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Unemployment Insurance - Worker Classification
Prior to January 1, 2011
Condition Seven - Paid Per-Job (Case Studies)
The individual receives compensation for services performed under a contract on a commission or per-job basis and not on any other basis
Case Studies Relevant to Condition Seven
Quality Communication Specialists, Inc. ("QCS") is a Wisconsin corporation which is engaged in business as a low voltage wiring contractor. QCS was incorporated in 1996.
While QCS does a small amount of work for private builders and individuals, wiring homes for telephone cables and speakers, 95% or more of its business is done with one company, Time Warner Cable ("TW"), a cable television provider. QCS provides "tap audit" services for TW, which consists of connecting, disconnecting, servicing and checking the connections between cable television lines and individual cable television subscribers' homes.
QCS enters into arrangements with individuals to perform the tap audit services which it contracts with TW to provide. These individuals are paid by QCS for performing those tap audit services. The issue for decision in this case is whether five such individuals who performed tap audit services for QCS in a number of calendar quarters in 1997 through 1999, did so as employees or as independent contractors.
One of the conditions that QCS had to satisfy to show that the individuals providing tap audit services were independent contractors was that they received compensation for services performed under a contract on a commission or per-job or competitive-bid basis and not on any other basis.
The tap auditors were paid according to the number of "taps" they worked on. They were paid at a fixed rate of $4 per tap for active taps, and $2 per tap for inactive taps. A representative of QCS acknowledged that the tap auditors were paid "per unit".
The commission determined that the tap auditors were not paid on a "commission" basis. A "commission" pay basis is one in which a person is paid a certain percentage of a price which someone else agrees to pay for a good or service. If the method of payment had been that the tap auditors were paid a percentage of the price which Time-Warner charged cable subscribers to come and set up a connection, it would be accurate to say that they were working on a commission basis - but they were not paid on any such basis. It is also clear that the tap auditors were not paid on a "competitive bid" basis, there having been no competitive bidding for the price for any element of the operation, whether it be considered the price to work on a particular "tap", the price for a route assignment, or the overall terms of the arrangement. The only significant question is whether the tap auditors were paid on a "per-job" basis.
QCS argues that the department was in error to characterize the pay system here as involving "piecework". According to QCS, "piecework" involves the production or processing of multiple similar items, and it argues that this is not the same as the work done by its tap auditors, who did not produce or process any items but who were paid by individual codes for individual tasks established by contract. The commission does not agree with this argument. The work the tap auditors did was precisely the processing of multiple similar items. The items were the cable taps they worked on; the processing was the creation or removal or modification of connections and the marking of the connections and recording of data about them. The substantial similarity of each individual task is attested to by the standardized rate of pay "per unit". This is closely equivalent to a typical "piecework" situation.
Since the pay system was not "commission" or "competitive bid", the remaining question is not whether the pay system was or was not "piecework"; it is whether the pay system was "per job". The commission believes that it was not. By referring to a "per job" payment basis, the legislature clearly had in mind a situation in which an independent businessperson enters into a contract to do an entire job of some kind for which a price is then set, the price presumably having been arrived at by the parties' negotiation taking into account the particulars of the job contracted for. In this case, the tap auditors are simply doing one task, over and over again, and being paid according to the number of times they do it. The price per task does not change, and no separate contract is entered into for each task.
The commission determined that QCS did not satisfy Condition Seven.
The petitioner, T & D Coils, Inc., contracts to supply services consisting of the winding, assembly and finishing of electrical coils. T & D is owned by Christina K. Sheen. Ms. Sheen and her husband started the business in 1994, assembling coils in their home. Subsequently, T & D's office was relocated outside the Sheens' home and the business began using home workers who perform the actual work of winding, assembling and finishing electrical coils (hereafter, assembly).
According to Ms. Sheen, "99%" of T & D's business comes from Altran Corp., a manufacturer of transformers. Altran supplies T & D with all materials necessary to create the coils. The materials include copper wire, cores, varnish or other coatings, blueprints and written specifications.
The issue is whether 12 individuals who performed assembly services in their homes for T & D in 1997 did so as employees or independent contractors.
In order to show that the requirements of Condition Seven were satisfied, T & D had to show that the 12 workers received compensation for services performed under a contract on a commission or per-job or competitive-bid basis and not on any other basis.
The commission considers that the term "commission basis" is inapplicable. That term would be applicable if, for example, the assemblers whose employment status is in issue were paid a percentage of the overall amount paid by Altrans to T & D. That was not the case.
The term "per-job basis" is also inapplicable in this case, even though T & D referred to the work assignments it made available to the assemblers as "jobs." The assemblers were paid a specified dollar amount for each coil that they satisfactorily assembled. Clearly, the amount received by an assembler for the unit of work referred to by T & D as a "job" could vary, depending upon the number of coils, if any, that were rejected by Ms. Sheen. There was no showing that all remuneration was withheld when some of the coils comprising a "job" were rejected.
Finally, the term "competitive-bid" basis is not applicable. It was not shown that the remuneration for assembling a particular type of coil was subject to negotiation or competition, and no practice of submitting bids was shown.
The administrative law judge found that 12 of the individuals "were paid on a piecework basis which varied according to the coil." The ALJ ultimately found that Condition Seven was met as to these individuals. The commission considers that a piecework basis of remuneration, paid by an employer for services performed in a continuing relationship involving the production or processing of multiple similar items, is not a remuneration basis that can satisfy Condition Seven. The condition presents an expressly exclusive list of bases of remuneration that can satisfy the condition.
The underlying policy of Condition Seven is clearly to differentiate between workers who are economically dependent upon an employer and individuals who are relatively independent. The latter are those individuals who accept risks that are characteristic of entrepreneurs or independent contractors, doing so because of the concomitant possibility of profit or remuneration exceeding that which they could earn as employees. Thus, a commission-basis worker accepts the linkage of his or her remuneration to the receipts of another entity; e.g., the business that provides a straight-commission salesperson with goods to sell, advertises the goods, et cetera. A per-job worker puts at risk her/his time, effort and, perhaps, unreimbursed expenses, with the intention of doing the job with sufficient efficiency that the remuneration will exceed that which could be earned as; e.g., time-based wages in another situation. Finally, the worker who responds to invitations for competitive bids patently accepts considerable economic risk. The piece-rate worker, who has a continuing employment relationship with one employing unit that provides work on an on-going basis, and remuneration at a fixed, previously agreed piece-rate, accepts far less risk and still has the economic incentive or opportunity to earn more than he/she might earn if paid on an hourly basis. Such an individual is, however, at risk of unemployment if her/his single employing unit becomes unable or unwilling to continue providing work.
The commission finds that the criteria for Condition Seven were not met with respect to any of the 12 individuals.
Rena Christman solicited businesses to utilize Cybrcollect to collect bad checks for them, and received $10 for every bad check collected by Cybrcollect for one of the businesses she successfully solicited.
The issue is whether Christman provided her services to Cybercollect as an employee or an independent contractor. One of the conditions that Cybercollect had to satisfy in order to show that Christman performed her services as an independent contractor was that she received compensation for the services she performed on a commission, per-job, or competitive-bid basis and not on any other basis.
The ALJ concluded that Condition Seven was not satisfied because Christman's arrangement is similar to payment on a piecework basis. The commission disagreed. If, for example, Christman were paid a set amount by Cybrcollect each time she made a business solicitation on its behalf, this would be comparable to payment on a piecework basis. However, the claimant's arrangement with Cybrcollect is more closely akin to payment on a commission basis and Condition Seven is satisfied as a result.
Further Reading and Research
If you wish to read and research further LIRC, circuit court and court of appeals cases on Condition Seven, please click on the following hyperlink from the LIRC Decision Digest: