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

CHARLES HEALY, Applicant

LLOYD FRANK LOGGING, Employer

LIBERTY MUTUAL INSURANCE CO, Insurer

WORKER'S COMPENSATION DECISION
Claim No. 2002-045949


An administrative law judge (ALJ) for the Worker's Compensation Division 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 order in that decision as its own.

ORDER


The findings and order of the administrative law judge are affirmed.

Dated and mailed July 28, 2005
healych . wsd : 101 : 8   ND 2.11

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

MEMORANDUM OPINION


The applicant operates Chuck Healy's Four Seasons, a sole proprietorship, for which he has a federal employer identification number and procured worker's compensation insurance for the business. However, the applicant does not employ anyone in connection with his sole proprietorship.

The applicant injured his knee while doing logging work for Lloyd Frank Logging.  Lloyd Frank Logging asserts that the applicant was not its employee within the meaning of Wis. Stat. § 102.07. This assertion implicates the applicant's sole proprietorship in two ways. Specifically, Lloyd Frank Logging contends:

(a) the applicant was an independent contractor of the type excluded from the definition of "employee" under Wis. Stat. § 102.07(8)(b) because he was providing services through his sole proprietorship, and

(b) the applicant is himself a covered employer due to procuring workers compensation insurance for his sole proprietorship, and thus excluded from the definition of "employee" under Wis. Stat. § 102.07(8m).

The ALJ's decision fully addresses the employer's first assertion based on Wis. Stat. § 102.07(8)(b). In passing on this issue, the commission merely re-emphasizes a few of the findings the ALJ made. First, unless each of the specific criteria under Wis. Stat. § 102.07(8)(b) are met, "every independent contractor is, for the purpose of [Wis. Stat. ch. 102], an employee" of any employer for whom it performs services in the course of the employer's trade, business or profession. Here, the applicant was hurt doing logging work in the course Lloyd Frank Logging's business. He is thus an employee of Lloyd Frank's -- even if he provided his services through his sole proprietorship -- Chuck Healy's Four Seasons -- unless the criteria set out in Wis. Stat. § 102.07 are met.

Wisconsin Stat. § 102.07(8)(b)3 requires the independent contractor to do the work under contracts to perform specific services or work for specific amounts of money under which the independent contractor controls the means of performing the work or services. Here, Lloyd Frank Logging paid the applicant by the cord, not a specific amount of money. Further, Lloyd Frank controlled the means of performing the work by telling the applicant where to work, and which trees to cut, on any given day, and by providing transportation to the job site. Transcript, page 14, 16. Wisconsin Stat. § 102.07(8)(b)6 requires that the contractor receive compensation on a commission or per job basis, and not on any other basis. Again, however, the applicant was told what trees to cut each day, then paid $12 per cord. Transcript, page 13, 14. This is not a "per job" payment, nor is it a commission in any real sense. Tied into this is the requirement under Wis. Stat. § 102.07(8)(b)7 that the applicant be able to make a profit or loss under contracts to perform work or services. Here, there is no "profit or loss" in any entrepreneurial sense with respect to the logging the applicant does for Lloyd Frank Logging; if he does the work and cuts the logs identified by Lloyd Frank Logging he gets paid per cord for his labor.

The ALJ makes these points and more in her decision. She correctly found the applicant was an employee of Lloyd Frank Logging.

In its brief, the applicant further argues the independent contractor provision does not even apply, as he did not provide work to Lloyd Frank Logging through his sole proprietorship, but simply as an employee. Lloyd Frank Logging counters that the applicant specifically listed "logging" and "tree removal" among the things that his sole proprietorship, Chuck Healy's Four Seasons does (exhibit 2), so that logging work with Lloyd Frank are services within the businesses of both entities. However, even if the applicant were working for Lloyd Frank Logging as an independent contractor though his sole proprietorship, the applicant remains an employee under Wis. Stat. § 102.07(8)(a) in this case, as the ALJ found.

What of Lloyd Frank Logging's claim that the applicant is himself a covered employer, and thus cannot be an "employee" under Wis. Stat. § 102.07(8m)?  This is based on the argument that since the applicant procured worker's compensation insurance for his sole proprietorship he has elected to become an employer under the coverage of the act. The relevant statutes provide:

102.05(2) Any employer who shall enter into a contract for the insurance of compensation, or against liability therefor, shall be deemed thereby to have elected to accept the provisions of this chapter, and such election shall include farm laborers, domestic servants and employees not in the course of a trade, business, profession or occupation of the employer if such intent is shown by the terms of the policy. Such election shall remain in force until withdrawn in the manner provided in sub. (1).

102.07(8m) An employer who is subject to this chapter is not an employee of another employer for whom the first employer performs work or service in the course of the other employer's trade, business, profession or occupation.

Clearly, the applicant procured worker's compensation coverage for his business, Chuck Healy's Four Seasons, as demonstrated by respondent's exhibit 1 and 2. However, supporting documentation provided with the policy indicates that the applicant did not have employees, that the applicant did not plan to have employees (Exhibit 2, November 30, 2000 letter from Healy), and that the applicant himself was not included in the worker's compensation coverage (Exhibit 2, Middlesex letter dated January 10, 2001, item 4.) Indeed, it appears that applicant's business paid a minimum premium.

Lloyd Frank Logging argues that the applicant is a covered employer because any person who buys WC insurance is a subject employer, by virtue of Wis. Stat. 102.05(2), citing the Neal & Danas handbook. (1)   However, that is not precisely what the statute says. It says that any employer who procures worker's compensation insurance is deemed to have elected to accept the provisions of the worker's compensation law, which election includes certain of his or her employees. That is the "employer" becomes a "subject employer." It is evident from the text of Wis. Stat. § 102.05 that the statute distinguishes between the words "employer" and "person." Compare Wis. Stat. § 102.05(2) and (3). So before the commission may conclude the applicant is a "subject" employer by virtue of Wis. Stat. § 102.05(2), he must be employer.

The commission concludes the applicant is not an employer. The Kress standards (2)  used to judge the existence of an employer-employee relationship (apart from the question of subjectivity) assume that there is someone providing services to the would-be employer. Here there is no one providing services to Chuck Healy's Four Seasons, except Chuck Healy himself and a non-incorporated owner is generally not considered to be his own employee, as he is not in the services of "another." See: Marlin Electric Co. v. Industrial Commission, 33 Wis. 2d 651, 658 (1966). Nor has he elected to cover himself under Wis. Stat. § 102.075. Again, see Exhibit 2, November 30, 2000 letter from Healy and Middlesex letter dated January 10, 2001, item 4.

The commission therefore concludes that because the applicant's sole proprietorship has no employees, he is not an employer, at least not as of the date of injury or hearing. Consequently, the applicant can not be an employer deemed to have elected coverage by procuring worker's compensation insurance under Wis. Stat. 102.05(2). (3)

cc:
Attorney Michael H. Gillick
Attorney James Moermond



Appealed to Circuit Court.  Affirmed February 9, 2007.  Appealed to the Court of Appeals.  Affirmed, Lloyd Frank Logging et al., v. Charles D. Healy and LIRC, 2007 WI App 249, 306 Wis. 2d 385, 742 N.W.2d 337.  

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Footnotes:

(1)( Back ) Neal & Danas, Worker's Compensation Handbook 2.2 (5th ed. 2003).

(2)( Back ) In Kress Packing Co. v. Kottwitz, 61 Wis. 2d 175, 182 (1973), the court set out a two-part test for determining the existence of an employment relationship in worker's compensation cases. The Kress Packing court held that the primary test is whether the employer has the right to control the details of the work and that the secondary test requires consideration of various conditions including remuneration, the direct evidence of the right to control, respondent's furnishing of tools and equipment and its right to fire and hire.

(3)( Back ) On this point, the commission notes the supreme court's repeated admonition: "In cases where the evidence is evenly balanced and an inference may be drawn one way as easily as another, the scale should be turned in favor of the claimant, principally because it was the intent and purpose of the [Workers Compensation Act (WCA)] to bring border-line cases under it and to close up avenues of escape which would naturally be suggested to those seeking to avoid liability under the [WCA]." Wisconsin Electric Power Co. v. LIRC, 226 Wis. 2d 778, 796 (1999) (quoting CBS v. LIRC, 219 Wis. 2d at 565, 582 (1998)(quoting City of Phillips v. DILHR, 56 Wis. 2d 569, 580 (1972)).

The applicant raises the question of a worker who has a side business, say as a carpenter, for which he or she has WC insurance, but works mainly for another employer in completely unrelated work, say for a tavern as a bartender. Even though he or she is clearly an employee of the tavern, should he be excluded from coverage by virtue of his unrelated carpentry business? In this case, of course, the Lloyd Frank Logging argues that the applicant was providing services as part of his sole proprietorship (Chuck Healy's Four Seasons), while the applicant argues the two are unrelated. Given the conclusion the applicant is not an employer, the commission need not address this question.

 


uploaded 2005/08/01