Unemployment Insurance - Worker Classification

Part 2: Six of Nine Conditions - Indian Tribal Government

Condition Five - Redo Unsatisfactory Work (Case Studies)

The individual is obligated to redo unsatisfactory work for no additional compensation or is subject to a monetary penalty for unsatisfactory work.

Case Studies Relevant to Condition Five

Wis. LIRC UC Decision: Harris, Thomas - June 15, 2006

Thomas J. Harris (Harris) is the sole proprietor of a residential remodeling/new construction business. Between the years 2001 and 2003, Harris hired ten individuals to perform carpentry, drywall, roofing, framing, paneling, window/door installation, tiling, cement, masonry, and cleaning work. The issue is whether these ten individuals performed those services as employees.

In regard to Condition Five., it is not simply the obligation to do re-work without additional pay which is the determining factor, because this obligation is typical as well of piecework employees. Evidence establishing, for example, not only an obligation to do such re-work but an expectation that it will be done, as well as a penalty for not doing so, would satisfy this condition.

The evidence in this regard, although silent as to one of the workers, shows that the other nine workers were expected to repair any defects in their work without additional compensation for time or for materials. The fact that these workers were expected to pay for repair/replacement materials distinguishes their situation from piecework employees, and, as a result, Condition Five was satisfied as to nine of the workers.

LIRC UC Decision: Quality Communications Specialists - July 30, 2001

Quality Communications Specialists (QCS) is a cable television wiring service that was contracted by Time Warner Cable to connect, service and disconnect cable television service in subscribers' homes. QCS hired five individuals as independent contractors to do this work. The issue is whether the five individuals performed those services as employees.

The evidence tends to establish not merely an obligation to correct unsatisfactory work in order to be paid for it, but an expectation that unsatisfactory work will be repaired -- whether or not the worker might, if allowed to do so, simply be inclined to let that piece of work go and simply not be paid for it. Thus, the worker is responsible for the satisfactory completion of the services that he or she contracts to perform.

The evidence also shows an actual penalty scheme, in which "back charges" of $25 or $50 can be made if poor workmanship requires that certain work be re-done. These back charges appear to be significantly greater than the $2 to $4 per unit price paid to the workers. Thus, there is liability for a failure to satisfactorily complete the services.

Condition Five was satisfied as to the five workers.

WIS. LIRC UC Decision: Preferred Financial - October 23, 2008

Preferred is a licensed mortgage broker. In 2004 and 2005, fifteen individuals performed services for pay for Preferred Financial as loan originators. Loan originators were required to be licensed, and were prohibited from performing services for more than one mortgage broker at a time. The loan originators sought customers for new purchase home mortgage loans, loans for refinancing existing home mortgages, and home equity loans. The loan originators would research whether an interested customer met the income/credit requirements of the lenders with which Preferred did business; refer customers meeting such requirements to a particular lender; prepare the necessary paperwork and otherwise process the loan once it was approved by the lender; and attend the closing. The loan originators received a commission for each loan they closed, at the rate established in their fee agreement with Preferred. The issue is whether the subject individuals performed services for the employer as statutory employees during the time period at issue.

In order to sustain its burden to show that the requirements of Condition Five are satisfied, Preferred would have to show that the loan originators were responsible for the satisfactory completion of the services they performed, and liable for any failure to satisfactorily complete them. In the sales context, such a failure could include, for example, mistakes in preparing or transmitting a customer loan request; mistakes in screening a customer; or mistakes in communicating cost, loan features, or availability to a customer.

Preferred argued that this condition was satisfied because, if the loan originators did not satisfactorily complete the services they performed, the consequences could range from not closing loans and losing money out of their pockets to losing their state license. The risk of not being paid for unsatisfactory work performed does not satisfy this condition, because this would be typical of piecework employees as well. In addition, the record does not establish the conditions under which a loan originator could lose his or her state license, e.g., does not establish that a license could be lost for making an error in processing a loan. Condition Five was not satisfied.

WIS. LIRC UC Decision: Berrybuilt LLC - October 8, 2009

Berrybuilt is a construction contractor. A worker for Berrybuilt performed plumbing services for Berrybuilt in 2007 and 2008. The issue is whether the worker performed those services as an employee.

In order to show that the requirements of condition five are satisfied, the record would have to show that the worker was responsible for the satisfactory completion of the services he performed, and liable for any failure to satisfactorily complete them. It is not simply the obligation to do re-work without additional pay which is the determining factor, because this obligation is typical as well of piecework employees.

Under the circumstances present here, Condition Five could be satisfied, for example, if the record showed that the worker was not only expected to personally remedy unsatisfactory work without additional compensation, but also that he would incur some sort of penalty, e.g., he would incur additional costs for having to perform re-work, or he would be liable to Berrybuilt for the cost of having such re-work performed if he did not do it himself. Although the record shows that the worker would be expected to correct unsatisfactory work without additional compensation, it does not show that the worker would incur any type of penalty.

Condition Five is not satisfied.