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

COSGROVE CONSTRUCTION INC, Employer

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 357102, Hearing No. S9800017MD

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 FINDINGS OF FACT and CONCLUSIONS OF LAW, the third, fourth, fifth, sixth and seventh paragraphs are deleted and the following is substituted therefor:

"The employer did not establish either of the alternative conditions, described above in this Appeal Tribunal Decision, that could meet the first part of the two-part conjunctive test for employment status, prescribed by Wis. Stat. § § 108.02(12)(b)1 and 2.

"The employer testified that he did not know whether the workers in issue had federal employer identification numbers or had applied for such identification numbers when they performed services for him in 1996, the year for which the employer has been found liable for Unemployment Insurance contributions.

"On the question of whether the workers filed business or self- employment federal income tax returns for the previous year, 1995, the employer presented only his own hearsay testimony that the workers in issue had told him that they had filed such returns.

"The employer did not present any testimony by the workers in issue, nor did he present any corroborative documentary evidence. While the employer's own hearsay testimony could be, and was received, the Appeal Tribunal finds that the evidence was insufficient to meet the employer's burden of proof under the statute.

"Even if the employer had met his burden of proof on the first conjunctive part of the statutory test, he would have had the further burden of proving that at least six of the eight statutory criteria prescribed in Wis. Stat. § § 108.02(12)(b) 2. a.-h. were satisfied.

Findings as to whether the record evidence satisfies at least six of the eight criteria comprising the second conjunctive part of the statutory test will be included in this Appeal Tribunal Decision. The Labor and Review Commission prefers this approach as a means of informing affected parties regarding the requirements of a particularly complex statute, and as a way to conserve decision-making resources in the event of a reversal of a finding that the first part of the statutory test has not been met.

"a. The individual maintains a separate business with his or her own office, equipment, materials and other facilities. Here, the employer testified that he did not know whether the cleaners have their own office. The employer also testified that he did not know whether the cleaners lease any business locations.

"While Criterion a. includes "equipment, materials and other facilities", that language refers to office equipment and materials, and other facilities directly related to, or necessitated by the maintenance of a business separate from the business of an alleged employer. Cleaning materials and supplies used in the performance of services at work-sites do not fall within this criterion. Such items constitute "the main expenses related to the performance of services .under contract." As such, they are addressed by Criterion c., as hereafter discussed.

"Criterion a. was not satisfied.

"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. While the employer contended that the individuals performed their services for his business as independent contractors, he did not produce any paper contract or persuasive evidence of an oral contract. Moreover, the employer did not contend, in his testimony at hearing, that the individuals in issue "operate[d] under contracts" (as could be the case, for example, if the individuals also performed their services for other contractors, or if the individuals and the employer periodically negotiated an agreement calling for a specific amount of work for specific amounts of money).

"The individuals in issue did control the means and method of performing their services. The employer testified that he did not tell them how to do the work, which consisted of sweeping, mopping, dusting, cleaning counter surfaces, carrying out light trash, etc. There is no objective basis for not believing the employer on that point. His testimony is not hearsay and it is not inherently incredible. Indeed, based on common knowledge as to how the interiors of houses are cleaned, it seems plausible that the individuals would need no more instruction than would be given to an acknowledged independent contractor.

"Based on the foregoing, the employer established that the cleaners did control the means and method of performing their services. However, the employer did not satisfy the first part of Criterion b. (that the individuals operated under multiple contracts for the performance of specific services for specific amounts of money).

"Criterion b. was not satisfied.

"c. The individual incurs the main expenses related to the services that he or she performs under contract. The Commission considers it reasonable to infer that the "main expenses" actually related to these individuals' performance of cleaning services would be cleaning supplies and implements; e.g., soaps, polishes, brooms and the like. The employer testified that the workers in issue provide all such supplies. This testimony was apparently based on the employer's personal knowledge. Therefore, it was not hearsay. It was not controverted and, in the view of the Commission, it was not inherently incredible.

"Criterion c. was satisfied by the employer.

"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 employer testified that he did not pay the individuals in issue anything extra when they had to go back to a house and do more cleaning because a "customer" (homeowner, realtor?) was not satisfied. It seems clear that the customer would be the owner of the new home or, perhaps, a realtor.

"The employer did not contend that either of the cleaners whose status is in issue in this case was ever actually required to do "re- work" without compensation. The employer's testimony that he had such a right even though it was never in fact exercised, and was not corroborated by any other evidence, is unpersuasive and entitled to little weight.

"Criterion d. was not 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. There is insufficient support in this record for a finding that the individuals whose status is in issue were compensated on any of the three specific and clearly exclusive statutory bases prescribed in Criterion e. Instead, the individuals worked on a piece-rate basis, with their total remuneration being calculated by the employer and dependent upon the square footage of the residence to be cleaned.

"Criterion e. was not satisfied.

"f. The individual may realize a profit or suffer a loss under contracts to perform services. The employer testified, "In regard to how they could suffer a loss, if they do damage to things and have to pay for them.a cabinet, the floor, a door, etc."

"The employer's testimony that the individuals "could" suffer a loss does not satisfy Criterion f. because there is no evidence that this ever happened in fact. Moreover, there is not even a contention that the individuals could make a profit, in the sense of remuneration distinguishable in any way from piece-rate wages.

"Criterion f. was not satisfied.

"g. The individual has recurring business liabilities or obligations. The employer, who had the burden of proof, presented no evidence on this point.

"Criterion g. was not satisfied.

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

"The focus of Criterion h. is upon business receipts and expenditures. Business receipts are distinguishable from wages in that wages may reasonably be viewed as "guaranteed pay" at an accepted rate for all units of work performed. That is essentially what the individuals here in issue received. They had accepted and received piece-rate remuneration of twelve cents per square foot, based on the square footage reflected on building plans, for all work they performed for the employer. They were not subject to the vagaries of changing receipts and expenditures, as the operator of a business would be.

"Criterion h. was not satisfied.

"The employer did not show, by evidence presented at the hearing, that six of the eight criteria were satisfied.

"It was not established in this record that the individuals in issue held, or had applied for federal employer identification numbers in 1996, the year in which they performed cleaning services for the employer. It was also not established that either of the individuals had filed business or self-employment federal income tax returns for the previous year, 1995.

"The individuals in issue performed the services in issue as employes of the employer, within the meaning of Wis. Stat. § 108.02(12).

"The employer is liable for past-due unemployment insurance contributions, including interest, based upon such services, pursuant to Wis. Stat. § § 108.02 and 108.17.

DECISION

The employer's request for further hearing is denied for the reasons discussed in the commission's memorandum opinion. The decision of the administrative law judge, as modified above, is affirmed. Accordingly, the employer is liable for unemployment insurance contributions, including interest, as more particularly set forth in the initial determination.

Dated and mailed June 30, 1999
cosgrco.smd : 200 : 7  EE 410 EE 410.03  EE 410.04 PC 740

/s/ David B. Falstad, Chairman

/s/ Pamela I. Anderson, Commissioner

/s/ James A. Rutkowski, Commissioner

MEMORANDUM OPINION

In his petition for commission review, the employer requests another hearing and offers to have "the cleaning company" present; he also offers to provide proof that the individuals in issue filed "a self-employed tax return form."

The employer's post-hearing offers of proof have been considered by the commission but do not meet the well-established standards for granting a new hearing.

At the hearing, the employer testified, "I am sure I read Exhibit 4 when I received it." That exhibit is the form the department issues to acknowledge receipt of a timely appeal (request for hearing); the form also provides to parties the information that they are responsible for arranging for the attendance of witnesses necessary to their case.

The hearing notice the employer subsequently received also supplies information to parties regarding their responsibility to arrange for necessary witnesses. The hearing notice advises parties to contact the hearing office if they need assistance; e.g., a subpoena. Parties are also informed that important findings cannot be based solely upon uncorroborated hearsay (the exception is hearsay that is admissible under ch. 908 of the Wisconsin Statutes). That limited exception does not apply to evidence of the type presented by the employer herein.

At the hearing, the employer testified he did not know whether the individuals in issue have Federal Employer Identification Numbers, and did not know whether they had applied for any.

On the issue of whether Ms. Dresen and Ms. Riesen had filed tax returns indicative of self-employment, the employer's witness, Mr. Cosgrove, provided only his own testimony that they had told him that. He did not bring to the hearing any corroborative documentary evidence regarding the individuals' tax returns, and did not obtain the appearance of the alleged employes. There is no contention that the employer even attempted, prior to the hearing, to obtain corroborating documentary evidence or to arrange for the individuals to appear and corroborate his hearsay testimony.

There is no assertion by the employer that the now-offered witnesses and documents were unavailable at the time of the hearing. Therefore, there is no showing of the due diligence that is the usual test as to whether a post-hearing offer of additional evidence justifies a second hearing. Accordingly, the commission sees no basis for granting another hearing, and no basis for considering the late-offered evidence.

cc: COSGROVE CONSTRUCTION INC

ATTORNEY JORGE FUENTES
ENFORCEMENTS SECTION

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