Wis.LIRC UC Decision: Ebenhoe, Jacob - January 20, 2017 - EE 409 – EE450.01 – EE 450.02f – EE 450.02i - CL did not perform services for, and was not an employee of the EU, a transportation network company. The services were not performed “for” the EU, the EU simply provides a technology platform for drivers and passengers to use to connect with each other. In reaching this conclusion, the LIRC referenced specific provisions in Wis. Stat. ch. 440, subch. IV (defining a transportation network company and its relationship with participating drivers), within the criteria set out by the courts (Acuity Mutual and Kress), and the LIRC's most recent decision in Advantage Research Inc. The LIRC also addressed the statutory employee test found at Wis. Stat. § 108.02(12)(bm), finding that even if the CL performed services for the EU, he did not do so as a statutory employee, but instead as an independent contractor. The driving services were not integrated into the EU's technology business. The CL performed driving services under a similar agreement with another entity and was not economically dependent on the EU.

State of Wisconsin

Labor and Industry Review Commission


Jacob Ebenhoe	Unemployment Insurance Decision^{^[1]}
Claimant

Lyft Inc.
Respondent	Dated and Mailed:

Hearing No.16002409MD	January 20, 2017
Hearing No.16002409MD

Respondent Lyft's request for a stay of this matter is denied. The decision of the administrative law judge is affirmed, and the findings of fact and conclusions of law are hereby modified to conform to the findings of fact and conclusions of law below. Accordingly, payments made to the claimant as a Lyft driver may not be used in calculating the claimant's benefit entitlement. The claimant is not required to report these payments to the department on his weekly claims.

By the Commission:
	/s/
	Laurie R. McCallum, Chairperson

	/s/
	C. William Jordahl, Commissioner

	/s/
	David B. Falstad, Commissioner

Procedural Posture

This case is before the commission to consider the employee's eligibility for unemployment insurance benefits. An administrative law judge (ALJ) for the Unemployment Insurance Division of the Department of Workforce Development (DWD) held a hearing and issued a decision. A timely petition for commission review was filed by DWD. Respondent Lyft requested that these proceedings be stayed pending the outcome of a related unemployment tax liability audit. The commission denies the request for a stay. The commission has considered the petition, and it has reviewed the evidence submitted at the hearing. Based on its review, the commission makes the following:

Findings of Fact and Conclusions of Law

1. The respondent [Lyft] is a transportation network company headquartered in California.

2. Lyft has developed a smart phone application which connects individuals searching for automobile transportation with individual drivers available to provide such transportation.

3. In order to provide driving services through the Lyft application, an individual must complete an application, pass a criminal background check, and enter into a Terms of Service Agreement (exh. 1) with Lyft. This agreement requires drivers to have a current valid driver's license, to have automobile insurance which comports with the requirements of state law, and to maintain their vehicle. This agreement contains a provision which holds Lyft harmless for the acts of the drivers.

4. A driver may accept or reject a request from a potential passenger. Once the transportation service is completed, the passenger pays a third-party entity [Stripe] by credit card through the Lyft application, and Lyft receives 25% of the payment and the driver receives 75%.

5. Once the service is completed, consistent with Wisconsin law, the passenger is given the opportunity to rate the driver. Once the service is completed, Lyft requires that the driver rate the passenger.

6. Drivers may use the Lyft logo on their vehicle but are not required to do so in Wisconsin.

7. The claimant [Ebenhoe] has been a Lyft driver since April 2016. Ebenhoe uses his personal vehicle, smart phone, and other equipment to perform these driving services; is required to perform these services personally; chooses the location in which he will provide driving services by specifying the areas in which he will accept driving requests; receives no training or instructions from Lyft; and reports to Lyft only when an individual driving service has been completed.

8. Ebenhoe bears the cost of: operating and maintaining the personal vehicle he uses to provide the driving services, vehicle insurance, smart phone, and data access plan.

9. Since December 2015, Ebenhoe has been providing driving services through Uber, another transportation network company.

10. Ebenhoe does not perform services for Lyft within the meaning of Wis. Stat. §108.02(12)(a).

11. Ebenhoe does not qualify as a statutory employee within the meaning of Wis. Stat. §§108.02(12)(a) and (bm).

Memorandum Opinion

Request for stay

Lyft requested a stay of these proceedings, which arise under Wis. Stat. § 108.09, pending the outcome of a related unemployment insurance tax liability audit arising under Wis. Stat. § 108.10. The commission denies the request to stay these proceedings. First, this benefits case, contrary to Lyft's argument, does have a practical impact. The issues in this case affect not only the wages the claimant is required to report in filing any claims for unemployment insurance, but also the wages that can be used to compute any benefit to which he may be entitled. In addition, Wis. Stat. § 108.101(3) provides that "no finding of fact or law, determination, decision or judgment with respect to rights or liability under s. 108.10 is binding in an action or proceeding under s. 108.09."[2]

Statutory definition of “employee”

Wisconsin Stat. § 108.02(12)(a) defines an "employee" as "any individual who is or has been performing services for pay for an employing unit, whether or not the individual is paid directly by the employing unit, except as provided in par. (bm), (c), (d), (dm) or (dn)." This provision 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.[3]

The commission notes that the parties understood Ebenhoe would be performing his services as an independent contractor and not as an employee, and Lyft would be issuing him a 1099 at the end of the tax year as a result. However, it has been a longstanding tenet of unemployment law in Wisconsin that an individual's status as an independent contractor or a statutory employee is determined by statute, and not by the terms of a private agreement.[4]

In addition, the statutory provision at issue, Wis. Stat. § 108.02(12)(bm), specifically states that an employing unit must meet the statutory criteria "by contract and in fact." In other words, a contract (or agreement) between the parties is not sufficient alone to establish that independent contractor criteria are met.

Performance of services “for” employing unit

Lyft in effect argues that the driving services at issue are not performed “for” Lyft within the meaning of Wis. Stat. §108.02(12)(a) because Lyft simply provides a technology platform for drivers and passengers to use to connect with each other. The commission agrees.

The commission finds Lyft's argument compelling given the way in which the roles of a “transportation network company” such as Lyft, and a “participating driver” such as Ebenhoe are defined in Wis. Stat. ch. 440, subch. IV. A “transportation network company” is defined as a business that, for compensation, uses a digital network to connect passengers to participating drivers. Wis. Stat. § 440.40(6). This provision goes on to exclude from the definition of “transportation network company” taxicabs, limousines, shuttles, or other for-hire vehicle services. A “participating driver” is an individual who “[p]ays a fee to a transportation network company to be connected to a passenger.” Wis. Stat. § 440.40(3). Pursuant to Wis. Stat. §440.41(2), a transportation network company is “not considered to control, direct, or manage a participating driver,” except as provided in Wis. Stat. ch. 440, Subch. IV, or by contract between the company and the driver.

As the commission stated in Advantage Research, Inc., UI Dec. Hearing No. S1500294MW (LIRC Oct. 21, 2016),[5] citing Acuity Mutual Ins. Co. v. Olivas, 298 Wis.2d 640, 726 N.W.2d 258 (2007), and Kress Packing v. Kottwitz, 61 Wis. 2d 175, 182, 212 N.W.2d 97 (1973):

…the most important consideration in resolving questions as to the identity of the entity for which services are being performed is the presence or absence of a right to control the details of the work.

Here, the statutes specifically provide that a transportation network company such as Lyft does not control, direct, or manage the work of a participating driver such as Ebenhoe, but instead provides a technology platform through which a participating driver pays a fee to be connected to a passenger. Given this expression of legislative intent, the commission finds that Ebenhoe does not perform services for Lyft within the meaning of Wis. Stat. § 108.02(12)(a).

Statutory employee test

Even if Ebenhoe performed services for Lyft within the meaning of Wis. Stat. §108.02(12)(a), or even if Wis. Stat. subch. IV, ch. 440, did not apply here, the record does not support a conclusion that Ebenhoe performed driving services using the Lyft application as a statutory employee.

Wisconsin Stat. § 108.02(12)(bm) sets forth a two-part test to determine whether an individual is an employee. The first part of the test provides five important but not exclusive factors to consider in determining whether the individual performed his services free from the control or direction of the employing unit. Each factor is a separate indicator of an employing unit's exercise of direction or control over the individual, none of them are essential in any case, and each factor may be weighted differently depending upon the facts of each case.

Wis. Stat. § 108.02(12)(bm)1. - Freedom from control or direction by the employing unit

a. Whether the individual is required to comply with instructions concerning how to perform the services. Ebenhoe independently operated and maintained his vehicle, determined his route, selected which passenger requests for service to accept, and decided the hours he would drive. DWD argues that the fact that Lyft, in its Terms of Service agreement, required Ebenhoe to comply with state law demonstrates that he was required to comply with instructions within the meaning of this provision. First, these are requirements imposed by state law, not by Lyft. Moreover, these requirements relate primarily to factors other than how Ebenhoe's driving services were to be performed. Finally, these are requirements with which both employees and independent contractors would be expected to comply. See, e.g., Acute Care, Inc., UI Dec. Hearing No. S0500090MD (LIRC Feb. 18, 2005). This factor is met.

b. Whether the individual receives training from the employing unit with respect to the services performed. The only training Ebenhoe received related to the use of the smart phone application for connecting with passengers and receiving payment. Otherwise, Ebenhoe was an experienced driver familiar with the technology to map a route. This factor is met.[6]

c. Whether the individual is required to personally perform the services. The record establishes that Ebenhoe was required to personally perform the driving services. This factor is not met.

d. Whether the services of the individual are required to be performed at times or in a particular order or sequence established by the employing unit. Ebenhoe selected which passenger requests for service to accept, and decided the hours he would drive. This factor is met.

e. Whether the individual is required to make oral or written reports to the employing unit on a regular basis. The only reports Ebenhoe was required to make were those confirming the completion of a passenger service request, including rating the passenger. Reports confirming the completion of a job or assignment are not made on a “regular” basis, and are not the types of reports contemplated by this factor.[7] This factor is met.

The commission finds that four of the five factors are met. This would be sufficient for the commission to find that Ebenhoe is not performing services under Lyft's direction and control. The five factors are not exclusive, however.

In addition, as discussed above, transportation network companies such as Lyft are regulated by Wisconsin law. Wis. Stat. ch. 440, subch. IV. Wisconsin Statutes §440.41(2), states, as relevant here, that “[a] licensed company is not considered to control, direct, or manage a participating driver or that participating driver's personal vehicle used for engaging in transportation network services, except as provided in this subchapter or in a written agreement between the licensed company and the participating driver.” Lyft qualifies as a “licensed company” within the meaning of Wis. Stat. § 440.40(1), and Ebenhoe as a “participating driver” within the meaning of Wis. Stat. § 440.40(3). Neither the terms of the agreement between Ebenhoe and Lyft, nor the remaining language of Wis. Stat. ch. 440, subch. IV, set forth an applicable exception to Wis. Stat. § 440.41(2).

DWD argues that the fact that Lyft set the amount of the fares charged passengers demonstrates direction and control by Lyft over its drivers. Although this could be regarded as an indicia of control, given the delineation of the nature of the relationship between Lyft and its drivers by the Legislature in Wis. Stat. ch. 440, as well as the fact that four of the five statutory factors are met here, the commission finds that Ebenhoe performed his services free from control or direction by Lyft.

Both parts of the statutory test, i.e., lack of direction and control and economic independence, must be satisfied for an individual to be considered an independent contractor rather than a statutory employee. The commission finds that the first part of the test is met, i.e., Lyft does not exercise direction and control over Ebenhoe.

The commission next addresses whether it has been established that six of the nine factors in the second part of the test have been met, i.e., that Ebenhoe is economically independent of Lyft.

Wis. Stat. § 108.02(12)(bm)2. - Economic independence and entrepreneurial risk

a. The individual advertises or otherwise affirmatively holds himself or herself out as being in business.

This factor can be met if it is established that the individual is advertising his services, such as through business cards, posting notices in the newspaper or elsewhere, or having an actual place of business. It can also be met if the individual is affirmatively holding himself out as being in business or performing particular services, by taking some kind of action to make the public, in particular those entities who would be interested in his services, aware of his availability to perform those services. See, Keeler v. LIRC, 154 Wis. 2d 626, 633 (Ct. App. 1990)(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).

Through his availability on both the Lyft and Uber smart phone applications, Ebenhoe affirmatively holds himself out to a certain class of customers, i.e., passengers seeking a digital connection to transportation services, as being available as a driver.[8] This factor is met.

b. The individual maintains his or her own office or performs most of the services in a facility or location chosen by the individual and uses his or her own equipment or materials in performing the services.

This two-part factor requires that an individual maintain his own office or choose where to perform his services, and that he use his own equipment or materials in performing the services.

Ebenhoe not only used his personal vehicle and smart phone and other equipment to perform these services, but he chose the location of these services by specifying the areas in which he would accept driving requests and only accepting certain requests in that area. This factor is met.

c. The individual operates under multiple contracts with one or more employing units to perform specific services.

As noted in In re Gronna, UI Dec. Hearing No. S9900063WU (LIRC Feb. 22, 2000), the requirement of multiple contracts is based on sound legislative policy, as it "tends to show that an individual is not dependent upon a single, continuing relationship that is subject to conditions dictated by a single employing unit." The commission has consistently stated that this requirement may be satisfied by multiple contracts with separate entities or by multiple serial contracts with a putative employer if it is established that those contracts 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.

Although Ebenhoe provided driving services under a single agreement with Lyft, he also provided driving services under an agreement with Uber. Although DWD argues that Ebenhoe performed these services for Uber as a statutory employee, the record does not establish this fact. This factor is met.

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

Applying this factor 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.[9] Since Ebenhoe bore the costs of operating and maintaining his vehicle, vehicle insurance, smart phone, and data access plan, and paid a fee to Lyft for use of the technology platform,[10] it is obvious that he bore the main expenses related to the driving services at issue. Accordingly, this factor is met.

e. The individual is obligated to redo unsatisfactory work for no additional compensation or is subject to a monetary penalty for unsatisfactory work.

The fact that Ebenhoe's agreement with Lyft included an indemnification/hold harmless provision establishes that this factor is satisfied. See, MSI Services, Inc., UI Hearing No. S0600129AP (LIRC Sept. 5, 2008). This factor is met.

f. The services performed by the individual do not directly relate to the employing unit retaining the services.

This factor relates to the "integration" of the individual's services into the kind of work done by the employing unit. See, Keeler v. Labor & Industry Review Commission, 154 Wis. 2d 626, 453 N.W.2d 902 (Ct. App. 1990).

Referring again to Wis. Stat. ch. 440, subch. IV, Ebenhoe, a participating driver, pays a fee to Lyft, a transportation network company, to connect to a passenger through Lyft's technology platform, a mobile phone application. Lyft is, as a result of these statutory definitions, a provider of technology services utilized in the transportation industry, not a provider of transportation services. A participating driver, such as Ebenhoe, is simply a user of the technology developed and provided by Lyft, for which he pays a fee. Ebenhoe's driving services are not integrated into Lyft's technology business, and this factor is met.

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

The test is whether, over the term of the agreement between Ebenhoe and Lyft, there was a realistic possibility that Ebenhoe could realize a profit or suffer a loss.[11] Since Ebenhoe could realize more in income than he expended in related costs, he could realize a profit. However, since Ebenhoe has the ability to accept or refuse any request for transportation, and could discontinue using the Lyft application at any time if he did not find it profitable, there is no realistic possibility he could sustain a loss over the term of the agreement. This factor is not met.

h. The individual has recurring business liabilities or obligations.

This test requires proof of a cost of doing business that Ebenhoe would incur even during a period of time that he was not performing driving services using the Lyft application.

The commission has interpreted the "recurring business liabilities and obligations" in this factor to involve overhead types of expenses, such as expenses for liability insurance, continuing education expenses, membership dues and other business costs that are of a continuing or recurring nature, regardless of whether a claimant is performing services at the time.[12]

Ebenhoe did not have any recurring business liabilities. The expenses he incurred related to his personal vehicle, cell phone, and data access plan. The commission has consistently held that expenses must be for business purposes alone or they do not qualify as business liabilities or obligations. See, e.g., Start Renting, Inc., UI Dec. Hearing No. S0800059MD (LIRC May 15, 2009). Ebenhoe obviously would not incur the fee charged by Lyft if he were no longer performing driving services using the Lyft application. Ebenhoe's expenses do not satisfy this factor as a result. This factor is not met.

i. The individual is not economically dependent upon a particular employing unit with respect to the services being performed.

The economic dependence factor was addressed and interpreted in a published Court of Appeals decision, Larson v. LIRC, 184 Wis. 2d 378, 392, 516 N.W.2d 456 (Ct. App. 1994), as follows:

[E]conomic dependence is not a matter of how much money an individual makes from one source or another. Instead, it refers to the survival of the individual's independently established business if the relationship with the putative employer ceases to exist.

Ebenhoe performed driving services under an agreement with Uber prior to and during the period of time he performed driving services under an agreement with Lyft, so it is reasonable to assume that he would continue to perform driving services were his relationship with Lyft to end. This factor is met.

Ebenhoe met 7 of the 9 factors set forth in Wis. Stat. § 108.02(12)(bm)2., which exceeds the 6 required to satisfy the second part of the test. As a result, since both parts of the test set forth in Wis. Stat. § 108.02(12)(bm) are met, it must be concluded on this record that, even if Ebenhoe performed services for Lyft, he did not do so as a statutory employee, but instead as an independent contractor.

cc:	Attorney Sarah J Platt

Attorney Andrew J. Rubsam

[1] Appeal Rights: See the blue enclosure for the time limit and procedures for obtaining judicial review of this decision. If you seek judicial review, you must name the following as defendants in the summons and the complaint: the Labor and Industry Review Commission, all other parties in the caption of this decision or order (the boxed section above), and the Department of Workforce Development.

Appeal rights and answers to frequently asked questions about appealing an unemployment insurance decision to circuit court are also available on the commission's website http://lirc.wisconsin.gov.

[2] See, Huckstep v. J & JH Co., UI Dec. Hearing No. 02006946MD (LIRC May 28, 2003).

[3] Quality Commc'n Specialists Inc., UI Dec. Hearing Nos. S0000094MW, S0000095MW (LIRC July 30, 2001).

[4] Roberts v. Indus. Comm'n, 2 Wis. 2d 399, 86 N.W.2d 406 (1957). See also Knops v. Integrity Project Mgmt., UI Dec. Hearing No. 06400323AP (LIRC May 12, 2006); Gamble v. American Benefit Ltd., UI Dec. Hearing No. 04004847MD (LIRC Feb. 15, 2005).

[5] See, also, County of Door, UI Dec. Hearing No. S0500025AP (LIRC March 28, 2007).

[6] Schumacher v. Spar Mktg. Servs., Inc., UI Dec. Hearing No. 11203182EC (LIRC Mar. 21, 2012).

[7] See Rohland v. Go2 IT Group, UI Dec. Hearing No. 12202959EC (LIRC Feb. 14, 2013), aff'd sub nom. Career Connections Staffing Services, Inc. v. LIRC, No. 13-CV-179 (Wis. Cir. Ct. La Crosse Cnty. Oct. 23, 2013); Ziburski v. Castforce, Inc., UI Dec. Hearing No. 13202144EC (LIRC Nov. 22, 2013)(the term "regular" connotes reporting at the end of a specified time interval, regardless of whether the individual job is completed by that date; the commission considers the communication of information at the close of an assignment to be a typical requirement of most working relationships, whether the individual performing the services is an employee or an independent contractor).

[8] Gabris v. PWR Transport LLC, UI Dec. Hearing No. 14001671MD (LIRC Sept. 19, 2014)(listing on craigslist of availability to perform IT services constitutes advertising).

[9] Preferred Financial of Wis., Inc., UI Dec. Hearing No. S0600240MW (LIRC Oct. 23, 2008).

[11] Zabel v. Snyder's of Hanover, UI Dec. Hearing No. 10000988MD (LIRC Sept. 2, 2010).

[12]Clear Choices, Inc., UI Dec. Hearing Nos. S0300202EC, S0300203EC (LIRC Oct. 26, 2005) (expenses that are incurred regardless of the level of actual business activity).