Worker's Compensation - Worker Classification

Nine Requirements Test - Independent Contractor

Requirement Three - Operate Under Specific Contracts (Case Studies)

The individual operates under contracts to perform specific services or work for specific amounts of money and under which the independent contractor controls the means of performing the services or work.

Case Studies Relevant to Requirement Three

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 contracted with Nestle to perform specific transportation services for specific amounts of money. While the contractual terms for each long-haul delivery the applicant made did not vary, if the applicant was not content with these terms he was free to sever the contract at any time. He informed the dispatcher of the type of deliveries he needed in order to maintain a profitable business, and was assigned such deliveries. On occasion, he agreed to perform short haul deliveries for Nestle at different rates of reimbursement.

Delivery deadlines and completion deadlines are frequently an integral part of business contracts. A customer's demand for completion of a service by a certain date and time is merely one more responsibility of the business contractor providing the service. Such demand does not constitute control of the means of performing the work. Furthermore, the applicant acknowledged that on occasion he rejected a load when he didn't believe he could complete it by the deadline set by Nestle.

Nestle's computation of the most direct route for delivery constituted its offer for the amount of compensation it would pay for a particular delivery job. The applicant was free to accept or reject this contractual condition at the time he entered into agreement with Nestle. The condition was reasonable and the applicant accepted it each time he drove for Nestle. This meant that if for any reason he took a less-than-direct route to the delivery site, he ended up with less money for his services. Such risk of loss is consistent with a business enterprise. In addition, the applicant acknowledged that on numerous occasions, and for various reasons, he refused loads offered to him by Nestle. It is clear from these facts that the applicant controlled the means of performing his services for Nestle.

The commission concluded that the conditions of Requirement Three were satisfied.

Wis. LIRC WC Decision: Shilling, Michael - February 7, 2001

Michael Shilling, the applicant, was injured on November 20, 1998, when he was electrocuted while painting a building, and fell 20 to 30 feet to the ground. He suffered electrical burns, and dislocated his hip. As a result, he sustained considerable disability and incurred considerable medical expense.

The applicant performed the painting job on which he injured as part of an ongoing relationship with Richard S. Schaefer, a/k/a Scott Schaefer. On appeal to the commission, the primary issue is whether the applicant was an employee of Mr. Schaefer's when injured, or an independent contractor excluded from the definition of "employee" for the purposes of workers compensation laws.

In 1997 and 1998, Scott Schaefer operated a painting business under the trade name Premium Co. (a/k/a Premium Coatings Co.) Mr. Schaefer himself did some painting in this business; he also hired painters as employees and, he asserts, as independent contractors.

In 1997, the applicant began painting buildings for Mr. Schaefer as an employee. That arrangement changed in 1998, when at Schaefer's insistence, the applicant started his own business. The applicant adopted his own trade name "MGPC." The applicant continued to paint buildings for Mr. Schaefer after this conversation. The applicant worked on several projects in calendar year 1998 before his injury on November 20, 1998.

Upon completion of a job, the two men would normally execute "Independent Contracting Agreements," using their trade names. These documents, naming "Premium Co." as the contracting party and "MGPC" as the independent contractor, specified a dollar amount to be paid. The dollar amount was derived by some portion of the profits, depending on the amount of work the applicant did; the percentage varied from job to job.

Signing the contracts at the end of the job was evidently Mr. Schaefer's standard operating procedure because he paid the applicant a percentage of the amount remaining after deduction of expenses, and that could not be determined until the job was done.

There was a conflict about the extent to which Mr. Schaefer controlled the details of the work performed by the applicant under the contracts. The applicant testified that on some jobs Mr. Schaefer would instruct him as to technique, specifically telling how much paint to put on, and which way to paint. On the roofing painting job he was injured on, Mr. Schaefer just told him to paint the roof, to be careful, and to not get any paint on the house itself.

Mr. Schaefer testified he allowed the applicant to use his own technique, though he may have showed him a better or quicker way to do something on occasion. Mr. Schaefer also testified that if, upon inspection, he would see something was not going right, "I would have to correct it." He then stated, though, that he would expect the applicant to make the corrections.

The commission construed Mr. Schaefer's testimony on this point to mean that Mr. Schaefer would check the work and tell the applicant to make corrections. On cross examination, Mr. Schaefer followed up on this remark, and testified that if a customer with whom he had contracted to have the customer's building painted was not satisfied, Mr. Schaefer would take care of it, meaning that Mr. Schaefer "would finish it, do it right, refinish it, whatever. He also testified that if preparatory work (like pressure cleaning and scraping) was not done satisfactorily, the applicant would have to do it over, and that Mr. Schaefer decided whether the work was done properly.

Requirement Three of the independent contractor test requires the worker to operate under contracts to perform specific services or work both for specific amounts of money and under which the independent contractor controls the means of performing the services or work. The record indicates that the applicant provided his services under a kind of ongoing oral agreement to perform the work. However, the written contracts specifying the amounts to be paid were generally not signed until after the work was done. No written contract specifying the amount to be paid was ever signed with respect to the project the applicant was injured on.

While there may have been an underlying oral contract to provide services for payment of some percentage of the profits, the actual percentage (let alone the specific amount of money) was not determined until after the work was done. Beyond that, whatever the terms of the after-the-fact form contracts there is considerable testimony that it was Mr. Schaefer who determined how the paint was to be applied, what techniques were to be used in application, and when the preparatory work was satisfactorily completed.

The commission concluded that the conditions of Requirement Three were not satisfied.