Sears, Roebuck and Co. v. Department of Industry, Labor and Human Relations

• Decision Date: 29 June 1979
• Docket Number: 77-129,Nos. 77-004,s. 77-004
• Citation: 280 N.W.2d 240,90 Wis.2d 736
• Parties: SEARS, ROEBUCK AND COMPANY, Appellant and Cross-Respondent, v. DEPARTMENT OF INDUSTRY, LABOR AND HUMAN RELATIONS, Respondent and Cross-Appellant. MONTGOMERY WARD & COMPANY, INCORPORATED, Plaintiff-Appellant and Cross-Respondent, v. DEPARTMENT OF INDUSTRY, LABOR AND HUMAN RELATIONS, Defendant-Respondent and Cross-Appellant.
• Court: Wisconsin Supreme Court

Page 240

280 N.W.2d 240

90 Wis.2d 736

SEARS, ROEBUCK AND COMPANY, Appellant and Cross-Respondent, v. DEPARTMENT OF INDUSTRY, LABOR AND HUMAN RELATIONS,

Respondent and Cross-Appellant.

MONTGOMERY WARD & COMPANY, INCORPORATED, Plaintiff-Appellant and Cross-Respondent, v. DEPARTMENT OF INDUSTRY, LABOR AND HUMAN RELATIONS,

Defendant-Respondent and Cross-Appellant.

Nos. 77-004, 77-129.

Supreme Court of Wisconsin.

Argued May 29, 1979.

Decided June 29, 1979.

John A. Hazelwood (argued), Patricia A. Graczyk and Quarles & Brady, Milwaukee, on brief, for appellant and cross-respondent in case no. 77-004.

Jay M. Wexler (argued in both cases), Enforcements Section, Madison, for respondent and cross-appellant; Uclair W. Brandt, Chief Counsel, Madison, on brief.

John S. Skilton (argued), Richard H. Porter, Michael P. Erhard and Foley & Lardner, on brief, for appellant and cross-respondent in case no. 77-129.

DAY, Justice.

These are actions to review decisions of the Department of Industry, Labor and Human Relations. (DILHR). In each case DILHR affirmed decisions of the Appeal Tribunal which determined that certain individuals known as "catalog sales merchants" in the case of Sears, and as "catalog sales agents" in the case of Montgomery Ward (Ward) were employees within the meaning of sec. 108.02(3), Stats., and that Sears and Ward were liable for past due and delinquent unemployment compensation contributions. DILHR also affirmed that portion of the Appeal Tribunal's decisions determining that employees of these catalog sales merchants or agents were also employees of Sears and Ward within the meaning of sec. 108.02(3), Stats., Case No. 77-004, Sears Roebuck and Company v. DILHR was heard before the Honorable George R. Currie, Reserve Circuit Judge. The judgment, entered May 2, 1977, affirmed that portion of DILHR's decision which determined that Sears catalog sales merchants were employees of Sears within the meaning of sec. 108.02(3), Stats., and reserved that portion of DILHR's decision which determined that employees of Sears catalog sales merchants were employees of Sears within the meaning of sec. 108.02(3), Stats., and remanded the matter for further proceedings consistent with the court's decision. Case No. 77-129, Montgomery Ward & Company, Inc. v. DILHR, was heard before the Honorable Michael B. Torphy, Jr., Circuit Judge. The judgment entered June 16, 1977, affirmed that portion of DILHR's decision which determined that Ward's catalog sales agents were employees of Ward within the meaning of sec. 108.02(3), Stats., and reversed that portion of the decision which determined that employees of Ward catalog sales agents were employees within the meaning of sec. 108.02(3), Stats., and remanded the matter for further proceedings consistent with the court's decision. Sears and Ward appeal those portions of the decisions determining that catalog sales merchants or agents are their employees for unemployment compensation purposes. DILHR takes a cross-appeal from those portions of the judgments which reversed and remanded DILHR's determination that employees of such catalog sales merchants or agents were employees of Sears and Ward for unemployment compensation purposes. Because of the identity of the legal issues involved, these cases have been consolidated on appeal and will be decided in a single opinion.

The questions presented by this appeal are:

1. Did Sears and Ward meet their burdens to show that catalog merchants or agents are not their statutory employees by showing that they are free from their direction and control and that they are customarily engaged in independently established businesses as required by sec. 108.02(3)(b)?

2. If the catalog merchants and agents are employees of Sears and Ward, are workers performing services for such merchants and agents necessarily also statutory employees of Sears and Ward?

We hold that Sears and Ward did not make the necessary showings required by the statute to show that these catalog merchants or agents were not their employees. However, we continue to adhere to the rule of Price County Telephone Co. v. Lord, 47 Wis.2d 704, 177 N.W.2d 904 (1970) that an individual may be an employee for purposes of his own unemployment compensation and at the same time be an employer subject to the contribution provisions of ch. 108 for the protection of those who work for him.

Sears is a large retail distributor of general merchandise. It sells merchandise to the general public through retail stores, and through its catalogs. Generally, Sears has one or more retail stores located in all cities or metropolitan areas sufficiently populous to warrant such operations. In smaller communities that are unable to support a retail store, Sears operated company-owned catalog sales offices which sell merchandise from the Sears catalog. There is no controversy as to the status of individuals employed in the retail stores and the company-owned catalog sales offices. In still smaller rural communities, generally with population of 3,000 to 3,500 people, where Sears does not operate company-owned facilities, Sears authorizes catalog sales merchants. Such merchants are local residents who own or lease store facilities from which they solicit orders and distribute merchandise through the Sears catalogs. The question presented by this appeal is whether such merchants and their employees are statutory employees of Sears for purposes of unemployment compensation. At issue are the calendar years 1971 through September, 1975.

Montgomery Ward is also engaged in general retail and catalog merchandising nationally. It, too, maintains retail stores and catalog order stores whose employees are conceded by Ward to be statutory employees under the unemployment compensation law. It contracts with individuals in the less densely populated areas of the state to become catalog sales agents to distribute its merchandise. Like Sears, it takes the position that such individuals are independent contractors, and not employees of Ward. The calendar years of 1971 through 1973 are at issue here.

QUESTION # 1: DID SEARS AND WARD MEET THEIR BURDENS TO SHOW THAT CATALOG MERCHANTS OR AGENTS ARE NOT THEIR STATUTORY EMPLOYEES BY SHOWING THAT THEY ARE FREE FROM THEIR DIRECTION AND CONTROL AND THAT THEY ARE CUSTOMARILY ENGAGED IN INDEPENDENTLY ESTABLISHED BUSINESSES AS REQUIRED BY SEC. 108.02(3)(b)?

The word "employee" for purposes of the unemployment compensation law is defined at sec. 108.02(3), Stats., (1971):

"108.02. Definitions. . . 27 (3) Employe. (a) 'Employe' means any individual who is or has been performing services for an employing unit, in an employment, whether or not he is paid directly by such employing unit; except as provided in par. (b). If a contractor performing services for an employing unit is an employe under this subsection and not an employer subject to the contribution provisions of this chapter, a person employed by the contractor in fulfillment of his contract with the employing unit shall be considered the employe of the employing unit.

"(b) Paragraph (a) shall not apply to an individual performing services for an employing unit if the employing unit satisfies the department as to both the following conditions:

"1. That such individual has been and will continue to be free from the employing unit's control or direction over the performance of his services both under his contract and in fact; and

"2. That such services have been performed in an independently established trade, business or profession in which the individual is customarily engaged."

The definition is identical in the 1973 version of the statute.

In each case, DILHR affirmed the conclusion of the Appeal Tribunal that the appellants had failed to offer satisfactory proof that these catalog sales merchants or agents were free of the employing unit's control or direction over the performance of their services both under their contracts and in fact, and that such services have been performed in an independently established trade, business or profession in which the individual is engaged. In order to prevail, the putative employer must show that the individuals in question met the tests of both paragraphs (b)(1) and (b)(2) of sec. 108.02(3).

This court is bound to apply the definition of "employee" provided by ch. 108. This was the rule of Moorman Mfg. Co. v. Industrial Comm., 241 Wis. 200, 203, 5 N.W.2d 743, 744 (1942) in which the court said:

"We shall assume that under the facts Elliott was a common-law independent contractor. But this does not necessarily bar him from being an employee under the act. His status under the act must be determined from the act itself in view of the purpose of the act as declared therein."

In Transport Oil, Inc. v. Cummings, 54 Wis.2d 256, 267, 195 N.W.2d 649, 655 (1972), the court treated the two tests of sec. 108.02(3)(b) as factual questions, and affirmed the finding of the department because it was supported by credible evidence:

"Under the provisions of sec. 108.02(3)(b), Stats., all the fact finder must do is find that the claimant is not exempted by either condition 1 or condition 2. Here the appeal tribunal found that Cummings was not exempted by condition 2 and was, therefore, an employee under the statute. On appeal this court need only consider whether the evidence supports that conclusion. Sec. 108.09(7) provides that findings of fact made under this chapter are conclusive, absent fraud. As otherwise expressed, findings of the department will not be set aside if there is any credible evidence to support them." (footnotes omitted).

Findings of fact made by the department under Ch. 108 are conclusive if supported by any credible evidence in the record. R. T. Madden, Inc. v. I. L. H. R. Dept., 43 Wis.2d 528, 547, 169 N.W.2d 73 (1969). This court does not weigh the conflicting evidence to determine what shall be believed. That is solely within the province of the administrative...