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

TAMMY L LOBERGER, Employer
ALEX LOGAN WHOLESALE FLOORING

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 652883, Hearing No. S9800050MD

An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued an appeal tribunal 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 conclusions in that appeal tribunal decision as its own, except that it makes the following modifications:

1. In the second paragraph of the findings of fact and conclusions of law, the following is added as the final sentence of that paragraph:

The appellant's payments to those individuals were sufficient to make appellant an employer subject to the contribution provisions of Wis. Stat. § 108 effective January 1, 1996, if the individuals were statutory employes of appellant.

2. The final three paragraphs of the Appeal Tribunal's findings of fact and conclusions of law are deleted and the following text is substituted therefor:

The appellant contended that all of the individuals in issue were independent contractors pursuant to the above statutory tests. However, the evidence presented by appellant was insufficient to establish that any of the individuals held, or had applied for, Federal Employer Identification Numbers in 1996.

The evidence presented by appellant was also insufficient to establish that any of the individuals in issue filed business or self-employment federal income tax returns for 1995 based upon services similar to those here in issue.

Accordingly, appellant did not meet the burden of establishing that the test prescribed in Wis. Stat. § 108.02(12)(b) 1. was satisfied by at least one of the above-discussed alternative means that are set forth in Wis. Stat. § § 108.02(12)(b)1a and b.

Even if appellant had met the above-discussed burden, the evidence presented by appellant at the hearing was insufficient to meet appellant's additional burden of establishing that the individuals in issue met at least six of the eight conditions in Wis. Stat. § § 108.02(12)(b)2a-h set forth above.

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

The installers who testified did not maintain separate businesses with offices, flooring materials in stock, or other facilities. While each owned hand tools and a vehicle used in performing installations, there was no showing that they had equipment dedicated to the operation of a place of business; e.g., office furniture, office equipment, merchandise displays and the like.

While both of the installers who testified performed installation services for flooring companies other than Ms. Loberger's company, that fact does not establish that either witness "maintain[ed] a . . . business," because the other companies may in fact also be employers of the individuals. A worker can be an employe of more than one employer at the same time.

Criterion a. was not satisfied on this record.

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.

In order to get work assignments from Ms. Loberger, the installers had to be available to work when and where she (or the retail customer) desired. While there was testimony that specific hours of work were the prerogative of the installer, the installer would not get the work assignment unless the installer was available and able to commit to completion of the installation by a date desired by the retail customer.

There was no continuing contract and therefore no contract provision assuring the installers any particular number or frequency of assignments for any specific remuneration.

Criterion b. was not satisfied.

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

The installers who testified supplied their own hand tools, a vehicle, adhesives, and fasteners. While the main expense of providing installed floor coverings to retail customers was clearly the cost of the material, borne by Ms. Loberger's business, the items provided by the installers were just as clearly the main expenses related to their performance of services.

Criterion c. was satisfied.

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.

The testimony of the witnesses at the hearing was consistent as to the accepted requirement that installers rectified, at their own expense, defects in installation complained of by the retail customers.

Criterion d. was satisfied.

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.

The installers received compensation on a per-job basis, in amounts that they accepted when they accepted a work assignment offered by Ms. Loberger.

Criterion e. was satisfied.

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

It was not established on this record that the installers could realize a profit; they performed an agreed-upon amount of work for an agreed- upon amount of pay. Their remuneration was not speculative; it was not shown that they bore any entrepreneurial risk.

Ms. Loberger testified that the installers were paid when they completed an installation. However, there were instances when the installer was paid before Ms. Loberger received full payment from the retail customer. In other instances, Ms. Loberger "advanced" part of an installer's pay prior to completion of the installation.
Criterion f. was not satisfied.

g. The individual has recurring business liabilities or obligations.

The focus of this criterion is business liabilities or obligations, which are distinguishable from the relatively minor cost of installation supplies addressed at Criterion c., 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.

Criterion g. was not satisfied.

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 clearly would depend on receipts versus expenditures.

The commission considers that the intended focus of Criterion h. is to look for the risk of fluctuations in business receipts and expenditures that may occur in spite of continuing work. Here, the individuals in issue received the amounts they agreed upon for all work assignments they accepted from Ms. Loberger's company.

Criterion h. was not satisfied.

The appellant did not establish that any of the individuals in issue, including Mark Sebunia as well as those named in the Initial Determination, were independent contractors. The evidence presented did not show that any of the individuals met the requirements of Wis. Stat. § 108.02(12)(b)1. If the test under Wis. Stat. § § 108.02(12)(b)2 a-h had been reached, the evidence presented would not suffice to show that at least six of the eight criteria therein were met.

The appeal tribunal therefore finds that the services performed for the appellant by Mark Sebunia and the individuals named in the department's initial determination constituted employment, within the meaning of Wis. Stat. § 108.02(12).

DECISION

The decision of the administrative law judge, as modified, is affirmed. Accordingly, the individuals in issue performed their services for appellant in 1996 as employes of appellant and appellant is an employer subject to the contribution provisions of Wis. Stat. § 108. The effective date of the employer's liability for contributions is January 1, 1996.

Dated and mailed June 30, 1999
loberta.smd : 200 : 7  EE 410  EE 410.03  EE 410.05

/s/ David B. Falstad, Chairman

/s/ Pamela I. Anderson, Commissioner

/s/ James A. Rutkowski, Commissioner

MEMORANDUM OPINION

In her petition, the employer asserts that the effect of the ATD is to brand her and the installers who testified as "liars." However, in the view of the commission, neither the hearing record nor the appeal tribunal decision contains any indication that the administrative law judge considered the employer or her witnesses to be "liars."

Testimony can be truthful but still lack sufficient weight to meet a party's burden of proof under the very specific statutory tests for determining whether a worker is an independent contractor or an employe. Decision-makers must exercise their discretionary authority in determining the weight that should be given to evidence.

However, discretionary authority to assess the weight of testimony is not without limits. For example, the administrative rules applicable to hearings permit the admission of relevant hearsay evidence into the record, but hearsay evidence alone cannot be the basis for the resolution of an issue; the admissible hearsay evidence must be corroborated by non-hearsay evidence. The applicable administrative rule is Wis. Admin. Code § DWD 140.16(1). The code section contains an exception not applicable here.

In this case, the employment status of the installers had to be determined under the tests laid down by the legislature, regardless of the intent or beliefs of the employer and the installers.

It is undisputed that all six of the installers in issue performed services for pay for Ms. Loberger in the period in issue (calendar year 1996). Therefore, the initial presumption of employe status applies, pursuant to Wis. Stat. § 108.02(12)(a).

An alleged employer can overcome the statutory presumption of employe status only by demonstrating, to the satisfaction of the decision-maker, that the "independent contractor exception" is applicable. In other words, the alleged employer has the ultimate burden of proof as to all of the tests for independent contractor status prescribed by the Legislature in Wis. Stat. § § 108.02(12)(a) and (b).

Ms. Loberger had the initial burden of establishing that the installers held or had applied for Federal Employer Identification Numbers (FEINs) when they performed services for her in 1996, or that they had filed business or self- employed federal income tax returns in 1995, based on similar services. Wis. Stat. § 108.02(12)(b)1a and b.

Ms. Loberger had several contacts with the department prior to the hearing and received written information as to her burden of proof and the kind of evidence needed to meet that burden. At the hearing, she was represented by an attorney. Nonetheless, she did not produce non-hearsay evidence that would have been relevant to the first conjunctive test (FEINs or business tax returns).

Despite such notice and the apparent availability of additional relevant testimony and corroborating documents, the employer did not present sufficient evidence to persuade the appeal tribunal that she had met her burden of proof regarding the first conjunctive test. The commission is similarly unpersuaded.

Ms. Loberger testified, "Some of the installers had Federal ID numbers and some used their social security numbers." Ms. Loberger also prepared Exhibit 1. It lists six installers she had used in the three years preceding the hearing. The list includes alleged FEINs for three installers; only one is involved in this case (Mark Sebunia).

Ms. Loberger testified that she got the FEINs in Exhibit 1 from the installers. However, Ms. Loberger did not explain when she prepared Exhibit 1 or the period of time to which it relates. No corroborating or less equivocal evidence was presented on the statutory test as to whether Mr. Sebunia had a FEIN or had applied for one while working for Ms. Loberger in 1996.

On the question of tax returns, Ms. Loberger testified, "I don't know for a fact that the installers filed income tax with the federal government that showed that they were operating their own businesses."

Mr. Sebunia's own testimony as to FEINs was, "I believe that I applied for my Federal ID number in 1996." Other testimony by Mr. Sebunia was to the effect that he performed very little work for Ms. Loberger in 1996. He also testified that he started his own company, BBI, Inc., and "believes" that he formed that corporation in 1996, but did not have any BBI records with him at the hearing.

Mr. Sebunia's testimony as to tax returns was "I file tax return [sic] for BBI separate from myself." That present-tense testimony, unfortunately, tells the decision-maker nothing as to whether he in fact filed business or self-employed returns for 1995 or 1996 based on services performed for Ms. Loberger. Moreover, Mr. Sebunia had been subpoenaed to appear and was ordered in the subpoena to bring his 1995-7 tax returns to the hearing. He did not do so.

Bruce Danz, another installer whose employment status was in issue, also testified at the hearing. His testimony was also equivocal and uncorroborated. He testified that he filed a Schedule C as "A & B Flooring" based on work performed for Ms. Loberger in 1996. However, he did not bring any returns to the hearing for any year. It also seems quite clear that Mr. Danz did not have a FEIN while performing services for Ms. Loberger in 1996, since he testified, "I use my social security number" (for federal tax purposes).

The testimony of the employer and the employer's other witnesses was insufficient to meet the employer's burden to show that the statutory tests for independent contractor status had been met.

There is no indication that the employer attempted, prior to the hearing, and with due diligence, to obtain available evidence, documentary or otherwise, to corroborate the hearsay and opinion testimony regarding FEINs; e.g., Mr. Sebunia's testimony that he "believed" he applied for a FEIN in 1996. Similarly, there is no indication of an attempt, prior to the hearing, and with due diligence, to obtain copies of the 1995 federal tax returns of at least some of her installers (two of whom testified in support of her position at the hearing). Tax records can be subpoenaed and witnesses supporting an employer's position; e.g., Mr. Sebunia and Mr. Danz, can voluntarily supply copies of their returns.

For all of the above reasons, the commission has affirmed the appeal tribunal decision , with some modifications to add specific findings regarding the criteria under Wis. Stat. § 108.02(12)(b)2 a-h that the employer would have the further burden of satisfying even if the decision herein as to the "FEIN" or "business tax return" tests were reversed.

The employer should carefully read the enclosed information regarding an appeal to Circuit Court (action for judicial review).

cc: ATTORNEY JORGE L FUENTES
ENFORCEMENTS SECTION

ATTORNEY HARRY VAN CAMP

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