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Part 2: Independently Established Business (Case Studies)
Cases demonstrating the test for performing services in an independent business:
NOTE: Chapter DWD 107 was referred to in the original decisions below as ILHR 107. The numbering of the provisions remains the same.
Brett G. Shotwell v. Bushor Logging - (LIRC August 31, 1993) - Independent contractor status proven.
Brett Shotwell performed services as a woodcutter and buncher for Bushor Logging. His father-in-law, the owner of Bushor Logging, performed work as a skidder operator. Shotwell set his own hours and days of work. He owned all the tools needed to perform the work. He paid for all expenses regarding the equipment. He was not instructed as to how to perform his services as he had the necessary training and experience to do so.
Both Shotwell and his father-in-law found logging jobs. The father-in-law submitted bids for work. Shotwell could have hired others to perform the cutting services, although he never did so. He did not advertise in a telephone directory, newspaper, or any other form. He did, however, advertise by word of mouth. He did not have business cards or any other identification as being engaged in an independent business. He did not work for any other entity while he performed services with his father-in-law. At times, the claimant quit working with his father-in-law and became an employee of a different logging business and construction company.
Direction and Control: ILHR 107.04 (1) (a)-(e) set forth a number of factors that determined direction and control. Among these factors are (a) whether the piece cutter is responsible for providing and maintaining his own equipment; (b) whether the piece cutter applies necessary personal services to meet contract obligations and may engage the services of other individuals without the knowledge or consent of the logging contractor; (c) whether the piece cutter can refuse work; (d) whether the logging contractor supervises the piece cutter in the performance of services; and (e) whether the logging contractor can discipline the piece cutter or impose work rules to obey. The commission found that the factors set forth in ILHR 107.04 (1) (a)-(e) were satisfied in this case and that Bushor Logging has established that Brett Shotwell was free from its direction and control.
Independently Established Business: ILHR 107.05 set forth factors to determine whether a piece cutter was in an independently established business in which the piece cutter was customarily engaged. The first set of factors is found in ILHR 107.05 (1) (a)-(f). These factors are (a) whether the piece cutter negotiated contracts with the logging contractor for the right to cut timber; (b) whether the piece cutter negotiated the compensation to be paid for cutting timber; (c) whether the piece cutter had an ownership interest in a business (in determining whether ownership exists the department shall consider whether the piece cutter could sell or give away the business without restriction from the logging contractor, whether the piece cutter had an expectation of profit or bears the risk of loss while performing services for the logging contractor, and whether the piece cutter had a monetary investment in the trade, such as tools, equipment and inventory, which are usual and customary in the industry); (d) whether the piece cutter is represented to logging contractors as a person who provides timber cutting services; (e) whether the piece cutter is free to solicit contracts, enter into contracts and perform services under contract for more than one logging contractor at or about the same time; and (f) whether the piece cutter determines the rate of pay, is liable for paying the wages, and actually pays the wages of individuals, including other piece cutters, engaged by the piece cutter to meet the contract obligations.
The commission found that Bushor Logging established Shotwell's independence in terms of factors (b), (c), (d), (e), and, in part, (f). Since one or more factors under ILHR 107.05 (1) (a)-(f) was met, the commission next examined the factors set forth in ILHR 107.05 (2) (a)-(e). These factors were (a) whether the business of the piece cutter could continue when the contractual relationship with the logging contractor ends; (b) whether the piece cutter is free to perform services for other logging contractor while performing services for the logging contractor; (c) whether the piece cutter bears the principal burden of maintaining personal expenses such as meals, lodging and transportation, while performing services; (d) whether the piece cutter has a reputation in the community generally on which to rely for business as a piece cutter; and (e) whether the piece cutter may incur liability for damages if there is a breach of contract by the piece cutter. The commission found that all these factors were present except for that contained in (2) (e), since there is no evidence that the claimant would incur liability for damages if there was a breach of contract.
The commission found that a sufficient number of the factors in ILHR 107.05 were present to determine that the claimant was in an independent business.
The commission ruled that the Brett Shotwell performed services for Bushor Logging as an independent contractor and not as an employee.
Nettleton Logging (LIRC February 28, 1992) - Independent contractor status not proven.
NOTE: This case is more general in its discussion of the factors of Chapter DWD 107.05 (1).
The status of employees in the logging industry is governed both by Sec. 108.02 (12), Stats. and by Wis. Admin. Code Chapter DWD 107. Although the employer, a logging contractor, satisfied the Commission that it did not exercise direction or control over the cutters, it did not prove that they were engaged in independently established businesses.
Under Chapter DWD 107.05 (1) the cutters:
- Did not negotiate contracts with the employer to cut timber but provided services so that the employer could fulfill its contracts with a paper company.
- Did not independently negotiate their compensation, but were paid by industry standard.
- Had no business that they could sell or give away without restriction because they had no name recognition, did not advertise, and had no customer list.
- Had no expectation of profit or risk of loss except for their wages.
- Although they did have a monetary investment in the tools of their trade, the Commission has long held that mere investment in the tools of the trade is not a sufficient proprietary interest to establish an independently established business.
- It was not proved these cutters had any other customers for their services except the employer and while the employer asserted they were free to solicit contracts, it was not proved that they ever did so.
Since the employer was unable to meet the independently established business test, the Commission concluded that these cutters were employees.