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Unemployment Insurance - Worker Classification
Prior to January 1, 2011
Condition One - Holds or Applied For IRS ID Number (Case Studies)
The individual holds or has applied for an identification number with the federal Internal Revenue Service.
Case Studies Relevant to Condition One
From 1999 through 2004, Todd Mailandt provided information technology services to clients of Evolution Technology Systems. In 2000, Mailandt signed an agreement with Evolution which, among other provisions, called for him to receive $30 an hour for performing these services, and characterized him as an independent contractor.
Evolution argues that the fact that the 2000 agreement provides that Mailandt would be performing services as an independent contractor should define his employment status here. However, this employment status is to be determined by statute, not by the terms of a collective bargaining contract or other private agreement. Roberts v. Industrial Comm., 2 Wis. 2d 399 (1957); Knops v. Integrity Project Management, UI Hearing No. 6400323AP (LIRC May 12, 2006) (the intent of the parties is not a condition considered in determining a claimant's status, let alone controlling it). The cases cited by Evolution in support of its argument relate to the workers compensation program, not the unemployment insurance program, and are inapposite as a result.
The issue is whether Mailandt performed his services for Evolution as an employee or an independent contractor. One of the conditions that Evolution Technology Systems had to satisfy to demonstrate that Maitland was an independent contractor was that he holds or has applied for an identification number with the federal Internal Revenue Service.
LIRC found that Mailandt did not hold or apply for a federal Employer Identification Number (FEIN) within the meaning of Condition One. Evolution argued that the fact that Mailandt holds a social security number and is permitted by the IRS to use this number as his taxpayer identification number satisfied this condition. However, the commission has consistently held that possession of a social security number does not satisfy condition 1. See, e.g.., Angel Care, UI Hearing No. SO200141MW (LIRC Dec. 30, 2004); Rabe v. Tatge, UI Hearing No. 05003125 (LIRC Nov. 10, 2005); Oil Equipment Co., Inc., UI Hearing No. S0300057MW (LIRC Dec. 30, 2004). LIRC found that that this condition was not met. Evolution subsequently appealed the LIRC decision to Milwaukee County circuit court. The court upheld the LIRC decision.
MSI Services, Inc. utilized the services of mystery shoppers to evaluate business services or products for its clients. During the time period at issue, 130 individuals provided mystery shopper services for MSI in Wisconsin. Mystery shoppers entered into a standard agreement with MSI defining the overall terms of the relationship.
MSI posted assignment opportunities online. This posting included the general nature and location of an assignment as well as the amount MSI was offering for completing it. Mystery shoppers could indicate online their interest in a particular assignment, as well as their willingness to either complete the assignment for the posted amount or for a higher "pre-authorized distance (PAD)" amount. MSI would then review the online responses and select a mystery shopper for the assignment.
Once a mystery shopper was selected, MSI would conduct an orientation for the assignment, including detailed instructions. These instructions were generally specified by the client.
The issue is whether the mystery shoppers performed their services for MSI as employees or independent contractors. One of the conditions that MSI had to satisfy to demonstrate that the mystery shoppers were independent contractors was that they hold or have applied for federal Employer Identification Numbers (FEIN) with the federal Internal Revenue Service.
LIRC found that the record did not show that any mystery shopper held or applied for a FEIN as required by Condition One.
MSI contends that the language of Wis. Stat. 108.02 (12) (bm)1 should be interpreted as requiring only that an individual possess or have applied for a social security number, since the IRS solicits and maintains taxpayer social security numbers. This contention is possibly, although only tenuously, arguable in regard to holding an identification number, i.e., an individual taxpayer "holds" a social security number, and this number, used as an "identification number," appears on taxpayer documents filed "with the federal internal revenue service." However, this contention is not even possibly arguable in regard to applying for an identification number, i.e., an individual does not "apply for" a social security number "with the federal Internal Revenue Service," but instead with the Social Security Administration.
In addition, the commission has consistently held that possession of, or application for, a social security number does not satisfy condition 1. See, Rabe v. Tatge, UI Hearing No. 05003125 (LIRC Nov. 10, 2005); Kunst v. Energy Marketing Services, UI Hearing No. 08400750AP (LIRC July 31, 2008). Although MSI argues that "legislative history" suggests otherwise, it does not cite any authority for this argument. Moreover, a common-sense reading of Wis. Stat. 108.02(12) (bm)1 does not support MSI's argument. All wage earners are required to obtain a social security number and to report their earnings to the IRS using this number, but generally only those who operate a business employing other individuals hold or apply for a FEIN. The ten conditions stated in Wis. Stat. 108.02(12) (bm) are intended to represent factors more likely present when services are rendered as an independent contractor rather than as an employee. Adopting MSI's interpretation would, by permitting every individual wage earner to satisfy Condition One frustrate this intent as it relates to this condition.
The commission found that MSI Services did not satisfy Condition One
Kevin O'Brien is a licensed social worker and marriage/family therapist. On February 3, 2007, O'Brien entered into a one-year contract to perform social work/therapy services for Angel Adams.
This contract provided that O'Brien would be paid 60% of the amount Angel Adams received as government/private insurance reimbursement for the therapy services he provided; O'Brien would be responsible for his own insurance, including professional liability insurance, and for maintaining required professional licensing; and Angel Adams would provide administrative support for scheduling and confirming therapy appointments.
Angel Adams maintained a list of approximately 36 qualified social work/therapy providers, including O'Brien. When it accepted a patient, Angel Adams would contact a provider it considered a good match, and offer this patient to the provider. O'Brien was free to accept or decline a patient he was offered by Angel Adams.
The issue is whether O'Brien performed his services for Angel Adams as an employee or an independent contractor. One of the conditions that Angel Adams had to satisfy to show that O'Brien was an independent contractor was that he possessed or applied for a Federal Employer Identification Number (FEIN).
The record does not show that O'Brien held or applied for a FEIN, as required by Condition One, until March 23, 2007. LIRC found that given that the language of Condition One does not specify when a FEIN is required to be acquired in order to satisfy this condition, and that since O'Brien acquired a FEIN within a few weeks of first performing services for Angel Adams and apparently before the end of the first tax reporting period thereafter, Condition One is satisfied.
Further Reading and Research
If you want to read and research further LIRC and circuit court cases on Condition One, please click on the following hyperlink from the LIRC Decision Digest: