NATURE'S PATHWAYS LLC, 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:

In the quotation of the language of Wis. Stat. § 108.02(12)(a) on page 2 of the decision, the words "in an employment" are deleted.

That part of the FINDINGS OF FACT and CONCLUSIONS OF LAW section beginning with the analysis of condition 1 on page 3 of the decision and continuing through the end of the section on page 7 of the decision, is deleted and the following substituted:

The putative employer (Nature) addresses in its brief only those parts of the ALJ's decision with which it disagrees. However, review of a decision of an administrative law judge is not appellate in nature, but is instead a de novo decision-making process, and any petition for commission review from any party brings the entire case before the commission. See, Dane County Hockey Officials, UI Hearing No. S9800101MD (LIRC Feb. 22, 2000). As a result, the commission is not limited in its review of this case to those aspects of the administrative law judge's decision challenged in the petition. See, Metalor Technologies USA, UI Hearing No. S0800045MD (LIRC Nov. 25, 2008).

 
Wisconsin Statutes § 108.02(12)(a) creates a presumption that a person who provides services for pay is an employee, and it requires the entity for which the person is performing those services to bear the burden of proving that the person is not an employee. See, Dane County Hockey Officials, supra.; Quality Communications Specialists, Inc., UI Hearing Nos. S0000094MW, etc. (LIRC July 30, 2001).

Since it is undisputed that Walla, the individual at issue, performed services for Nature for pay during the time period relevant here, it is Nature's burden to rebut the presumption that she did so as an employee.

The record shows that Walla held a FEIN, and condition 1. is satisfied as a result.

The record also shows that Walla filed business or self-employment income tax returns for the appropriate years, satisfying 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. Princess House, Inc., v. DILHR, 111 Wis.2d 46, 330 NW.2d 169 (1983); Larson v. LIRC, 184 Wis.2d 378, 516 N.W.2d 456 (Ct. App. 1994). See, also, Diane Egan/Health Exams Plus, Inc., UI Hearing No. SO300071JV (LIRC April 15, 2005); Lozon Remodeling, UI Hearing No. 59000079HA (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 putative employer to satisfy its burden.

Although the record shows that Walla used certain of her own materials and equipment to perform services for Nature, it does not show she had a separate office, or even a separate space in her home devoted to a business purpose. In order to establish the existence of a separate home office, it is not sufficient to simply show, as here, that Walla conducted business in her home, using her own resources. Instead, Nature was required to show, through competent evidence, that Walla maintained a separate space in her home devoted primarily to a business purpose, and acquired and utilized the equipment in this office primarily for business reasons. See, Ziburski v. Shop n Check, UI Hearing No. 08201187EC (LIRC April 27, 2009).

To satisfy condition 4., it must be established that the individual operates under contracts to perform specific services for specific amounts of money, and that, under these contracts, she controls the means and methods of performing the services.

The record shows that Walla controlled the means and method of performing the subject editing services.

Condition 4. 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 has periodic opportunities for "arm's length" negotiation with the putative employer as to the conditions of their relationship, and that he 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 record shows that Walla performed services for Nature under a single contract.

The ALJ found that the record did not show that Walla had agreements with other customers. However, the record actually shows that, during 2006, 2007, and 2008, Walla performed editing services only for Nature, but that she performed similar services under contracts with other entities prior to 2006.

The question then becomes whether these earlier contracts would satisfy the multiple contracts requirement of condition 4. In Fisher v. Wispolitics.com, UI Hearing No. 06004206MD (LIRC April 24, 2007), the commission held that contracts with other entities existing outside the time period at issue, but during the term of the individual's relationship with the putative employer, were appropriately considered in analyzing condition 4. Here, however, these other contracts preceded the term of Walla's relationship with Nature. In order to determine the existence of a bona fide business enterprise, however, the time period relevant to condition 4. would be the time period the individual has been performing the type of service at issue. Accordingly, the contracts with other entities prior to 2006 would satisfy the multiple contracts requirement of condition 4.

Condition 4. is 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 generally requires qualification of the expenses.

The record shows that Walla bore all of the expenses except, presumably, certain minimal administrative expenses incurred by Nature to communicate with Walla and to compensate her. Even though few of the expenses were quantified in the record, it is obvious that Walla bore the main expense, and condition 5. is satisfied.

Condition 6. requires liability by the individual for a failure to perform satisfactorily. The fact that Walla's agreement with Nature included an indemnification provision establishes that this condition is satisfied. See, MSI Services, Inc., UI Hearing No. S0600129AP (LIRC Sept. 5, 2008).

Condition 7. requires that workers receive compensation for the services they perform on a commission, per-job, or competitive-bid basis and not on any other basis.

The ALJ held that, because Walla's agreement with Nature provided that she be paid $400 each month, her compensation was in the form of a salary rather than in one of the forms specified in the statutory language. Nature argues, however, that Walla was compensated on a per-job basis because she was paid $400 every time she completed a job, a job consisted of the editing of an individual publication, and one individual publication was completed and issued each month. The commission agrees with the ALJ that Walla's compensation was more akin to a salary than to compensation on a per-job basis. Condition 7. is not satisfied 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 Walla of more in pay for her services than she was required to spend on costs she incurred in performing such services would constitute "realiz[ing] a profit. . .under contracts to perform services." However, given that Walla was guaranteed payment every month and incurred only nominal expenses, the record does not support a conclusion that, over the term of her contract with Nature, she could suffer a loss within the meaning of condition 8. See, Lozon Remodeling, supra. (with an assured amount of remuneration per unit of work, claimant could not suffer a loss for purposes of condition 8.); Dane Co. Hockey Officials, supra.; Fisher, 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 she was not performing work through the putative employer, such as the cost of an office lease, professional fees, or liability insurance.

The only costs incurred by Walla that could arguably qualify as recurring business expenses are her monthly phone and internet costs. In order for these costs to satisfy condition 9, however, the record would have to show that Walla's phone and internet access were used exclusively for business purposes. See, Start Renting, Inc., UI Hearing No. S0800059MD (LIRC May 15, 2009), aff'd sub nom., Start Renting, Inc., v. LIRC and DWD, Case No. 09-CV-2872 (Wis. Cir. Ct. Dane Co., Oct. 29, 2009). The record does not establish this. As a result, condition 9. is not satisfied.

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 have been 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, The Floor Guys, UI Hearing No. S9900063W1J (LIRC Feb. 22, 2000). The record does not establish that Walla had put a significant investment at risk.
Nature argues that Walla's $2,500 investment in computer equipment is sufficient to satisfy condition 10. However, the record reflects that this is not what Walla had actually invested in computer equipment, but instead what she would invest if she were to purchase the type of replacement equipment she wanted. Moreover, the record does not show that Walla was at risk of losing her investment in her equipment.

Condition 10. is not satisfied.

In summary, only conditions 1., 2., 4., 5., and 6. 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 Walla performed services for Nature 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, Nature's Pathways LLC is liable for contributions and related interest in regard to the services performed by the subject individual for the time period at issue, and this matter is remanded to the department to calculate Nature's Pathways LLC's liability for tax contributions and interest consistent with this decision.

Dated and mailed February 5, 2010
natures . smd : 115 : 5 EE 410 EE 410.04a

/s/ James T. Flynn, Chairperson

/s/ Robert Glaser, Commissioner

/s/ Ann L. Crump, Commissioner

cc: Attorney Kevin L. Eismann
Attorney Michael J. Mathis (Bureau of Legal Affairs)

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uploaded 2010/02/10