LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

STRUCK & IRWIN FENCE INC, Employer

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Hearing No. S9700192MD, Account No. 243931

An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter finding that Danuta Iwaniuk performed her services as an employe. A timely petition for review was filed. On October 30, 1998, the commission reversed and held that Ms. Iwaniuk performed her services as an independent contractor. On November 25, 1998, the commission set aside its original decision to reconsider Ms. Iwaniuk's employment status in 1995 which was prior to the change in the independent contractor statute.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on the applicable law, records and evidence in this case, the commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The employer is a Wisconsin corporation engaged in the sale and rental of scaffolding equipment. In 1994, it started using the services of Danuta Iwaniuk to perform cleaning services at its business location. Ms. Iwaniuk performed these services during the four quarters of 1995 and the first two quarters of 1996.

Danuta Iwaniuk reported her income as a cleaner on Federal self-employment income tax forms for the previous tax year. She did her work on her clients' premises. She provided the equipment for her cleaning jobs including cleaning supplies, bucket, vacuum cleaner, mop, and rags, as necessary. In some instances, she used client's supplies and equipment. During the course of her tenure with the employer, she began using its vacuum cleaner and some other supplies. She performed her services when the building was empty at her own discretion. She requested assistance from friends and relatives as necessary to complete her responsibilities and paid for these services as necessary. The employer had no role in hiring or paying her assistants. She paid her own and her workers' transportation to the work site and her workers' compensation and liability insurance. She had business cards, a yellow pages ad, and advertised in the newspaper when she needed additional clients. During the period she performed services for the employer, she performed services for other clients and in 1995 earned more than half of her income from other clients. Prior to being hired by the employer she prepared an estimate for the cost of her services. She was paid weekly based on the number of visits.

For services performed prior to January 1, 1996, an individual who is a performing services will be found to be an employe unless that individual is shown to have been free from the employing unit's control or direction over the performance of her services both under her contract and in fact, and that the services have been performed in an independently established trade, business, or profession in which the individual is customarily engaged. Wis. Stat. § 108.02 (12).

The commission finds that Ms. Iwaniuk meets this test. She provided her cleaning services without supervision after the employer had left the premises. The employer did not control the details of the work. Her compensation did not change based on the number of hours it took to perform her services each visit. She was free to hire others to do the work if she wished and had done so in the past. She therefore performed her cleaning services free from the employer's direction and control. The remaining issue is whether Ms. Iwaniuk satisfies the independently established business factor, in which case she is an independent contractor for unemployment insurance purposes.

Five interrelated factors must be taken into account in determining whether the independently established statutory condition has been satisfied. Those factors are (1) integration, (2) advertising or holding out, (3) entrepreneurial risk, (4) economic dependence and (5) proprietary interest. Keeler v. LIRC, 154 Wis. 2d 626, 633-634, 453 N.W.2d 902 (Ct. App. 1990). The factors should not be mechanically applied. 154 Wis. 2d at 632.

In this case, Ms. Iwaniuk's cleaning services were not an integrated function of the employer's scaffolding business, but were solely related to maintaining its business premises. She held herself out as a cleaning service, had a yellow pages ad, business cards, and advertised in the paper for clients when she needed work. She was not economically dependent upon the employer because she earned half her income from other clients and advertised as necessary when she needed more work. To a lesser degree, she also had a proprietary interest in her clients' good will, her customer list, and her equipment. She assumed the risk of the business if her expenses in hiring others, buying supplies, and paying insurance exceeded the amount she estimated it would cost to provide the services when she took on a new client.

For services provided after December 31, 1995, in order for an employer to demonstrate services are provided as an independent contractor, it must satisfy the department that

1. The individual:

a. Holds or has applied for an employer identification number with the federal internal revenue service; or

b. Has filed business or self-employment income tax returns with the federal internal revenue service based on such services in the previous year; and

2. The individual meets 6 or more of the following conditions:

a. The individual maintains a separate business with his or her own office, equipment, materials and other facilities.

b. The individual operates under contracts to perform specific services for specific amounts of money and under which the individual controls the means and method of performing the services.

c. The individual incurs the main expenses related to the services that he or she performs under contract.

d. 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.

e. 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.

f. The individual may realize a profit or suffer a loss under contracts to perform services.

g. The individual has recurring business liabilities or obligations.

h. The success or failure of the individual's business depends on the relationship of business receipts to expenditures.

Wis. Stat. § 108.02(12)(a), (b).

Ms. Iwaniuk filed a self-employment tax return for her cleaning business in the preceding year and thereby satisfied the first test of the independent contractor provision. The remaining issue before the commission is whether the employer demonstrated that she met 6 of the 8 factors remaining in Wis. Stat. § 108.02(12)(b).

Ms. Iwaniuk satisfies the first factor by maintaining a separate business with equipment, materials and other facilities. In evaluating this factor the commission considers what is reasonable in a particular case or industry. The employe did her work on her clients' premises since she was a cleaner, so an office would be unnecessary. However the employe provided the equipment for her jobs as necessary including cleaning supplies, bucket, vacuum cleaner, mop, and rags. While she currently uses some employer provided chemicals, paper towels, garbage bags and a vacuum cleaner, the circumstances of her clients vary and she has the equipment and materials available which she supplies as needed.

Ms. Iwaniuk also satisfies the second factor. She operates under a verbal open ended contract to perform specific weekly cleaning services for specific amounts of money and she has complete discretion over the means and method of performing her cleaning services. She gets assistance from friends and relatives as necessary to complete her responsibilities and has paid for these services.

Ms. Iwaniuk satisfies the third factor. She incurs the main expenses related to the services that she performs under her contract. She bears many of the costs of the supplies and equipment. She pays her own and her worker's transportation to the work site and her workers' compensation and liability insurance. She has business cards, and a yellow pages ad, and advertises in the newspaper when she needs additional clients. Finally she employes others to help as necessary.

Ms. Iwaniuk satisfies the fourth factor. She is responsible for the satisfactory completion of her cleaning services and is liable for a failure to satisfactorily complete the services. The employe indicated she has been complained to occasionally about her work which she then was obligated to correct.

Ms Iwaniuk also satisfies the fifth factor. She receives compensation for services performed under a contract on a per-job basis and not on any other basis since she is paid per visit each week, the equivalent of a per job basis in this setting. Her compensation does not change based on the number of hours it takes to perform her services each visit.

Ms. Iwaniuk does not realize a profit or suffer a loss under her contract to perform services. There is no profit or loss risk under the contract.

Ms. Iwaniuk has recurring business liabilities or obligations arising from her insurance costs and cyclical advertising costs. These satisfy this requirement.

Finally, the success or failure of Ms. Iwaniuk's business depends on the relationship of business receipts to expenditures. This employment is not a hobby. If she hires help, has equipment break down or her insurance goes up, her business could become unprofitable and fail. She satisfies this final factor.

After evaluating the above factors the commission concludes that this individual meets more than the minimum six factors and provides her services as an independent contractor. She runs an independent business and should be excluded from the employer's payroll.

The commission therefore finds that the services of Danuta Iwaniuk were not performed for the employer in employment, and that payments she received are not taxable for unemployment insurance purposes, within the meaning of Wis. Stat. § 108.02(12) and 108.02(26).

DECISION

The decision of the administrative law judge is reversed. Accordingly, payments made to Danuta Iwaniuk are not taxable for unemployment insurance benefits for the quarters more particularly set forth in the determination. This matter is remanded to the department to recalculate the employer's correct liability for the quarters at issue, if not otherwise resolved.

Dated and mailed: February 26, 1999
strucir.srr :178 : 1  EE 410  EE 410.03 EE 411

/s/ David B. Falstad, Chairman

/s/ Pamela I. Anderson, Commissioner

/s/ James A. Rutkowski, Commissioner

MEMORANDUM OPINION

The commission did not consult with the ALJ prior to reversing. The commission's decision is not based on any differing credibility assessment but arises from a different legal conclusion when applying the law to essentially the same facts.

cc: HOWARD C ANUNSON CPA
SUBY VON HADEN & ASSOCIATES SC

ATTORNEY PETER ZEEH
ENFORCEMENTS SECTION

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