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Unemployment Insurance - Worker Classification
Prior to January 1, 2011
Condition Six - Liable for Satisfaction (Case Studies)
The individual is responsible for satisfactory completion of the services that he or she contracts to perform and is liable for a failure to satisfactorily complete the services.
Case Studies Relevant to Condition Six
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 Six., 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 Six was satisfied as to nine of the workers.
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 Six 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 Six was not satisfied.
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 Six 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 Six 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 Six is not satisfied.
Acute Care contracted with physicians to staff emergency rooms in rural hospitals. During 2004, the period at issue, Acute Care had a contract with a physician, Dr. Khan.
The issue is whether Dr. Khan performed services for Acute Care during 2004 as an employee or as an independent contractor.
In order to satisfy Condition Six, Dr. Khan is required to have been responsible for the satisfactory completion of the services he performed, and liable for any failure to satisfactorily complete them. Dr. Khan was required in his relationship with Acute Care to possess, and to pay for, professional malpractice insurance. In addition, his contract with Acute Care stated that he would be responsible for any professional or administrative failures on his part, including his failure to report for a scheduled shift. According to the record, if such a failure occurred, Dr. Khan would be responsible for paying the costs of a replacement physician, even if this cost exceeded what Dr. Khan would have been paid for the shift. This establishes his liability for any failure to satisfactorily render emergency medical services, and Condition Six is satisfied as a result.
Further Reading and Research
If you wish to read and research further LIRC and circuit court cases on Condition Six, please click on the following hyperlink from the LIRC Decision Digest:
EE 410.06 - Employee - responsible, liable for satisfactory completion