RICHARD E. WENZEL, Employee
SCHOOL DISTRICT OF STRATFORD, 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 issue in this case is whether certain sports officiating services performed by the claimant in his base period for School District of Stratford were performed by him as an employee or an independent contractor.
The department determined that the claimant performed his services as an independent contractor, and the ALJ affirmed that determination. The claimant has petitioned for review, asserting that he performed his services as an employee of the school district. (1)
Because the putative employer is a public school district, the applicable tests for employee status are those found in § 108.02(12)(c), which provides in effect that
an individual who provides services for pay will be considered an employee unless the employing unit satisfies the department that:
1. 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. such services have been performed in an independently established trade, business or profession in which the individual is customarily engaged.
The claimant has worked as game official in interscholastic sporting events in both basketball and softball for several years. He continues to work in that capacity.
The claimant works for a designated fee for each game that he officiates. In order to perform officiating work, he is obligated to be licensed through the Wisconsin Interscholastic Athletic Association. He is free to perform officiating duties for entities other than the employer, and he has done so. The claimant is provided a list of scheduled athletic events which he picks and chooses to perform his officiating duties.
The witness for the school district testified that the claimant does not act under the supervision of anybody at the school, other than the rules that the WIAA puts out.
The ALJ stated in his decision that the claimant "expressed the belief that he was free of the direction and control over the performance of his duties both in contract and in fact". The commission finds in the synopsis of the hearing no indication of testimony by the claimant expressly to this effect. It assumes that this was a reference to the testimony of the claimant to the effect that, with respect to supervision and direction, if he makes calls in a game that the school doesn't like, he will get told about it, but that there's probably no other way that the school can look at his work other than not liking his calls. The claimant also testified that he is not under any obligation to maintain any particular level of physical fitness to do his job.
The commission concludes, in agreement with the ALJ, that in this case the foregoing evidence supports a finding of freedom from direction and control sufficient to satisfy § 108.02(12)(c)1.
The remaining question is whether it was established that the claimant performed his services in an independently established trade business or profession in which he was customarily engaged.
In Keeler v. LIRC, 154 Wis. 2d 626 at 632-634 (1990), the Wisconsin Court of Appeals adopted a five-factor method of analyzing the question of whether a worker's services are performed as part of an independently established trade, business, or profession in which the worker is customarily engaged. These factors were described by the court in this way:
1. Integration. This factor is best explained by example as the court did in Moorman Mfg. Co. v. Industrial Comm'n, 241 Wis. 200, 5 N.W.2d 743 (1942). 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 [Inc. v. DILHR], 111 Wis. 2d at 46; 330 N.W.2d at 169 [(1983)], 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 [Insurance] Act would suggest that the dependent person have access to unemployment compensation benefits.
5. Proprietary interest. In Transport Oil [Inc. v. Cummings], 54 Wis. 2d at 256; 195 N.W.2d at 649 [(1972)], 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 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.
With respect to the question of integration, the ALJ found, and the commission agrees, that the clamant provided a vital role in officiating at athletic events. The ALJ reasoned, however, that the claimant's role in officiating at athletic events was not integrated into the employer's role in fielding an athletic team for such events, that by necessity, what the employee did was explicitly outside of that function, and that the services he performed were as much for the opposing team as for the employer. Based on this, the ALJ concluded that the claimant's services were not truly integrated into the employer's business.
The commission believes that the ALJ's legal conclusion that this did not constitute "integration" as contemplated by the Keeler court, was erroneous. That conclusion was at odds with the decisions that have been rendered regarding sports officials' status under § 108.02(12)(c), Wisconsin Soccer Association (LIRC, Dec, 7, 2007), and Milwaukee Kickers (LIRC, Oct. 23, 2008). Even in the circuit court decision reversing the ultimate outcome in LIRC's Wisconsin Soccer Association decision - a circuit court decision which the ALJ here looked to - the circuit court agreed that the services of the soccer officials involved in that case were integrated with the business of the putative employer. Wisconsin Soccer Assoc. v. LIRC and DWD (Wis. Cir. Ct., Milwaukee Co., July 22, 2008).
The distinction drawn by the ALJ here between the school district's activity in fielding a team for a sporting event, and the claimant's activity in officiating that event, is not persuasive, because it is inconsistent with the clear approach reflected by the "tinsmith" example used by the Keeler court. In the language of the Keeler tinsmith example, the question is whether an individual's activities are "totally unrelated to the business activity conducted by the company retaining his services" and whether those services "do not directly relate to the activities conducted by the company retaining these services". This simply cannot be said here. The two activities which the ALJ attempts to contrast, far from being totally unrelated, are closely and directly related. Both are directly involved with the sporting event. In addition, the ALJ's rationale overlooks the fact that the role of the school district was not solely in fielding a team in the sporting event; it also included hosting that event and providing all of the things that would be necessary for the two teams to play the game -including officials to call the game.
The result of analysis of the "integration" factor is thus more consistent with the claimant being an employee than an independent contractor.
With respect to advertising or holding out, the ALJ found, and the commission agrees, that it was not shown that the employee has been active in soliciting new work or has done anything overtly to promote himself as a game official. The ALJ also found, that the claimant had performed similar services for other school districts. The commission agrees; the evidence was that the claimant had officiated for the Medford School District, although he also testified that he very seldom did any other officiating.
The ALJ did not expressly state whether he concluded that analysis of the "advertising or holding out" was more in favor of the claimant being an employee or an independent contractor. He concluded only that the claimant had "made himself available for the small class of customers who could use his services, and indeed has performed services for other school districts".
By using this phrasing, the ALJ appears to have been suggesting a rationale like that relied on by the circuit court in the Wisconsin Soccer Assoc. case, in which the court opined that under Keeler, offering, advertising or holding out of services to multiple members of a relevant economic community indicated the existence of an independent business.
Significantly, though, the court in Wisconsin Soccer Assoc. also found that there was in that case "overwhelming" evidence in the record of significant holding out or advertising via word of mouth, internet, email, and person to person both by the vast majority of referees who worked the State Cup games and the soccer referee community at large.
The point of the court's analysis of this factor in Wisconsin Soccer Assoc. was that even though the target community to which an individual held themselves out might be a limited one when compared to the public at large, when that was in fact the "relevant" community involved in the consumption or use of the services at question, that was what mattered. There still has to be some evidence of holding out. In Wisconsin Soccer Assoc., there was: as the court noted, there was evidence of officials advertising or publicizing their availability, and trying to find or drum up work by a variety of means. Here, there is not. The only evidence here bearing on holding out, was that the putative employer's athletic director would contact the claimant, and that the claimant might get a call to pick up a game at some school other than Stratford or Medford. Both of these, of course, involve people contacting the claimant, not the claimant holding himself out to or contacting prospective customers. The fact that that the claimant agreed to do work which was offered to him by those district does not rise to the level of holding out.
The result of analysis of the "advertising or holding out" factor is thus more consistent with the claimant being an employee than an independent contractor.
With respect to the issue of entrepreneurial risk, there was no showing that the claimant could lose money in performing his officiating duties. There was no "entrepreneurial risk" associated with the claimant's activities. The result of analysis this factor is thus more consistent with the claimant being an employee than an independent contractor.
With respect to the issue of economic dependence, the pay that the employee received was incidental to his primary source of income. In this instance, there was little or no economic dependence upon the employer for the performance of the duties he was engaged in. The result of analysis of the "economic dependence" factor is thus more consistent with the claimant being an independent contractor than an employee.
Finally, regarding the fifth Keeler factor, proprietary interest, the ALJ acknowledged that the claimant had no business which could be sold or given away, but he opined that "as a licensed individual, the work he performed was in the nature of a profession limited to only a certain class of individuals." He concluded that while any proprietary interest would have been "slight" he could not find that it did not exist.
Initially, the commission would note that this reverses the appropriate burden of proof here. The question is not whether there is enough evidence to allow the ALJ to find that a proprietary interest did not exist; the question is whether there is enough evidence to allow the ALJ to find that a proprietary interest did exist.
The ALJ's discussion of this factor suggests that he equated being "a licensed individual" who is "perform[ing] [work] ... in the nature of a profession limited to only a certain class of individuals," with having some degree of proprietary interest. This may have been a reference to the discussion of this
Keeler factor by the court in Larson v. LIRC, 184 Wis.2d 378, 391 (Ct. App. 1994). As was noted by the court in
Larson, 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." However, that is not the same as saying that the mere fact that one performs a kind of work limited to only a certain class of individuals, is sufficient to establish a proprietary interest.
Application of the Keeler factors -- The Keeler factors are not strict tests but instead guidelines, to be analyzed in light of the public policy of more fairly sharing the economic burdens of unemployment for those economically dependent on another, not those who pursue an independent business. The weight given to the various factors and the importance of each varies according to the specific facts of each case. Keeler, 154 Wis. 2d at 634. In this case the economic independence of the claimant was a factor suggesting independent contractor status. However, even though that was the case, and even if the nature of the claimant's activities were considered to satisfy the proprietary interest test under the theory that he had a business dependent on his own particular talents, it is still the case that analysis of the integration, advertising or holding out and entrepreneurial risk factors are all more consistent with the claimant being an employee than an independent contractor. Considered overall, the application of Keeler here requires a conclusion that the claimant was not an independent contractor, but an employee.
The commission therefore finds that the claimant performed services for the employer as an "employee", within the meaning of Wis. Stat. § 108.02(12), during the calendar quarters at issue herein.
DECISION
The decision of the administrative law judge is reversed. Accordingly, the wages paid to the employee by the employer in the calendar quarters at issue herein shall be included in the department's computation of the employee's base period wages for computing potential benefit eligibility.
Dated and mailed March 26, 2009
wenzri . urr : 110 : 1 EE 413
/s/ James T. Flynn, Chairperson
/s/ Robert Glaser, Commissioner
/s/ Ann L. Crump, Commissioner
It appears that the ALJ may have decided this case as he did because he took the circuit court's decision in the Wisconsin Soccer Assoc. v. LIRC & DWD case as being controlling on cases involving sports officials. Thus, the ALJ said:
The appeal tribunal notes that in a recently issued case dealing with a very similar issue, Wisconsin Soccer Assoc. v. LIRC and DWD (Wis. Cir. Ct., Milwaukee Co., July 22, 2008), it has been determined that soccer referees perform their services as independent contractors. The appeal tribunal finds the analysis in that case to be persuasive and concludes that in this instance, the employee also performed his services as an independent contractor rather than as an employee of the employer.
However, the circuit court's decision in Wisconsin Soccer Association did not depend only on a particular legal analysis; it also depended on the specific evidence which was in the record in that case about the manner in which those soccer referees performed their services. The evidence in Wisconsin Soccer Association was much stronger than the evidence here. In that case, there was "overwhelming" evidence in the record of significant holding out or advertising via word of mouth, internet, email, and person to person; here, there is essentially no evidence of advertising or holding out. In addition, in Wisconsin Soccer Association the court noted that the referees incurred significant expenses including training and certification costs, transportation, and uniform and equipment costs, and that they ran a significant risk of loss. Here, there was no evidence of expenses other than the cost of a uniform shirt and pants and a whistle, and transportation, and, as the ALJ found, no showing that the claimant could lose money. There is no evidence in the record here quantifying that expense, so it clearly cannot be found that it was "significant", and it cannot be found that there was any possibility of an actual, much less "significant", loss.
Wisconsin Soccer Association did not constitute a blanket ruling that every individual performing services as a sports official is ipso facto an independent contractor. There must still be actual evidence in the record sufficient to establish the kinds of facts which the Wisconsin Soccer Association decision found to be indicative of independent contractor status. The record here falls short of that.
NOTE: This is a benefit case under Wis. Stat. § 108.09. Its effect is limited to resolving a specific issue relating to this claimant's benefit claim. The issue has to do with whether earnings from School District of Stratford should be included in determining the amount of UI benefits the claimant may be entitled to. The total amount of a claimant's entitlement to UI benefits depends on the amount of the claimant's total earnings from services as an employee during his or her base period. The issue in this case, as to whether the claimant performed his services for School District of Stratford as an employee or as an independent contractor, arose because it was necessary to determine the total amount of claimant's entitlement to UI benefits amount.
The evidence from the hearing in this matter was that the claimant's earnings from School District of Stratford during his base period were in the amount of not more than several hundred dollars. However, the commission notes that records of the department contained in the file in this matter reflect that for this same base period, the claimant had significant wages from another employer. The amount of these wages was such that the relative contribution of School District of Stratford to the claimant's total base period wages, will be well below 5%. This is significant, because Wis. Stat. § 108.07(3m) provides that the department shall not make any charge to the UI account of an employer for benefits paid a claimant who had base period wages from that employer that amounted to less that 5% of the claimant's total base period wages.
It should also be noted, that is not a tax case under Wis. Stat. § 108.10. By virtue of Wis. Stat. § 108.101, the outcome in this case cannot be considered binding in any tax case under § 108.10 which may arise in the future.
For these reasons, the outcome of this case will not have any adverse effects on the material interests of School District of Stratford.
*****************
Editor's Note: See Elie v. City
Business USA LLC, UI Dec. Hearing No. 11608771MW (LIRC March 28, 2012)
and Schumacher v. Spar Marketing Services Inc., UI
Dec. Hearing No. 11203182EC (March 21, 2012) references to how the economic dependence analysis in Wenzel is at odds with the court of appeals' decision in Larson;
with the commission noting it is bound by and follows Larson in its analysis of the economic dependence factor.
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