NICOLE L VANPELT, Employee
QUALITY CONTROLLED SERVICES, 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 non-italicized portion of the third full paragraph on page 3 of the decision, which analyzes condition 4., is modified to read as follows:
Although the putative employer did not control the means and methods of performing the work at issue here, the record does not show that the multiple contracts requirement of this condition were met.
The second sentence of the fifth full paragraph on page 3 of the decision, which analyzes condition 6., is modified to read as follows:
The record shows that VanPelt may not get paid if she did not properly complete the required post-shopping reports (see page 5 of synopsis), and would not be offered further jobs if her performance was not satisfactory.
The decision of the administrative law judge, as modified, is affirmed. Accordingly, the claimant is required to report her income from services performed for the employer as they are earned.
Dated and mailed August 31, 2007
vanpeni . umd : 115 : 8 EE 410
/s/ James T. Flynn, Chairman
/s/ Robert Glaser, Commissioner
/s/ Ann L. Crump, Commissioner
The claimant (VanPelt) worked six months as a "mystery shopper" for the putative employer (Quality), which contracts to perform customer satisfaction surveys, incentive rewards programs, and worker productivity improvement programs for retail clients.
VanPelt performed these services pursuant to a written agreement with Quality. Under the terms of this agreement, VanPelt would consult an online list of potential jobs, which specified a particular fee for each job, and select those she was willing to perform. VanPelt was responsible for providing her own transportation to each job, and for obtaining Internet access in order to file required reports. VanPelt would be reimbursed for any retail items she purchased as a part of each job.
The only hearing witness was Derek Mayes (Mayes), Quality's associate general counsel.
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 VanPelt performed services for Quality for pay, she did so in an "employment," within the meaning of Wis. Stat. § § 108.02(12)(a) and (15). As a result, a presumption that she did so as an employee is created which may be rebutted by showing that VanPelt'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 VanPelt held or 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 VanPelt presumably used her own vehicle and certain of her own materials to provide services for Quality, the record does not show that she had a separate office or even a separate space in her home dedicated to a business purpose. Moreover, the record does not show that VanPelt provided shopping or similar services for any entity other than Quality, a circumstance which further militates against a conclusion that she was maintaining an enterprise separate and apart from her relationship with Quality. 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 VanPelt operates under contracts to perform specific services for specific amounts of money, and that, under these contracts, she controls the means and method of performing the services.
The record shows that VanPelt controls the means and method of performing the shopping services for Quality. 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.
It is not apparent from the record whether the relevant contract(s) would be the single written contract entered into between VanPelt and Quality, or the multiple agreements created by VanPelts' acceptance of particular jobs. Neither, however, satisfies the multiple contracts requirement of condition 4., the single written contract for obvious reasons, and the multiple job-specific agreements because the record shows that they were not negotiated at arms length, but instead were governed by fees and other terms dictated by Quality. 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).
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. Lozon Remodeling, supra.; Quality Communications Specialists, Inc., supra. This inquiry requires quantification of these expenses.
VanPelt bore the cost of transportation. Although she was required to have access to the Internet, the record does not show that she paid for this access. Quality, or its clients, bore the cost of the retail products VanPelt purchased as a mystery shopper, and presumably, certain administrative, billing, and record-keeping costs. Since there is no quantification in the record of any of these costs, and it is not obvious that VanPelt's costs necessarily exceeded those borne by others, condition 5. is not met.
In order to satisfy condition 6., VanPelt is required to have been responsible for the satisfactory completion of the services she performed, and liable for any failure to satisfactorily complete them. The record shows only that VanPelt may not get paid if she did not properly complete the required post-shopping reports), and would not be offered further jobs if her performance was not satisfactory. These facts do not distinguish VanPelt's circumstance in this regard from that of a piecework employee. See, T & D Coils, UI Hearing No. S9800147MW (LIRC Dec. 15, 1999); Spencer Siding, Inc., UI Hearing Nos. S0300142GB, etc. (LIRC June 2, 2006). As a result, condition 6. is not satisfied.
VanPelt was 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 VanPelt of more in payments than she was required to spend performing services for Quality could constitute "realiz[ing] a profit...under contracts to perform services." However, since VanPelt is essentially guaranteed payment if she satisfactorily performs the shopping services, and selects the shopping jobs she performs, it is difficult to envision how she could suffer a loss. See, Dane County Hockey Officials, supra. 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 she was not performing work through the putative employer, such as the cost of an office lease, professional fees, or professional liability insurance. The record does not show that VanPelt incurred any such costs, and, as a result, condition 9. is not met.
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 VanPelt put a significant investment at risk, and, as a result, condition 10. is not satisfied.
In summary, only condition 7. is 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 one of the ten conditions compels the conclusion that VanPelt performed services for Quality as an employee, not an independent contractor.
Quality argues in its petition that VanPelt was responsible not only for her travel expenses, but also for taking photo stills of retail locations with a digital camera. However, Mayes testified at hearing in this regard only that he didn't know whether VanPelt had to take photos with a digital camera, "but I would not be surprised if she did." This hardly constitutes proof. Even if it did, the fact that the cost of taking such photos is not quantified in the record would not change the analysis of any of the conditions.
Quality also attempts to "clarify" in its petition that VanPelt would be required to "re-perform" any unsatisfactory services to Quality's satisfaction and at her expense. However, this goes beyond a clarification of a matter of record, and is, in fact, new information. The commission is limited to the evidence of record in reaching its decision. Since Quality had full and fair opportunity to present its case at hearing, further hearing to permit the offer of this new information is not merited.
Finally, Quality did not explain at hearing its failure to provide correct and complete information during the fact-finding investigation of this matter, as evidenced in department records. As a result, no overpayment would be created, and any benefits erroneously paid because of this failure remain charged to Quality.
cc: Maritz Research, Inc.
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