LEONARD J PIONTEK, Employee
COOPER SPRANSY REALTY INC, Employer
An administrative law judge 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 administrative law judge. Based on its review, the commission makes the following:
The employee worked for the employer, a real estate business, for approximately one and a half years as a real estate agent. His last day of work was April 13, 2009 (week 16), when he quit in order to accept a more lucrative job with a different real estate company.
The employee worked only part-time for the employer. In July of 2008 he was laid off from his primary employment with a manufacturing company and became eligible for unemployment insurance. After the lay-off the employee continued his part-time work with the employer. The employee contended that his services for the employer were performed as an independent contractor and that he was not in an employment relationship with the employer. Therefore, the employee maintained that his separation should not affect his eligibility for benefits.
The employee and employer (also referred to as the "broker,") entered into a contract under which all agreements solicited on behalf of the broker remained the property of the broker, but the employee would receive a set percentage commission for each offer accepted. Under the contract the employee's commission would be 50% of the total sales commission, and 35% where the employer generated the lead. The employee was expected to have a minimum of five transactions per year to remain on this plan. He was not permitted to accept compensation for services as a real estate agent from anyone other than the broker. The sales contracts entered into were between the clients and the broker, with the employee acting as an agent of the broker. If there was a breach of contract, the matter was between the client and the broker. In one instance in which a client was dissatisfied, the agreement was rescinded and the client was released from the contract.
The employee set his own hours and determined his own sales goals. He could work where he chose, and was not subject to any work rules or policies.
The contract between the employee and the employer provided that the broker would provide the employee with a desk, telephone, stationery, postage, business cards, signs and forms, and with supervision and support, and that it would pay for all marketing and supplies, with a limit of $250 per month on advertising for each listing. The employee had an office in his home, with a telephone, copier, computer, and fax machine, which were used primarily in conjunction with his work for his primary employer. The employee estimated that 15% of the office use was devoted to his real estate work. The contract required the employee to stay current with all dues associated with being a licensed real estate agent including but not limited to multiple listing dues and realtor dues. The realtors' association dues and multiple listing fees added up to about $1,000 a year, and the employee's real estate license cost about $150 a year. The employee also paid for continuing education, which cost approximately $120 a year. The employee filed self-employment taxes for the years 2007 and 2008. In 2008 the employee listed $5,095 in expenses which included, in addition to the fees and dues referenced above, car and truck expenses, telephone, miscellaneous office expenses, and "client appreciation," which included closing gifts, in the amount of $141. Some of the listed expenses were incurred in conjunction with the employee's work for his previous employer, the manufacturing firm.
The initial issue to decide is whether the employee performed services for the employer as an independent contractor or as an employee of the employer.
Wis. Stat. § § 108.02(12)(a) and (bm) state, in relevant part, as follows:
(a) "Employee" means any individual who is or has been performing services for pay for an employing unit, whether or not the individual is paid directly by such employing unit; except as provided in par. (b), (bm), (c), (d), (dm) or (dn).
(bm) During the period beginning on January 1, 2000, with respect to contribution requirements, and during the period beginning on April 2, 2000, with respect to benefit eligibility, par. (a) does not apply to an individual performing services for an employing unit. . ., if the employing unit satisfies the department that the individual meets 7 or more of the following conditions by contract and in fact:
1. The individual holds or has applied for an identification number with the federal internal revenue service.
2. The individual has filed business or self-employment income tax returns with the federal internal revenue service based on such services in the previous year or, in the case of a new business, in the year in which such services were first performed.
3. The individual maintains a separate business with his or her own office, equipment, materials and other facilities.
4. 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.
5. The individual incurs the main expenses related to the services that he or she performs under contract.
6. 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.
7. 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.
8. The individual may realize a profit or suffer a loss under contracts to perform services.
9. The individual has recurring business liabilities or obligations.
10. The success or failure of the individual's business depends on the relationship of business receipts to expenditures.
Wis. Stat. § 108.02(12)(a) creates a presumption that a person who provides services for pay is an employee, and it requires the entity paying for those services to bear the burden of proving that the person is not an employee. See, Dane County Hockey Officials, UI Hearing No. S9800101MD (LIRC Feb. 22, 2000); Quality Communications Specialists, Inc., UI Hearing Nos. S0000094MW, etc. (LIRC July 30, 2001).
The commission has considered whether the record establishes that seven of the ten enumerated conditions have been satisfied, and concludes they have not.
Condition 1 is not met. The employee has no FEIN.
Condition 2 is satisfied. The employee filed self-employment tax returns in 2007 and 2008.
Condition 3 is not met. The employee has a home office, with a telephone, fax machine, copier, and computer, which he uses partially for his real estate work. However, it is critical under this test that the individual has a separate business apart from the employer's business. See, St. Clair v. Rylan & Co. Inc, UI Hearing No. 00001091MD (LIRC June 7, 2000). The employee is not allowed to sell property on his own without using the employer's name or title. He does not maintain a separate real estate business.
Condition 4 is not met. This factor contemplates serial contracts. However, the employee had only a single ongoing contract with the employer, which was not a contract to perform specific services for specific amounts of money.
Condition 5 is not met. The employer provided office support staff to answer phones for the employee and to generate leads which were given to the employee. According to the contract, the employer also paid for all marketing, up to a limit of $250 per listing per month, and supplies. The employee paid for his own vehicle and gas, his cell phone, and copier paper for home office. He also paid dues to the realtors' associations, paid a multiple listing service fee, paid to keep his real estate license current and for continuing education, and paid for "client appreciation," including closing gifts. While both parties incurred expenses, the expenses paid by the employer are not quantified in the record and cannot be compared with those incurred by the employee. It was therefore not established that the main expenses related to the services the employee performed were incurred by the employee. See, Ziburski v. Shop N Chek Inc., UI Hearing No. 08201187EC (LIRC April 27, 2009).
Condition 6 is not met. The employee's clients entered into a contract with the employer, with the employee as agent. If a problem arose, the resolution of that problem would be between the client and the broker.
Condition 7 was met, where the employee was paid solely by commission.
Condition 8 was met. Although the employee testified that he never lost money while working for the employer, it was possible for his expenses to exceed his compensation.
Condition 9 was met. The employee pays dues to national, state and local realtors' associations. He also pays a real estate license fee of about $150 per year and spends approximately $120 a year for continuing education.
Condition 10 was not met. The commission has interpreted condition 10 as intending to examine the overall course of a worker's business. It requires that a significant investment have been put at risk and that there is the potential for real success through the growth in the value of the investment and for real failure in the sense of actual loss of the investment. See, Thomas Gronna, The Floor Guys, UI Hearing No. S9900063W1J (LIRC Feb. 22, 2000). The record does not establish that the employee had a significant investment at risk. He had no capital investment in a business beyond annual dues and licensing payments and incidental expenses.
To summarize, the record supports a conclusion that conditions 2, 7, 8 and 9 are satisfied. However, the employee does not satisfy conditions 1, 3, 4, 5, 6, and 10. It was therefore not shown that the employee satisfied at least seven of the ten enumerated conditions necessary to be considered an independent contractor, such that the separation disqualifications would not apply to him.
The next issue to decide is whether the employee's quitting was for any reason permitting the immediate payment of benefits.
Under Wis. Stat. § 108.04(7)(a), an employee who voluntarily terminates employment with an employer is ineligible for benefits unless the quitting falls within a statutory exception permitting the immediate payment of benefits. Here, the employee quit in order to accept a more lucrative employment opportunity. His quitting for this reason did not fall within any statutory exception.
The commission therefore finds that the employee performed his services for the employer as an employee, within the meaning of Wis. Stat. § 108.02(12).
The commission further finds that in week 16 of 2009, the employee quit, and not for any reason permitting the immediate payment of benefits, within the meaning of Wis. Stat. § 108.04(7)(a).
The commission further finds that the employee was paid benefits in the total amount of $1,727, for which he was not eligible and to which he was not entitled, within the meaning of Wis. Stat. § 108.03(1). Pursuant to Wis. Stat. § 108.22(8)(a), he is required to repay such sum to the Unemployment Reserve Fund.
The commission further finds that waiver of benefit recovery is not required under Wis. Stat. § 108.22(8)(c), because although the overpayment did not result from the fault of the employee as provided in Wis. Stat. § 108.04(13)(f), the overpayment was not the result of a department error. See Wis. Stat. § 108.22(8)(c)2.
The decision of the administrative law judge, as modified, is affirmed. Accordingly, the employee is ineligible for benefits beginning in week 16 of 2009, and until four weeks have elapsed since the end of the week of quitting and the employee has earned wages in covered employment performed after the week of quitting equaling at least four times the employee's weekly benefit rate which would have been paid had the quitting not occurred. The employee is required to repay the sum of $1,727.00 to the Unemployment Reserve Fund. This decision also results in an overpayment of federal additional compensation (FAC) benefits that must be repaid. You will receive a separate "UCB-25 Notice of Federal Additional Compensation Overpayment" regarding the amount of FAC benefits that must be repaid.
Dated and mailed March 17, 2010
piontle . umd : 164 : 1 ET 483.01 EE 415
/s/ James T. Flynn, Chairperson
/s/ Robert Glaser, Commissioner
/s/ Ann L. Crump, Commissioner
The appeal tribunal resolved this matter based upon application of a previous commission decision, Uren v. Jacobson Group SE INC (LIRC, Nov. 19, 2004), in which the commission found that the quit statute applies where "an employee terminates work with an employing unit," but does not require that the employee be an employee of that particular employing unit. At the time that decision was issued the statutory definition of "employee" required that the individual perform services "in an employment." Uren, who worked in excluded employment, had argued that his services were not performed "in an employment," and the commission's decision was intended to address that argument. Subsequent to that decision, the statute was modified to remove the requirement that the services be performed "in an employment." The statute now 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. . ." Wis. Stat. § 108.02(12)(a). It is clear from the current statute that a person who works in excluded employment is considered to be an "employee," and is subject to the separation disqualifications in the statute, unless he can establish that he performed his services as an independent contractor.
The parties here stipulated to consideration of the independent contractor issue, and evidence was presented on that question. However, the administrative law judge did not address the independent contractor issue because she erroneously concluded that Uren resolved the matter. The Uren decision held only that, under the former version of the statute, an individual working in excluded employment was still subject to the quit disqualification in the statute. The decision did not read the independent contractor provision out of the statutes. To the contrary, where a claimant performed his services as an independent contractor, he is not considered an "employee" who could quit a job.
The commission has rewritten the appeal tribunal decision to reflect this analysis, and to include findings on the independent contractor issue. After reviewing the evidence in the record, the commission concludes that the employee did not perform his services as an independent contractor. Therefore, the administrative law judge's ultimate conclusion that there was a disqualifying separation is affirmed.
cc: Lindsey Kearl
Appealed to Circuit Court. Affirmed, February 16, 2011. [Circuit Court decision summary]
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