MICHAEL D GLOSKY, Employee

BROADBAND SOLUTIONS 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 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:

The fourth full paragraph on page 6 of the appeal tribunal decision, incorporating the ALJ's analysis of condition 8. is deleted and the following substituted:

Although it is arguable that the claimant could realize a profit, the record does not show that he could suffer a loss, and condition 8. is not satisfied as a result.

The decision of the administrative law judge, as modified, is affirmed. Accordingly, the claimant performed services for the employer as an employee during the time period at issue, and would be eligible for benefits, if otherwise qualified, as a result.

Dated and mailed September 15, 2006
gloskmi . umd : 115 : 1   EE 410

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

Broadband argues that the fact that the contract for the claimant's services provides that he would be performing services as an independent contractor should define his employment status for purposes of determining his eligibility for benefits. However, a claimant's eligibility for unemployment benefits is to be determined by statute, not by the terms of a collective bargaining contract or other private agreement. Roberts v. Industrial Comm., 2 Wis. 2d 399 (1957); Knops v. Integrity Project Management, UI Hearing No. 06400323AP (LIRC May 12, 2006)(the intent of the parties is not a condition considered in determining the claimant's status, let alone controlling it).

Broadband also contends that, since the claimant did not file a petition for commission review, only those matters challenged by Broadband in its petition are before the commission. However, commission review of a decision of an administrative law judge is not appellate in nature, but is instead a de novo decision-making process. Any petition for commission review from any party brings the entire case before the commission. See, Dane County Hockey Officials, UI Hearing No. S9800101MD (LIRC Feb. 22, 2000).

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 4-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 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 for which they performed those services to bear the burden of proving that they are not employees. See, Dane County Hockey Officials, supra.; Quality Communications Specialists, Inc., UI Hearing Nos. S0000094MW, etc. (LIRC July 30, 2001).

The record shows that the claimant held or applied for a federal employer identification number (FEIN) within the meaning of condition 1., and filed self-employment income tax returns within the meaning of condition 2.

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); Diane Egan/Health Exams Plus, Inc., UI Hearing No. S0300071JV (LIRC April 15, 2005); Lozon Remodeling, UI Hearing No. S9000079HA (LIRC Sept. 24, 1999). In Quality Communications Specialists, Inc., supra., the commission clarified that all parts of the test articulated in condition 3. must be met in order for the employer to satisfy its burden. Although the record shows that the claimant generally used his own equipment, it does not show that he was actually engaged in a separate business with an office devoted to that purpose. The fact, as argued by Broadband, that the claimant necessarily had some location where he prepared his invoices, does not satisfy the requirement that he have a separate business office. Moreover, during the time period at issue here, the claimant did not perform installation services for pay for any entity other than Broadband, a circumstance generally inconsistent with the existence of a separate business. See, Prince Cable, Inc., UI Hearing No. S9900227MW (LIRC Feb. 23, 2001).

To satisfy condition 4., it must be established that the claimant 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.

Broadband did not successfully rebut the claimant's testimony that he was required to attend meetings each work morning to obtain further instruction as to the manner in which he and the other installers were to perform their services, and that Broadband regularly inspected his work for quality control purposes. As a result, the record does not show that the claimant controlled the means and method of performing his services as an installer.

Moreover, condition 4. 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, and that he is not dependent upon a single, continuing relationship that is subject to conditions dictated by a single employing unit. See, T-N-T Express LLC, UI Hearing Nos. S9700385, etc. (LIRC Feb. 22, 2000); Dane Co. Hockey Officials, supra. Here, the claimant operated under a single contract with Broadband, not multiple contracts, with terms that did not vary over time and were dictated by Broadband.

The record does not show that either of the requirements of condition 4. were met here.

Applying condition 5. requires a determination of what services are performed under the contract, what expenses are related to the performance of these services, which of these expenses are borne by the person whose status is at issue, and whether these expenses constitute the main expense. Lozon Remodeling, UI Hearing No. S9000079HA (LIRC Sept. 24, 2999); Quality Communications Specialists, Inc., supra. This inquiry requires quantification of these expenses.

It should first be noted that the cost of the cable boxes, modems, and other cable system components installed by the claimant would be considered a related expense. See, Prince Cable, Inc., supra.

The record shows that Broadband bore the cost of bookkeeping and other record keeping; training and daily instruction; and materials such as fittings and cable splitters. Charter, Broadband's customer, bore the cost of the cable box, modem, and other cable system components. The claimant bore the cost of purchasing, operating, insuring, and maintaining a vehicle; liability insurance; tools, including a cordless screwdriver, wrenches, extension ladder, strippers and crimpers, and small hand tools; and leasing a meter. Only the total cost of the tools ($500) and liability insurance ($170 annually) were provided in the record. Without further evidence as to the cost of the other items, and as to the useful life of the vehicle and equipment, it is not possible to conclude with any degree of certainty that the claimant bore the main expense. Condition 5. is not satisfied here.

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 piecework employees. See, T & D Coils, UI Hearing No. S9800147MW (LIRC Dec. 15, 1999); Spencer Siding, Inc., UI Hearing Nos. S0300142GB, etc. (LIRC June 2, 2006). 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, would satisfy this condition. Here, the claimant's pay was reduced for any installations which Broadband deemed unacceptable. Since this could qualify as a penalty, condition 6. is satisfied. See, Prince Cable, Inc., supra.; Clear Choices, Inc., supra.

Condition 7. requires that workers receive compensation for the services they perform on a commission, per-job, or competitive-bid basis and not on any other basis. The claimant performed services on a piecework basis, which does not satisfy this condition. See, John Barnett, (LIRC Oct 29, 2002); Quality Communications Specialists, Inc., supra.

Condition 8. looks at whether, under an individual contract for a worker'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). It is arguable, as the commission concluded in Quality Communications Specialists, Inc., supra., that the receipt by the claimant of more in pay for his services under the subject contract than he was required to spend on the various expenses he incurred in performing such services would constitute "realiz[ing] a profit...under contracts to perform services." However, given that the claimant was paid every two weeks the contract amount for each installation he chose to perform, the record does not support a conclusion that, over the term of his contract with Broadband, he could suffer a loss within the meaning of condition 8. See, Lozon Remodeling, supra. (with an assured amount of remuneration per unit of work, claimant could not suffer a loss for purposes of condition 8.). Condition 8. is not satisfied.

Condition 9. requires proof of a cost of doing business which the worker would incur even during a period of time he was not performing work through the employer. The record shows that the claimant did not have such continuing costs. Although he carried his own liability insurance, which could qualify as a recurring business liability for purposes of satisfying this condition, the record shows that he discontinued it after his relationship with Broadband ceased. See, Quale and Associates, Inc., UI Hearing No. S0200201MW (LIRC Nov. 19, 2004).

The commission has interpreted condition 10. as intending to examine the overall course of a worker's business. See, Quality Communications Specialists, Inc., supra. Condition 10. requires that a significant investment have been 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. See, Thomas Gronna, The Floor Guys, UI Hearing No. S9900063WU (LIRC Feb. 22, 2000). The record here does not establish that the claimant had put a significant investment at risk.

In summary, only conditions 1., 2., and 6. have been satisfied here. Since Wis. Stat. § 108.02(12)(bm) requires that seven conditions be satisfied in order for a worker to be considered an independent contractor, the satisfaction of only three conditions compels the conclusion that the claimant performed services for Broadband as an employee, not an independent contractor, during the time period at issue.

cc: Attorney Christine L. Peterson

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