Transport Oil Inc. v. Cummings, 2

• Decision Date: 28 March 1972
• Docket Number: No. 2,2
• Citation: 54 Wis.2d 256,195 N.W.2d 649
• Parties: TRANSPORT OIL INC., a Wisconsin Corporation, Appellant, v. Maurice G. CUMMINGS and Dept. of ILHR, Respondents.
• Court: Wisconsin Supreme Court

Page 649

195 N.W.2d 649

54 Wis.2d 256

TRANSPORT OIL INC., a Wisconsin Corporation, Appellant, v. Maurice G. CUMMINGS and Dept. of ILHR, Respondents.

No. 2.

Supreme Court of Wisconsin.

March 28, 1972.

This appeal involves a controversy over whether the respondent, Maurice G. Cummings, is entitled to unemployment benefits from the account of appellant, Transport Oil Inc.

In January, 1966, respondent Cummings entered into a lease with Transport. Under the lease terms Commings was to rent a gasoline station in the city of Janesville and purchase the bulk of his supplies from Transport. The evidence shows that Cummings:

1. Determined the hours the business was open.

2. Hired and discharged station attendants.

3. Paid the station attendants and made payroll deductions.

4. Paid advertising expenses.

5. Assumed liability for bad checks.

6. Carried insurance on the station's contents.

7. Kept records of sales tax and made sales tax payments.

8. Obtained and kept the necessary licenses.

9. Determined the prices of retail goods sold.

10. Contracted with other suppliers for non-Transport products.

On the other hand, the evidence also demonstrates that:

1. Cummings had to purchase most items from Transport.

2. Cummings had to pay Transport each day for the previous day's sales.

3. Transport directed Cummings how to illuminate the station.

4. Transport determined the grade of the gasoline to be sold.

5. Transport determined the time and quantity of gasoline delivered to Cummings.

6. Transport retained title to the gasoline until the time of sale.

7. Only Transport could permit access to certain pumps, meters, and tanks.

8. Transport could set gasoline prices under certain conditions.

9. Cummings could not assign an interest in the station without the permission of Transport.

10. Cummings could act only as the agent for Transport in the sale of certain fuels.

11. Transport employed Mrs. Cummings to deposit money in the bank for Transport.

12. Cummings received his income from the difference between the money received from customers and the amount paid Transport and other suppliers. He received no compensation directly from Transport, but Transport did guarantee Cummings a monthly gross profit of $500.

In March 1970, Transport became dissatisfied with the operation of Cummings' station and terminated the lease agreement with him. Cummings applied for unemployment compensation as an employee of Transport under the provisions of ch. 108, Stats. Transport asserted that Cummings was not an employee within the meaning of sec. 108.02(3), Stats. Transport also asserted that Cummings was not eligible for unemployment benefits because he was discharged for misconduct within the meaning of sec. 108.04(5). The deputy of the Unemployment Compensation Division of the Department of Industry, Labor and Human Relations determined that Cummings was entitled to unemployment compensation benefits from Transport. The appeal tribunal fot eh department affirmed the deputy's determination. The appeal tribunal's decision was later affirmed by the Department of Industry, Labor and Human Relations' Commission. Transport brought an action in the circuit court for Dane county to review the commission's determination. The circuit court, Hon. W. L. Jackman presiding, affirmed the commission's determination. Transport appeals from that judgment.

A. R. Fowler, Madison, for appellant.

Arnold J. Spencer and Uclair W. Brandt, Madison, for respondent DILHR.

WILKIE, Justice.

Two issues are raised on this appeal:

1. Was Cummings an employee within the meaning of sec. 108.02(3), Stats.? 2. Was Cummings discharged for misconduct thereby excluding him from compensation benefits?

WAS CUMMINGS AN EMPLOYEE OF TRANSPORT?

A. Did the department apply the proper criteria? See. 108.02(3), Stats., defines an 'employee' for the purposes of unemployment compensation. That statute provides:

'(3) Employe. (a) 'Employe' means any individual who is or has beenperforming services for an employing unit, in an employment, whether or not heis paid directly by such employing unit; except as provided in par. (b). If acontractor performing services for an employing unit is an employe under thissubsection and not an employer subject to the contribution provisions of thischapter, a person employed by the contractor in fufilment of his contractwith 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.'

By its findings and order the appeal tribunal of the department interpreted the statute (which findings and order were affirmed without modification by the department), indicating that in order for a person to have an 'independently established trade, business or profession' within the meaning of sec. 108.02(3) (b) 2, Stats., 'it must be such a business as the person has a proprietary interest in, an interest which he alone controls and is able to sell or give away.' Cummings was found not to have such a proprietary interest and on that basis alone the appeal tribunal found that Cummings was an employee of Transport.

Transport asserts that the department applied the wrong criteria, first because the appeal tribunal did not determine whether or not Cummings was 'an employee' within the meaning of par. (a) of the statute, and second because the tribunal gave too much weight to the finding of no proprietary interest. We are here concerned with the findings and order of the department, which were a summary affirmance of those made by the appeal tribunal of the department, hence the review here is of the findings as made by the appeal tribunal and affirmed by the commission of the DILHR.

The only finding made by the tribunal was that Cummings had no proprietary interest in the business, thus meaning that he was an employee. Under sec. 108.02(3), Stats., a two-step process is required to determine whether an individual is an 'employee.' The first step is to decide whether a person falls within the purview of par. (a): that he is an 'individual who is or has been performing services for an employing unit, in an employment.' If the person meets the test of par. (a), the second step is to determine whether the individual is exempted by both of the provisions of par. (b). Appellant's initial assertion is that the appeal tribunal did not make the determination required under par. (a).

A review of the decision of the appeal tribunal reveals that no specific finding was made that Cummings fell within the coverage of par. (a). Davis in his Administrative Law Treatise discusses at length those findings which are a prerequisite to a valid administrative determination and those findings which can be implied. ¹ Davis differentiates between 'basic findings' and 'ultimate findings.' ² The basic findings are those on which the ultimate finding rests. ³ Here the basic findings are: One, that Cummings falls within the coverage of par. (a), and two, that he is not exempted by par. (b). Here the initial finding as to coverage under par. (a) was not made. A basic finding may not be implied from an ultimate finding. ⁴

In addition to not considering whether Cummings was an employee within the meaning of sec. 108.02(3)(a), the appeal tribunal in this case did not state any reasons for concluding that Cummings was an employee of Transport. An administrative agency must indicate its reasons for reaching its findings.

The Wisconsin Administrative Procedure Act requires that the administrative agency prepare formal findings of fact and conclusions of law. ⁵ While the provisions of ch. 227, Stats., do not apply to workmen's compensation or unemployment compensation cases, ⁶ we believe that even in those cases the agency has the obligation to state the reasons for its conclusions. The requirement that an agency adequately state the reasons for its action has long been recognized. ⁷ In the leading case in the area, Securities and Exchange Comm'n. v. Chenery Corp., ⁸ the Supreme Court of the United States reversed an order of the Securities and Exchange Commission and remanded the case to the commission with directions to give its reasons for taking a certain action. Mr. Justice Frankfurter, writing for the court, said:

'Congress has seen fit to subject to judicial review such orders of the Securities and Exchange Commission as the one before us. That the scope of such review is narrowly circumscribed is beside the point. For the courts cannot exercise their duty of review unless they are advised of the considerations underlying the action under review. If the action rests upon an administrative determination--an exercise of judgment in an area which Congress has entrusted to the agency--of course it must not be set aside because the reviewing court might have made a different determination were it empowered to do so. But if the action is based upon a determination of law as to which the reviewing authority of the courts does come into play, an order may not stand if the agency has misconceived the law. In either event the orderly functioning of the process of review requires that the grounds upon which the administrative agency acted be clearly disclosed and adequately sustained. 'The administrative process will best be vindicated by clarity in its exercise.' Phelps Dodge Corp. v. National Labor Relations Board, 313 U.S. 177, 197, 61 S.Ct. 845, 853, 85 L.Ed. 1271. What was said in that case is equally applicable here: We do not intend to enter the...