WILLIAM D McSORLEY, Employee

VELOCITY EXPRESS, 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 claimant (McSorley) performed delivery services for more than four years for Velocity Express (VEXL), a courier and small package delivery service. The claimant voluntarily terminated this employment in May of 2006. He initiated a claim for unemployment benefits on October 15, 2006 (week 42) after a subsequent employment ended.

The issue is whether payments by VEXL to McSorley for services he performed during the based period should be treated as wages for benefit computation purposes because he performed these services as an employee.

This issue relates solely to McSorley's eligibility for benefits, not to VEXL's liability for contributions. The commission notes that the reversal requested by VEXL would have no effect upon its liability for unemployment contributions but instead, as explained in the department determination, would simply remove the claimant's VEXL earnings from the base period wages upon which the amount of his benefit is computed.

A two-step analysis is used to determine whether an individual is an employee. Goldberg v. DILHR, 168 Wis. 2d 621, 625 (Ct. App. 1992). The first step is to determine whether the individual has been performing services for an employing unit, in an employment. Wis. Stat. § 108.02(12)(a). An "employment" is "any service . . . performed . . . for pay." Wis. Stat. § 108.02(15)(a). There is no dispute that the claimant performed services for VEXL for pay. A presumption therefore arises that such services were performed as an employee. The burden then shifts to the employer to establish that the claimant is excepted from employee status by some statutory provision. See, Dane County Hockey Officials, UI Hearing No. S9800101MD (LIRC Feb. 22, 2000); Quality Communications Specialists, Inc., UI Hearing Nos. S0000094MW, etc. (LIRC July 30, 2001).

One of the statutory exceptions to the otherwise applicable presumption of employee status appears in Wis. Stat. § 108. 02(12)(c), which provides,

(c) Paragraph (a) does not apply to an individual performing services for a government unit or nonprofit organization, or for any other employing unit in a capacity as a logger or trucker if the employing unit satisfies the department:

1. That such individual has been and will continue to be free from the employing unit's control or direction over the performance of his or her services both under his or her contract and in fact; and

2. That such services have been performed in an independently established trade, business or profession in which the individual is customarily engaged.

"Trucker" is defined by Wis. Stat. § 108.02(25e) as "a contract operator with a trucking carrier."

The term "contract operator" is defined in Wis. Admin. Code § DWD 100.02(12) as "an individual who contracts to lease a motor vehicle to a carrier for use in the carrier's business." The record shows that McSorley contracted to lease a delivery vehicle he owned to VEXL.

"Carrier" is defined in Wis. Admin. Code § DWD 100.02(8) as:

(8) "Carrier" means a person engaged in the hauling of passengers or freight by motor vehicle and includes a person engaged as a "common motor carrier," under s. 194.01 (1), Stats., as a "contract motor carrier," under s. 194.01 (2), Stats., or as a "private motor carrier," under s. 194.01 (11), Stats.

The statutory definitions of the three categories of "carriers" incorporated into Wis. Admin. Code § DWD 100.02(8) are sufficiently broad, individually and in the aggregate, that virtually any kind of courier service company, including VEXL, would fall within their ambit. See, T-N-T Express LLC (LIRC, Feb. 22, 2000).
McSorley qualifies as a trucker within the meaning of Wis. Stat. § 108.02(12)(c).

The next step then is to determine whether, within the meaning of Wis. Stat. § 108. 02(12)(c), McSorley performed his courier services free from VEXL's direction and control, and performed these services in an independently established trade, business or profession in which he was customarily engaged.

This determination is governed by Wis. Adm. Code § § DWD 105.03 [direction and control], and DWD 105.04 [independently established business].  
 

Direction and control

Wisconsin Administrative Code § DWD 105.03 provides as follows:

DWD 105.03 Contract operators; direction and control.

(1) The department shall examine the factors enumerated in this section to determine, both under contract and in fact, whether the contract operator is free from a carrier's direction or control, while the contract operator performs services for the carrier. The department shall determine whether:

(a) The contract operator owns the motor vehicle or holds the vehicle under a bona fide lease arrangement with any person other than the carrier;

(b) The contract operator is responsible for the maintenance of the motor vehicle;

(c) The contract operator bears the principal burden of the motor vehicle operating costs including such items as fuel, repairs, supplies, insurance and personal expenses while on the road;

(d) The contract operator supplies, or is responsible for supplying, the necessary personal services to operate the motor vehicle;

(e) The contract operator determines the details and means of performance, namely, the type of equipment, assignment of driver, loading, routes and number of stops to be made during the haul, as well as starting, completion and elapsed times;

(f) The contract operator may refuse to make a haul when requested by the carrier;

(g) The contract operator may terminate the lease at any time after reasonable notice; and

(h) The contract operator is compensated on a division of the gross revenue or by a fee based upon the distance of the haul, the weight of the goods, the number of deliveries, or any combination of these factors.

(2) If the department determines that all of the factors under sub. (1) (a) to (h) are present in the relationship between the contract operator and the carrier, the contract operator shall be deemed to be free from the carrier's direction and control in the performance of services under s. 108.02 (12) (b) 1., Stats. If one or more of the factors under sub. (1) (a) to (h) are not present in the relationship between the contract operator and the carrier, the department shall consider additional factors of the relationship, both under contract and in fact, including whether:

(a) The contract operator may negotiate with the carrier to determine the method, frequency and regularity of payments made to the contract operator;

(b) The contract operator has the authority to discharge any driver whom he or she employs;

(c) The carrier requires decals, lettering, signs, emblems or other markings on the contract operator's motor vehicle for the purpose of advertising the carrier's name or business;

(d) The carrier requires the contract operator to submit reports;

(e) The carrier requires the contract operator to obey any work rules or policies; and

(f) The carrier requires any deductions from payments owing to the contract operator for federal or state income taxes or taxes under the federal insurance contributions act.

(3) If the contract operator is found to be under the carrier's direction or control under subs. (1) and (2), the contract operator shall be deemed to be an employe of the carrier under s. 108.02 (12) (b) 1., Stats.

The ALJ determined that, contrary to Wis. Adm. Code § DWD 105.03(1)(e), McSorley "did not determine all of the manner and means of performance" of his driving services for VEXL, because "[d]uring much of his workday, he was running an established route for the employer with scheduled pickups and deliveries and a strict time frame for completing much of it...unlike an over-the-road driver, his itinerary was largely scheduled by the employer's route requirements." The commission disagrees.

Any driver has to meet the needs of the customer, including pickup and delivery deadlines and locations. The presence of requirements such as these, imposed by the customer to meet business needs, does not constitute control by the putative employer over the details and means of performance within the meaning of Wis. Adm. Code § DWD 105.03(1)(e). See, e.g., Thomson Newspapers, Inc., UI Hearing No. S9200097MW (LIRC May 31, 1994) (no direction and control where employer's establishment of pick-up and delivery times simply insured the result for which bundle haulers' services were retained). McSorley independently determined the route he would follow to make the delivery to the location specified by the customer, the vehicle he would use, the manner in which the item to be delivered would be loaded into the vehicle, and the timing required to complete the delivery by the customer's deadline. This satisfies Wis. Adm. Code § DWD 105.03(1)(e).

In addition, McSorley met the other requirements of Wis. Adm. Code § DWD 105.03(1). He (a) owned the vehicle he used to make deliveries, (b) maintained the vehicle, (c) paid the costs of operating the vehicle, (d) operated the vehicle, (f) was not required to accept each delivery job offered to him by VEXL, (g) under the terms of his agreement with VEXL, could terminate the vehicle lease upon reasonable notice to VEXL, and (h) was compensated based on a percentage of gross revenue for each on-demand delivery and based on a set fee for route deliveries.

As a result, since McSorley met each of the requirements of Wis. Adm. Code § DWD 105.03(1) it would not be necessary to consider the additional factors set forth in Wis. Adm. Code § DWD 105.03(2).

However, even considering such additional factors, the direction and control element of Wis. Stat. § 108. 02(12)(c)1. is satisfied here.

The ALJ concluded that the additional factors set forth in Wis. Adm. Code § § DWD 105.03(2)(c) and (e) were not satisfied because "the employer required the claimant to display its signs on his vehicle and to wear a uniform identifying him as its representative, and barred him from competing with the employer during and after his association with it." The commission disagrees.

Wis. Adm. Code § DWD 105.03(2)(c) deals with a carrier requirement that a contract operator display markings on his vehicle "for the purpose of advertising the carrier's name or business." The evidence of record shows, however, that VEXL's name was displayed on McSorley's vehicle in letters only two to three inches high in order to meet Department of Transportation requirements. Neither the size nor the purpose of this display reasonably supports a conclusion that it was done for advertising purposes. Since this code provision relates only to displays "on the contract operator's motor vehicle," the fact that McSorley wore a uniform displaying VEXL's name for security purposes appears to be immaterial.

Wis. Adm. Code § DWD 105.03(2)(e) relates to a carrier requirement that a contract operator obey work rules or policies. A provision in a contract limiting a contract operator's ability to solicit the carrier's customers does not constitute a work rule or policy. Work rules and policies are usually understood to be requirements or guidelines as to the manner in which an individual conducts himself while carrying out his day-to-day work responsibilities.

In addition, the other additional factors stated in Wis. Stat. § DWD 105.03(2), support a conclusion that McSorley perform his driving services free of VEXL's direction and control. In particular, McSorley (a) had the ability to choose the method, frequency, and regularity of VEXL's payments to him (see Addendum A to exhibit #7), (b) was given the authority in paragraph 1 of his contract with VEXL (exhibit #7) to fire any driver he employed, (d) was only required to submit reports to comply with DOT requirements and as to his completed deliveries, and (f) was not subject to any tax withholding deductions by VEXL.  
 

Independently established business

The next question then is whether McSorley performed services for VEXL in an independently established business, trade, or profession in which he was customarily engaged, within the meaning of Wis. Adm. Code § DWD 105.04.

This code provision states as follows:

DWD 105.04 Contract operators; independently established business; customarily engaged.

(1) If the department determines that a contract operator is free from a carrier's direction or control in the performance of services under s. DWD 105.03, the department shall examine the following factors to determine whether a contract operator who performs services for a carrier is performing these services in an independently established business in which the contract operator is customarily engaged. The department shall determine whether:

(a) The contract operator owns the motor vehicle or holds the vehicle under a bona fide lease arrangement with any person other than the carrier;

(b) The contract operator is free to hire another person as a driver in the performance of services for the carrier; and

(c) The contract operator is free to reject hauling a load offered by the carrier.

(2) If the department determines that all of the factors under sub. (1)(a) to (c) are present in the relationship between the contract operator and the carrier, the contract operator shall be deemed to be performing services in an independently established business in which the contract operator is customarily engaged under s. 108.02 (12) (b) 2., Stats. If one or more of the factors under sub. (1)(a) to (c) are not present in the relationship between the contract operator and the carrier, the department shall consider additional factors including whether:

(a) The contract operator's business may provide a means of livelihood that is separate and apart from the livelihood gained from services performed for a particular carrier;

(b) The business would continue if the relationship with the carrier were terminated; and

(c) The contract operator has an ownership interest in a business that the contract operator alone may sell or give away without restriction from the carrier.

(3) If the contract operator is found to be free from the carrier's direction or control but not engaged in an independently established business under subs. (1) and (2), the contract operator shall be deemed to be an employe of the carrier under s. 108.02 (12) (b) 1. and 2., Stats. If the contract operator is found to be free from the carrier's direction or control and engaged in an independently established business, the contract operator shall be deemed to be an independent contractor and not an employe of the carrier under s. 108.02 (12) (b) 1. and 2., Stats.

McSorley met all of the requirements set forth in Wis. Adm. Code § 105.04(1). In particular, McSorley owned the vehicle he used to perform delivery services for VEXL; although he did not do so, he was free to hire another driver to perform these services; and he was free to, and did, reject deliveries offered to him by VEXL.

Because McSorley was free from VEXL's direction and control within the meaning of Wis. Adm. Code § DWD 105.03, and performed services in an independently established business within the meaning of Wis. Adm. Code § 105.04, he is deemed to be an independent contractor, not an employee, by operation of Wis. Adm. Code § 105.04(3).

The commission therefore finds that, within the meaning of Wis. Stat. § 108.02(12)(c), the claimant performed services for VEXL during the base period as a trucker in an independently established business free from VEXL's control or direction, not as an employee.

The commission notes that the file appears to indicate that VEXL failed to provide requested information during the department investigation. The commission's remand directive includes but is not limited to examination of this matter and its possible impact upon the overpayment or charging of benefits.

The decision of the administrative law judge is reversed. Accordingly, any amounts paid to the claimant by VEXL during the time period at issue for services performed shall not be included in the department's computation of the claimant's base period wages for computing potential benefit eligibility. This matter is remanded to the department for recomputation of the claimant's benefit amount and for other action consistent with this decision.

Dated and mailed May 9, 2007
mcsorwi . urr : 115 : 1  EE 412  EE 413

/s/ James T. Flynn, Chairman

/s/ Robert Glaser, Commissioner

NOTE: The commission did not confer with the administrative law judge before reversing his decision, because its reversal was not based upon a differing view as to the credibility of witnesses, but instead upon a differing conclusion as to what the hearing record in fact established and upon a differing interpretation of the relevant law.

 

cc:
Velocity Express, Inc. (Oak Creek, Wisconsin)
Consultech

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