Varsity Tutors LLC v. LIRC ( 2019 )

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
October 15, 2019
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.
Appeal No. 2018AP1951 Cir. Ct. No. 2017CV3102
STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT I
VARSITY TUTORS LLC,
PLAINTIFF-RESPONDENT,
V.
LABOR & INDUSTRY REVIEW COMMISSION,
DEFENDANT-APPELLANT,
DEPARTMENT OF WORKFORCE DEVELOPMENT
AND HOLLAND GALANTE,
DEFENDANTS.
APPEAL from an order of the circuit court for Milwaukee County:
STEPHANIE ROTHSTEIN, Judge. Affirmed.
Before Brash, P.J., Kessler and Dugan, JJ.
No. 2018AP1951
¶1 DUGAN, J. The Wisconsin Labor and Industry Review
Commission (LIRC) appeals the trial court’s order reversing LIRC’s
determination that Holland Galante was an employee of Varsity Tutors LLC
(Varsity), an online business that connects tutors with students.1 The trial court
concluded that Varsity proved the minimum six out of the nine statutory
conditions necessary to establish that Galante was an independent contractor—not
an employee—pursuant to WIS. STAT. § 108.02(12)(bm)2.
¶2 On appeal, LIRC argues that Varsity failed to prove that Galante was
an independent contractor because Varsity only proved two of the statutory
conditions. Therefore, LIRC asserts we should affirm its determination that
Galante is an employee of Varsity. We are not persuaded. We agree with the trial
court’s conclusion that Varsity proved at least six out of the nine statutory
conditions necessary to establish that Galante was an independent contractor.2
Therefore, we affirm the trial court’s decision.
BACKGROUND
¶3 Varsity utilizes a website to connect students with academic tutors in
a variety of subjects. In 2014, although Galante’s primary employment was as a
1
LIRC’s notice of appeal states that it appeals the trial court’s August 28, 2018 decision
that affirmed LIRC’s March 17, 2017 decision in part, reversed in part, and remanded the matter
to LIRC for further proceedings. Our review of that decision is limited to rulings adverse to
LIRC. See WIS. STAT. RULE 809.10(4) (2017-18). All references to the Wisconsin Statutes are
to the 2017-18 version unless otherwise noted.
2
Because we agree with the trial court’s conclusion, we need not address the three
remaining statutory conditions that the trial court concluded Varsity did not prove. See State v.
Castillo, 213 Wis. 2d 488, 492, 570 N.W.2d 44 (1997) (stating that appellate courts should
resolve appeals “on the narrowest possible grounds”).
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No. 2018AP1951
research technologist, she entered into a contract with Varsity to tutor students as a
“side job.”
¶4 As a part of its standard vetting process, Varsity required that
Galante take tests in the subjects for which she intended to provide tutoring
services. The tests confirmed that Galante was eligible to tutor in the chemical
and biological sciences. After Galante passed the exams, Varsity interviewed her
online. After the interview process was completed, Galante signed her contract
with Varsity.
¶5 Pursuant to her contract with Varsity, Galante created an online
profile with Varsity that included (1) her first name; (2) her test scores for the
subjects in which she intended to provide tutoring services; (3) a personal
statement; and (4) her photograph. Varsity paid Galante $15.00 per hour for
tutoring. She used her own computer, materials, vehicle, equipment, and internet
connection to provide tutoring services. Varsity requires that tutors maintain a
minimum level of automobile insurance if the tutor wants to drive to and from
tutoring sessions.
¶6 Any student who wants tutoring services through Varsity purchases
tutoring hours through Varsity’s online platform. Each time a student receives a
tutoring session, Varsity charges the student’s account.
¶7 Interested students browse tutor profiles on Varsity’s website to aid
them in selecting a tutor. When a student was interested in being tutored by
Galante, Varsity notified her electronically. She then decided whether to accept,
deny, or ignore the request. If Galante accepted a tutoring request, then she and
the student entered into a customized contract. Each contract specified session
dates and locations, materials that would be used, billing rates, and any additional
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No. 2018AP1951
billable activities outside of tutoring. Tutors are not required to work a certain
number of hours or maintain a minimum number of tutoring sessions.
¶8 Varsity does not provide any instructional content to tutors and does
not assess the quality of the tutoring sessions. Varsity also does not provide any
instructional training to tutors. Tutors are responsible for creating their own
individualized lesson plans for each student and are not required to be licensed as
teachers.
¶9 Varsity never provided Galante with a critique of her work
performance. Although Varsity encouraged tutors to complete “session notes”
about the tutoring sessions, it only retained the notes for advertising or marketing
purposes. Although students were given the opportunity to rate their tutor after
completing a session, Varsity did not use those ratings for any type of performance
review. Further, Varsity did not assess any student’s post-tutoring results.
¶10 Galante listed that she tutored for Varsity on her LinkedIn business
profile.
¶11 In 2016, Galante applied for unemployment benefits. The
Department of Workforce Development (DWD) determined that she was an
employee of Varsity for purposes of unemployment benefits. LIRC affirmed
DWD’s findings with some modifications, and concluded that Galante performed
services for Varsity as an employee and did not meet the relevant statutory criteria
for an independent contractor.
¶12 Varsity filed an action seeking judicial review of LIRC’s decision.
In a written opinion, the trial court affirmed LIRC’s decision in part, reversed in
part, and remanded for further proceedings. The trial court found that Galante
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No. 2018AP1951
provided services to Varsity. However, it further found that Varsity proved that
Galante was an independent contractor within the meaning of the applicable
statute. This appeal followed.
¶13 Additional relevant facts are included in the discussion section.
DISCUSSION
¶14 The central issue on appeal is whether Varsity met its burden of
proving that Galante was an independent contractor for purposes of unemployment
compensation. LIRC argues that it correctly interpreted and applied WIS. STAT.
§ 108.02(12)(bm) when it concluded that Galante provided services for Varsity as
its employee and not as an independent contractor.
I. Standard of review and substantive law
¶15 We review LIRC’s decisions in unemployment insurance cases
pursuant to WIS. STAT. § 108.09(7). See Schiller v. DILHR, 103 Wis. 2d 353,
355, 309 N.W.2d 5 (Ct. App. 1981). We review LIRC’s decision, not that of the
trial court, see Virginia Surety Co., Inc. v. LIRC, 2002 WI App 277, ¶11, 258
Wis. 2d 665, 654 N.W.2d 306, although we may benefit from the trial court’s
analysis, see Heritage Mutual Insurance Co. v. Larsen, 2001 WI 30, ¶25 n.13,
242 Wis. 2d 47, 624 N.W.2d 129.
¶16 In reviewing LIRC’s decision, we “may not set aside an order or
award unless ‘the findings of fact by [LIRC] do not support the order or award.’”
See id., ¶24 (citation omitted). Furthermore, “findings of fact made by [LIRC]
acting within its powers shall, in the absence of fraud, be conclusive,” and this
court “shall not substitute its judgment for that of [LIRC] as to the weight or
credibility of the evidence on any finding of fact.” See id.
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No. 2018AP1951
¶17 We review LIRC’s “conclusions of law under the same standard
[that] we apply to a [trial] court’s conclusion of law—de novo.” See Tetra Tech
EC, Inc. v. DOR, 2018 WI 75, ¶84, 382 Wis. 2d 496, 914 N.W.2d 21 (italics
added).3 Although we no longer defer to administrative agency decisions, we give
those decisions “due weight[.]” See id., ¶78. “Due weight is a matter of
persuasion, [and] not [one of] deference”; it does not “oust the court as the
ultimate authority or final arbiter”; and it affords “respectful, appropriate
consideration” of LIRC’s determination and also affords us “independent
judgment in deciding questions of law.” See id. (quotation marks omitted).
¶18 WISCONSIN STAT. § 108.02(11) states that “[a]n employee shall be
deemed ‘eligible’ for [unemployment] benefits for any given week of the
employee’s unemployment[.]” An employee is defined as “any individual who is
or has been performing services for pay for an employing unit[.]” See
§ 108.02(12)(a). The following exception to the definition of employee is set forth
in § 108.02(12)(bm):
Paragraph (a) does not apply to an individual performing
services for an employing unit … if the employing unit
satisfies the department that the individual meets the
conditions specified in subds. 1. and 2., by contract and in
fact:
1. The services of the individual are performed free
from control or direction by the employing unit over the
performance of his or her services.…[4]
3
In Tetra Tech EC, Inc. v. DOR, 2018 WI 75, ¶108, 382 Wis. 2d 496, 914 N.W.2d 21,
our supreme court ended the practice of Wisconsin courts “deferring” to the conclusions of law of
administrative agencies, such as LIRC.
4
LIRC agrees that Galante’s services were performed free from Varsity’s control or
direction. See WIS. STAT. § 108.02(12)(bm)1. Therefore, we need only address whether Varsity
proved that Galante met at least six of the nine conditions set forth in § 108.02(12)(bm)2.
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No. 2018AP1951
....
2. The individual meets 6 or more of the following
conditions:
a. The individual advertises or otherwise
affirmatively holds himself or herself out as being in
business.
b. 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.
c. The individual operates under multiple contracts
with one or more employing units to perform specific
services.
d. The individual incurs the main expenses related
to the services that he or she performs under contract.
e. The individual is obligated to redo unsatisfactory
work for no additional compensation or is subject to a
monetary penalty for unsatisfactory work.
f. The services performed by the individual do not
directly relate to the employing unit retaining the services.
g. The individual may realize a profit or suffer a
loss under contracts to perform such services.
h. The individual has recurring business liabilities
or obligations.
i. The individual is not economically dependent
upon a particular employing unit with respect to the
services being performed.
¶19 Statutory interpretation is a question of law. See Bank Mut. v. S.J.
Boyer Constr. Inc., 2010 WI 74, ¶21, 326 Wis. 2d 521, 785 N.W.2d 462. Courts
give effect to the language of a statute when interpreting it. State ex rel. Kalal v.
Circuit Ct. of Dane Cty., 2004 WI 58, ¶45, 271 Wis. 2d 633, 681 N.W.2d 110.
Statutory interpretation begins with interpreting the language within the statute
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No. 2018AP1951
and if the meaning is clear, we stop the inquiry. See id. “Statutory language is
given its common, ordinary, and accepted meaning[.]” Id.¶20 This court assumes that the legislature says what it means and means
what it says. See Heritage Farms, Inc. v. Markel Ins. Co., 2009 WI 27, ¶14 n.9,
316 Wis. 2d 47, 762 N.W.2d 652; see also Ball v. District No. 4, Area Bd. of
Vocational, Tech. & Adult Educ., 117 Wis. 2d 529, 539, 345 N.W.2d 389 (1984)
(stating that “[t]he ... presumption is that the legislature chose its terms carefully
and precisely to express its meaning”).
II. Varsity met its burden of establishing that Galante
was an independent contractor
¶21 In order to establish that Galante was an independent contractor for
purposes of unemployment compensation benefits, Varsity had to prove that
Galante met six of the nine conditions set forth in WIS. STAT. § 108.02(12)(bm)2.
LIRC agrees that Galante met the following two conditions: (1) Galante
performed her tutoring services in a location chosen by her and used her own
materials; and (2) Galante was obligated to redo unsatisfactory work for no
additional compensation or was subject to a monetary penalty for unsatisfactory
work. See §§ 108.02(12)(bm)2.b. & e. However, LIRC contends that Varsity did
not meet its burden of proving that Galente satisfied four or more of the other
statutory conditions required to establish that she was an independent contractor.
We address each of the four remaining conditions that the trial court found Varsity
had proved, in sequence.
A. Galante advertised she was a business
¶22 LIRC argues that Varsity failed to establish that Galante advertised
herself as a tutor with the aim of attracting students to her tutoring business
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No. 2018AP1951
because she did not have business cards, did not publish newspaper notices, did
not have a physical business place, and did not promote her tutoring services other
than through Varsity’s website. LIRC argues that although Galante completed an
online tutoring profile on Varsity’s platform, the webpage is related to Varsity’s
business, not any independent business of Galante.
¶23 Pursuant to WIS. STAT. § 108.02(12)(bm)2.a., Varsity must prove
that Galante “advertises or otherwise affirmatively holds … herself out as being in
business.” In Ebenhoe v. Lyft, Inc., UI Dec. Hearing No. 16002409MD (LIRC
Jan. 20, 2017), LIRC concluded that the driver for the Lyft ride sharing mobile
application had satisfied the advertisement condition because his availability as a
driver was accessible on both the Lyft and Uber mobile applications.5
¶24 LIRC attempts to distinguish Ebenhoe. It argues, based upon the
nature of the internet based ride sharing business, the mobile applications were the
only avenues available for the driver to advertise his transportation services,
whereas Galante could have advertised her tutoring services in a number of other
ways.6 We are not persuaded.
¶25 The trial court found that as a digital platform—a business model
nearly identical to that of Lyft or Uber—Varsity merely provides a way for
5
Although LIRC’s decisions are not binding authority, we may consider prior LIRC
decisions on review. See, e.g., Gilbert v. LIRC, 2008 WI App 173, ¶10, 315 Wis. 2d 726, 762
N.W.2d 671.
6
In a footnote, LIRC also briefly argues that its application of the statutory employee
test in Ebenhoe constituted an alternative basis upon which to resolve the issue of whether the
driver was an employee of Lyft. See Ebenhoe v. Lyft, Inc., UI Dec. Hearing No. 16002409MD
(LIRC Jan. 20, 2017). However, LIRC does not develop this argument and, therefore, we decline
to further address it. See State v. Pettit, 171 Wis. 2d 627, 646-47, 492 N.W.2d 633 (Ct. App.
1992).
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No. 2018AP1951
students who want to be tutored to connect to qualified tutors. We agree. By
advertising herself as a tutor on Varsity’s online platform, Galante affirmatively
held herself out as being in the business of tutoring. Thus, we conclude that the
advertising condition has been met.
B. Galante incurred the main expenses related to
the tutoring services she performed under her
contract with Varsity
¶26 LIRC argues that Varsity incurred the main expenses as opposed to
Galante because Galante relied on materials that she already owned and, although
she paid for her own internet, phone, and car insurance, these costs were not
specifically related to her tutoring services. Further, LIRC argues that Varsity
incurred expenses on behalf of Galante, such as those associated with recruiting
and vetting qualified tutors; operating an online platform; matching qualified
tutors and interested students; and managing its online system.
¶27 We disagree. We conclude that Galante, not Varsity, incurred the
main expenses associated with the tutoring services that she performed. Varsity
did not incur any specific expenses attributable to Galante’s services. Varsity did
not teach or train Galante how to tutor; Varsity did not cover the cost of educating
Galante so that she could qualify as a tutor; Varsity did not incur any
transportation expenses associated with Galante’s in-person tutoring sessions; and
Varsity did not incur any incidental expenses for tutoring students such as books
or other materials.
¶28 Moreover, Varsity’s contract with Galante expressly states “[t]he
Company shall not be responsible for nor shall it reimburse Tutor for any expenses
Tutor incurs in providing the Services[.]” The foregoing provision is consistent
with the trial court’s finding that Galante was required to furnish, at her own
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expense, worksheets, curriculum, textbooks, writing supplies, and academic
enhancement materials for her students.
¶29 We further note that LIRC has held that the only expenses relevant
to this inquiry are those necessary to perform the actual services of the individual
and not those relating to other costs outside of what the individual was contracted
to perform. See J. Lozon Remodeling, Hearing No. S9000079HA (LIRC Sept. 24,
1999) (concluding that the cost of procuring siding materials was not relevant to
the analysis of expenses borne by an individual who installed siding and
occasionally also installed windows or performed miscellaneous other services for
a remodeler). Applying the reasoning of Lozon, the expenses that Varsity incurred
for recruiting and vetting qualified tutors; operating an online platform; matching
qualified tutors and interested students; and the costs relating to managing its
online system are not related to the actual services that Galante performed. Thus,
we conclude that Varsity proved this condition—Galante incurred the main
expenses for tutoring students under her contract with Varsity.
C. Galante performed services that do not directly
relate to Varsity’s business of connecting
students with tutors through its digital platform
¶30 The next condition at issue is whether the services Galante
performed directly relate to Varsity as the employing unit retaining the services.
See WIS. STAT. § 108.02(12)(bm)2.f. LIRC argues that Galante’s tutoring services
were “completely integrated” into Varsity’s business of providing and locating
academic support, and that her services were not tangential to that business. It
argues that, for example, Galante did not clean Varsity’s offices or cater luncheons
for Varsity executives.
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¶31 We previously held that the condition of integration is best explained
by:
the example of a tinsmith called upon to repair a company’s
gutters when the company is engaged in a business
unrelated to either repair or manufacture of gutters.
Because the tinsmith’s activities are totally unrelated to the
business activity conducted by the company retaining his
services, the services performed by the tinsmith do not
directly relate to the activities conducted by the company
retaining those services, and those services were, therefore,
not integrated into the alleged employer’s business.
See Keeler v. LIRC, 154 Wis. 2d 626, 633, 453 N.W.2d 902 (Ct. App. 1990).
¶32 Here, the record does not support LIRC’s assertion that Galante’s
services were integrated into Varsity’s online business of connecting students with
tutors. Varsity generates revenue by facilitating business relationships between
students and tutors. However, that does not transform Varsity’s business into a
tutoring business. As stated, Varsity’s business provides a digital platform to
connect students who want to be tutored with qualified tutors who want to teach
them.
¶33 We conclude that Galante’s tutoring services are not directly related
to Varsity’s business of facilitating tutorial relationships through its online
platform. Varsity is an entity that connects students who want tutoring with
people who want to provide tutoring services. In Keeler, we held that activities
that do not relate to the “activities conducted by the company retaining [those]
services … [are,] therefore, not integrated[.]” See id. Galante’s services are
similar to those described by the tinsmith example. See id. Galante provided
tutoring services—an activity separate from Varsity’s business of being an online
platform that connects students with tutors. Although Varsity has an online
platform to assist students with academic support, Varsity itself does not provide
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No. 2018AP1951
any tutoring services. Additionally, Varsity does not teach or train tutors how to
tutor the students. It also does not assess the quality of the tutoring sessions or
critique the tutor’s performance. Further, Varsity does not assess any student’s
post-tutoring results.
¶34 In contrast to Varsity’s business of providing a digital platform to
connect students and tutors, Galante tutors students. Like all the tutors who
connect with students through Varsity, Galante created her own individualized
lesson plans for each student. She chose and paid for whatever materials would be
used during tutoring sessions and the dates and locations of those sessions.
Galante, not Varsity, incurred transportation expenses associated with her in-
person tutoring sessions and any incidental expenses for tutoring students such as
a computer, internet connection, equipment, books or any other materials.
¶35 Thus, we conclude that Varsity met its burden of establishing this
condition—Galante’s tutoring services are not integrated with Varsity’s services.
D. Galante had recurring business liabilities and
obligations
¶36 The next condition that Varsity had to prove was that Galante had
recurring business liabilities and obligations. See WIS. STAT.
§ 108.02(12)(bm)2.h. LIRC interprets this condition as including overhead
expenses—for example, membership dues, liability insurance, and other recurring
business costs. LIRC argues that this condition “must be met for business
purposes alone” and states that there is no evidence to suggest that Galante’s
automobile insurance was purchased specifically so she could tutor students. It
also argues that Galante’s automobile insurance was for personal purposes and
was not intended to be a recurring business obligation.
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No. 2018AP1951
¶37 We disagree. Under her contract with Varsity, Galante was required
to maintain a specific level of auto insurance. The requirement of the auto
insurance qualifies as a recurring business liability and obligation, and that
requirement is sufficient to fulfill this condition. In Quality Communications
Specialists Inc., Hearing No. S0000094MW (LIRC July 30, 2001), LIRC held
“the recurring obligation to pay premiums for insurance which must be maintained
in order for the individual to be able to perform their services under the contract
… fit[s] within the intended meaning of the phrase, ‘recurring business liabilities
or obligations.’” Thus, we conclude that Varsity established that Galante’s auto
insurance qualifies as a recurring business liability and obligation.
CONCLUSION
¶38 In summary, we conclude that Varsity proved that Galante met at
least six of the nine statutory conditions to qualify as an independent contractor
pursuant to WIS. STAT. § 108.02(12)(bm)2. As previously noted, LIRC stipulated
that Galante met two of the nine conditions because (1) Galante performed her
tutoring services in a location chosen by her and used her own materials; and
because (2) Galante was obligated to redo unsatisfactory work for no additional
compensation or was subject to a monetary penalty for unsatisfactory work. As
discussed above, Varsity proved that (1) Galante advertised or otherwise
affirmatively held herself out as being in business; (2) Galante incurred the main
expenses related to her tutoring services; (3) Galante performed services that did
not directly relate to Varsity’s business of facilitating relationships between tutors
and students through its digital platform; and (4) Galante had recurring business
liabilities or obligations. Therefore, we conclude that LIRC erred when it
concluded that Varsity had not proven at least six statutory conditions required to
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No. 2018AP1951
establish that Galante was an independent contractor.7 For the reasons stated
above, we affirm the trial court’s order.
By the Court—Order affirmed.
Not recommended for publication in the official reports.
7
Varsity also argues that Galante was not an employee of Varsity as that term is defined
in WIS. STAT. § 108.02(12)(a), because she did not provide “services for” Varsity and, therefore,
she was not entitled to unemployment compensation. However, § 108.02(12)(bm) provides that
§ 108.02(12)(a) does not apply to an individual who falls within paragraph (bm), which includes
independent contractors. Because we decide that Galante was an independent contractor pursuant
to § 108.02(12)(bm), we need not address this argument.
15