Worker's Compensation - Worker Classification

Nine Requirements Test - Independent Contractor

Requirement Two - Obtain a FEIN or Have Filed Business or Self-Employment Tax Returns (Case Studies)

The individual obtains a Federal Employer Identification Number (FEIN) from the Federal Internal Revenue Service (IRS) or has filed business or self-employment income tax returns with the IRS based on the work or service in the previous year.

Case Studies Relevant to Requirement Two

Wis. LIRC WC Decision: Allen, Christopher - July 24, 2008

On August 29, 2002, Christopher Allen, the applicant, fell off scaffolding and fractured his left heel while hanging drywall at an airport hangar owned by Metro Hangar Partners, LLC (MHP). His services had been secured by verbal employment contract offered through the person of Michael Sereich.

The only evidence submitted concerning the organization of MHP was the testimony of Sereich, the self-described "manager" of MHP. Sereich had no capital investment in MHP. That investment was provided by Donald Shine and Maureen Sereich (Sereich's ex-wife). MHP was created "...to invest in airplane hangars and to rent and/or sell the hangar." Sereich asserted that MHP never had any employees, but he failed to explain his own employment status with the company. MHP never had a worker's compensation insurance policy.

Sereich was the sole owner of another limited liability company, Sky Builders, that was created to perform construction work on the airport hangars owned by MHP, and also to perform construction work on "totally separate projects." Sky Builders employed four or five employees to construct the hangar in which the applicant was subsequently injured. This work was done early in the calendar year 2002, and by May 2002, it was completed and all the employees had been laid off. Subsequently, Sereich telephoned the applicant and offered him $700 to hang and finish 47 sheets of drywall in the airport hangar. The applicant accepted this employment offer.

Several issues arise from the conceded fact that on August 29, 2002, the applicant fell and fractured his left heel while hanging drywall at an airport hangar owned by Metro Hangar Partners, LLC. One of those issues was whether at the time of his injury the applicant was performing services as an employee under the Act, or as an independent contractor not subject to the Act;

As to requirement Two, LIRC determined the applicant did not hold nor had he applied for a federal employer identification number, nor had he filed business or self-employment income tax returns with the federal Internal Revenue Service based on work or service in the previous year. Therefore, the applicant did not meet this requirement.

Wis. LIRC WC Decision: Floerchinger - August 15, 2001

Donald Floerchinger, the applicant, was the owner/operator of a Kenworth semi-tractor. He began hauling freight for Nestle Transportation Company in September of 1995. At that time, he signed a "Contractor Operating Agreement" with Nestle agreeing to provide his personal driving services and the exclusive use of his tractor to Nestle. This contract included a stipulation that the applicant perform his services under Nestle's Federal Motor Carrier operating authority, which required him to prominently affix Nestle's name to his tractor. The agreement further provided Nestle with exclusive possession and control of the applicant's tractor during its term, and the applicant was not free to haul freight for any other entity. The agreement was subject to immediate termination by either party, with or without cause, upon receipt by the other party of written notice of termination, either sent through the mail or delivered in person.

The agreement contemplated that the applicant would provide his services as an independent contractor who would be "free . . . to determine the means and methods of performance of all transportation services undertaken . . . ." In practice, the applicant was free to refuse to haul loads offered to him; however, when he did so Nestle would place his name at the bottom of the dispatch list, or on occasion offer him shorter, less desirable trips for his next dispatch. Nevertheless, the reasonable inference from the applicant's testimony is that he refused loads for various reasons, and that Nestle regularly offered him trips of sufficient distance to satisfy his economic needs and motivate him to continue his contractual relationship with Nestle.

Nestle paid the applicant 85 cents per mile for all except infrequent short hauls paid on a different basis. The 85 cents per mile was based on the most direct route as calculated by Nestle, leaving the applicant to sustain the loss should he for some reason choose or be required to take a different route. From this 85 cents per mile, the applicant was responsible for his tractor financing payments, fuel, highway use taxes, maintenance and repairs, insurance, meals and lodging, and license fees. Nestle reimbursed the applicant for tolls but only in accordance with Nestle's determination of how many tolls were authorized. Nestle provided the applicant with a credit card for fuel purchases for accounting convenience, but the fuel cost accrued to the applicant. Nestle also provided the applicant with logbooks and trip sheets. Nestle reimbursed the applicant for payments made to the workers that handled the truck's cargo.

Nestle also required the applicant to install a satellite tracking and communication device in his tractor cab. Nestle paid for this device and for its installation, but charged the applicant a rental fee for it. Nestle owned the trailers used for hauling. If the applicant broke down on a trip, he would be paid at his regular rate for the number of miles driven up to the point of breakdown, and would be paid at a lesser rate if he had to "deadhead" or "bobtail" to another location before picking up another load.

The applicant also purchased liability insurance through Nestle, whereby his exposure to loss was limited to $1,000.00. The Contractor Operating Agreement required the applicant to purchase his own worker's compensation insurance policy and thereby hold Nestle harmless for any injury, but he failed to purchase such policy. His claim is for an injury which occurred on or about May 13, 1998.

The applicant filed a sole proprietorship tax return (Schedule C) in each year of his agreement with Nestle. He has owned a number of tractors and has been an owner/operator of them since 1965. He has a federal employer identification number which is required to pay road use taxes.

As to Requirement Two, the commission found that it was undisputed that the applicant had applied for and received a Federal Employer Identification Number, and that he had consistently filed business tax returns with the Internal Revenue Service. Therefore, the commission held that both conditions of Requirement Two were met.