such services are not being performed

The ALJ found this condition to be met based on the fact that the contract between the appellant and the installers stated that they were required to obtain liability insurance. The ALJ noted that Pakan stated that he did obtain such insurance, at an expense of $600 per year.

A recurring obligation to pay premiums for insurance which must be maintained in order for the individual to be able to perform their services under contract, would satisfy the "recurring business liabilities or obligations" condition. Quality Communications. The department acknowledges that the contract under which the installers performed their services require that each of the installers carry liability insurance; it argues, though, that there was nothing in the record establishing that any of the installers other than Pakan, actually complied with this requirement and obtained such insurance.

The commission finds the evidence on this condition to be insufficient to carry the employer's burden of proof, for the reason argued by the department. As was noted above, the statute expressly requires that the putative employer must prove that the stated conditions are satisfied "by contract and in fact". Wis. Stat. § 108.02(12)(bm) (emphasis added). The express distinction between "by contract" and "in fact", and the use of the conjunctive "and" to join them, makes it clear that both must be proved. Merely proving that the contract requires the installers to obtain insurance does not prove that they in fact do so. Such proof could have been supplied by providing the certificates of insurance which the contract gives appellant the right to demand from any installer to show that they have the coverage required by the contract. ⁽³⁾   No such proof was provided. While Pakan asserted that he carried a liability insurance policy costing $600 (presumably, annually), he did not purport to be able to declare that the other installers did so, and his testimony cannot be generalized to them.

For the foregoing reasons, the commission concludes that the evidence offered at hearing was insufficient to carry the appellant's burden of proof as to this condition with respect to any of the individuals whose status was at issue other than Pakan.  
 

10. The success or failure of the individual's business depends on the relationship of business receipts to expenditures -- As noted above, this condition looks at the overall course of the person's business, which presumably involves a number of different contracts with different parties, or at least a number of separately-negotiated contracts with a single party. The 8th condition was not met here because, while losses were theoretically possible in connection with individual installations, there was no realistic possibility that an installer might sustain an overall loss over the course of one of the one-year contracts which were the way in which the relationship was structured. It is clear, that there is similarly a lack of any reasonable possibility that in the course of an installer's overall "business" -- multiple, sequential contracts with appellant, and possible contracts with others -- there would be an overall loss. From the evidence offered here, it appears clear that the success or failure of the installers' activity did not depend on the relationship of receipts to expenditures, since receipts could reliably be predicted to exceed expenditures if the installer did the work offered to him. The success or failure of the installers' activity depended simply on whether they were assigned installation work by the appellant and whether they did such work when it was assigned. This is characteristic of employment. This condition was not shown to have been met.
 

To summarize the foregoing, the commission has concluded that the appellant established that only conditions 1, 5, 6 and 9 were met as to Pakan (with condition 1 being met only as to 2001), that only conditions 1, 5 and 6 were met as to Koehn, and that only conditions 5 and 6 were met as to the other individuals. The appellant has thus failed to establish the applicability of seven of the applicable conditions to any of the individuals at issue, and it has thus failed to overcome the presumption that they provided their services for the appellant as employees.

The commission therefore finds that the named individuals performing installation services for appellant Clear Choices, Inc. did so as statutory employees, for the first, second and fourth quarters of 2001, for the first three quarters of 2002, and for the first quarter of 2003, within the meaning of Wis. Stat. § 108.02(12).

The decision of the administrative law judge is affirmed. Accordingly, Clear Choices, Inc. is liable for unemployment contributions and interest for the first, second and fourth quarters of 2001, for the first three quarters of 2002, and for the first quarter of 2003.

Dated and mailed October 26, 2005
clearch . srr : 110 : 8 EE 407 EE 410 PC 715

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

NOTE: This case presents an issue about the adequacy of the oath administered to one of the witnesses, and about whether to consider the testimony of that witness in view of the way the oath was administered.

When the ALJ attempted to administer the oath to Mark Pakan, one of the installers who was called as a witness by the appellant, the following colloquy took place:

ALJ: I'm going to ask you to stand so that I can administer the oath. Please raise your right hand. Do you solemnly swear to God, or affirm, that the testimony you will give [unintelligible; may be "in this proceeding"] will be the truth, the whole truth and nothing but the truth?

Pakan: I can give you the facts. I can't give you the truth. I don't know the truth.

ALJ: Do you affirm that you will tell the truth as you know it?

Pakan: The facts as I know them.

ALJ: I'm gonna have -- gonna sit down and think about this [unintelligible] we can proceed.

Pakan: Okay.

ALJ: And why do you not consider that to be the truth?

Pakan: Because I don't know the truth.

ALJ: Okay, I'll accept it as just facts as you perceive them.

Pakan: Okay.

The first question is, whether this was an adequate oath. The rules of the UI Division specifically require that testimony be given under oath and prohibit taking testimony from a witness who will not be sworn. Thus, Wis. Admin. Code § DWD 140.15 provides:

(1) All testimony shall be given under oath or affirmation. The administrative law judge shall administer the oath or affirmation to each witness. No person who refuses to swear or affirm the veracity of his or her testimony may testify...

(emphasis added). There being no other reference to the form of the oath, this rule clearly contemplates the administration of an oath in the same manner as oaths are administered in court. Wis. Stat. § 906.03 provides:

906.03 Oath or affirmation. (1) Before testifying, every witness shall be required to declare that the witness will testify truthfully, by oath or affirmation administered in a form calculated to awaken the witness's conscience and impress the witness's mind with the witness's duty to do so.

(2) The oath may be administered substantially in the following form: Do you solemnly swear that the testimony you shall give in this matter shall be the truth, the whole truth and nothing but the truth, so help you God.

(3) Every person who shall declare that the person has conscientious scruples against taking the oath, or swearing in the usual form, shall make a solemn declaration or affirmation, which may be in the following form: Do you solemnly, sincerely and truly declare and affirm that the testimony you shall give in this matter shall be the truth, the whole truth and nothing but the truth; and this you do under the pains and penalties of perjury.

The commission concludes that the colloquy between the ALJ and the witness was not sufficient as an oath or affirmation under Wis. Admin. Code § DWD 140.15 and Wis. Stat. § 906.03.

While the Wisconsin Supreme Court has observed that "[a]n oath is a matter of substance, not form," State v. Tye, 2001 WI 124, ¶19, 248 Wis. 2d 530, 636 N.W.2d 473, this does not mean that the form of the oath can be modified in any manner whatsoever. The words of the oath must serve its purpose, and "[t]he purpose of an oath or affirmation is to impress upon the swearing individual an appropriate sense of obligation to tell the truth." Ibid. (emphasis added). The statute expressly declares that the oath must be in a form calculated to awaken the witness's conscience and impress the witness's mind with the witness's duty to testify truthfully, and the forms of the oath provided in the statute, while varying with respect to whether the witness swears, declares or affirms, are consistent in being about telling "the truth". In the Judicial Council Committee's Note which accompanied the adoption of § 906.03 in the 1974 revision of the Rules of Civil Procedure, the comment of the Federal Advisory Committee on the parallel federal provision was quoted and described as conforming with subs. (1) and (2) of the statute: "Affirmation is simply a solemn undertaking to tell the truth...". 59 Wis. 2d R162 (emphasis added). The same recognition that the oath is a promise to tell the truth is reflected in § DWD 140.15 when it provides that no person who refuses to swear or affirm "the veracity of his or her testimony" may testify, veracity being simply a synonym for truthfulness. Thus, at a minimum, an oath requires some sort of commitment to tell the truth.

The wording used in the administration of the oath is not merely symbolic. An oath serves the purpose of "impress[ing] upon the swearing individual an appropriate sense of obligation to tell the truth" not only by awakening the conscience of the witness, but also by reminding the witness that he or she is subject to the criminal penalty for perjury or false swearing for giving testimony which is not true. The awareness of the applicability of the criminal statutes concerning perjury and false swearing, is certainly one of the most powerful inducements to witnesses to testify truthfully. Particularly for this last reason, the question of whether an oath is properly administered is one of real practical importance, because if an oath is not legally sufficient, a strong argument could be made that false statements made after it were not false testimony "under oath", and there could thus be no potential criminal liability for perjury or false swearing.

The problem here is that Pakan was very clearly refusing to make any sort of promise or commitment to tell "the truth". Indeed, that was precisely the substance of his objection to being sworn in the normal form.

The law recognizes that some persons may have conscientious objections, based on religious beliefs (or on an absence thereof), to swearing an oath in the name of the Deity, and for this reason the option is provided to simply make a solemn declaration or affirmation of intent to tell the truth. However, the commission is aware of no precedent holding that a witness may be excused from making any sort of promise to tell the truth at all, based on some claimed religious belief about whether there is such a thing as "truth".⁽⁴⁾

For all the foregoing reasons, the commission concludes that the colloquy between the ALJ and Pakan did not constitute a sufficient "oath" as required by § DWD 140.15, and that for that reason Pakan should not have been allowed to testify.

The next question presented, is whether Pakan's testimony should be disregarded in view of the fact that it should not have been allowed.

Given the requirements of Wis. Admin. Code § DWD 140.15, and given the ultimate imperative reflected in Wis. Stat. § 102.23(6) that the commission's decision be based on credible and substantial evidence, a reasonable argument could be made that unsworn testimony should not be considered by the commission in deciding a matter. This result would not necessarily be inappropriate here, where the party which had the burden of proof (the appellant) and which called the witness in an effort to meet that burden, bore some responsibility for the situation by its failure to insist that its witness be properly sworn.

However, the department also failed to object to the testimony. Furthermore, the ALJ's response to Pakan's refusal to cooperate with the oath, and her actions in allowing him to testify, could reasonably have led the parties to believe that the oath was sufficient and the testimony was given "under oath". In these circumstances, it would be problematic to decide after the fact that the testimony should not be considered, since if the parties had been aware that the oath was insufficient they might have made proper objections or attempted to convince the witness to agree to be properly sworn.

Ultimately, the commission finds it unnecessary to resolve this question of whether Pakan's testimony should be disregarded, because even if Pakan's testimony was treated as being part of the record and was considered and weighed with the other evidence, it would conclude that the record was not sufficient to carry the appellant's burden of proof as to a sufficient number of the relevant conditions. ⁽⁵⁾   It cautions, however, that in another case in which the outcome would be determined by whether or not certain testimony were considered to be validly in the record, the problem created by an inadequate oath such as occurred here would be a difficult one. For this reason, the commission strongly urges that administrative law judges ensure that a proper oath is administered to all witnesses before they are allowed to testify.

cc:
Attorney James W. Flory
Attorney Michael J. Mathis

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(1)( Back ) The individuals in question, with the calendar years during which they performed services for appellant, were: Lance Anderson (2001); Dennis George (2001); Gabe Knowlton (2001); Brad McGary (2001); Mark Pakan (2001, 2002 and 2003); Scott Schultz (2001); Robert Simet (2001); Gary Walsh (2001); Terry L. Lade (2001, 2002); Sean Koehn (2002, 2003); Steve Laterell (2002); Terry Simpson (2002); and Donald LaCrosse (2003).

(2)( Back ) The assertions by Pakan and Koehn that they applied for and received FEINs were unsupported by any independent documentation or corroboration, such as copies of their FEIN applications, or paperwork granting the FEIN, or even an assertion as to what their specific FEINs were. While in another case the lack of such independent documentation or corroboration supporting the existence of FEINs might not be reason to doubt the weight of testimony that they existed, circumstances here put the matter in a different light. Pakan and Koehn evidently subscribed to the notion that they were somehow not subject to the federal tax system at all. Given this, it is not altogether clear why they would have filed applications for an FEIN, a step that has to do with the operation of the federal tax system.

(3)( Back ) The "Independent Contractor Sales, Service and Installation Contract" provides, in relevant part: "Independent Contractor shall provide the Company with certificates of insurance evidencing the coverage required hereby upon the Company's request therefor."

(4)( Back ) In any event, even if this were the law, the commission not find it applicable here. For a number of reasons, the commission is not persuaded that Pakan's refusal to be sworn arose out of any such belief. Nothing in what Pakan said suggested that his objection to promising to tell "the truth" had any basis in religious convictions. Also, despite Pakan's resistance to taking the oath based on a claim that he could not give and did not know "the truth", in his testimony which followed he twice stated with respect to documents he had prepared or provided information for (Exs. 6 and 7) that they were "true" to the best of his knowledge; thus it appears that Pakan's professed inability to state what was "true" was a selective one. Finally, Pakan's assertion that he was "exempt" from any taxes because "the state, the federal, does not recognize me, they only recognizes my fiction, and I am not the fiction" suggests an inclination to rely on quibbles about the meaning of words to justify avoidance of legal obligations.

(5)( Back ) The findings and conclusions set forth above reflect such consideration of Pakan's testimony along with the other evidence.

uploaded 2005/10/31