UPDATE to Independent contractors in Wisconsin UI proceedings

Back in June 2013, there was a post about independent contractors issues in Wisconsin unemployment law. The brief included in that post went through the various factors used in determining independent contractor status for unemployment purposes as well as why that status is at issue in two separate proceedings — one proceeding to determine the claimant’s eligibility for benefits and another proceeding to determine whether the employer is responsibile for paying unemployment taxes for that claimant.

LIRC issued a decision in that case in August. In regards to the factors, there are two points of disagreement. First, the brief used the old office test. Under the current office test, this factor is satisfied “if the individual uses his own equipment and materials in performing the services, and either maintains his own office or performs most of his services in a location he chooses” (see p.11 of the LIRC decision). The old test described in the brief is only applicable in the following circumstances (see n.7 at p.11 of the LIRC decision):

If an individual does not choose where to perform his services, it must be determined whether he maintains his own office. In such a case, the analysis would proceed utilizing the longstanding interpretation that the term “office” has received in cases involving condition 3 in the pre-2011 law, albeit without reference to a “separate business.”

Second, LIRC disagrees with the position in the brief that graphic layout work is not the same as translation work. In this case, the claimant has done translation work in the past but had not done translation work which also required him to do graphic layout of the translation using certain software in order to prep the document for final publication. LIRC lumped the graphic layout work as similar to the prior translation work.

Despite these differences, a finding of employee status was still an easy call.

Since this decision, LIRC has issued another interesting independent contractor decision involving a freelance for Madison’s major newspapers. In the Martin v. Madison Newspapers, Inc., Hearing No. 13001922MD (10 October 2013) decision, LIRC offers another extensive overview of how to apply independent contractor factors for unemployment purposes.

These two situations reinforce the notion put forward in the brief that employers who hope to avoid unemployment taxes need to think strategically in these kinds of cases and perhaps not contest an employee eligibility determination pursuant to Wis. Stat. § 108.09, especially since the matter of employer tax liability will be determined in a separate proceeding under Wis. Stat. § 108.10.

Notwithstanding the difficult burden employers have in initially establishing the factors specified in sub-section (bm), employers are also faced with the added difficulty in these matters that much of the information needed in regards to these factors is in the hands of claimants and not employers. While employees and employers are in theory opposed to each other in these unemployment cases, they also depend on each other to bring forth evidence that the other side needs in order to succeed in its claims. Employers, after all, likely do not have any direct knowledge about how individual claimants qua independent contractors market their services to others, account for their business expenses and income, manage their own place of business, obtain their own liability insurance, pay for their recurring operational costs, and how many other clients they might or might not have. As a result, employers who actually hope to avoid payment of unemployment taxes for the services at issue are dependent on the claimant’s cooperation in the Wis. Stat. § 108.10 proceeding to determine whether the claimant is an employee or independent contractor.

Keep in mind as well that good guidance from DWD on independent contractor issues is available at this website. Here, you can explore the factors pursuant to the various tests in unemployment law, workers’ compensation, wage law, and equal rights law whether an individual qualifies as an independent contractor or employee.

Independent contractors in Wisconsin UI proceedings

Here is a brief I will be using for training purposes for the unemployment clinic here in Madison. It runs through the basic issues relating to deciding whether a claimant is an employee or an independent contractor. The test is still extremely difficult to meet.

Moreover, the case registers basic procedural and substantive problems with how independent contractor cases are currently handled in Wisconsin. Simply put, Wisconsin unemployment law leads to duplicate and unnecessary proceedings in regards to independent contractor determinations for both employees and employers in ways that are frustrating for both. While much is at present being changed in unemployment law in Wisconsin, real problems that the businesses and residents of Wisconsin have in regards to independent contractor issues and the ensuing long, complicated, and often unnecessary hearings over these issues are not even being mentioned.

In the case at issue in the brief, there was little at stake for either party, but four hours of hearings and now a LIRC appeal has taken place.

In this situation, both the claimant and the employer are probably justified in disputing how independent contractor law in unemployment cases are handled. The claimant in this matter has had to deal with DWD investigations not only for the $500 at issue in this case but $200 earned from serving in a chorus in a show. The employer is stuck with any of its freelancers being subject to UI taxes and an intrusive DWD examining all of its employees.

Until this portion of UI law changes once again, there are ways for making these kinds of cases a little less problematic and burdensome for all involved. What the attached brief does in part is demonstrate the circumstances and issues that employers and employees need to be aware of before simply fighting each other.

UPDATE available.