MICHAEL W ZOROMSKI, Employee
COX AUTO TRADER, 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:
1. The references to "Dominion Enterprises" as the employer/appellant on the face sheet and in the body of the decision are changed to "Cox Auto Trader."
2. In the paragraph of the FINDINGS OF FACT and CONCLUSIONS OF LAW section in which condition 8. is analyzed, the last two sentences are deleted and the following substituted:
The record does not show there is a reasonable possibility that the claimant could suffer a loss over the term of his contract with the putative employer.
3. In the paragraph of the FINDINGS OF FACT and CONCLUSIONS OF LAW section in which condition 9. is analyzed, the last two sentences are deleted and the following substituted:
The record does not show that the claimant has such costs.
The decision of the administrative law judge, as modified, is affirmed. Accordingly, the $6370 paid to Zoromski for services performed for Cox during the base period are to be used in calculating Zoromski's benefit entitlement.
Dated and mailed August 31, 2007
zorommi2 . umd : 115 : 1
EE 410 EE 410.05 EE 410.06
EE 421 PC 749
/s/ James T. Flynn, Chairman
/s/ Robert Glaser, Commissioner
/s/ Ann L. Crump, Commissioner
Although the appeal tribunal decision identifies the putative employer as Dominion Enterprises, the employer's representative, its district manager, testified that the employee provided services for Cox Auto Trader (Cox), not Dominion Enterprises. As a result, the commission's decision makes this change.
The commission notes that the appellant here is Cox, the putative employer, even though the issue relates solely to benefit eligibility, not employer liability for contributions.
Even though Zoromski provides driving services for Cox, he does not qualify as a trucker within the meaning of Wis. Stat. § 108.02(25e), for purposes of invoking the exception stated in Wis. Stat. § 108.02(12)(c), because he does not lease his vehicle to Cox. Wis. Adm. Code § DWD 100.02(12). See, McSorley v. Velocity Express, UI Hearing No. 06004688MD (LIRC May 9, 2007).
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 Zoromski performs services for Cox for pay, he does so in an "employment," within the meaning of Wis. Stat. § § 108.02(12)(a) and (15). As a result, a presumption that he does so as an employee is created which may be rebutted by showing that Zoromski's employment satisfies 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 Zoromski holds or has applied for a federal employer identification number (FEIN) as required by condition 1., or filed a business or self-employment tax return as required by 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 Zoromski used his own equipment and materials to provide services for Cox, he did not have a separate office or even a separate space in his home dedicated to a business purpose. Cox argues, citing a 2003 appeal tribunal decision (ATD) involving the same putative employer (1), that, as that ATD concluded, "[t]here is no need for an office or business separate from the claimant's vehicle" in order for condition 3. to be satisfied.
However, as discussed below, the manner in which an issue was resolved in this ATD, although possibly relevant, does not have preclusive effect here, and is not considered binding precedent.
Moreover, the use of one's personal vehicle to carry out delivery duties and to prepare related paperwork does not qualify as maintaining a separate business office, just as using one's dining room table or personal computer to carry out work responsibilities does not. See, Stehn v. Cybrcollect, Inc., UI Hearing No. 05000775MD (LIRC Sept. 7, 2005).
Finally, the fact that Zoromski performs delivery services only for Cox also militates against a conclusion that he is maintaining an enterprise separate and apart from his relationship with Cox. 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).
As a result, condition 3. is not satisfied.
To satisfy condition 4., it must be established that Zoromski 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 Zoromski controls the means and method of performing the delivery services for Cox. 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/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.
There were two contracts entered into between Zoromski and Cox, one in 2003 and the other in 2006. The only differences between the two contracts were an increase in the weekly flat rate for Zoromski's route and the addition of provisions related to the introduction of new electronic recordkeeping equipment by Cox. Zoromski testified that the terms of the contract were determined by Cox without negotiation. Cox's representative testified that, as far as negotiating the terms of the contracts with its delivery drivers, "we haven't had too much of that." This single, continuing relationship with conditions dictated by Cox does 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).
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, supra.; Quality Communications Specialists, Inc., supra. This inquiry requires quantification of these expenses, and, under the circumstances present here, a determination of which entity, Zoromski or Cox, bears the larger total expense.
Given that Zoromski bears the costs of operating and maintaining the vehicle he uses to make deliveries, and of the electronic recordkeeping equipment (PDA), including the cost of the phone line for operating the PDA, and the only things Cox pays for are paper for the PDA and self-addressed/stamped envelopes, it is obvious that the expenses Zoromski bears would necessarily exceed those borne by Cox. As a result, the record supports a conclusion that condition 5. is satisfied.
In order to satisfy condition 6., Zoromski is required to be responsible for the satisfactory completion of the services he performs, and liable for any failure to satisfactorily complete them. Zoromski is responsible, if he fails to complete his route, for locating and paying another driver to do so; and for directly addressing and resolving any customer concerns. In addition, the contract provides that Zoromski will indemnify and hold Cox harmless for any damages resulting from his actions or those of his agents. Condition 6. is satisfied.
Zoromski is paid on a per-job basis, which satisfies condition 7.
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 Zoromski of more in payments than he was required to spend performing services for Cox could constitute "realiz[ing] a profit...under contracts to perform services." However, since Zoromski is essentially guaranteed payment if he performs the delivery services, it is difficult to envision how he could suffer a loss over the term of his contract with Cox. See, Dane County Hockey Officials, supra. Zoromski testified that, if his weekly rate of $150 no longer covered his weekly gas expenses for driving the delivery route, he would simply terminate the relationship on 30 days' notice as set forth in the contract. However, even if his vehicle got only 15 miles per gallon, at the current cost of gas of $3 per gallon, Zoromski would have to be driving a route of 750 miles to exceed $150 in gas costs. Since his route only took him 5 hours to complete, he clearly was not driving 750 miles (150 miles each hour) during that time. Cox also argues that Zoromski could suffer a loss during a particular week if his vehicle needed expensive repairs. However, what is to be examined here are expenses over the entire course of the multi-year contract, not expenses over the course of one week. Moreover, since Zoromski used his personal vehicle to make the deliveries, only the proportion of repair/maintenance costs attributable to delivery driving, not all repair/maintenance costs, would be cognizable, and there is no quantification of these costs in the record. Given these facts, the evidence of record does not establish that a realistic possibility exists that Zoromski could suffer a loss over the term of his contract with Cox. As a result, 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 professional liability insurance. The ALJ concluded that the liability insurance Zoromski carried on his car, as well as the cost of car repairs, would satisfy this condition. However, Zoromski utilized his personal vehicle for making deliveries for Cox. Since Zoromski would presumably carry liability insurance on his personal vehicle whether or not he was performing delivery services for Cox, and since any repair/maintenance costs associated with making deliveries would cease once Zoromski was no longer performing such services, these costs would not qualify as continuing business obligations or liabilities within the meaning of condition 9. As a result, condition 9. is not satisfied here.
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 Zoromski put a significant investment at risk, and, as a result, condition 10. is not satisfied.
Cox cites Tyrrell / The Armory, Inc., UI Hearing No. 06002517JV (LIRC Dec. 6, 2006), for the proposition that, if the claimant regards the work activity at issue as recreational, and would continue to engage in it even if it were not profitable in a financial sense, condition 10. is satisfied. Although the decision in Tyrrell does draw this conclusion, it was intended to apply the analysis of condition 10. set forth in Dane County Hockey Officials, supra. The analysis in Dane County states, however, contrary to the conclusion reached in Tyrrell, that, because the workers had not made a significant investment in their officiating endeavor, and, because they regarded it as recreational, i.e., as an "enjoyable hobby" which they would regard as successful even if it were not profitable, condition 10. was not satisfied.
The correct interpretation of Dane County Hockey Officials, supra., and of the relevant statutory language, supports a conclusion that condition 10. is not satisfied here.
In summary, conditions 5., 6., and 7. are satisfied. Since Wis. Stat. § 08.02(12)(bm) requires that seven conditions be satisfied in order for a worker to be considered an independent contractor, the satisfaction of only three of the ten conditions compels the conclusion that Zoromski performed services for Cox as an employee, not an independent contractor, during the time period at issue.
Cox argues that, by application of the doctrine of issue preclusion (collateral estoppel), the commission should be bound by earlier appeal tribunal decisions (2) involving the same putative employer, and cites Goldberg Trucking, UI Hearing Nos. S9200706AP, etc. (LIRC April 28, 1994) in support. The commission disagrees.
First of all, Goldberg Trucking involves the impact of a prior commission decision, not, as here, a prior decision of a lower level tribunal. In addition, the prior decision in Goldberg Trucking resolved the contribution liability for the same employer for the six calendar quarters immediately preceding the quarters at issue, and not, as here, a benefit eligibility issue predating the matter at issue by, in one case, six years, and in the other, more than four years. Finally, the decision in Goldberg Trucking held that the prior commission decision, given the specific circumstances, would not have preclusive effect, or even constitute binding precedent, but instead could have "substantial bearing."
In addition, there are factual distinctions between the prior matters and that under consideration here, which would reduce the impact of the earlier decisions. For example, in both Dal Porto and Pomerenke, the drivers were paid by the stop rather than a fixed amount for a route. In addition, in Pomerenke, the driver had a separate space in his home dedicated to a business purpose, and had purchased a van just to use for delivery driving.
Moreover, the persuasiveness of these ATDs is diminished by those aspects of their legal analyses which fail to take the statutory language into account and which are inconsistent with commission precedent. For example, the ATD in Dal Porto concluded that a delivery driver working out of his personal vehicle would satisfy the condition 3 requirement for a separate business office; a single contract would satisfy condition 4.; the possibility of earning a profit or suffering a loss over the course of one week, rather than over the term of the entire contract, would satisfy condition 8.; costs of operating a vehicle would constitute a recurring business liability or obligation; and condition 10. would be satisfied if a driver could earn a profit or sustain a loss over the course of a week.
Finally, the record shows that, during the relevant time period (the last two quarters of 2005 and the first two quarters of 2006), the claimant was paid $1495 per quarter ($115 each week for 13 weeks) in the first three of these quarters, and $1885 ($145 each week for 13 weeks) in the final quarter, for services he performed for Cox.
cc:
Cox Auto Trader's Corp.
Attorney Janet M. Kyte
Appealed to Circuit Court. Appeal dismissed February 4, 2008.
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