Unemployment Insurance - Worker Classification

Indian Tribal Government

Part 2: Six of Nine Conditions

The second part of the two part test to determine if a worker is an employee or an independent contractor is the "six of nine" conditions.

The purpose of this test is to determine if the worker is operating an independent business separate from that of the employer. In addition to being free of the employer's direction and control, the worker must meet six of nine conditions to be considered an independent contractor. If the worker does not meet six of nine conditions, the worker is an employee, even though the worker may be free from the employer's direction and control.

The department has provided the following tools for each of the nine conditions to assist the employer with the analysis of each of the conditions:

• An explanation of each of the nine conditions
• Cases studies relevant to each of the nine conditions based upon cases decided by the Labor and Industrial Review Commission (LIRC), Wisconsin Circuit Courts, and Wisconsin Appellate Courts
• A hyperlink to the LIRC Decision Digest for each of the nine conditions containing additional cases for review

1. Condition One - Held Out as a Business

   The individual advertises or otherwise affirmatively holds himself or herself out as being in business.

   Explanation of Condition One

   The individual must make the public aware that he/she is engaged in a business endeavor. This can be accomplished by some form of advertising, such as using business cards, posting notices regarding the services and/or having an actual place of business.

   Case Studies

   Cases studies relevant to condition one based upon cases decided by the Labor and Industrial Review Commission (LIRC), Wisconsin Circuit Courts, and Wisconsin Appellate Courts

2. Condition Two - Office, Materials, Equipment, etc

   The individual maintains his or her own office or performs most of the services in a facility or location chosen by the individual and uses his or her own equipment or materials in performing the services.

   Explanation of Condition Two

   The individual meets this condition by having his/her own office or chooses the place to perform the services. The individual also uses either materials or equipment that are his own. The individual is not choosing the location when the employing unit requires the individual to travel to a designated route, to canvass a territory within a certain amount of time or to work at specific places.

   Case Studies

   Cases studies relevant to condition two based upon cases decided by the Labor and Industrial Review Commission (LIRC), Wisconsin Circuit Courts, and Wisconsin Appellate Courts

3. Condition Three - Multiple Contracts

   The individual operates under multiple contracts with one or more employing units to perform specific services.

   Explanation of Condition Three

   The individual meets this condition by having contracts with more than one employing unit to perform services, or by having more than one contract with one employing unit. Contracts with the employing unit can be either written or verbal.

   Case Studies

   Cases studies relevant to condition three based upon cases decided by the Labor and Industrial Review Commission (LIRC), Wisconsin Circuit Courts, and Wisconsin Appellate Courts

4. Condition Four - Incurs Main Expenses

   The individual incurs the main expenses related to the services he or she provides under contract.

   Explanation of Condition Four

   The appropriate application of this condition requires:

   1. A determination of what services are performed under contract
   2. A determination of the expenses that are related to the performance of those services
   3. A determination of which of those expenses are incurred by the person whose status is at issue
   4. Finally, based upon the above three determinations, a final determination can be made as to whether the main part of those related expenses was incurred by the person whose status is at issue
   
   

   Case Studies

   Cases studies relevant to condition four based upon cases decided by the Labor and Industrial Review Commission (LIRC), Wisconsin Circuit Courts, and Wisconsin Appellate Courts

5. Condition Five - Redo Unsatisfactory Work

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

   Explanation of Condition Five

   If the work performed by the individual for the employing unit is not satisfactory to the employing unit, the individual doing the work must redo the work without being paid additional money or may incur a monetary penalty. A monetary penalty could include nonpayment for unsatisfactory work.

   Case Studies

   Cases studies relevant to condition five based upon cases decided by the Labor and Industrial Review Commission (LIRC), Wisconsin Circuit Courts, and Wisconsin Appellate Courts

6. Condition Six - Services Do Not Directly Relate

   The services performed by the individual do not directly relate to the employing unit retaining the services.

   Explanation of Condition Six

   The services provided to the employing unit by the individual must be substantially different from the employing unit's business. The services provided by the individual to the employing unit are not directly related to, or integrated into, the employing unit's business. The services provided are directly related to, or integrated into, the employing unit's business when the success or continuation of the employing unit depends upon the performance of those services.

   For example, where an employing unit that manufactures furniture engages a worker to fabricate upholstery for chairs that the employing sells, the worker's services performed to make or assemble the upholstery material for the chairs is directly related or integrated into the employing unit's product.

   On the other hand, where a worker is hired to paint the building in which the employing unit's manufacturing business is located, the painting work is not integrated into the business activity of the employing unit.

   Case Studies

   Cases studies relevant to condition six based upon cases decided by the Labor and Industrial Review Commission (LIRC), Wisconsin Circuit Courts, and Wisconsin Appellate Courts

7. Condition Seven - May Realize Profit or Loss

   The individual may realize a profit or suffer a loss under contracts to perform such services.

   Explanation of Condition Seven

   This condition examines whether, under a contract for the individual's services, there can be a profit, as well as whether there can be a loss under that same contract. A profit means that income received under the contract exceeds the expenses incurred in performing the contract. A loss means the income received under that contract fails to cover the expenses incurred in performing the contract.

   The potential for profit and the potential for loss need to be evaluated by looking at the specific contracts the individual enters into. This test does not look at the question of whether, in the long run, income received through the individual's business will exceed expenses, or vice-versa. Rather, it looks at the question of whether under particular contracts the individual enters into, there can be a profit or there can be a loss.

   Case Studies

   Cases studies relevant to condition seven based upon cases decided by the Labor and Industrial Review Commission (LIRC), Wisconsin Circuit Courts, and Wisconsin Appellate Courts

8. Condition Eight - Recurring Liabilities or Obligations

   The individual has recurring business liabilities or obligations.

   Explanation of Condition Eight

   This condition requires proof of a cost of doing business which the worker would incur even during a period the worker was not performing work for the employer. Such costs may include, but are not limited to, an office lease, professional fee or liability insurance.

   Case Studies

   Cases studies relevant to condition eight based upon cases decided by the Labor and Industrial Review Commission (LIRC), Wisconsin Circuit Courts, and Wisconsin Appellate Courts

9. Condition Nine - Not Economically Dependent

   The individual is not economically dependent upon a particular employing unit with respect to the services being performed.

   Explanation of Condition Nine

   If an examination of the of the economic relationship between the worker and the employer establishes that the worker is independent of the employer, performs services and then moves on to perform similar services for another, it is proof of an independent trade or business. On the other hand, if the economic relationship shows a strong dependence by the worker upon the employer, it is evidence that the worker is an employee.

   Case Studies

   Cases studies relevant to condition nine based upon cases decided by the Labor and Industrial Review Commission (LIRC), Wisconsin Circuit Courts, and Wisconsin Appellate Courts