DANIEL R JOLLIFFE, Employee

RIPP TRUCKING, 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:

The issue in this case is claimant eligibility for benefits, not employer liability for contributions. The claimant/appellant is contending that he was not an employee of Ripp Trucking during the time period relevant here, but instead an independent contractor. The claimant indicated to the administrative law judge at the start of the hearing that he understands, if his contention prevails, the amount of benefits to which he is entitled will be significantly reduced.

Ripp Trucking (Ripp) is in the business of hauling and delivering gravel, blacktop, and other construction materials. The claimant performed services as a driver for Ripp. The time period at issue here is the last quarter of 2004, and the first three quarters of 2005.

The issue is whether the claimant performed these services for Ripp as an employee, within the meaning of Wis. Stat. § 108.02(12), during this time period.

In 2003, Ripp determined that the claimant would be paid 10% of what Ripp earned per hauling/delivery job. This method and rate of compensation were not subsequently re-negotiated. Ripp owned the truck driven by the claimant, and paid for gas and most routine maintenance and repairs. The claimant paid for other routine maintenance and certain repairs, particularly those resulting from problems occurring while he was using the truck. Ripp carried the basic insurance policies on his trucks, but the claimant carried a supplemental liability policy, which cost him $2,000 in 2005.

The claimant also leased one of Ripp's trucks at the rate of $45 per hour to perform hauling/delivery services for other entities.

The claimant had a post office box he used as a business mailing address, a business cell phone, and a business name (DJ Transportation and Professional Services), and used business cards and promotional items to advertise his business.

The ALJ decided that the claimant performed services for Ripp as an employee during the time period at issue. The ALJ, however, reached this result by concluding that the claimant qualified as a "trucker" within the meaning of Wis. Stat. § 108.02(25e) and by consequently analyzing the requirements of Wis. Stat. § 108.02(12)(c) and Wis. Adm. Code Ch. DWD 105. The commission disagrees.

A "trucker" is defined as a "contract operator with a trucking carrier." Wis. Stat. § 108.02(25e). "Contract operator" in turn is defined as "an individual who contracts to lease a motor vehicle to a carrier for use in the carrier's business." Wis. Admin. Code § DWD 100.02(12). "Carrier" is defined as a person engaged in hauling passengers or freight, and includes a person engaged as a common motor carrier. Wis. Admin. Code § DWD 100.02(8).

It is undisputed that the claimant drove trucks owned by Ripp in performing the services at issue here. The claimant did not lease a truck to Ripp in order to perform these services and, in fact, did not have an ownership or leasehold interest in a truck during the relevant time period. As a result, the claimant does not qualify as a "contract operator" within the meaning of Wis. Adm. Code § DWD 100.02(12), or, consequently, as a "trucker" within the meaning of Wis. Stat. § 108.02(25e). See, Kelly v. Standard Express, Inc., UI Hearing No. 00607916MW (LIRC June 8, 2001)(the claimant did not come within the scope of Wis. Adm. Code Ch. DWD 105 because he did not own the truck or hold it under lease from an entity other than putative employer).

Since the claimant does not qualify as a "trucker," the analytical framework set forth in Wis. Stat. § 108.02(12)(bm) is required to be applied rather than that set forth in Wis. Stat. § 108.02(12)(c), See, T-N-T Express LLC, UI Hearing Nos. S9700385, etc. (LIRC Feb. 22, 2000); Silver Lady Escort, UI Hearing No. S8908799GB (LIRC Nov. 5, 1993); Winegarden v. JDC Logistics, Inc., UI Hearing No. 01609807MW (LIRC March 28, 2002).

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 four-year period beginning on January 1, 2000, with respect to contribution requirements, ...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 seven 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.

A two-step analysis is required in order to determine whether an individual is an employee within the meaning of Wis. Stat. § 108.02(12). Goldberg v. DILHR, 168 Wis.2d 621 (Ct. App. 1992).

The first step is to determine whether the individual has been performing services for the putative employer in an employment within the meaning of Wis. Stat. § 108.02(12)(a). An "employment" is "any service...performed by an individual for pay." Wis. Stat. § 108.02(15)(a).

It is evident from the record, and apparently undisputed, that the claimant performed services for Ripp in an employment within the meaning of Wis. Stat. § 108.02(12)(a) during the time period at issue.

The second step of the analysis is to determine whether the claimant's employment satisfied the criteria for independent contractor status set forth in Wis. Stat. § 108.02(12)(bm). See, Lozon Remodeling, UI Hearing No. S9000079HA (LIRC Sept. 24, 1999); Kip Koth LLC, UI Hearing No. S0100034RH (LIRC April 8, 2003).

The claimant held a federal employer identification number and filed self-employment income tax returns for the years at issue. Conditions 1. and 2. are satisfied.

The focus of condition 3. is upon determining whether a separate business, i.e., an enterprise created and existing separate and apart from the relationship with the putative employer, is being maintained with the individual's own resources. See, Princess House, Inc., v. DILHR, 111 Wis.2d 46, 330 N.W.2d 169 (1983); Larson v. LIRC, 184 Wis.2d 378, 516 N.W.2d 456 (Ct. App. 1994); Lozon Remodeling, supra. In Quality Communications Specialists, Inc, UI Hearing Nos. S0000094MW, etc. (LIRC July 30, 2001), the commission clarified that each factor set forth in the statutory language governing this condition must be met in order for the condition to be satisfied.

Although the record shows that the claimant had business cards, a business name, and a business address and phone number; did some limited advertising; performed services for other entities; and owned certain of his own equipment, it does not show that he maintained a separate office. Condition 3. is not satisfied as a result. See, Diane Egan, UI Hearing No. S0300072JV (LIRC April 15, 2005).

To satisfy condition 4., it must be established that the individual operates under contracts to perform specific services for specific amounts of money, and that, under these contracts, he controls the means and method of performing the services. The record shows that the claimant exercised enough independence and discretion in conducting the work under consideration here to satisfy the second part of the test.

Condition 4., however, also requires multiple contracts. These may take the form of multiple contracts with separate entities, or multiple serial contracts with the putative employer, if such contracts are shown to have been negotiated "at arm's length," with terms that will vary over time and will vary depending on the specific services covered by the contract. The existence of bona fide multiple contracts tends to show that the individual either has multiple customers, or that he has periodic opportunities for "arm's length" negotiation with the putative employer as to the conditions of their relationship. See, T-N-T Express LLC, supra.

Here, although the claimant essentially had a single contract with Ripp with terms that did not vary over time and which were dictated by Ripp, the claimant also had hauling/delivery contracts with other entities. Although the claimant used one of Ripp's Trucks for these other jobs, these other entities were not customers of Ripp's and the claimant paid Ripp for the use of its truck for these jobs. As a result, both requirements of condition 4. have been satisfied.

Applying condition 5. requires a determination of what services are performed under a contract, what expenses are related to the performance of those services, which of those expenses are borne by the person whose status is at issue, and whether those expenses constitute the main expense. See, Lozon Remodeling, supra; Quality Communications Specialists, Inc., supra. This inquiry typically requires quantification of these expenses. See, Quale & Associates, Inc., UI Hearing No. S0200210MW (LIRC Nov. 19, 2004).

Here, the main expenses appear to be the costs of the truck, gas, truck maintenance and repairs, and insurance. Ripp owned the trucks, and paid for gas, most routine maintenance and certain repairs, and a basic insurance policy. The claimant paid for some maintenance and repairs and supplemental liability insurance. Other than testimony that the claimant's insurance costs were $2,000 in 2005, the record contains no other quantification of these expenses. It is not possible under the circumstances present here to determine whether condition 5. is satisfied without such additional evidence.

In regard to condition 6., it is not simply the obligation to do re-work without additional pay which is the determining factor, because this obligation is typical as well of piece-work employees. See, T & D Coils, UI Hearing No. S9800147MW (LIRC Dec. 15, 1999); Quality Communications Specialist, Inc., supra.; Wisconsin Tennis Officials, Inc., UI Hearing Nos. S0200129MW, etc. (LIRC Feb. 28, 2005). Evidence establishing, for example, not only an obligation to do such re-work but an expectation that it will be done, as well as a penalty for not doing so, is generally held to satisfy this condition.

Here, the record establishes (exhibit #3) such an expectation and such a penalty, i.e., the claimant would be expected to remedy any deficiencies at his own expense, including the cost for Ripp to hire another individual to remedy the deficiency if the claimant failed to do so. Condition 6. has been satisfied.

Condition 7. requires that the individuals receive compensation for their services on a commission, per-job, or competitive-bid basis and not on any other basis. Here, the claimant was paid by Ripp ten percent of what Ripp received for a job. This is akin to payment on a commission basis. Condition 7. has been satisfied.

Condition 8. examines whether, under an individual contract for the claimant's services, there can be a profit (if the income received under that contract exceeds the expenses incurred in performing the contract), as well as whether there can be a loss under that contract (if the income received under that contract fails to cover the expenses incurred in performing the contract). The receipt by the claimant of more in pay for his driving services under the contract he had with Ripp than he was required to spend could constitute "realiz[ing] a profit. under contracts to perform services." Quality Communications Specialists, Inc. It is difficult to conceive how the claimant could, over the course of his contract with Ripp, have earned less than he expended. It is not difficult to conceive, however, how the claimant could suffer a loss under those contracts he had with other entities. These were contracts for single hauling/delivery jobs, and the claimant was responsible not only for leasing the truck by the hour and paying for gas, but also for paying the cost of any uninsured damage the truck may sustain, e.g., tire replacement or replacement of a deployed airbag. Condition 8. is satisfied.

Condition 9. requires proof of a cost of doing business which the claimant would incur even during a period of time he was not performing work for Ripp. The record shows that the claimant paid for his own vehicle liability insurance, business cell phone, and renewal of his commercial driver's license, costs which would presumably continue as long as he remained in business, even if he no longer performed services for Ripp. Condition 9. is satisfied.

The commission has interpreted condition 10. as intending to examine the overall course of a person's business. See, Quality Communications Specialists, Inc., supra. The record does not show that the claimant had made any significant investment in a business, or that he faced a realistic prospect of any significant period of time in which he would have to make expenditures without any receipts coming in. See, Harlan Mrochinski, UI Hearing No. S0100001WR (LIRC July 15, 2004)(condition 10. requires that a significant investment is put at risk and there is the potential for real success through the growth in the value of the investment and for real failure in the sense of actual loss of the investment). Condition 10. is not satisfied.

To summarize, the record supports a conclusion that conditions 1., 2., 4., 6., 7., 8., and 9., i.e., seven of the ten conditions stated in Wis. Stat. § 108.02(12)(bm), are satisfied. This meets the statutory threshold, and it is concluded as a result that the claimant performed services for Ripp as an independent contractor during the time period at issue.

It should be noted that the claimant insists that he did not initiate a claim on January 25, 2006. However, the department's records indicate such a claim was initiated. It appears that the claimant may actually be asserting that he did not specifically initiate a claim for benefits based on his employment with Ripp. Ripp, however, was one of the entities for which he performed services for pay during his base period, and, as a result, it was the department's obligation to consider his relationship with Ripp in evaluating the claimant's claim for benefits.

The commission finds that amounts earned by the claimant for services he performed for Ripp during the time period at issue here may not be included in the computation of his benefit entitlement. As a result, the claimant no longer qualifies for a standard base claim beginning in week 4 of 2006. He does, however, qualify for an alternate base claim. Conversion to an alternate base claim as of week 4 of 2006 yields a weekly benefit rate of $169, and a maximum benefit amount of $2053, so that claimant exhausts benefits with a payment of $12 for week 21 of 2006.

The commission also finds that the claimant was paid benefits in the amount of $3319 for which he was not eligible and to which he was not entitled, and that the claimant is required to repay this amount to the Unemployment Reserve Fund.

The commission further finds that waiver of benefit recovery is not required under Wis. Stat. § 108.22(8)(c), because, although the overpayment did not result from the fault of the employee, within the meaning of Wis. Stat. § 108.04(13)(f), the overpayment was not the result of department error. See Wis. Stat. § 108.22(8)(c).

The decision of the administrative law judge is reversed. Accordingly, amounts earned by the claimant for his performance of services for Ripp during the last quarter of 2004 and the first three quarters of 2005 may not be used in calculating the claimant's benefit entitlement. The employee is required to repay the sum of $3119 to the Unemployment Reserve Fund.

Dated and mailed July 20, 2006
jollida . urr : 115 : 8   EE 410

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

cc: Attorney Roger Merry

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