MILWAUKEE KICKERS SOCCER
CLUB, INC., Employer
KICKERS OF WISCONSIN
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 by the department.
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:
Milwaukee Kickers Soccer Club, Inc. (hereinafter, "MK") is a non-profit organization that organizes and sponsors youth amateur soccer competition in Wisconsin. It has approximately 7,000 members and 600 teams. In connection with its activities, MK utilizes the services of various individuals who work as coaches and others who work as referees.
The department's determination in this matter found from the first quarter of 2003 through the fourth quarter of 2004, both the coaches and the referees performed their services for MK as its employees, and that MK was on that basis liable for certain contributions and interest. MK appealed, specifically challenging only the determination that the referees were employees. After a hearing and briefing which focused entirely on the referees, the ALJ affirmed the determination that the coaches performed their services as employees, but decided that the referees were independent contractors. The department then filed a timely petition for commission review, objecting to the ALJ's decision that the referees were independent contractors. No petition for review was filed by MK.
Given this history, the significant issue presented by this case is whether the referees were employees of MK or independent contractors. (1)
There is no dispute that the referees were "performing services for" MK within the meaning of Wis. Stat. § 108.02(12)(a). This creates a rebuttable presumption that they did so as employees of MK. Waedekin v. County of Winnebago (LIRC, Sep. 12, 2008). It is also not disputed that MK is a non-profit organization within the meaning of Wis. Stat. § 108.02(12)(c), so that the applicable tests which must be met to rebut the presumption of employee status, are the "freedom from direction and control" and "independently established business" tests of § 108.02(12)(c)1. and 2. In addition, the department concedes that the referees' services were performed free from the direction and control of MK within the meaning of the applicable statute, Department's Brief p. 4, so the case comes down to whether it was shown that the referees performed their services in an independently established trade, business or profession within the meaning of § 108.02(12)(c)2. Finally, as the department points out in its reply brief, MK effectively concedes in its brief that the services of the referees are integrated with the business of MK within the meaning of the first of the five factors discussed in Keeler v. LIRC, 154 Wis. 2d 626, 632-34, 453 N.W.2d 902 (Ct App 1990). Thus, this case ultimately comes down to interpretation and application of the last four of the five Keeler tests.
In addition to looking to the relevant Keeler tests, the commission must look to the recent decision of Judge Christopher Foley of the Milwaukee County Circuit Court in
Wisconsin Soccer Association v. LIRC and DWD (Milw. Co. Cir. Ct., July 22, 2008). That case, like this one, concerned the question of whether soccer referees in organized youth amateur soccer activities in Wisconsin performed their services as employees or as independent contractors. In that case, as in this one, an ALJ found that the referees were not employees, DWD petitioned for review, and the case ultimately came down to application of
Keeler factors 2 through 5. In its brief in this case, DWD has described the facts in the
Wisconsin Soccer Association case as being "virtually identical to the facts in this matter". In
Wisconsin Soccer Association v. LIRC and DWD, the court concluded that "no reasonable application of the
Keeler factors and statutory standards could lead to the conclusion that the referees were employees of the WSA." Neither DWD, nor the commission, has filed an appeal from Judge Foley's decision, and the time for filing any such appeal has now expired, so the decision is final.
Discussion -- In Keeler v. LIRC, 154 Wis. 2d 626, 631 (1990), the Court of Appeals identified five "interrelated factors" to be analyzed in applying the "independently established" test. The court described those factors this way:
1. Integration. This factor is best explained by example as the court did in [Moorman Mfg. Co.] The court illustrated this factor by using the example of a tinsmith called upon to repair a company's gutters when the company is engaged in a business unrelated to either repair or manufacture of gutters. Because the tinsmith's activities are totally unrelated to the business activity conducted by the company retaining his services, the services performed by the tinsmith do not directly relate to the activities conducted by the company retaining these services and these services were therefore not integrated into the alleged employer's business.
2. Advertising or holding out. This factor cited in [Princess House], deals with the concept that a truly independent contractor will advertise or hold out to the public or at least to a certain class of customers, the existence of its independent business.
3. Entrepreneurial risk. The supreme court in Princess House noted that a truly independent businessman will assume the financial risk of the business undertaking. Id.
4. Economic dependence. If an examination of the economic relationship establishes that the alleged employee is independent of the alleged employer, performs services and then moves on to perform similar services for another, it is proof of an independent trade or business. On the other hand, if the economic relationship shows a strong dependence by the alleged employee on the alleged employer, the public policy behind the Unemployment Compensation Act would suggest that the dependent person have access to unemployment compensation benefits. Id.
5. Proprietary interest. In Transport Oil, 54 Wis. 2d at 256, 195 N.W.2d at 649, the factor of whether the alleged employee had a proprietary interest in his business is used to determine whether the business was independently established. While the factor includes the ownership of the various tools, equipment, or machinery necessary in performing the services involved, it also includes the more sophisticated concept of proprietary control, such as the ability to sell or give away some part of the business enterprise.
154 Wis. 2d at 633-34.
Integration - As noted above, MK concedes that the services of the referees are integrated with the business of MK.
Advertising / holding out - The names of referees appeared on a list maintained by the State Referee Committee which was made available to organizations (like MK) which were looking for referees. DWD argues that MK is relying solely on this fact to satisfy the advertising/holding out test, and that this by itself is inadequate because it is a "totally passive" act. MK argues in response that this factor does not require "conventional advertising", and points out that in Keeler itself the court found that "while the woodcutters did not advertise their services, everyone knew whose services were available for woodcutting because of the limited number of persons in that industry".
MK also places reliance on a recent LIRC decision, Eichman v. Wis. Technical College System Foundation (LIRC, Feb. 18, 2007), involving an individual who presented emergency preparedness workshops to students and staff in public school districts. In Eichman, the commission said:
Although the evidence does not establish that the claimant advertised his services, it does establish that he was well known within the emergency preparedness community and highly regarded there as a trainer, and that he held himself out to this community as a professional instructor.
It argues that, just as in Keeler and Eichman, while referees did not advertise their services, referee assignors (the individuals who actually made all the decisions on which referees worked which matches) knew whose services were potentially available through list provided by the State Referee Committee.
The commission is satisfied that in addition to the matter of the referees' names being on the list maintained by the State Referee Committee, there is other evidence of "holding out". When MK's witness Riche was ready to schedule referees for a tournament or a league, he would send out a mass e-mail or letter to referees on that list asking to know if the referees were available. Some referees - perhaps 200 or 300 in response to his initial contact to 800, or perhaps as few as 50 - would then respond to him concerning their availability. In addition, he would get inquiries from referees as to open positions for tournaments in Milwaukee, and he indicated that everybody knows when the tournaments are and "they shop around for games". These kinds of responses and inquiries are a kind of "holding out" even by the terms argued by DWD,
i.e., they are "some action of an affirmative nature" by individuals holding themselves out to potential customers or clients as available for work.
Entrepreneurial risk - Referees must pay for their own uniform clothing, whistles, flags and referee cards. A new referee could spend $80 to $100 on required equipment, and if they continue refereeing over time they could spend more. Their annual cost of maintaining the required certification was $40 to $50. In addition, MK's witness testified repeatedly and expressly that there are "quite a few" referees who lose money doing the work, that it was "not uncommon" for referees to lose money doing the work, and that it was "somewhat common" to lose money doing the work.
DWD argues that the amounts involved here were so small that there was no genuine "risk", and also that the likelihood of any loss was not significant because the referees had virtually total control over whether they would suffer a net loss. MK argues that under Larson v. LIRC, 184 Wis. 2d 378, 516 N.W.2d 456 (Ct App 1994), the magnitude of the risk is not by itself determinative, and that the level of expense involved here was comparable to that which was found in Keeler itself to be sufficient. In reply, DWD argues primarily that the "minimal" risk of loss the referees were argued to face could be avoided by them by simply choosing to work enough games so as to not lose money.
In Wisconsin Soccer Association the circuit court, noting the holding of Larson that the magnitude of the risk is not determinative, also noted two LIRC decisions which have agreed: Eichman, supra, and Williams v. MTEC (LIRC, No. 21, 2007). (2) Judge Foley observed:
The nature of the services in issue necessarily entail somewhat nominal reward and related risk. However the magnitude of the risk is not determinative [citing Larson; Grutzner S.C. v. LIRC, 154 Wis. 2d 648, 453 N.W. 2d 920 (1990); Eichman; Williams]. Unquestionably, referees incur significant risk in the form of expenses necessarily incurred to secure game assignments. The "significance" of those expenses is in recognition of the limits of the potential reward in view of the nature of the services at issue. The record establishes significant entrepreneurial risk which the LIRC wholly and inappropriately disregarded. This factor strongly supports the conclusion that the referees are not employees of the WSA.
The evidence as to the necessary costs and the payments available establishes the possibility that some individuals performing services as a referee could end up losing money. That leaves only DWD's theory, that because it would always be within the choice of the individual to work enough games to defray these expenses there was no significant risk of loss. The problem with this theory is that its predicate is not established: an individual might not be selected for enough games to defray their fixed costs. Particularly given that MK's witness Riche testified directly that there
were quite a few referees who lost money doing it, and given the Wisconsin Soccer Association court's discussion of this and the commission's own decisions adopting the
Larson reasoning that the magnitude of potential loss is not determinative, the commission will find that this factor was satisfied.
Economic (in)dependence - DWD makes a very limited argument with respect to this factor, to the effect that MK failed to meet its burden to prove that the referees did actually do refereeing for other soccer clubs and organizations. It asserts that while it was possible that referees performed similar services over the summer for other soccer clubs or organizations, it was also possible that they worked only for MK, and that the proof was thus inadequate because MK did not present testimony of any referees. MK for its part asserts that there is sufficient evidence that the referees did in fact provide similar services for other entities.
The record establishes that there are about 3,300 registered soccer referees in Wisconsin, around 800 of those in southeast Wisconsin, and that in addition to Milwaukee Kickers, there are around 15-20 other entitities scheduling the services of soccer referees in the metro Milwaukee area, as well as 7 to 8 high schools that also use the services of referees. According to MK's witness - who, it should be noted given DWD's argument, himself also performed refereeing services - it is "common" for referees to referee games for more than one scheduler. He also testified that he himself refereed for soccer clubs and organizations other than MK, and that every referee he could think of did work for another soccer club or high school. In view of this, DWD's argument that "there is no evidence whatsoever in the record that any of the referees in fact performed services for other soccer clubs or organizations" is simply not persuasive. There was in fact such evidence of this, in the form of the testimony from MK's witness. The commission believes that the weight of that evidence is sufficient to justify a conclusion that these individuals are economically independent for purposes of this factor.
Proprietary interest - The department asserted in its reply brief, that MK conceded in its brief that the referees did not satisfy the "proprietary interest" test. The department cited to page 10 of MK's brief to support this assertion. The commission is satisfied that there is no concession as to this test either there or anywhere else in MK's brief.
A referee could of course freely transfer their uniform clothing and equipment. However, MK's witness testified that a referee who had been assigned to a match could not arrange to have someone else do it.
This does not necessarily require the conclusion that this test is not met, though. In Eichman, supra the commission said:
Finally, as to proprietary interest, the claimant does not in fact have anything he alone could sell or transfer as an ongoing concern, such as goodwill. However, as was noted by the court in Larson, supra., the proprietary interest factor is not the sole test of whether an individual is engaged in an independently established business. The court stated, "we do not read the supreme court to foreclose 'independently established business' status from all individuals whose businesses depend on their own particular talents and not upon an extensive personnel pool or equipment inventory. Business based on the provision of creative services are common in the film industry. [Cite omitted]. Thus, even though the facts do not show that the crew members could sell their businesses, we consider that factor in light of film industry practices." Larson at 395. The claimant's business depended upon his particular knowledge and talents as an instructor, not upon a personnel pool or equipment inventory, and satisfied this factor.
The commission followed this same rationale in Williams, supra, involving a teacher, and also in Seftar v. Waukesha Symphony (LIRC, April 25, 2002) and Ristau v. Fox Valley Symphony (LIRC, August 23, 2006), both involving professional musicians.
The circuit court in Wisconsin Soccer Association v. LIRC and DWD also noted the language of the Larson decision which was quoted by the commission in Eichman. Judge Foley said:
I will abide LIRC's finding that referees did not have the ability to unilaterally transfer the right to officiate a match to another referee, although the evidence in that regard admits of either factual conclusion. Tr. 62. However, balancing this consideration is the acknowledged right of referees - State Cup or otherwise - to accept or reject assignments at their whim. Tr. 27-29, 31.
More importantly, however, LIRC's reliance on the absence of ownership of significant tangible assets is illogical given the nature of the services in issue. Larson, at 395. The sole product offered by the referee are their creative services rendering the traditional view of proprietary interest being dependent on saleable tangible assets as virtually inapplicable and an inappropriate premise of LIRC's decision.
The rationale of the court in Wisconsin Soccer Association v. LIRC and DWD dictates a conclusion that the "proprietary interest" factor should be considered "inapplicable" here in the same fashion.
Conclusion - The Keeler factors are not to be mechanically applied. Rather, the weight and importance of each factor varies according to the specific facts of each case. The five factors should be applied in a manner consistent with the purpose of the statute, i.e., "to affect unemployment compensation coverage for workers who are economically dependent on others in respect to their wage-earning status." Larson v. LIRC, supra. While the referees' services are integrated with the activities of MK, considering the application of the other Keeler factors, as well as the holding of the court in Wisconsin Soccer Association v. LIRC and DWD, the commission is persuaded that they should properly be considered as independent contractors.
The commission therefore finds that the individuals performing services for Milwaukee Kickers as coaches during the calendar quarters at issue performed those services as employees of Milwaukee Kickers, within the meaning of Wis. Stat. § 108.02(12).
The commission further finds that the individuals performing services for Milwaukee Kickers as referees during the calendar quarters at issue did not perform those services as employees of Milwaukee Kickers, within the meaning of Wis. Stat. § 108.02(12), but rather as independent contractors.
The Findings of Fact and Conclusions of Law of the administrative law judge are modified to conform with the foregoing and, as modified, the decision of the administrative law judge is affirmed. Accordingly, Milwaukee Kickers Soccer Club, Inc. is not liable for payments of contributions and interest for the quarters in question based on payments made to the referees. Milwaukee Kickers Soccer Club, Inc. is liable for payments for the same period of time for payments of contributions and interest based on amounts received by the coaches. The case is remanded to the department for recalculation of the liability in accordance with these findings and conclusions. The coaches have been identified by the use of an asterisk next to their names in Exhibit 1.
Dated and mailed October 23, 2008
milwkic . srr : 110 : EE 413
/s/ James T. Flynn, Chairperson
/s/ Robert Glaser, Commissioner
/s/ Ann L. Crump, Commissioner
NOTE: The department argued in its brief that the commission should disregard those portions of MK's brief which cite cases arising under Wis. Stat. § 108.09, because Wis. Stat. § 108.101(2) specifically provides that no decision in an unemployment case arising under § 108.09 is binding in a tax case under § 108.10. It asserted that for this reason, those arguments in MK's brief are "meaningless". The commission disagrees with this argument, for two reasons.First, the department's argument goes too far in its reading of the intended scope of Wis. Stat. § 108.101(2). The commission believes that provision was intended to prevent application of the doctrines of issue preclusion and claim preclusion from UI benefit cases to UI tax cases. See, South East Cable LLC (LIRC, April 8, 2008). Thus, for example, it would prevent the department from asserting in an "independent contractor or employee" tax case against a particular employer, that a decision on that legal issue in a previous benefit case involving that employer is binding against that employer in the tax case. Similarly, it would prevent an employer in such a tax case from asserting that a decision in its favor on that issue in a previous benefit case involving it, is binding on the department in the tax case. However, the commission does not believe that § 108.101 was intended to entirely prevent consideration of legal reasoning and statutory interpretation found in an earlier decision, simply because one was a tax case and the other was a benefit case.
Second, the department's argument goes too far in contending that § 108.101(2) would have the effect of entirely preventing consideration of a previous decision, to the point of making it "meaningless." In a clear reflection of its intended purpose to limit application of preclusion doctrines, § 108.101(2) specifically states that in the situations it applies to, a previous decision shall not be "binding." Conspicuously, in another subsection of the same statute, § 108.101(1), it is provided that a UI decision shall not be "admissible or binding" in any matter not arising under the UI law. The use of "admissible or binding" in § 108.101(1), when contrasted with the use of "binding" in § 108.101(2)-(4), indicates that in those latter cases, the types of other decisions referred to may be considered, but may simply not be treated as "binding".
The commission's previous decisions on interpretation and application of provisions of the UI Act are not "binding" on it, and have never been treated as such. However, the commission has regularly looked to and considered its past interpretations as part of its process of deciding what outcome to arrive at in cases coming before it. This kind of consideration of past decisions is entirely appropriate. It is clearly contemplated by the courts' recognition of the importance of the commission "develop[ing] and apply[ing] consistent policies and standards", Brown v. LIRC, 2003 WI 42, ¶51, 267 Wis. 2d 31, 671 N.W.2d 279. The same legal standards for distinguishing between employees and independent contractors apply whether the issue arises in the context of a benefit or a tax dispute. The commission does not believe that § 108.101 was intended to preclude it from looking to its own past decisions in order to attempt to achieve consistency in the application of those relevant legal standards.
Finally, the commission would note that it had no disagreement with the material findings of fact made by the administrative law judge, and that it has substituted its own findings of fact simply in order to be able to set out more fully the reasons it arrived at the same ultimate conclusion and result as that reached by the administrative law judge.
cc:
Attorney Michael J. Mathis
Attorney Michael J. Lund
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