Wisconsin Labor and Industry Review Commission --
Summary of Wisconsin Court Decision relating to Unemployment Insurance
Subject: Pre-Paid Legal Services, Inc. v. LIRC and Nazir I. Al-Mujaahid (Wis. Cir. Ct., Dane Co., May 2, 2001)
Digest Codes: EE 410 EE 410.02
The claimant signed an agreement with the employer in December of 1998, whereby he agreed to sell pre-paid legal services contracts for the employer on a commission sales basis. He did not actually begin selling for the employer until January of 1999, when he did earn commission income from sales. The employer and the claimant each considered the claimant to be an independent sales contractor. The claimant did not file a business or self-employment income tax return with the federal government in 1998, nor has he ever applied for or received a federal employer identification number. He intended to file a self-employed federal tax return for the 1999 calendar/tax year, using his social security number to identify his commission sales employment.
The commission affirmed the appeal tribunal’s finding that the claimant had not satisfied either of the two mandatory conditions of Wis. Stat. § 108.02(12)(b); namely, he had not filed for a federal employer identification number, nor had he filed a business or self-employment income tax return in the previous year. The employer appealed and argued that the statute was ambiguous and could not have meant that a first-year business would have had to have filed a previous-year tax return. The employer also argued that the classifications established in the statute lack a reasonable basis and the statute therefore violates the Equal Protection provisions of the federal and state constitutions.
Held: The statutory language is clear on its face and unambiguously requires that a tax return have been filed in the previous year. The classifications established by the statute have a rational basis in distinguishing between established independent contractors and those who are not independently established, and therefore the statute is constitutional.
Please note that this is a summary prepared by staff of the commission, not a verbatim reproduction of the court decision.
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