STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)
CARE & COMFORT ASSOCIATES INC, Employer
UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 662009, Hearing No. S9700120MW
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, the positions of all parties, and the applicable law. The commission has reviewed the evidence submitted to the ALJ.
Based on its review, the commission makes the following:
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Petitioner is a corporation solely owned by Lynette E. Kramer, R.N. Ms. Kramer and eleven other individuals provide 24-hour per day specialized nursing care to the corporation's single client. The twelve individuals are registered nurses, licensed practical nurses and, in one instance, a certified nursing assistant.
There is an issue as to whether the petitioner is an employer subject to Wisconsin unemployment insurance law pursuant to Wis. Stat. § 108.02 (13).
It was undisputed that the twelve alleged employes' services and pay were sufficient to satisfy the quantitative tests in Wis. Stat. § 108.02(13)(e), and thereby make petitioner a "subject employer" if the twelve individuals performed their services as "employes" (performed their services in an "employment").
Resolution of the "subject employer" issue therefore depends upon resolution of the issue as to whether the twelve listed individuals are "employes" within the meaning of Wis. Stat. § 108.02 (12).
It is petitioner's position that Ms. Kramer is an independent contractor, not an employe of the corporation or the client. She and the client's family executed a written contract purporting to give her that status. The other care-givers whose employment status is in issue were then recruited by Ms. Kramer. Petitioner asserts that these individuals are also independent contractors rather than employes of the corporation.
It is undisputed that all of the individuals performed services for pay; they are therefore presumed to be employes pursuant to Wis. Stat. § 108.02 (12) (a). The presumption can be overcome by showing that the independent contractor exception in Wis. Stat. § 108.02 (12) (b) applies. In order for that exception to be applicable, two tests must both be met. The putative employer first must show that each of the alleged employes identified themselves to the Internal Revenue Service as either an employer in her/his own right, or as self-employed. These alternate means of meeting the first of the two conjunctive tests are specified in Wis. Stat. § § 108.02 (12) (b) 1. a. and b. Petitioner did satisfy the first of the two conjunctive tests by showing that all twelve individuals had filed self-employment federal income tax returns for 1995.
The dispositive issue, then, is whether petitioner met the second conjunctive statutory test. That test requires a putative employer to show that the individuals' services were performed under conditions that satisfy at least six of the eight criteria for independent contractor status specified in Wis. Stat. § § 108.02(12)(b)2.a.-h. These criteria address the degree of control a putative employer has over the manner in which an alleged employe performs the services in issue.
The Administrative Law Judge (ALJ) found that criteria a., b. and f. (to be discussed below) were not satisfied as to any of the individuals. Accordingly, the Appeal Tribunal Decision held that all of the individuals were employes of the petitioner-corporation, and that the corporation was an employer subject to Wisconsin unemployment law retroactive to January 1, 1996 (the parties had stipulated that this would be the effective date, if liability were established).
Implicit in the Appeal Tribunal Decision is the mathematical reality that a putative employer who has failed to satisfy three of the eight potentially applicable criteria cannot satisfy six of the eight.
The Commission considers that each of the eight statutory criteria should be expressly
addressed, and has done so as follows:
a. The individual maintains a separate business with his or her own office, equipment,
materials and other facilities.
The individuals whose employment status is in issue in this case indicated they use areas in their homes to process and file paperwork related to their provision of health-care services. This does not satisfy the statutory criterion of a separate business. A dedicated office area is merely one of several factors to be examined in determining whether a separate business exists. Petitioner did not show that the individuals in issue owned, or otherwise bore the expense of, any significant equipment, materials and other facilities used in relation to their performance of health-care services.
While each of the twelve individuals here in issue had other clients in addition to the petitioner's sole client, that fact does not establish that any of the individuals "maintains a...business", because the other "clients" may in fact also be employers of the individuals. A worker can be an employe of more than one employer at the same time.
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.
A physician directed the health-care services to be performed for the petitioner-corporation's sole client. Specific methods of performance were controlled by the petitioner through orientation of each individual at the start of the working relationship.
Petitioner scheduled work-shifts, and required that any substitute workers arranged for by the individuals in issue must be on a list approved by petitioner. Petitioner's possession and use of those prerogatives constitute control over the method of the individuals' performance of their services.
Petitioner's retained right, and actual exercise of, control are further demonstrated by the manner in which orientation was provided to the individuals. Orientation was done by Ms. Kramer personally, or by another individual with experience in the special needs of the petitioner-corporation's sole client. Accordingly, the required orientation was performed by the petitioner-corporation via specifically designated agents of the corporation.
c. The individual incurs the main expenses related to the services that he or she performs under contract.
This criterion was not satisfied because almost none of the necessary medical equipment was provided by the individuals (minor exceptions being that some of the individuals personally owned relatively inexpensive professional tools such as stethoscopes or blood pressure cuffs). It was not shown that the individuals bore any part of the expenses solely related to their performance of health-care services for the Petitioner's client.
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.
This criterion was satisfied. Health care professionals have a high degree of responsibility and potential personal liability. The individuals in this case had individual malpractice insurance.
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.
Hourly wages, which the individuals here in issue received, do not constitute a basis of payment that satisfies this criterion. Hourly pay is not a commission nor is it per-job pay. Moreover, the rate of pay in this case was not determined on a competitive-bid basis. The petitioner-corporation specified the hourly rate.
f. The individual may realize a profit or suffer a loss under contracts to perform services.
This criterion was expressly addressed by the ALJ: "...given the individuals were paid on an hourly basis, they could not suffer a profit or loss. They were paid for the amount of time they worked, no more and no less; they risked no entrepreneurial loss."
The negligible amount of expenses personally paid by the individuals serve also to show the absence of entrepreneurial risk. There was no appreciable investment in tools and equipment by the individuals. The expenses of license renewals and/or the cost of required continuing education are incurred by many professional workers who are acknowledged employes. Moreover, the total of such expenses was not shown to be so high as to constitute any significant entrepreneurial risk. This is especially so in view of the fact that the individuals had other clients/employers while working for petitioner. Accordingly, recoupment of professional expenses did not depend solely on their relationship with petitioner.
g. The individual has recurring business liabilities or obligations.
The focus of this criterion is business liabilities or obligations, which are distinguishable from the self-imposed personal expenditures addressed at c., above, and from the professional licensing expenses addressed at f. above.
One example of a regularly recurring expense that could be considered in determining whether criterion g. has been satisfied would be rent for a place of business--a cost of doing business that would continue whether or not one had customers or revenue in a given period.
h. The success or failure of the individual's business depends on the relationship of business receipts to expenditures.
This criterion, as stated, literally assumes the existence of a business, a matter addressed by criterion a. If the individual does have a business, its success or failure would seem, ipso facto, to depend on receipts versus expenditures.
The Commission considers that the intended focus of criterion h. is to look for business receipts and expenditures, as distinguished from wages. Here, the individuals in issue received the same amounts (per hour) for all work they performed for the petitioner-corporation; they were not subject to the vagaries of changing receipts and expenditures.
All of the individuals whose employment status is here in issue performed services for pay for the petitioner-corporation and were subject to the corporation's right of control over their performance of those services.
The commission finds that each of the individuals was an employe of the petitioner-corporation within the meaning of Wis. Stat. § 108.02 (12). None of the individuals performed their services for petitioner as independent contractors under the tests for such status that are incorporated in Wis. Stat. § 108.02 (12).
The commission further finds that the petitioner-corporation was an employer subject to the Wisconsin unemployment insurance law effective January 1, 1996, pursuant to Wis. Stat. § 108.02 (13).
DECISION
The decision of the administrative law judge is modified in accordance with the foregoing and, as modified, is affirmed. Accordingly, the twelve named individuals who performed services for the petitioner, and any other individuals performing similar services for petitioner, did so as employes of petitioner.
As of January 1, 1998, the Petitioner is an employer subject to the Wisconsin unemployment insurance law. This matter is remanded to the department for action consistent with this decision.
Dated and mailed April 30, 1999
careco2.srr : 200 : EE 410
EE 410.06
/s/ David B. Falstad, Chairman
/s/ Pamela I. Anderson, Commissioner
James A. Rutkowski, Commissioner
cc: ATTORNEY HARVEY HELD
SWARTZBERG & DUGGAN SC
ATTORNEY BONNIE LISS
ATTORNEY MICHAEL MATHIS
ENFORCEMENTS SECTION
Appealed to Circuit Court. Affirmed February 3, 2000, as to result (the commission's decision was reversed on 4 out of the 8 tests -- a, b, c, and g -- under Wis. Stat. § 108.02 (12)(b)2., but the result was affirmed due to the employer's failure to prevail on 6 out of the 8 tests). [Circuit Court decision summary]
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