KEVIN P O'BRIEN, Employee

ANGEL ADAMS 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:

That part of the FINDINGS OF FACT and CONCLUSIONS OF LAW section following the first paragraph is deleted and the following substituted:

The claimant (O'Brien) is a licensed social worker and marriage/family therapist.

During 2006, he performed social work/therapy services as a member of the staff of Family Service of Waukesha. This employment relationship ended on November 10, 2006.

On February 3, 2007, O'Brien entered into a one-year contract (exhibit #1) to perform social work/therapy services for the putative employer (Angel Adams).

This contract provided that O'Brien would be paid 60% of the amount Angel Adams received as government/private insurance reimbursement for the therapy services he provided; the claimant would be responsible for his own insurance, including professional liability insurance, and for maintaining required professional licensing; and Angel Adams would provide administrative support for scheduling and confirming therapy appointments.

Angel Adams maintained a list of approximately 36 qualified social work/therapy providers, including O'Brien. When it accepted a patient, Angel Adams would contact a provider it considered a good match, and offer this patient to the provider. O'Brien was free to accept or decline a patient he was offered by Angel Adams.

The claimant is the appellant here. The issue is whether the claimant's earnings from Angel Adams are required to be included in the base period wages upon which the amount of the claimant's benefit is computed because he functioned during this base period as an employee of Angel Adams, within the meaning of Wis. Stat. § 108.02(12)(a).

The effect on the claimant, if the appeal tribunal decision were to be reversed as he has requested in his appeal, would be to reduce his base period wages, upon which the amount of his benefit is based, by the amount he earned from Angel Adams. Such a reversal would have no effect upon the putative employer's liability for contributions to the unemployment insurance fund since that issue is not before the commission.

Wisconsin Statutes § 108.02, states as follows, as relevant here:

(11) Eligibility. An employee shall be deemed "eligible" for benefits for any given week of the employee's unemployment unless the employee is disqualified by a specific provision of this chapter from receiving benefits for such week of unemployment, and shall be deemed "ineligible" for any week to which such a disqualification applies.

(12) Employee. (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), (d), (dm), or (dn)...

(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 other than a government unit or nonprofit organization in a capacity other than as a logger or trucker, 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 methods of performing such 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 such 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.

15) Employment. (a) "Employment", subject to the other provisions of this subsection means any service, including service in interstate commerce, performed by an individual for pay.

It appears to be undisputed that, since O'Brien performed services for Angel Adams for pay, he did so in an "employment," within the meaning of Wis. Stat. § § 108.02(12)(a) and (15). As a result, a presumption that he did so as an employee is created which may be rebutted by showing that O'Brien's employment satisfied at least seven of the ten conditions set forth in Wis. Stat. § 108.02(12)(bm). 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).

The record does not show that O'Brien held or applied for a federal employer identification number (FEIN,) as required by condition 1, until March 23, 2007. However, given that the language of condition 1. does not specify when a FEIN is required to be acquired in order to satisfy this condition, as well as the fact that O'Brien acquired a FEIN within a few weeks of first performing services for Angel Adams and apparently before the end of the first tax reporting period thereafter, condition 1. is satisfied.

O'Brien testified that he filed a quarterly estimated self-employment tax return based on his projected earnings from Angel Adams for the first quarter of 2007, his first year of business. This satisfies 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); 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 O'Brien testified that he worked out of his home, he did not testify that he had a separate space in his home dedicated to a business purpose. In addition, although O'Brien testified that he had another client, his testimony indicates that he did not provide therapy services as a part of his relationship with this client. As a result, the record does not show that O'Brien has a business providing therapy services separate and apart from his relationship with Angel Adams. See, Prince Cable, Inc., UI Hearing No. S9900227MW (LIRC Feb. 23, 2001) (fact that worker performs services only for putative employer generally inconsistent with existence of separate business). Condition 3. is not satisfied.

To satisfy condition 4., it must be established that O'Brien 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. 

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/she has periodic opportunities for "arm's length" negotiation with the putative employer as to the conditions of their relationship, and that he/she 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.

The contract under which O'Brien performed services for Angel Adams was a single contract with terms that did not vary over time or by event, and which were dictated, apparently without negotiation, by Angel Adams. This single contract did not satisfy the multiple contracts requirement of condition 4. See, Barnett v. Alternative Entertainment, Inc., UI Hearing No. 02003109WU (LIRC Oct. 29, 2002); Dane Co. Hockey Officials, supra.; Thomas Gronna, The Floor Guys, UI Hearing No. S9900063WU (LIRC Feb. 22, 2000); Gary R. Gilbert, UI Hearing No. S0200083DB (LIRC July 21, 2005).

O'Brien argues that each time he accepts a patient through referral from Angel Adams, and provides therapy services to this patient, a separate contract is created. However, although, under certain circumstances, it is appropriate in analyzing condition 4. to consider service contracts negotiated by workers with individual customers under the auspices of the putative employer, such an analysis is not apt here. See, Quale & Associates, Inc., d/b/a Handyman Connection, UI Hearing No. S0200201MW (LIRC Nov. 19, 2004); Matthew G. Frazer, UI Hearing Nos. S0600184MD, etc., (LIRC June 14, 2007).

The multiple contracts requirement of condition 4. is not satisfied.

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. See, Lozon Remodeling, supra.; Quality Communications Specialists, Inc., supra. This inquiry requires quantification of these expenses, and, under the circumstances present here, a determination of which entity, O'Brien or Angel Adams, bears the larger total expense.

O'Brien testified that he paid the cost of driving his personal vehicle to home visits with patients, which had totaled 300 miles in a period of four months; $50-75 for certain therapy aids such as games and art equipment; $100 annually for malpractice insurance; $280 annually for his membership in the American Association of Marriage and Family Therapists; and an unspecified amount for continuing professional education. Angel Adams paid the administrative costs for scheduling and confirming appointments; and for requesting, receiving, and disbursing reimbursements for services provided to patients. In the absence of quantification of the expenses borne by Angel Adams, and given that it is not obvious that the expenses O'Brien bore would necessarily exceed those borne by Angel Adams, condition 5. is not satisfied.

In order to satisfy condition 6., O'Brien is required to have been responsible for the satisfactory completion of the services he performed, and liable for any failure to satisfactorily complete them.. O'Brien was required in his relationship with Angel Adams to possess, and to pay for, professional malpractice insurance. This establishes O'Brien's liability for any failure on his part to satisfactorily render the therapy services he provided to clients. See, Care & Comfort Associates, UI Hearing No. S9700120MW (LIRC April 30, 1999).

The 60% of reimbursement O'Brien received under his contract with Angel Adams was in the nature of a commission, and satisfies condition 7. as a result.

Condition 8. examines 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 O'Brien of more in payments than he was required to spend performing services for Angel Adams could constitute "realiz[ing] a profit...under contracts to perform services." However, since O'Brien is essentially guaranteed payment for any patient he accepts, it is difficult to envision how he could suffer a loss over the term of his contract with Angel Adams. See, Dane County Hockey Officials, supra. 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 putative employer, such as the cost of an office lease, professional fees, or liability insurance. O'Brien's costs for professional malpractice insurance, fees to maintain his membership in a national professional association, and expenses of continuing professional education satisfy this condition. Condition 9. is satisfied.

Finally, 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 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. See, Thomas Gronna, supra. The record does not show that O'Brien put a significant investment at risk, and, as a result, condition 10. is not satisfied.

O'Brien argues that the cost of his labor should be factored into the analysis of condition 10., and, by implication, conditions 5. and 8. However, the cost of labor provided under a contract has not been interpreted by the commission as a qualifying expense within the meaning of condition 5. (see, Quality Communications Specialists, Inc., supra.). This makes sense given that the employee is not paying for his labor but instead, depending on whether he is an employee or an independent contractor, his employer or his customer is. Parallel reasoning would logically extend to the analysis of conditions 8. and 10., i.e., since O'Brien does not pay for his labor, it would not factor into determining whether he could sustain a loss within the meaning of condition 8., and would not represent a significant investment on his part within the meaning of condition 10.

In summary, conditions 1., 2., 6., 7., and 9. are satisfied. 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 five of the ten conditions compels the conclusion that O'Brien performed services for Angel Adams as an employee, not an independent contractor, during the time period at issue.

The decision of the administrative law judge, as modified, is affirmed. Accordingly, amounts earned by O'Brien for services performed for Angel Adams are to be used in calculating O'Brien's benefit entitlement.

Dated and mailed July 9, 2007
obrieke . umd : 115 : 1  EE 410 EE 410.01  EE 410.02  EE 410.03  EE 410.04a  EE 410.05

/s/ James T. Flynn, Chairman

/s/ Robert Glaser, Commissioner

/s/ Ann L. Crump, Commissioner

cc: Insight Counseling Services, Inc.

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