Case Title: Acuity Mutual Insurance Company v. Miguel A. Olivas

Citation: 2007 WI 12

Docket Number: 2005AP000685

State: wisconsin

Court: Wisconsin Supreme Court

Date: 2007-01-25T00:00:00Z

Document:
2007 WI 12 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2005AP685 
 
 
COMPLETE TITLE: 
 
 
Acuity Mutual Insurance Company, 
          Plaintiff-Appellant-Petitioner, 
     v. 
Miguel A. Olivas, 
          Defendant-Respondent. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2006 WI App 45 
Reported at: 289 Wis. 2d 582, 712 N.W.2d 374 
(Ct. App. 2006—Published) 
 
 
OPINION FILED: 
January 25, 2007   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
September 12, 2006   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Sheboygan   
 
JUDGE: 
James J. Bolgert 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
BUTLER, JR. J., concurs (opinion filed).   
 
DISSENTED: 
PROSSER, J., dissents (opinion filed). 
WILCOX and ROGGENSACK, JJ., join the dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the plaintiff-appellant-petitioner there were briefs by 
Samuel C. Wisotzkey, Jordan B. Reich, and Kohner, Mann & Kailas, 
S.C., Milwaukee; William R. Sachse, Jr., and Peterson, Johnson & 
Murray, S.C., Milwaukee, and oral argument by Samuel C. 
Wisotzkey. 
 
For the defendant-respondent there was a brief by Ness 
Flores, Paul Bugenhagen,Jr., and Flores & Reyes, Waukesha, and 
oral argument by Ness Flores.  
 
An amicus curiae brief was filed by James A. Friedman, 
Jennifer Cotner, and LaFollette Godfrey & Kahn, Madison, on 
behalf of The Wisconsin Insurance Alliance and The Wisconsin 
Compensation Rating Bureau. 
 
2007 WI 12
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2005AP685  
(L.C. No. 
2003CV672) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Acuity Mutual Insurance Company, 
 
          Plaintiff-Appellant-Petitioner, 
 
     v. 
 
Miguel A. Olivas, 
 
          Defendant-Respondent. 
 
 
 
FILED 
 
JAN 25, 2007 
 
A. John Voelker 
Acting Clerk of Supreme 
Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed.   
 
¶1 
SHIRLEY S. ABRAHAMSON, C.J.   This is a review of a 
published decision of the court of appeals affirming a judgment 
of the Circuit Court for Sheboygan County, James J. Bolgert, 
Judge.1  The circuit court ruled that the workers at issue 
satisfied the nine-part test for independent contractors set 
forth in Wis. Stat. § 102.07(8)(b) (2003-04) of the Worker's 
                                                 
1 Acuity Mut. Ins. Co. v. Olivas, 2006 WI App 45, 289 
Wis. 2d 582, 712 N.W.2d 374. 
No. 
2005AP685   
 
2 
 
Compensation Act (the Act).2  Accordingly, the circuit court 
dismissed Acuity Mutual Insurance Company's complaint against 
Miguel Olivas, holding that Olivas did not owe additional 
premiums for his worker's compensation insurance policy.   
¶2 
The court of appeals affirmed the order of the circuit 
court, basing its decision on different reasoning.  According to 
the court of appeals, Acuity Insurance presented a "garden-
variety breach-of-contract claim."3  Consequently the court of 
appeals applied common-law criteria to distinguish between 
independent contractors and employees and concluded that Acuity 
Insurance failed to demonstrate that the workers at issue4 were 
employees rather than self-employed contractors under the common 
law. 
¶3 
This case is not a traditional worker's compensation 
case in which the parties disagree whether an injured applicant 
qualifies for worker's compensation.  This is a dispute between 
an insurance company and a policyholder about the calculation of 
the premium for the worker's compensation insurance policy.     
¶4 
This review requires the court to determine whether 
the workers at issue are, for purposes of setting a premium 
under 
Olivas' 
worker's 
compensation 
insurance 
policy, 
                                                 
2 All references to the Wisconsin Statutes are to the 2003-
04 version of the statutes unless otherwise noted. 
3 Olivas, 289 Wis. 2d 582, ¶14. 
4 The word "workers" and the phrase "workers at issue" are 
used to refer to the men working on the Tenpas jobs with Olivas; 
the phrase does not usually include Olivas. 
No. 
2005AP685   
 
3 
 
independent contractors or employees of Olivas.  The test to 
determine whether the workers at issue are employees or 
independent contractors is found in Wis. Stat. § 102.07(8)(b), 
not in common-law criteria used to distinguish employees and 
independent contractors.  
¶5 
If the workers at issue are independent contractors 
under Wis. Stat. § 102.07(8)(b), they are not employees under 
the Act and they do not receive worker's compensation; Olivas 
would not owe any additional premiums to Acuity Insurance.   
¶6 
If 
the 
workers 
at 
issue 
are 
not 
independent 
contractors under Wis. Stat. § 102.07(8)(b), they are employees 
under the Act pursuant to Wis. Stat. § 102.07(8).  The court 
must then address whether an employment relationship exists 
under the Act between these worker-employees and Olivas, the 
alleged employer.  If such an employment relationship exists, 
the 
workers 
at 
issue 
are 
covered 
by 
Olivas' 
worker's 
compensation insurance policy and Acuity Insurance may recover 
additional premiums from Olivas. 
¶7 
For the reasons set forth, we affirm the decision of 
the court of appeals affirming the order of the circuit court.  
We agree with both parties and the nonparties who filed a brief 
that the Act, not the common law, governs whether the workers at 
issue are independent contractors or Olivas' employees.5  We 
                                                 
5 Both parties and the Wisconsin Insurance Alliance and the 
Wisconsin Compensation Rating Bureau, which filed a non-party 
brief, disagree with the court of appeals' decision that the 
case is governed by the common law.  The court agrees with the 
parties and the nonparties that the case is governed by the Act. 
No. 
2005AP685   
 
4 
 
further agree with Acuity Insurance that the workers at issue do 
not satisfy the nine-part test for independent contractors set 
forth in Wis. Stat. § 102.07(8)(b).  Accordingly, the workers at 
issue are employees under Wis. Stat. § 102.07(8) of the Act. 
¶8 
We agree, however, with Olivas that the workers at 
issue are not employees in his service in the course of his 
trade, business, profession, or occupation.  In other words, no 
employment relationship exists between the workers at issue and 
Olivas.  Accordingly, Acuity Insurance could not take them into 
account in setting the premium for Olivas' worker's compensation 
insurance policy.  We therefore affirm the decision of the court 
of appeals that the complaint must be dismissed. 
¶9 
First we set forth the facts (Part I), the standard of 
review (Part II), the allocation of the burden of proof (Part 
III), and the application of the policy, the Act and the common 
law (Part IV).  There are two parts to resolving the merits of 
the issue presented:  whether the workers at issue are 
independent contractors (Part V), and whether an employer-
employee relationship exists between Olivas and the workers at 
issue (Part VI). 
I 
¶10 Both the relevant facts derived from the testimony and 
the circuit court's findings of fact are essentially undisputed. 
¶11 Steve Tenpas, the owner of a drywall contracting and 
painting business named Tenpas Drywall, contracted with Olivas, 
a drywall installer, for Olivas to do drywalling.  Desiring to 
minimize his own liability, Tenpas informed Olivas that before 
No. 
2005AP685   
 
5 
 
he would hire him as a subcontractor, Olivas would first have to 
secure his own worker's compensation and liability insurance. 
¶12 To satisfy Tenpas, Olivas purchased a liability and 
worker's compensation insurance policy from Acuity Insurance in 
2001.  Olivas was a "named insured" in his capacity as a sole 
proprietor; no employees were named as additional insureds.  
Acuity Insurance initially calculated Olivas' annual premium 
payment to be $3,513, based on Olivas' estimated $25,000 annual 
earnings.  Under the policy, Acuity Insurance reserved the right 
to conduct an audit and adjust the premium according to Olivas' 
actual remuneration. 
¶13 When Acuity Insurance audited Olivas in April 2003, 
the auditor discovered that Olivas had received approximately 
$190,000 from Tenpas.  Acuity Insurance substantially increased 
Olivas' 
premiums 
to 
reflect 
its 
exposure 
for 
worker's 
compensation for the workers at issue.  Olivas did not pay the 
increased premium, the policy terminated, and Acuity Insurance 
brings this action for unpaid premiums in the amount of 
$32,192.30.    
¶14 The case proceeded to trial on the single issue of 
whether the workers at issue were independent contractors or 
employees under the Act.  
¶15 According 
to 
the 
record, 
Olivas 
is 
a 
drywall 
installer.  Olivas obtained jobs from Tenpas, which he usually 
completed with five men.  Olivas was the only worker who spoke 
some English, so he alone communicated with Tenpas.  
No. 
2005AP685   
 
6 
 
¶16 Tenpas paid Olivas on a "per job" basis.  Tenpas alone 
decided the payment for each job, based on the size and the 
difficulty of the project.  Olivas had no say about the amount 
of the payment.  Tenpas did not use a competitive bidding 
process to parcel out the jobs.     
¶17 Olivas and the workers at issue divided the payments 
from Tenpas among themselves, as they decided, based on the work 
each did and each worker's experience.  Olivas asserted that he 
made no profit from the work of the others.   
¶18 Olivas received one Form 1099 from Tenpas (which is in 
the record), and each worker received a Form 1099 from Olivas.  
These latter forms are not in the record. 
¶19 Olivas testified that he and Tenpas entered this 
arrangement because the other five workers did not have 
"papers."  An inference can be made from the testimony that the 
five workers at issue are undocumented aliens.  Tenpas testified 
that he required all subcontractors to get their own liability 
and worker's compensation policies because he wanted to avoid 
large premiums on his own worker's compensation policy.  
¶20 Tenpas testified that he knew that Olivas had a "crew" 
assisting with the jobs and saw these workers at the job sites 
but otherwise had little interaction with them.  Tenpas 
acknowledged that he did not check whether the workers had 
proper INS documentation.  He stated that he investigates the 
backgrounds 
of 
the 
workers 
on 
his 
payroll 
but 
avoids 
investigating the backgrounds of others who work with the 
subcontractors.   
No. 
2005AP685   
 
7 
 
¶21 Olivas testified further that he was not in control of 
the work group; that he did not control the hours that each 
person worked; and that he did not have the power to hire or 
fire any worker.  Each worker was responsible for his own tools.  
¶22 One of the workers, Jose Mireles, testified at trial 
and corroborated Olivas' testimony. 
¶23 The circuit court found that each of the workers owned 
his own equipment; that each received a Form 1099 for tax 
purposes; that the workers agreed among themselves how Tenpas' 
payments 
would 
be 
distributed; 
that 
the 
payments 
were 
distributed according to the agreement; that each worker was 
equally responsible to complete the job satisfactorily; that 
each ran the same risk of nonpayment by Tenpas; and that the 
risk was minimal because Tenpas provided the supplies.   On the 
basis of these findings of fact, the circuit court reached the 
legal conclusion that the workers were independent contractors 
under Wis. Stat. § 102.07(8)(b) and dismissed Acuity Insurance's 
complaint with prejudice. 
II 
¶24 The standard of review is not disputed.  We review 
findings of fact made by the circuit court under Wis. Stat. 
§ 805.17(2):  "Findings of fact shall not be set aside unless 
clearly erroneous . . . ."  The relevant historical facts set 
forth above essentially are not in dispute.   
¶25 The parties disagree about the law and the application 
of the law to the facts.  This case therefore requires us to 
interpret the insurance policy, the Act, and case law and apply 
No. 
2005AP685   
 
8 
 
them to the facts of the present case.  Interpretation and 
application of an insurance policy, the Act, and case law are 
ordinarily 
questions 
of 
law 
that 
this 
court 
decides 
independently of the circuit court and court of appeals, but 
benefiting from their analyses. 
III 
¶26 We begin by stating the parties' legal arguments 
(which we will later discuss in turn) in order to allocate the 
burden of proof, that is, to allocate both the burden of 
production of evidence and the burden of persuasion.  
¶27 Acuity Insurance argues that whether it is entitled to 
additional premiums turns on whether the workers at issue are 
independent contractors under the nine-part test for independent 
contractors set forth in Wis. Stat. § 102.07(8)(b).  If the 
workers are not independent contractors, then according to 
Acuity Insurance, the workers are automatically employees under 
§ 102.07(8)(a) and Acuity Insurance is entitled to additional 
premiums.  To Acuity Insurance, the determination of the status 
of the workers as independent contractors or employees under 
§ 102.07(8) begins and ends the case. 
¶28 In 
contrast, 
Olivas 
argues 
that 
whether 
Acuity 
Insurance is entitled to additional premiums turns on whether an 
employer-employee relationship exists between him and the 
workers under Wis. Stat. § 102.07(4).  If the workers are not 
Olivas' employees, then according to Olivas, Acuity Insurance is 
not 
entitled 
to 
additional 
premiums. 
 
To 
Olivas, 
the 
No. 
2005AP685   
 
9 
 
determination 
of 
the 
employer-employee 
relationship 
under 
§ 102.07(4) begins and ends the case. 
¶29 As we shall explain further, both parties have valid 
arguments.  We conclude that for Acuity Insurance to succeed in 
its claim for additional premiums from Olivas, the workers at 
issue (1) cannot be independent contractors under Wis. Stat. 
§ 102.07(8)(b), 
and 
(2) 
must 
have 
an 
employer-employee 
relationship with Olivas.  This analysis is consistent with both 
Jarrett v. LIRC, 
2000 WI App 46, 233 Wis. 2d 174, 607 
N.W.2d 326, and Labor Ready, Inc. v. LIRC, 2005 WI App 153, 285 
Wis. 2d 506, 702 N.W.2d 27.   
¶30 Jarrett supports the proposition that whether a person 
is an employee or independent contractor must be determined 
under the statutory test for independent contractor status set 
forth in Wis. Stat. § 102.07(8).  Labor Ready supports the 
proposition that a sufficient employment relationship between an 
employee and the alleged employer must exist before the Act will 
apply.6   
¶31 The questions of who has the burden of proof of the 
status of the workers at issue as independent contractors and of 
their employment relationship to Olivas are questions of law.7  
                                                 
6 For a similar discussion of the relationship between these 
two propositions, see St. John v. The Last Detail, WC Claim No. 
1995007051 (LIRC Feb. 28, 2000).  
7 See, e.g., State v. Armstrong, 223 Wis. 2d 331, 344, 588 
N.W.2d 606 (1999); State v. Big John, 146 Wis. 2d 741, 755, 432 
N.W.2d 576 (1988); State v. McFarren, 62 Wis. 2d 492, 499, 215 
N.W.2d 459 (1974); Long v. Ardestani, 2001 WI App 46, ¶36, 241 
Wis. 2d 498, 624 N.W.2d 405. 
No. 
2005AP685   
 
10 
 
This court ordinarily decides questions of law independently of 
the circuit court or court of appeals.  
¶32 Acuity Insurance acknowledges that it has the burden 
to establish its prima facie contract case, namely its rights 
under the contract and the breach of the contract.  It argues, 
however, that it has met that burden by establishing the terms 
of the policy governing the calculation of the premium and the 
increase in Olivas' revenues over the $25,000 he estimated. 
¶33 Acuity Insurance further asserts that given the broad 
definition of "employee" in the Act, and the presumption that a 
worker is an employee, it satisfied its burden to establish that 
the workers at issue are employees for purpose of the Act.  
Acuity Insurance relies on Scholz v. Industrial Commission, 267 
Wis. 31, 41c, 65 N.W.2d 1 (1954), that the presumption of 
employee status exists and that the presumption constitutes 
prima facie proof that the workers at issue are employees.   
¶34 The Scholz case and its progeny do not support Acuity 
Insurance's reasoning.  The presumption that a person is an 
employee and that a relationship of employer and employee exists 
arises only when the person "was rendering service for the 
alleged employer."8  At issue in this case is whether the workers 
were rendering service for Olivas.  Thus the presumption that 
the workers are employees plays no role in the present case. 
                                                 
8 Revels v. Indus. Comm'n, 36 Wis. 2d 395, 400, 153 
N.W.2d 637 (1967). 
No. 
2005AP685   
 
11 
 
¶35 Furthermore, the Scholz presumption is a rebuttable 
presumption that "ceases to have force and effect when evidence 
to the contrary is adduced."9  Evidence to the contrary has been 
adduced in the present case, and Acuity Insurance does not have 
the benefit of the presumption.  
¶36 Acuity Insurance further asserts (without citation) 
that if an employer is trying to deny worker's compensation by 
contending that a person is an independent contractor, the 
employer has the burden to establish the facts supporting its 
position.  Acuity Insurance then argues that it therefore 
follows that Olivas has the burden to prove that the workers at 
issue are independent contractors.   
¶37 Older worker's compensation cases declare that the 
party seeking to defeat worker's compensation bears the burden 
to prove facts supporting its position.10  More recently the 
court has disavowed this declaration and has ruled that an 
                                                 
9 Revels, 36 Wis. 2d at 402 (citing Conrad v. Indus. Comm'n, 
254 Wis. 574, 578, 37 N.W.2d 60 (1949)).  See also Scholz v. 
Indus. Comm'n, 267 Wis. 31, 41b, 65 N.W.2d 1 (1954).   
10 See, e.g., Huebner v. Indus. Comm'n, 234 Wis. 239, 243, 
290 N.W. 145 (1940) ("[I]t will be presumed, for the purposes of 
the compensation act, that the person was an employee and 
therefore the burden to prove otherwise rests upon him who seeks 
to defeat compensation."); Connor Lumber & Land Co. v. Indus. 
Comm'n, 203 Wis. 85, 87, 233 N.W. 559 (1930); Habrich v. Indus. 
Comm'n, 200 Wis. 248, 254, 227 N.W. 877 (1929). 
No. 
2005AP685   
 
12 
 
applicant has the burden to prove that he or she is an employee11 
and that the issue whether the applicant might be an independent 
contractor does not present an affirmative defense.12  There is 
no claimant for worker's compensation in the present case. 
¶38 For the reasons set forth, we disagree with Acuity 
Insurance's analysis and are not persuaded by Acuity Insurance's 
view of who has the burden of proof.   
¶39 Our case law sets forth criteria to be used in 
allocating the burden of proof.   
¶40 The court has adopted, in State v. McFarren, 62 
Wis. 2d 492, 499-502, 215 N.W.2d 459 (1974), a five-factor 
analysis to be applied in allocating the burden of proof.13  The 
five McFarren factors are: (1) the natural tendency to place the 
burden on the party desiring change; (2) special policy 
considerations such as those disfavoring certain defenses; (3) 
convenience; (4) fairness; and (5) the judicial estimate of 
probabilities.  
                                                 
11 Beecher v. LIRC, 2004 WI 88, ¶52, 273 Wis. 2d 136, 682 
N.W.2d 29 ("As a general matter, the burden of proof in a 
worker's compensation case lies with the claimant."); Leist v. 
LIRC, 183 Wis. 2d 450, 457, 515 N.W.2d 268 (1994) ("[T]he 
claimant has the burden of proving beyond a legitimate doubt all 
the facts essential to the recovery of compensation."). 
12 Scholz, 267 Wis. at 41c. 
13 These 
five 
factors 
were 
adopted 
from 
Charles 
T. 
McCormick, McCormick's Handbook of the Law of Evidence, § 337, 
at 787-89 (2d ed. 1972).  See also 2 Charles T. McCormick, 
Handbook of the Law of Evidence, § 337, at 411-15 (5th ed. 
1999).  The McFarren factors were used, for example, in State v. 
Big John, 146 Wis. 2d 741, 756, 432 N.W.2d 576 (1988). 
No. 
2005AP685   
 
13 
 
¶41 We begin by applying these factors to the first issue 
in the present case: whether the workers are employees because 
they 
are 
not 
independent 
contractors 
under 
Wis. 
Stat. 
§ 102.07(8)(b).  The first McFarren factor favors placing the 
burden on Acuity Insurance as the party interested in changing 
the state of affairs between the parties.  Acuity Insurance is 
attempting to collect additional funds and obtain judicial 
recognition of its claim.  
¶42 The 
second 
factor 
about 
disfavored 
defenses 
is 
inapplicable.  
¶43 The third factor relates to the ease of and access to 
proof.  When facts lie peculiarly in the knowledge of a party, 
that party should ordinarily bear the burden of proof on that 
issue.14  At first glance, this factor favors placing the burden 
of proof of the status of the workers at issue on Olivas.  He 
may know more about the workers than Acuity Insurance.  Yet, 
McFarren cautions us not to overemphasize this factor: "Very 
often one must plead and prove matters as to which his adversary 
has superior access to the proof."15  For example, nearly all 
allegations required of a plaintiff in tort or breach of 
contract actions relating to the defendant's acts or omissions 
describe matters peculiarly within the defendant's knowledge.16  
                                                 
14 McFarren, 62 Wis. 2d at 500. 
15 Id. (quoting Charles T. McCormick, McCormick's Handbook 
of the Law of Evidence, § 337, at 787 (2d ed. 1972)). 
16 2 Charles T. McCormick, Handbook of the Law of Evidence, 
§ 337, at 413 (5th ed. 1999). 
No. 
2005AP685   
 
14 
 
Additionally, with liberal discovery, parties are placed on more 
equal footing with regard to evidence.  Olivas, Steve Tenpas, 
and the workers can provide Acuity Insurance with information.  
¶44 The fourth factor, "fairness," has two component 
parts: (a) proof of exceptions and (b) proof of negatives.  
Proof of exceptions has been "defined as providing that one who 
relies on an exception to a general rule or statute has the 
burden of proving that the case falls within the exception."17  
With regard to proof of negatives: "[T]he party asserting the 
negative has the burden to prove it unless the facts are 
peculiarly within the other party's knowledge or are much more 
difficult for the former to prove than the latter."18  
¶45 No proof of exceptions is involved here.  We go to 
proof of negatives.     
¶46 For Acuity Insurance to prevail, it must affirmatively 
prove that the workers are employees under the Act.  Proof that 
the workers at issue are employees is accomplished by proof that 
the workers at issue do not meet at least one part of the 
independent contractor test under Wis. Stat. § 102.07(8).   
¶47 The argument that Acuity Insurance should not have to 
prove a negative is not persuasive.  The commonly stated maxim 
                                                 
17 Big John, 146 Wis. 2d at 756. 
18 McFarren, 62 Wis. 2d at 503. 
No. 
2005AP685   
 
15 
 
that a party cannot be asked to prove a negative19 is not an 
invariable test, nor even always a significant circumstance.  
Parties frequently have to prove a negative.  Wigmore explains 
that "the burden is often on one who has a negative assertion to 
prove; a common instance is that of a promisee alleging 
nonperformance of a contract."20  A party can be required to aver 
and prove negative allegations, especially when the allegation 
is an essential part of the party's claim.21  For example, a 
party alleging nondelivery has the burden of proving that issue; 
a party alleging failure to perform has the burden of proof; a 
party alleging that a signature is a forgery has the burden of 
proving that the document was not signed by the purported 
signatory.  Thus this fourth factor does not convince us that 
the burden of proof of independent contractor status should be 
on Olivas.  
¶48 The fifth factor examines the judicial estimate of the 
probabilities.  "The risk of failure of proof may be placed upon 
the party who contends that the more unusual event has 
occurred."22  It is not unusual for an insurance company to audit 
                                                 
19 "Statements are found primarily in older cases to the 
effect that even though a party is required to plead a fact, it 
is not required to prove that fact if its averment is negative 
rather than affirmative in form."  2 McCormick, Handbook of the 
Law of Evidence, § 337, at 412 (5th ed. 1999).  
20 IX Wigmore on Evidence, § 2486, at 288 (Chadbourn rev. 
1981). 
21 Id. 
22 2 McCormick, Handbook of the Law of Evidence, § 337, at 
413 (5th ed. 1999). 
No. 
2005AP685   
 
16 
 
an insured under a worker's compensation policy and increase 
premiums.  Similarly, it is not unusual for a dispute to arise 
about the status of persons as employees or independent 
contractors.  This factor favors placing the burden on Acuity 
Insurance to show that Olivas failed to account for his 
employees. 
¶49 Considering the relative weight of the McFarren 
factors, we conclude that the burden of proof on the issue of 
whether the workers at issue were independent contractors more 
appropriately lies with Acuity Insurance. 
¶50 Similar considerations lead us to conclude that Acuity 
Insurance 
bears 
the 
burden 
of 
proof 
that 
an 
employment 
relationship exists between Olivas and the workers at issue.  
Again Acuity Insurance is the party attempting to obtain 
judicial recognition of its claim and should bear the burden of 
proving why it is entitled to additional premiums.  The second 
factor is not applicable.  As to the third factor, as we 
explained previously, Acuity Insurance can gain access to the 
information it needs.  The fourth factor is not relevant here.  
There are no exceptions or negatives involved in demonstrating 
the employment relationship. 
¶51 Finally, with regard to the fifth factor, disputes 
about 
employment 
relationships 
are 
common 
in 
worker's 
compensation cases; the burden of proof should be on Acuity 
Insurance, which is attempting to obtain judicial recognition 
that the relationship exists.  
No. 
2005AP685   
 
17 
 
¶52 For the reasons stated, we conclude that Acuity 
Insurance has the burden of proof on both issues that resolve 
the present case. 
IV 
 
¶53 Because this dispute involves an insurance policy, we 
examine the text of the policy to decide whether the policy, the 
Act, or the common law resolves the dispute.   
¶54 The parties do not explore in detail the text of the 
policy.  On this review the parties (and the nonparties who 
filed a brief) agree that the policy should be understood by 
reference to the Act and that the Act governs the resolution of 
the dispute.  
 
¶55 We have examined the policy, and we agree with the 
parties that the text of the insurance policy directs us to the 
Act to resolve the issues presented.   
 
¶56 Olivas purchased what appears to be a standard 
liability and worker's compensation insurance policy from Acuity 
Insurance.  The policy lists only Olivas as a named insured.  
The policy explains that "if you [Olivas] are designated in the 
Declarations as . . . [a]n individual, you and your spouse are 
insureds, but only with respect to the conduct of a business of 
which you are the sole owner."  The policy also provides 
coverage for any employees of Olivas.   
¶57 The policy requires Olivas to pay insurance premiums 
for any persons who subject Acuity Insurance to exposure to 
liability for worker's compensation.  Under the policy, Acuity 
No. 
2005AP685   
 
18 
 
Insurance pays all benefits or compensation required of Olivas 
under the Act.   
¶58 According to the policy, the premium is calculated on 
the following basis:  
[P]ayroll and all other remuneration paid or payable 
during the policy period for the services of:  
1. All your officers and employees engaged in work 
covered by this policy; and  
2. All other persons engaged in work that could make 
us liable under Part One - Workers' Compensation 
Insurance of this policy. 
¶59 The policy does not define "employees" or "other 
persons engaged in work that could make [Acuity Insurance] 
liable under the Worker's Compensation Insurance of this 
policy."23 
¶60 The policy provides that the "terms of this insurance 
that conflict with the workers' compensation law are changed by 
this statement to conform to that law."  The Act (Wis. Stat. 
§ 102.31) also specifically provides that "[e]very contract for 
the insurance of compensation provided under this chapter or 
against liability therefor is subject to this chapter and 
provisions inconsistent with this chapter are void."   
¶61 The policy obviously directs the courts to the Act to 
determine Acuity Insurance's exposure to liability for worker's 
compensation for the workers at issue and thus the premiums it 
                                                 
23 The policy states only that "'Employee' includes a leased 
worker. Employee does not include a temporary worker." "Leased 
worker" and "temporary worker" are defined by the policy, but 
these definitions are not relevant here. 
No. 
2005AP685   
 
19 
 
can charge.  We therefore conclude that the Act, not the common 
law, governs whether the workers at issue are independent 
contractors and whether the workers are Olivas' employees. 
V 
¶62 The parties agree, and so do we, that if the workers 
at 
issue 
are 
independent 
contractors 
under 
Wis. 
Stat. 
§ 102.07(8)(b), they are not employees, and Acuity Insurance is 
not liable for them under the Act and the policy.  Acuity 
Insurance therefore would not be entitled to additional premiums 
from Olivas.  
¶63 The Act (Wis. Stat. § 102.07(8)(b)) establishes a 
nine-part test to determine whether a person is an independent 
contractor and not an employee for purposes of worker's 
compensation.  Unless all parts of the nine-part test are met, 
the person is not an independent contractor exempt from the Act.  
To be an independent contractor, a person must meet all of the 
following conditions: 
1. Maintains a separate business with his or her own 
office, equipment, materials and other facilities.  
2. Holds or has applied for a federal employer 
identification 
number 
with 
the 
federal 
internal 
revenue service or has filed business or self-
employment 
income 
tax 
returns 
with 
the 
federal 
internal revenue service based on that work or service 
in the previous year.  
3. 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.  
4. Incurs the main expenses related to the service or 
work that he or she performs under contract.  
No. 
2005AP685   
 
20 
 
5. Is responsible for the satisfactory completion of 
work or services that he or she contracts to perform 
and is liable for a failure to complete the work or 
service.  
6. Receives compensation for work or service performed 
under a contract on a commission or per job or 
competitive bid basis and not on any other basis.  
7. May realize a profit or suffer a loss under 
contracts to perform work or service.  
8. Has continuing or recurring business liabilities or 
obligations.  
9. 
The 
success 
or 
failure 
of 
the 
independent 
contractor's business depends on the relationship of 
business receipts to expenditures.24 
 
¶64 Only if all nine parts of this test for independent 
contractors are met will the workers at issue fall within the 
definition of "independent contractor" and fall outside the 
definition of "employees" in the Act and therefore outside the 
policy.  Acuity Insurance insists that the workers at issue fail 
to meet one or more of this nine-part test. 
 
¶65 We agree with Acuity Insurance that Wis. Stat. 
§ 102.07(8)(b) provides the sole test for determining whether a 
person is an independent contractor exempt from the Act's 
coverage.  Indeed, § 102.07(8)(b) was amended in 1989 to replace 
the then-used test for distinguishing between employees and 
independent contractors, a test that was based on common-law 
                                                 
24 Wisconsin 
Stat. 
§ 102.07(8)(b) 
provides: 
"(b) 
An 
independent contractor is not an employee of an employer for 
whom the independent contractor performs work or services if the 
independent contractor meets all of the following conditions:" 
No. 
2005AP685   
 
21 
 
criteria for distinguishing between employees and independent 
contractors.   
 
¶66 The nine-part test in Wis. Stat. § 102.07(8)(b) was 
enacted to provide an easily understood and easily applied test 
to determine who is an exempt independent contractor under the 
Act.25  The Worker's Compensation Advisory Council26 stated that 
"[t]his redefinition is to eliminate the disputes involving 
cases where insurance companies have collected premiums for 
individuals where they may not have any liability and cases 
where they have not collected premiums from individuals for whom 
they are liable and employers who were or were not paying 
premiums under the mistaken notion that the individuals working 
                                                 
25 Jarrett v. LIRC, 2000 WI App 46, ¶17, 233 Wis. 2d 174, 
607 N.W.2d 326. 
26 The Worker's Compensation Advisory Council is a council 
created by statute, Wis. Stat. § 15.227(4).  It consists of the 
following persons appointed by the Secretary of Workforce 
Development: 
a 
designated 
employee 
of 
the 
Department 
of 
Workforce Development as chairperson, five representatives of 
employers, and five representatives of employees.  The Secretary 
of Workforce Development also appoints three representatives of 
insurers 
authorized 
to do worker's compensation insurance 
business in this state as nonvoting members of the council.  
Wisconsin Stat. § 102.14(2) requires the Advisory Council to 
"advise the department in carrying out the purposes of this 
chapter.  Such council shall submit its recommendations with 
respect to amendments to this chapter to each regular session of 
the legislature and shall report its views upon any pending bill 
relating to this chapter to the proper legislative committee." 
No. 
2005AP685   
 
22 
 
for them were or were not employees."27  The Advisory Council 
expected that "this proposed amendment would clarify and 
redefine the term independent contractor so that employers and 
their insurance companies will be able to identify which 
employees are covered by the Worker's Compensation Act."28 
 
¶67 As discussed earlier, Acuity Insurance has the burden 
to prove facts from which a court could reach the conclusion of 
law that the workers at issue fail to satisfy at least one part 
of the nine-part test and therefore are not independent 
contractors under Wis. Stat. § 102.07(8)(b).  The determination 
of whether the facts fulfill a statutory standard is a question 
of law that this court determines independently of the circuit 
court and court of appeals. 
 
¶68 In determining whether the workers at issue fail to 
meet at least one part of the nine-part test, we look to the 
record and to decisions of the Labor & Industry Review 
Commission (LIRC) for guidance on the interpretation and 
application 
of 
Wis. 
Stat. 
§ 102.07(8)(b). 
 
LIRC 
is 
the 
administrative body that regularly reviews worker's compensation 
claims.  Although we are not bound by LIRC's reasoning, 
                                                 
27 This explanatory language from the Worker's Compensation 
Advisory Council can be found in a document entitled "Plain 
Language Analysis of Independent Contractor Recommendation" 
contained in the legislative file for 1989 Wis. Act 64, on file 
with the Legislative Reference Bureau, Madison, WI.  See also 
Jarrett, 233 Wis. 2d 174, ¶17. 
28 Id.  This legislative history is set forth in greater 
detail in Jarrett, 233 Wis. 2d 174, ¶17, and in the nonparties' 
brief.  
No. 
2005AP685   
 
23 
 
conclusions, or interpretations of the law, LIRC's specialized 
knowledge and experience can help this court in applying the 
nine-part test in Wis. Stat. § 102.07(8)(b).29 
 
¶69 In James v. B&P Drywall, WC Claim No. 1999-051348 
(LIRC July 28, 2000), LIRC had to decide whether a subcontractor 
who installed drywall was an independent contractor or an 
employee covered under the Act.  The drywall installer was paid 
on a per-job basis for projects he accepted from other 
contractors.  The drywall installer supplied his own tools, and 
the contractors provided the drywall sheets.  Based on these 
facts, LIRC concluded that the drywall installer who applied for 
worker's compensation was not an independent contractor.30 
                                                 
29 For a discussion of the deference due to administrative 
decisions on questions of law, see Racine Harley-Davidson, Inc. 
v. Wis. Div. of Hearings & Appeals, 2006 WI 86, ¶¶8-20, 292 
Wis. 2d 549, 717 N.W.2d 184. 
30 LIRC determined that the first part of the nine-part 
test, that is, that the worker maintains a separate business 
with his or her own office, equipment, materials, and other 
facilities, was not met in James.  According to the evidence 
presented, the drywall installer kept his supplies in a bucket 
in the basement, did not have an office or home office, did not 
have a business card, did not set aside any space for business 
purposes, did not have a business phone line or office 
equipment, and did not keep any records except those needed for 
income tax purposes.     
In the present case, in contrast to James, no evidence was 
presented regarding whether the workers maintained a separate 
business, where they kept their tools, and what facilities they 
maintained.  We cannot just assume, without any evidence, that, 
like in James, these workers kept their tools in a bucket at 
their homes and did not have any equipment associated with 
running one's own business. 
No. 
2005AP685   
 
24 
 
 
¶70 LIRC concluded that the drywall installer in James 
failed the seventh, eighth, and ninth parts of the test and 
therefore was not an independent contractor.  The drywall 
installer had no continuing or recurring business liabilities or 
obligations or overhead.  He had only a few tools that did not 
require frequent maintenance or replacement.  LIRC opined that 
minor or trivial expenses like these could not result in the 
success or failure of the business, as envisioned by the ninth 
part of the test.  Because the drywall installer's "business" 
consisted of providing services with no overhead, LIRC concluded 
that the drywall installer did not have recurring expenses that 
could cause him to take a loss on any individual project. 
¶71 Applying the teachings of James and examining the 
record in the present case, we conclude that the workers in the 
present case failed the seventh and ninth parts of the test.  
Each worker in the present case supplied only labor and simple 
tools like hammers that do not require frequent repair or 
replacement.  The workers at issue did not have to purchase 
their own drywall sheets.  There was no risk that the workers 
would suffer a loss on any of the jobs.  They were paid only for 
the labor they put in, and they did not control any of the other 
costs involved with the project.  Their success was not related 
                                                                                                                                                             
In an unpublished decision, the court of appeals affirmed 
LIRC's 
decision 
that 
the 
drywall 
installer 
was 
not 
an 
independent contractor under Wis. Stat. § 102.07(8)(b).  B&P 
Drywall v. LIRC, 2001AP1422, unpublished slip op. (Wis. Ct. App. 
May 7, 2002). 
No. 
2005AP685   
 
25 
 
to the relationship of business receipts to expenditures, but 
rather to how much labor they were willing to provide. 
¶72 In reaching this conclusion of law, we disagree with 
the conclusion of law the circuit court reached.  The circuit 
court did not analyze the facts with respect to each part of the 
nine-part test in reaching its conclusion of law that the 
workers at issue are independent contractors.  The circuit court 
supported its conclusion of law with the following facts: each 
of the workers at issue owned his own equipment; each received a 
Form 1099 for tax purposes; the workers at issue agreed on how 
compensation 
would 
be 
distributed; 
the 
compensation 
was 
distributed according to the agreement; each worker at issue was 
equally responsible to complete the job satisfactorily; each ran 
the same risk of nonpayment (which is minimal) because Tenpas 
provided the supplies; the only risk was nonpayment by Tenpas.   
¶73 Even drawing inferences from the record to support the 
circuit court's conclusion of law that the workers at issue were 
independent contractors, we conclude that the workers failed at 
least one of the nine parts of the test.  
¶74 We therefore conclude that Acuity Insurance satisfied 
its burden to prove that the workers at issue failed to meet at 
least one part of the nine-part test and therefore do not 
No. 
2005AP685   
 
26 
 
qualify as independent contractors.  The workers are employees 
under Wis. Stat. § 102.07(8)(a).31    
¶75 Acuity Insurance argues, based on Jarrett v. LIRC, 
2000 WI App 46, 233 Wis. 2d 174, 607 N.W.2d 326, that the 
conclusion that the workers at issue are not independent 
contractors ends the inquiry and Acuity Insurance wins the case.   
¶76 In Jarrett, 233 Wis. 2d 174, ¶17, the court of appeals 
concluded that "Wis. Stat. § 102.07(8)(b) was intended to 
provide the sole test for determining whether a worker is an 
independent contractor under the Act. . . . [T]he legislature 
intended § 102.07 to create two classes of persons, employees 
and independent contractors, and to provide the method for 
determining whether a person is an independent contractor." 
¶77 Jarrett, however, cannot be interpreted, as Acuity 
Insurance urges, as ending the inquiry in the present case and 
completely resolving the dispute.  Jarrett is inapposite.  
¶78 In Jarrett, Jarrett was held to be an independent 
contractor, not an employee.  Consequently, in Jarrett neither 
LIRC nor the court of appeals had to examine whether an 
employment relationship existed under the Act between Jarrett 
and his alleged employer, that is, whether Jarrett's injury was 
sustained while he was in the service of the alleged employer.  
                                                 
31 Wisconsin Stat. § 102.07(8)(a) provides that "every 
independent contractor [who does not satisfy the nine-part test 
under § 102.07(8)(b)] is an employee of any employer under this 
chapter for whom he or she is performing service in the course 
of the trade, business, profession or occupation of such 
employer at the time of the injury."       
No. 
2005AP685   
 
27 
 
In Jarrett, the inquiry under Wis. Stat. § 102.07(8)(b) was the 
end of the inquiry under the circumstances of that case. 
¶79 In the present case, after determining that the 
workers are employees, not independent contractors, we must 
proceed to decide whether an employment relationship exists 
between the workers and the alleged employer, an issue that did 
not arise in Jarrett.32   
¶80 Simply concluding that the workers at issue are 
employees and not exempt independent contractors within the Act 
does not mean that Acuity Insurance can collect additional 
insurance premiums from Olivas for the workers at issue.  The 
next question we must address is whether these workers are 
employees of Olivas. 
VI 
¶81 Even if the workers at issue are employees (and not 
independent contractors under the Act), Olivas argues that 
Acuity Insurance is not liable for these workers under Olivas' 
policy unless Acuity Insurance proves that the workers are 
Olivas' employees, that is, unless Acuity Insurance proves that 
an employer-employee relationship exists between the workers at 
issue and Olivas. 
                                                 
32 After examining Jarrett, LIRC has recently concluded that 
the approach we use is the correct one, namely, a decision is 
made under Wis. Stat. § 102.07(8)(b).  Then, when the issue is 
posed, a decision is made under Wis. Stat. § 102.07(4) regarding 
the employer-employee relationship.  St. John v. The Last 
Detail, WC Claim No. 1995007051 (LIRC Feb. 28, 2000). 
No. 
2005AP685   
 
28 
 
¶82 The Act defines an employee in Wis. Stat. § 102.07.  
Subsection (4)(a) defines an employee as a "person in the 
service of another under any contract of hire, express or 
implied . . . if 
employed 
with 
the 
knowledge, 
actual 
or 
constructive, of the employer . . . ."  Subsection (4)(a)2. 
excludes as an employee "[a]ny person whose employment is not in 
the course of a trade, business, profession or occupation of the 
employer . . . ." 
¶83 The concept that an employee is in the service of 
another in the course of a trade, business, profession, or 
occupation 
of 
an 
employer 
also 
appears 
in 
Wis. 
Stat. 
§ 102.07(8)(a), which provides that a worker who does not 
satisfy 
any 
part 
of 
the 
nine-part 
test 
for 
independent 
contractors is an "employee of any employer under this chapter 
for whom he or she is performing service in the course of the 
trade, 
business, 
profession 
or 
occupation 
of 
such 
employer . . . ."   
¶84 Key to defining an employee under the Act, then, is 
the concept that an employee is "in the service of another in 
the course of a trade, business, profession or occupation of an 
employer." 
 
Clearly 
the 
Act 
does 
not 
impose 
worker's 
compensation liability on an employer when the employer does not 
have an employer-employee relationship with an injured person.  
The Act governs employers and their employees.  "The foundation 
of the Workmen's Compensation Act is the existence of an actual 
employer-employe [sic] relationship."  Wendlandt v. Indus. 
Comm'n, 256 Wis. 62, 67, 39 N.W.2d 854 (1949).  
No. 
2005AP685   
 
29 
 
¶85 A sufficient nexus must exist between Olivas and the 
workers at issue to enable this court to conclude that these 
workers are in the service of Olivas in the course of Olivas' 
trade, business, or occupation.  Olivas' worker's insurance 
policy does not cover every person who is an employee of some 
employer; it covers only employees in the service of Olivas.   
¶86 The 
most 
recent 
case 
interpreting 
Wis. 
Stat. 
§ 102.07(4)(a) and its definition of "employee" is Labor Ready, 
Inc. v. LIRC, 2005 WI App 153, 285 Wis. 2d 506, 702 N.W.2d 27.  
Labor Ready was a temporary help agency that operated as a 
hiring hall.  The applicant for worker's compensation was 
injured at Labor Ready's facilities, while the applicant was 
awaiting a possible job assignment.  The court of appeals 
affirmed LIRC's decision that the applicant was an employee of 
Labor Ready under § 102.07(4)(a) when he was injured.   
¶87 In determining the existence of an employer-employee 
relationship under the Act, the court of appeals applied the 
test 
established 
in 
Kress 
Packing 
Co. 
v. 
Kottwitz, 
61 
Wis. 2d 175, 182, 212 N.W.2d 97 (1973).  Although the Kress 
Packing test has been supplanted by Wis. Stat. § 102.08(b) for 
deciding independent contractor status for purposes of the Act,33 
the Labor Ready case demonstrates that the Kress Packing test 
continues to have vitality in determining whether a person is an 
employee under Wis. Stat. § 102.07(4)(a). 
                                                 
33 See Jarrett, 233 Wis. 2d 174, ¶17 ("Wisconsin Stat. 
§ 102.07(8)(b) . . . replaced 
the 
previous 
criteria 
for 
determining independent contractor status under the Act."). 
No. 
2005AP685   
 
30 
 
¶88 Kress 
Packing 
established 
the 
primary 
test 
for 
determining an employer-employee relationship: Does the alleged 
employer have a right to control the details of the work?34  In 
assessing the right to control, four secondary factors are 
considered:  (1) direct evidence of the exercise of the right of 
control, (2) method of payment of compensation, (3) furnishing 
of equipment or tools for the performance of the work, and (4) 
right to fire or terminate the employment relationship.35    
¶89 The Kress Packing test is fact-specific.  Carefully 
examining the record, the court of appeals concluded in Labor 
Ready that the applicant was an employee of Labor Ready because 
Labor Ready had exercised control of the applicant even before 
the applicant was assigned to a job.  The court of appeals 
emphasized that Labor Ready provided the facility at which the 
applicant was required to appear and wait.  Furthermore, Labor 
Ready documented the applicant's status as an employee.  The 
forms prepared by Labor Ready and signed by the applicant 
referred to the applicant as an employee; the applicant 
completed an Employee Withholding Allowance Certificate (W-4) 
for income tax purposes; the applicant was paid by Labor Ready, 
not the customer to whom the applicant would be assigned.  All 
these facts led the court of appeals to conclude that the 
"parties have sufficient relevant indicia of an employer-
                                                 
34 Kress Packing Co. v. Kottwitz, 61 Wis. 2d 175, 182, 212 
N.W.2d 97 (1973). 
35 Id. 
No. 
2005AP685   
 
31 
 
employee 
relationship . . . [and] 
for 
purposes 
of 
worker's 
compensation 
statutes, 
[the 
applicant] 
was 
Labor 
Ready's 
employee at the time he was injured.  See Wis. Stat. 
§ 102.07(4)(a)."36       
¶90 LIRC cases also demonstrate that the Kress Packing 
test continues to have vitality in determining whether a 
sufficient employer-employee relationship exists under the Act 
between an applicant and an alleged employer. 
¶91 For instance, in Nickell v. County of Kewaunee, WC 
Claim No. 94064155 (LIRC Sept. 24, 1996), LIRC addressed the 
worker's compensation claim of a caregiver who was indisputably 
an employee under the Act.  The issue to be decided was in whose 
service the caregiver-employee was for purposes of worker's 
compensation.  In answering this question, LIRC examined the 
Kress Packing secondary factors, focusing on who hired the 
caregiver, who had the ability to fire the caregiver, and who 
ultimately paid the caregiver's wages.  Acknowledging that "this 
case is not so clear-cut," LIRC concluded that the factors 
weighed 
in 
favor 
of 
holding 
that 
an 
employee-employer 
relationship existed between the caregiver and the county, not 
between the caregiver and the person cared for.  The county 
arranged the general terms of employment and ultimately paid for 
                                                 
36 Labor Ready, Inc. v. LIRC, 2005 WI App 153, ¶17, 285 
Wis. 2d 506, 702 N.W.2d 27.  The court of appeals went on to 
conclude that the applicant-employee was performing service 
growing out of and incidental to his or her employment under 
Wis. Stat. § 102.03(1).   
No. 
2005AP685   
 
32 
 
the caregiver's services, even though the caregiver's direct 
services were not rendered to the county.37   
¶92 With the Kress Packing test in mind and these examples 
of the application of the test, we review the facts of the 
present case to consider whether there are sufficient indicia of 
an employer-employment relationship under the Act between Olivas 
and the workers at issue.  
¶93 Olivas argues that the record demonstrates he was a 
go-between, middleman, or broker and that the workers at issue 
were not in his service.   
¶94 According to Acuity Insurance, Olivas occupied a 
significant leadership role among the workers at issue.  Acuity 
                                                 
37 In Day v. Village of Greendale, WC Claim No. 94005719 
(LIRC May 18, 1995), an applicant for worker's compensation was 
injured during a physical agility test before being hired.  In 
determining 
whether 
the 
person 
qualified 
for 
worker's 
compensation, LIRC relied on the Kress Packing factors in 
assessing the employment relationship between the parties.  LIRC 
refused to adopt the applicant's argument that the potential 
employer "controlled" the performance of the test.  LIRC 
concluded that the agility test was voluntary and that the Kress 
Packing test was not satisfied. 
In Ambrose v. Harley Vandeveer Trust, WC Claim No. 86-39393 
(Feb. 28, 1989), LIRC applied the Kress Packing test to 
determine whether an employee-employer relationship existed 
between a caregiver and a trust for the benefit of the person 
for whom care was provided.  LIRC held that the person for whom 
care was provided administered her own affairs and reserved the 
right to control the details of the caregiver's employment and 
to terminate the caregiver's employment.  The trust, according 
to LIRC, was a conduit for compensation.  The caregiver was not 
an employee of the trust under Wis. Stat. § 102.07(4).  This 
decision was affirmed by the court of appeals in an unpublished 
decision.  Ambrose v. LIRC, 1990AP440, unpublished slip op. 
(Wis. Ct. App. Oct. 23, 1990). 
No. 
2005AP685   
 
33 
 
Insurance points to the fact that Olivas communicated with 
contractors about work opportunities and about the details of 
each assignment——information which he then relayed to the 
workers at issue; Olivas also received payment on behalf of the 
workers at issue and received the 1099 tax form from Tenpas.   
¶95 The circuit court, the court of appeals, and this 
court do not agree with Acuity Insurance's characterization of 
the record.  The courts accept Olivas' position that the facts 
prove he was just a go-between, middleman, or broker.38   
¶96 According to Olivas' and a worker's testimony (which 
the circuit court apparently found credible), the workers at 
issue were drywall installers.  Olivas got the jobs on behalf of 
the workers at issue because he was able to speak English.  He 
did not control the details of the workers' work.  He did not 
order the workers at issue to hang a certain number of drywall 
sheets.  He did not set their working hours.39  He did not set 
                                                 
38 For a LIRC case in which LIRC had to decide whose 
employee the applicant was after it determined the applicant was 
not an independent contractor under Wis. Stat. § 102.07(8)(b), 
see St. John v. The Last Detail, WC Claim No. 1995007051 (Feb. 
28, 2000).  In that case, Reed (who was in the construction 
business) arranged a garage remodeling project as a favor to his 
in-laws.  The roofer working on the garage was injured.  Reed 
argued that he did not have an employer-employee relationship 
with the roofer.  LIRC concluded that Reed was not a middleman 
and that when he was injured, the roofer was performing services 
for Reed. 
39 At trial, Olivas testified to the following: "Q. Did you 
tell the other workers what hours they had to work? A. No, I 
never said anything to them."  
No. 
2005AP685   
 
34 
 
their compensation.  He did not pay them an hourly wage.  The 
group decided the distribution of the per-job payment.   
¶97 Olivas did not exercise the level of control that one 
would ordinarily expect from an employer.  Indeed, he apparently 
did not have a right to control the workers.  Thus, Olivas does 
not satisfy the Kress Packing primary control test. 
¶98 Nor does Olivas satisfy the Kress Packing secondary 
factors.  As to the first factor, Olivas did not exercise 
control over the details of the workers' work.  Admittedly, 
Olivas did help train two of his colleagues who lacked prior 
experience in drywall hanging.  This factor alone, however, will 
not create an employer-employee relationship between the parties 
without other evidence of "control."   
¶99 Second, Tenpas, not Olivas, determined how much would 
be paid for each job, based on the size and complexity of the 
job.  Then the workers at issue and Olivas, not Olivas alone, 
determined how the proceeds from the job would be distributed.  
According to the record, the workers and Olivas agreed that 
those with the most experience, who could hang more drywall 
sheets, would receive greater compensation.  Olivas did not pay 
the workers until Tenpas paid Olivas.40    
¶100 Third, each worker supplied his own equipment, like 
hammers and other tools, as necessary.  Olivas, like the other 
                                                 
40 When asked at trial "Does Miguel [Olivas] ever pay you 
when Steve [Tenpas] doesn't pay him?," one of the coworkers 
answered "No."  
No. 
2005AP685   
 
35 
 
workers, brought equipment only for himself.  Tenpas——not 
Olivas——supplied the drywall sheets for each project.   
¶101 Fourth, Olivas had no individual right to hire or fire 
any of the workers at issue.  Just as the workers at issue and 
Olivas collectively decided their compensation arrangement, so, 
too, they decided whether they would permit others to work with 
them.  Sometimes they allowed others to assist them on larger 
projects; Olivas did not control that decision.41  The workers at 
issue had not fired anyone, and instead, each worker could 
decide for himself whether he wished to work on a project.  
Workers had quit jobs, on their own terms and without need of 
Olivas' permission.  There was no contract, express or implied, 
binding these workers to Olivas or Olivas to these workers.  
¶102 Although under Kress Packing "a benefit conferred does 
not necessarily point to an employee-employer relationship,"42 we 
may consider in determining whether the workers at issue were in 
the service of Olivas whether they conferred a benefit upon 
Olivas.  Olivas received no pecuniary gain from his relationship 
                                                 
41 At trial, Olivas testified to the following: "Q. Did you 
ever add people to the group?  A. When it was a bigger job, we 
would all agree to bring one other person.  It would depend on 
the job that we were doing.  Q. And the decision was made by the 
group?  A. Yes.  Q. It wasn't made by you?  A. No."  
42 Kress Packing, 61 Wis. 2d at 181.  Whether the worker 
provides a "benefit" to the alleged employer is not the 
dispositive 
factor 
in 
establishing 
an 
employer-employee 
relationship 
between 
the 
parties. 
 
Lange 
v. 
DILHR, 
40 
Wis. 2d 618, 162 N.W.2d 645 (1968) ("something more than an 
incidental benefit to the claimed employer must be found to link 
the asserted employer and asserted employe [sic]"). 
No. 
2005AP685   
 
36 
 
to the workers.  Each worker at issue, and Olivas, received 
remuneration according to a decision of the group.  Olivas 
distributed Tenpas' payment without taking an extra share.  At 
trial, Olivas explained he "did not have any gains" or profit 
from his role.  
¶103 Olivas' prominent position emerges from the stark 
scenario that he is the only one with sufficient English skills 
to handle these matters and perhaps the only person legally 
entitled to work.43  Olivas, it appears, was the translator, not 
the employer, and his role as translator should not saddle him 
with obligations under worker's compensation. 
¶104 The factors relied on by Acuity Insurance's auditor to 
conclude there was an employer-employee relationship between 
Olivas and the workers at issue are legally insufficient.  The 
auditor testified at trial that she believed that Olivas oversaw 
the work of the group solely because the group was working 
together.  The auditor also testified that she believed Olivas 
was the employer because he was the only one that actually got 
paid and he was getting the jobs.  Under the totality of the 
circumstances of the present case, these facts upon which the 
auditor relied are consistent with the conclusion that Olivas 
occupied a leadership role with the workers at issue, not that 
the workers at issue were his employees. 
                                                 
43 At trial, Olivas testified that Tenpas would relate to 
him the details of each assignment "because the other ones 
didn't speak English."  
No. 
2005AP685   
 
37 
 
 
¶105 Examining the record as a whole, we conclude that 
there were not sufficient indicia of an employer-employee 
relationship between Olivas and the workers.  We conclude that 
the facts and the reasonable inferences therefrom lead to the 
conclusion of law that the workers were not performing work in 
Olivas' service.  We thus hold that Acuity Insurance cannot 
require Olivas to pay additional insurance premiums for these 
workers.44 
* * * * 
¶106 For the reasons set forth, we affirm the decision of 
the court of appeals affirming the order of the circuit court.  
We agree with both parties and the non-parties that the Act, not 
the common law, governs whether the workers at issue are 
independent contractors and Olivas' employees.  We further agree 
with Acuity Insurance that the workers at issue do not satisfy 
the nine-part test for independent contractors set forth in Wis. 
Stat. § 102.07(8)(b).  Accordingly, the workers at issue are 
employees under Wis. Stat. § 102.07(8) of the Act. 
¶107 We agree, however, with Olivas that the workers at 
issue are not employees in his service in the course of his 
trade, business, profession, or occupation.  In other words, no 
employment relationship existed between the workers at issue and 
Olivas. Accordingly, Acuity Insurance could not take these 
workers into account in setting the premium under Olivas' 
                                                 
44 This case does not require us to determine who had an 
employer-employee relationship with the workers at issue.  We do 
not address this question. 
No. 
2005AP685   
 
38 
 
worker's compensation insurance policy.  We therefore affirm the 
decision of the court of appeals affirming the order of the 
circuit court that the complaint must be dismissed. 
By the Court.—The decision of the court of appeals is 
affirmed. 
 
 
 
 
 
 
 
 
No.  2005AP685.lbb 
 
1 
 
 
¶108 LOUIS B. BUTLER, JR., J.   (concurring).  I concur.  
The dissent in this case makes for good reading, but it is light 
on substance.  It suggests that Miguel Olivas is an "employer" 
under 
Wis. Stat. § 102.04(1)(b)1. 
and 
(1)(e)(2003-04).1 
No 
evidence exists in this record that Olivas entered into a 
written or oral contract to employ anyone.   
¶109 In order to be an "employer," Olivas would have to 
employ three or more employees,2 or he would have to have a 
person in service "under any contract of hire, express or 
implied, oral or written."3  Assuming that Olivas qualifies as an 
employer under either Wis. Stat. § 102.04(1)(b)1. or (1)(e), he 
then is deemed thereby to have elected, as an employer who has 
entered into a contract for the insurance of compensation, or 
against 
the 
liability 
therefore, 
as 
provided 
in 
Wis. Stat. § 102.05, to become subject to the provisions of 
Chapter 102.4  The applicable provision of § 102.05 provides that 
"[a]ny employer who shall enter into a contract for the 
insurance . . . shall be deemed thereby to have elected to 
accept the provisions of this chapter, and such election shall 
include . . . employees . . . if such intent is shown by the 
terms of the policy."  Wis. Stat. § 102.05(2).   
                                                 
1 All references to the Wisconsin Statutes are to the 2003-
04 version of the statutes unless otherwise noted. 
2 Wis. Stat. § 102.04(1)(b)1. 
3 Wis. Stat. § 102.04(1)(e) (emphasis added). 
4 Wis. Stat. §§ 102.04(1)(e) and 102.05(2). 
No.  2005AP685.lbb 
 
2 
 
¶110 Under Wis. Stat. § 102.04(1)(e), the creation of an 
employment contract is a necessary requirement before one can be 
deemed to have elected to become an employer pursuant to 
Wis. Stat. § 102.05.  Acuity bears the burden of proving the 
existence of an employer-employee relationship between Olivas 
and the workers at issue,5 and Acuity has failed to meet its 
burden.  I agree with the majority's holding that "the Kress 
Packing test continues to have vitality in determining whether a 
sufficient employer-employee relationship exists under the Act 
between an applicant and an alleged employer,"6 and its 
conclusion that the workers at issue were not employees of 
Olivas under this test.7  I would add only that these workers 
were 
not 
Olivas' 
employees 
under 
the 
plain 
language 
of 
§ 102.04(1)(e).8  No contract of hire, express or implied, oral 
or written, has been offered into evidence.  Indeed, the 
evidence is to the contrary.  Majority op., ¶¶21-22, 81-105.  
See also dissent, ¶¶125, 130-131.   
¶111 The 
dissent 
simply 
assumes 
that 
an 
employment 
relationship exists in the absence of any evidence to support 
that assumption, because, after all, there were six workers, but 
only one insurance policy.  Yet, no written contract of 
                                                 
5 Majority op., ¶¶31-52. 
6 Majority op., ¶90 (referring to Kress Packing Co. v. 
Kottwitz, 61 Wis. 2d 175, 182, 212 N.W.2d 97 (1973)). 
7 Majority op., ¶¶92-105. 
8 See also Wis. Stat. § 102.07(4)(a). 
 
No.  2005AP685.lbb 
 
3 
 
employment between Olivas and the other workers was offered into 
evidence. No testimony was introduced establishing an oral 
contract of employment between Olivas and the other workers.  In 
the absence of any evidence of any written or oral employment 
contract between Olivas and the other workers, or that an 
employment relationship between Olivas and the other workers 
otherwise existed under the statutes or common law, Acuity has 
simply failed to establish how the remainder of Chapter 102 is 
at all applicable.  The evidence is just not there. 
¶112 One need only look at the terms of the insurance 
policy to see who was covered under the policy.  Acuity's policy 
lists Miguel A. Olivas as the first named insured.  In that part 
of the policy that lists additional named insureds, the policy 
itself provides the answer: "NONE."  The policy lists as "FIRST 
NAMED INSURED," "INDIVIDUAL."  While the policy does cover 
"[y]our employees . . . for acts within the scope of their 
employment[,]" evidence must exist that any covered individual 
is "your" employee. 
¶113 Olivas testified that he was not an employer and did 
not have any workers, but was one of a group of six people who 
hung drywall for Steve Tenpas.  Jose Mireles, one of the six 
workers in question, testified that he worked for Steve Tenpas.  
None of the remaining workers were called to testify by Acuity.  
As Acuity has the burden of proof as to the status of the 
workers to establish its prima facie contract case, it has 
simply failed to carry its burden.  Any "election" to become an 
No.  2005AP685.lbb 
 
4 
 
"employer" referred to by the dissent is simply irrelevant in 
the absence of proof of an employment contract.  
¶114 Accordingly, I join the majority opinion in this 
matter. 
 
 
 
No.  2005AP685.dtp 
 
1 
 
¶115 DAVID T. PROSSER, J.   (dissenting).  In this case, 
the court decides much more than whether Miguel Olivas owes 
additional 
premiums 
on worker's compensation and business 
liability policies issued to him by Acuity.  The majority makes 
law by opining about who qualifies as an employer and who 
qualifies 
as 
an 
employee 
under 
the 
Wisconsin 
Worker's 
Compensation Act in circumstances where the purported employees 
are undocumented workers.  Because the precedent established by 
this decision creates uncertainty for employers, insurers, and 
workers, I respectfully dissent. 
FACTUAL BACKGROUND AND PROCEDURAL HISTORY 
¶116 Unless noted otherwise, the following facts are based 
on the record made at a September 27, 2004, trial to the 
Sheboygan County Circuit Court, James J. Bolgert, Judge. 
¶117 In making its case for additional premiums, Acuity 
presented two witnesses: Deb Seidel, a premium auditor who had 
worked for Acuity for 16 years, and Steven Tenpas, a Sheboygan 
County drywall contractor. 
¶118 Tenpas owns Steve Tenpas Drywall, Inc.  At the time of 
trial, he had operated his business for 23 years, and his son 
had become part of the business.  The record does not indicate 
the number of payroll employees in the business, but Tenpas 
stated that when his company hires an employee for the payroll, 
the employee's history is investigated. 
¶119 Tenpas testified he had known Miguel Olivas for about 
five 
years. 
 
"He 
came 
to 
me 
looking 
for 
work 
as 
a 
subcontractor."  For many years Tenpas had asked all his 
No.  2005AP685.dtp 
 
2 
 
subcontractors to obtain and show proof of "workmen's comp and 
liability" policies, and he asked Olivas to comply with this 
requirement.  The requirement resulted from an early experience 
Tenpas had with his business.  The business grew rapidly, hired 
outside subcontractors, and then was audited by its worker's 
compensation carrier.  The implication of the testimony is that 
Tenpas was required to pay additional worker's compensation 
premiums for non-payroll "employees." 
¶120 Against this background, Tenpas bluntly explained his 
motivation.  He said he required his subcontractors to obtain 
worker's compensation coverage for their employees "so that I 
don't have to pay [for worker's compensation]."  "[H]e [Olivas] 
is in charge of whoever he hires, and they are covered."  He 
added: 
I don't know the people personally who he hires, so I 
don't have to be responsible for his men.  If I hire 
somebody in a payroll, we kind of——we investigate 
their history and stuff like that.  And if you hire a 
sub, you don't know exactly the history of all of his 
employees, so I require workmen's comp and liability 
from them so they are responsible for their workers. 
¶121 Tenpas testified that he paid Olivas each week by 
check, whereas he paid his own employees every two weeks.  
Tenpas gave Olivas a Form 1099 at the end of each year.  The 
Form 1099 for 2002 showed payments to Olivas of $193,644.17.  
The Form 1099 for 2003 showed payments of $191,370.27. 
¶122 Tenpas testified that Olivas was never on his payroll 
as an employee and that Olivas's workers were never on his 
payroll as employees.  He said he gave jobs to Olivas and that 
he and Olivas determined the price to be paid for the jobs based 
No.  2005AP685.dtp 
 
3 
 
on the number of sheets of drywall to be installed, which 
reflected the number of square feet of wall space to be covered.  
The price could go up based on the difficulty of a job. 
¶123 Tenpas stated that he did not determine the number of 
people who worked on a subcontracted job, or the identity of the 
people working, or how long they worked, or how much money they 
were paid.  He did not hire or fire any of the subject workers.  
He did not know whether Olivas or his workers worked exclusively 
on Tenpas projects because that was up to Olivas.  He said he 
knew Olivas had "done a few small jobs" for others; that "he did 
work for another drywall company the beginning of last year 
[2003] . . . I believe for a while."  The implication of the 
testimony is that Olivas was not required to work exclusively 
for Tenpas. 
¶124 Tenpas acknowledged that he knew Olivas did not work 
alone, that he had a crew of workers.  He had seen these workers 
at work sites, had said hello to them, and knew some of their 
first names.  However, there was a language barrier between him 
and these workers, he said, so that virtually all substantive 
communication was with Olivas. 
¶125 In his defense, Miguel Olivas testified that he was 
not an employer.  He said he was simply one of a group of six 
people who did drywall work for Steve Tenpas.  Of this group, 
Olivas was the only one who spoke English and the only one with 
"papers."  That is why Olivas was the one who approached Tenpas 
for work and the only one who spoke to Tenpas about job 
assignments and compensation.  Olivas said that Tenpas supplied 
No.  2005AP685.dtp 
 
4 
 
the drywall and other materials for jobs but not the tools used 
by the workers. 
¶126 When Olivas first came to Tenpas, Tenpas told Olivas 
that he required proof of a worker's compensation policy before 
permitting Olivas and his crew to work.  Olivas secured a policy 
and showed Tenpas the required proof.  He said Tenpas did not 
require the other workers to "provide proof of work comp 
insurance." 
¶127 Tenpas paid Olivas weekly by a check made out to 
Olivas.  Olivas, in turn, gave money to the other workers.  He 
testified that he "did not have any gains" (e.g., profits) and 
that the group collectively made the decision how to divide up 
the money.  "I did not make that decision," he said.  The six 
"would come to an agreement on who was going to get what, 
because we had different skill levels."  In making payments to 
others, Olivas did not withhold any money for social security or 
income taxes.  At the end of the year, Olivas received a single 
Form 1099 from Tenpas, and he then gave a Form 1099 to each of 
the other workers. 
¶128 Olivas acknowledged that he taught some of the other 
workers about drywalling and participated in group decisions to 
replace workers who left the group or add a new worker for a 
particular job.  He said, however, that he had no power to fire 
anybody. 
¶129 Olivas was asked whom he worked for "from December 7th 
of 2001 to December 7th of 2002."  He replied: "For Steve only.  
No.  2005AP685.dtp 
 
5 
 
Only Steve."  He was then asked, "[D]id you do any work for 
anybody else?"  He replied, "No, only him."1 
¶130 Olivas said: 
 
I don't have any workers.  We are just a group of 
workers. 
 
. . . [T]hey are not my employees, because we are 
just a group of workers. 
. . . .  
I was never a supervisor, because we were all——
the group of us, we were just independent workers. 
. . . .  
No one explained anything to me. 
. . . .  
None of us were responsible.  It was just an 
innocent group that we didn't know any of the laws 
from here. 
¶131 As part of his defense, Olivas called Jose Mireles, 
one of the workers.  Mireles testified that he worked for Steve 
Tenpas.  "Miguel pays me, but Steve pays him."  He testified 
that Olivas did not make a profit from the work Mireles did, but 
he also stated that some members of the group were paid more 
than others "because some of us have more experience than 
others."  He stated that Olivas gave him a Form 1099 at the end 
of the year.  He testified that he never dealt directly with 
Steve Tenpas. 
DISCUSSION 
                                                 
1 Olivas's testimony appears to conflict with Tenpas's 
testimony.  It should be noted, however, that Tenpas testified 
to what he thought occurred in 2003; Olivas may have testified 
only to what occurred in 2001 and 2002. 
No.  2005AP685.dtp 
 
6 
 
¶132 On the surface, this case involves nothing more than 
an insurance company's demand for additional premiums from an 
insured 
who 
purchased 
worker's 
compensation 
and 
business 
liability insurance policies.  To resolve this dispute, however, 
the court addresses relationships and responsibilities in the 
workplace as they are affected by the terms of insurance 
policies and the Wisconsin worker's compensation law. 
¶133 Miguel Olivas wanted to obtain work for himself and 
his friends from Steve Tenpas.  Tenpas was willing to provide 
work to Olivas and his friends but not as payroll employees.  
Payroll 
employees 
necessitate 
regular 
compensation, 
fringe 
benefits, withholding for social security and income taxes, 
worker's 
compensation 
coverage, 
unemployment 
compensation 
coverage, and liability coverage.  Payroll employees are the 
people an employer normally wants to keep working if and when 
the economy slows down. 
¶134 Tenpas is an "employer" with "payroll" employees.  
However, under the law, people who do any substantial amount of 
work for an "employer" also become "employees" for worker's 
compensation purposes, irrespective of whether they are formally 
on the employer's payroll, unless they fit into some other 
statutory 
category. 
 
See 
Wis. Stat. §§ 102.04(1)(b)1., 
102.07(4).  
¶135 Building 
contractors 
like 
Tenpas 
often 
engage 
subcontractors.  These subcontractors may be "employers" and/or 
independent contractors——not "employees"——if certain criteria 
are met. 
No.  2005AP685.dtp 
 
7 
 
¶136 A contractor may become responsible for work-related 
injury to a subcontractor and his employees if the subcontractor 
fails to provide for his own worker's compensation coverage.  
See Wis. Stat. § 102.06.  But contractors are not liable for 
injuries 
to 
a 
subcontractor 
and 
his 
employees 
when 
the 
subcontractor has elected to become an employer by purchasing an 
employer's 
worker's 
compensation 
policy.  
Wis. Stat. §§ 102.04(1)(e), 102.05(2). 
¶137 The circuit court ruled that Olivas's workers were 
independent contractors under Wis. Stat. § 102.07(8)(b).  This 
ruling excused Olivas from liability for additional premiums 
under his worker's compensation policy——at least in the absence 
of worker's compensation claims.  But this court rejects the 
circuit court's ruling.  It concludes that the workers were 
"employees."  This conclusion makes Olivas responsible for 
additional premiums under his worker's compensation policy 
except for the court's additional determination that the workers 
were not employees of Olivas. 
¶138 Although the court does not say so explicitly, the 
court implies that the Olivas workers were "employees," for 
worker's compensation purposes, of the only other suspect in 
this tale, Steve Tenpas.  Without saying so, the court assigns 
legal responsibility for any worker's compensation claims from 
the five undocumented workers to Tenpas Drywall.  This approach 
may or may not constitute good immigration policy, but it is bad 
worker's compensation law.  It is bad worker's compensation law 
because it impairs a contractor's statutory defense to imputed 
No.  2005AP685.dtp 
 
8 
 
liability, and it encourages subcontractor irresponsibility and 
fraud. 
¶139 The term "employer" is defined in Wis. Stat. § 102.04.  
Tenpas Drywall is an "employer" under § 102.04(1)(b)1.: "Every 
person who usually employs 3 or more employees, whether in one 
or more trades, businesses, professions or occupations, and 
whether in one or more locations." 
¶140 Miguel Olivas may be an "employer" under this same 
paragraph, but if he is not, then he is an "employer" under 
Wis. Stat. § 102.04(1)(e).  This paragraph provides that an 
employer includes: 
 
(e) Every person to whom pars. (a) to (d) are 
not applicable, who has any person in service under 
any contract of hire, express or implied, oral or 
written, and who, at or prior to the time of the 
injury to the employee for which compensation may be 
claimed, shall, as provided in s. 102.05, have elected 
to become subject to the provisions of this chapter, 
and who shall not, prior to such accident, have 
effected a withdrawal of such election. 
Wis. Stat. § 102.04(1)(e) (emphasis added).   
¶141 The 
above 
quoted 
paragraph 
references 
Wis. Stat. § 102.05.  Section 102.05(2) provides: 
 
(2) Any employer who shall enter into a contract 
for 
the 
insurance 
of 
compensation, 
or 
against 
liability therefor, shall be deemed thereby to have 
elected to accept the provisions of this chapter, and 
such election shall include . . . employees not in the 
course of a trade, business, profession or occupation 
of the employer if such intent is shown by the terms 
of the policy.  Such election shall remain in force 
until withdrawn in the manner provided in sub. (1). 
¶142 Subsection (1) of § 102.05 provides in part: 
No.  2005AP685.dtp 
 
9 
 
If an employer who is subject to this chapter only 
because the employer elected to become subject to this 
chapter under sub. (2) cancels or terminates his or 
her contract for the insurance of compensation under 
this chapter, that employer is deemed to have effected 
withdrawal, which shall be effective on the day after 
the contract is canceled or terminated. 
Wis. Stat. § 102.05(1). 
 
¶143 These provisions must be read in context with two 
other statutes: Wis. Stat. §§ 102.06 and 102.07(8m).  The first 
statute, § 102.06, reads as follows: 
102.06 
Joint 
liability 
of 
employer 
and 
contractor. 
 
An 
employer 
shall 
be 
liable 
for 
compensation to an employee of a contractor or 
subcontractor under the employer who is not subject to 
this chapter, or who has not complied with the 
conditions of s. 102.28 (2) in any case where such 
employer would have been liable for compensation if 
such employee had been working directly for the 
employer, 
including 
also 
work 
in 
the 
erection, 
alteration, repair or demolition of improvements or of 
fixtures upon premises of such employer which are used 
or to be used in the operations of such employer. The 
contractor 
or 
subcontractor, if subject to this 
chapter, shall also be liable for such compensation, 
but the employee shall not recover compensation for 
the same injury from more than one party. The employer 
who becomes liable for and pays such compensation may 
recover the same from such contractor, subcontractor 
or other employer for whom the employee was working at 
the 
time 
of 
the 
injury 
if 
such 
contractor, 
subcontractor or other employer was an employer as 
defined in s. 102.04.  This section does not apply to 
injuries occurring on or after the first day of the 
first July beginning after the day that the secretary 
files the certificate under s. 102.80(3)(a), except 
that if the secretary files the certificate under s. 
102.80(3)(ag) this section does apply to claims for 
compensation filed on or after the date specified in 
that certificate. 
¶144 Section 102.06 has its origin in the original worker's 
compensation law.  Chapter 599, Laws of 1913; Wis. Stat. § 2394-
No.  2005AP685.dtp 
 
10 
 
6 (1913).  The purpose of this section was explained in 
Marinette County Fair Ass'n v. Industrial Commission, 242 Wis. 
552, 8 N.W.2d 268 (1943).  It is "to prevent employers from 
relieving themselves of liability by doing through independent 
contractors 
what 
they 
would 
otherwise 
do 
through 
direct 
employees."  Id. at 554 (quoting Madison Entm't Corp. v. Indus. 
Comm'n, 211 Wis. 459, 463, 248 N.W. 415 (1933)). 
¶145 Section 102.06 was applied somewhat inconsistently2 
until this court decided Green Bay Packaging, Inc. v. Department 
of Industry, Labor & Human Relations, 72 Wis. 2d 26, 240 
N.W.2d 422 (1976).  In Green Bay Packaging, the injured 
"employee," Siemzuch, was employed by Majeske to cut hardwood on 
land for which Majeske owned the "stumpage" rights.  The wood 
was to be delivered to Green Bay Packaging for use in the 
manufacture of paper.  Siemzuch was killed by a falling tree.  
Majeske had entered into a contract with Green Bay Packaging for 
the year in which Siemzuch was killed.  Id. at 27.  But he had 
failed to carry worker's compensation coverage.  Id. at 31.  
Thus, the issue was whether Majeske, the immediate employer of 
Siemzuch, was a "contractor under" Green Bay Packaging, pursuant 
to Wis. Stat. § 102.06, even though Green Bay Packaging had 
virtually no control over Siemzuch.  The court said: 
It is clear from the statute that an employer such as 
GBP shall be liable for compensation to an employee of 
a 
contractor 
or 
subcontractor 
under 
him, 
such 
as . . . Majeske . . . "who has not complied with the 
                                                 
2 Compare Great Atl. & Pac. Tea Co. v. Indus. Comm'n of 
Wis., 205 Wis. 7, 236 N.W. 575 (1931), with Marinette County 
Fair Ass'n v. Indus. Comm'n, 242 Wis. 552, 8 N.W.2d 268 (1943). 
No.  2005AP685.dtp 
 
11 
 
conditions of sec. 102.28(2), Stats., in any case 
where such employer [GBP] would have been liable for 
compensation if such employe [Marcin Siemzuch] had 
been working directly for him."  Here . . . Majeske 
did not carry the required workmen's compensation 
insurance.  The language is crystal clear and does not 
permit of the qualifying restriction . . . that a 
contractor under be performing part of the "ordinary 
and usual" business of the principal employer. 
Green Bay Packaging, 72 Wis. 2d at 31-32. 
¶146 To understand the relevance of Green Bay Packaging to 
the present case, it must be recognized that the court's opinion 
emphasizes that an employer can take steps to protect against 
unexpected, imputed 
worker's compensation liability.  The 
opinion quotes from Great Atlantic & Pacific Tea Company v. 
Industrial Commission of Wisconsin, 205 Wis. 7, 236 N.W. 575 
(1931), as follows: 
 
Thus construed, sec. 102.06 "conserves to the 
employee the indemnity intended to be given him by the 
legislature by making contractors liable for injuries 
received by employees of a subcontractor who is not 
under the act.  They [contractors] will be careful to 
protect themselves and will also see to it that their 
subcontractors are protected against such losses." 
Green Bay Packaging, 72 Wis. 2d at 29-30 (quoting Great Atl. & 
Pac. Tea, 205 Wis. at 15) (emphasis added). 
¶147 The Green Bay Packaging court stated that it was 
"returning to the A. & P. standard" and quoted that case to the 
effect that "sec. 102.06 was not intended to make an employer 
liable to the injured employees of every one with whom the 
employer had some sort of contractual relations."  Green Bay 
Packaging, 72 Wis. 2d at 36 (quoting Great Atl. & Pac. Tea, 205 
Wis. at 11). 
No.  2005AP685.dtp 
 
12 
 
¶148 The authority of an employer to protect himself from 
liability was reiterated in a Wisconsin Law Review article 
analyzing the Green Bay Packaging case.  See Stuart B. Eiche, 
Note, Worker's Compensation——Liability Of Principal Employer For 
Injuries To Employees Of His Contractors Or Subcontractors, 1977 
Wis. L. Rev. 185: 
The court stated that the purpose of the statute is to 
protect 
employees 
of 
irresponsible 
and 
uninsured 
contractors to the same extent that direct employees 
of the principal employer are protected.  Thus, 
liability is imposed on the principal employer under 
section 102.06 only when the contractor is not subject 
to the Worker's Compensation Act or does not carry 
compensation 
insurance. 
 
To 
avoid 
liability, 
a 
principal employer need only require his contractors 
to protect themselves against such losses. 
 
. . . .  
. . . [S]ection 102.06 imposes liability on the 
principal only if his contractor or subcontractor is 
not subject to the Worker's Compensation Act or is 
uninsured. 
Eiche, supra, at 186, 192 (emphasis added).3 
                                                 
3 Wisconsin Stat. § 102.06 is presently suspended because 
the legislature created an uninsured employers fund, 1989 Wis. 
Act 64, and the fund has a cash balance that equals or exceeds 
$4,000,000.  See Wis. Stat. § 102.80(3).  This means that an 
employee of an uninsured subcontractor will turn to the fund, 
rather than the remote "contractor," for worker's compensation 
benefits.  Wis. Stat. § 102.81(1).  The fund will then seek 
reimbursement for payments made.  The law provides that an 
uninsured employer shall reimburse the fund for any payments 
made under § 102.81(1).  See Wis. Stat. § 102.82(1).  The 
suspension of § 102.06 does not vitiate the analysis because the 
principle that a contractor may seek to prevent liability by 
requiring a subcontractor to provide insurance coverage for the 
subcontractor's employees remains intact. 
No.  2005AP685.dtp 
 
13 
 
 
¶149 The second statute that must be considered in relation 
to 
Wis. Stat. §§ 102.04(1)(e) 
and 
102.05(2) 
is 
Wis. Stat. § 102.07(8m).  Subsection (8m) is part of the section 
that defines "employee."  It reads: "An employer who is subject 
to this chapter is not an employee of another employer for whom 
the first employer performs work or service in the course of the 
other employer's trade, business, profession or occupation."  
(Emphasis added.)  This subsection makes the obvious point that 
a person is not simultaneously an employer and an employee on 
the same work project. 
 
¶150 Applying the law to this case, Olivas elected to 
become an employer pursuant to Wis. Stat. §§ 102.04(1)(e) and 
102.05(2) by entering into contracts with Acuity for the 
insurance of compensation and liability.  He elected to become 
an employer (and to give up his potential status as a statutory 
employee) because Tenpas insisted that he purchase worker's 
compensation and liability insurance as a condition precedent to 
any contractual and employment relationship that Olivas and his 
friends could have with Tenpas Drywall.  It is impossible to 
imagine that Steve Tenpas insisted that Miguel Olivas be covered 
personally by worker's compensation insurance but not Olivas's 
other workers.  The fact is, the Acuity policies issued to 
Olivas covered any workers for whom Olivas could be liable.  
Those policies were in effect until they were canceled or 
terminated.  Wis. Stat. § 102.05(1). 
 
¶151 Acuity is upset not only because it believes Olivas 
owes the company additional premiums but also because it 
No.  2005AP685.dtp 
 
14 
 
believes that it would have been liable under Olivas's insurance 
policies if one of Olivas's workers had been injured on the job.  
Acuity invokes the familiar principle that an insurer should not 
be expected to assume risks for which it has not been paid. 
 
¶152 The dilemma in this case must be confronted head-on.  
If one of Olivas's workers——such as Jose Mireles——had been 
injured, 
the 
worker 
would 
likely 
have 
sought 
worker's 
compensation benefits from (1) Olivas; (2) Tenpas; or (3) the 
uninsured employers fund.  The most logical candidate is Olivas. 
 
¶153 Olivas testified that he was not the employer of these 
workers.  But the question is not whether Olivas believed the 
workers were his employees; the question is whether they were 
his employees, for worker's compensation purposes, as a matter 
of law. 
 
¶154 The law often depends upon the facts.  If this case 
were being remanded to the circuit court for additional fact 
finding, the better course would be to avoid comment on the 
evidence.  But the case is not going back.  It is over.  This 
makes comment necessary. 
 
¶155 Miguel Olivas elected to become an employer under 
Wis. Stat. §§ 102.04(1)(e) and 102.05(2).  He purchased the 
requisite insurance.  The insurance provided coverage for any 
employees he might have.  Miguel Olivas also was an employer by 
the nature of his relationship with the workers.  The workers 
were in Olivas's service under an implied contract of hire.  
Olivas played the critical role in securing jobs for his 
friends.  He made the contacts with Tenpas Drywall.  He 
No.  2005AP685.dtp 
 
15 
 
discussed all the details of jobs, including time considerations 
and compensation.  He told the workers where to go on jobs.  He 
worked with them.  He received all payments from Tenpas Drywall 
for jobs, and he disbursed all payments to others for their 
work. 
¶156 Olivas and the five other workers were not equals.  
Because Olivas negotiated all Tenpas job assignments, he 
probably made sure that he participated in most, if not all, of 
those assignments.  Why?  Not every Tenpas job required a full 
crew of six workers.  Because Olivas was the only worker who was 
certain to be burdened with social security and federal and 
state income taxes, he was entitled to take any job he wanted.  
One doubts that the relationship among the workers was such that 
a majority of the workers could exclude Olivas from a job that 
he had obtained for them.  Olivas was their meal ticket.  He 
also participated in deciding on replacements and on any person 
brought in as an extra.  He was not without power.  He 
participated in "hiring." 
¶157 In 2002 Olivas received payments totaling $193,644.17.  
In that year, he paid about $3500 in insurance premiums on 
estimated income of $25,000.  If Olivas took money for the 
insurance premiums off the top, he still had about $190,000 to 
divide among himself and the five workers.  The sum of $190,000 
divided by 6 equals $31,666.  This amount is obviously more than 
$25,000 and would trigger an additional premium under the 
worker's compensation policy, even if the policy covered only 
Olivas.  However, the testimony at trial was clear that the six 
No.  2005AP685.dtp 
 
16 
 
workers were not paid at the same rate.  Olivas had greater 
skills than some of the other workers and was paid a larger 
share of the $190,000 than some of the other workers. 
¶158 Olivas gave each of the workers a Form 1099 at the end 
of the year.  The first box on the 2002 and 2003 1099 forms is 
for "Payer's name, street address, city, state, ZIP code, and 
telephone no."  We do not have copies of these 1099s in the 
record, but Deb Seidel testified that she saw them.  Olivas must 
have put his own name and address in the first box in order to 
show that he did not receive $193,644.17 in 2002 and $191,370.27 
in 2003 as taxable income.  When Tenpas gave Olivas a Form 1099, 
Tenpas would have filed that document with both the Internal 
Revenue Service and the Wisconsin Department of Revenue.  Hence, 
Olivas had good reason to fill out the 1099s he issued to others 
in a way that showed he was paying out money.  In the eyes of an 
auditor like Deb Seidel, such entries would have firmed up 
Olivas's status as an employer of the workers, especially since 
Olivas could not produce certificates of insurance from the 
workers. 
¶159 Olivas paid the workers each week after he received a 
check from Tenpas Drywall.  Suppose, after putting his friends 
to work, he refused to pay them.  Is there any question who the 
workers would have gone after for breach of contract?  Weren't 
these workers "in service" under a "contract of hire, express or 
implied, oral or written"?  See Wis. Stat. §§ 102.04(1)(e); 
102.07(4)(a); 102.08(8)(a). 
No.  2005AP685.dtp 
 
17 
 
¶160 The logic and law of this dissent is amply supported 
by the testimony.  Tenpas testified that he required all his 
subcontractors to obtain worker's compensation and liability 
coverage for their employees.  Olivas acquired such policies, 
and he showed Tenpas certificates of insurance.  The following 
excerpts from Olivas's own testimony show his intent: 
Q 
And did Steve tell you that you should buy a 
workers' compensation policy? 
A 
Steve told me that in order for him to be able to 
give me work, we needed to have a workmen's comp 
insurance. 
 
. . . .  
A 
I told him [the insurance agent] that we needed a 
policy for workmen's comp. 
 
. . . .  
Q 
 . . .  You bought a policy? 
A 
Yes, we did buy it. 
 
. . . .  
Q 
And did you tell the insurance agent or salesman 
that you had a drywall company? 
A 
No. 
Q 
Did you tell him that you were a contractor? 
A 
That we were a group of workers. 
 
. . . .  
Q 
Did you show him [Tenpas] the work comp policy 
before you started working for him? 
A 
Yes.  They require that in order for him to give 
us work.  That is when I went to get that 
insurance. 
 
. . . .  
No.  2005AP685.dtp 
 
18 
 
Q 
I think you testified that when you met with the 
insurance agent, you explained to him that you 
worked with a crew.  Is there anything in your 
policy that talks about any of the other workers 
besides yourself? 
A 
I explained to them that we were a group of 
workers, and we were looking——we wanted workmen's 
comp insurance in order to work.  (Emphasis 
added.) 
These many "we" and "us" references show that when Olivas 
purchased insurance policies, he was intending to obtain 
coverage for more than himself.   
¶161 In my view, Olivas was an employer in fact and in law.  
He purchased worker's compensation and liability policies for 
himself and his crew.  When he ultimately realized the full cost 
of the policies, he did not want to pay the premiums.  He 
attempted to cancel the policies retroactively. 
¶162 The majority opinion attempts to derail this analysis 
by determining, as a matter of law, that Olivas's five workers 
were simply not employees of Olivas.  If this conclusion were 
correct, it would mean that if a worker like Jose Mireles had 
been injured, the worker would have had to seek worker's 
compensation benefits from Tenpas or the fund, even though 
Olivas had a worker's compensation policy. 
¶163 Arguably, the worker would not seek compensation from 
the fund because Tenpas would not be an "uninsured employer."  
Tenpas was insured.  However, if the worker went after Tenpas, 
Tenpas would be citing the same law relied upon by the majority 
to exempt Olivas.  See, e.g., Kress Packing Co. v. Kottwitz, 61 
Wis. 2d 175, 212 N.W.2d 97 (1973); Labor Ready, Inc. v. LIRC, 
2005 WI App 153, 285 Wis. 2d 506, 702 N.W.2d 27.  See also 
No.  2005AP685.dtp 
 
19 
 
Wagner v. Continental Casualty Co., 143 Wis. 2d 379, 421 
N.W.2d 835 (1988).   
¶164 Tenpas would argue that he was more remote than Olivas 
and had less knowledge about and control over the workers than 
Olivas.  One suspects that if Tenpas visited a job site and saw 
that the work was unsatisfactory, he had the authority to 
require changes.  But one also suspects that if Olivas saw a 
worker doing a slipshod job, he could have intervened to correct 
the problem.  Moreover, one suspects that if a worker's 
performance was consistently inadequate and undermined the 
position of the whole crew, Olivas would have taken steps to 
have him eliminated. 
¶165 There is little or no evidence that Steve Tenpas 
exercised direct control over the workers.  Tenpas paid Olivas 
the same way he would pay any subcontractor, that is, he would 
pay with a single check because he would not know the number of 
workers on a job or what they should be paid.  Tenpas furnished 
drywall, but he did not furnish equipment or tools.  Tenpas did 
not fire any worker.  Presumably, he could have terminated 
Olivas or declined to give him additional jobs, but he never 
exercised that control over any of the workers. 
¶166 Tenpas's relationship with Olivas's workers would not 
exist 
but 
for 
Olivas's 
assurance 
that 
he 
had 
worker's 
compensation and liability coverage for the workers, which he 
did.  Sticking Tenpas with responsibility for a worker's injury, 
in spite of Olivas's insurance coverage, would wipe out Tenpas's 
statutory defense against liability and undo decades of worker's 
No.  2005AP685.dtp 
 
20 
 
compensation law.  It is simply mind boggling to believe that a 
worker like Mireles could be an employee of Tenpas but not of 
Olivas. 
¶167 The 
majority 
is 
diverted 
from 
basic 
worker's 
compensation law by unproven notions about the exploitation of 
undocumented workers.  As a result, it undercuts long-standing 
presumptions, see majority op. at ¶34, and creates uncertainty 
for employers, insurers, and workers.  The majority's decision 
may force employers like Tenpas to bear responsibility for risks 
they took careful steps to avoid, and may force insurers to 
provide coverage of risks for which they have not been paid.   
¶168 The alternative is to set certain workers adrift in a 
worker's compensation limbo.  In my view, the statutes are not 
likely to be construed in a way that denies coverage for the 
workers.  Somebody is going to have to pay. 
¶169 For the reasons stated, I respectfully dissent. 
¶170 I am authorized to state that Justices JON P. WILCOX 
and PATIENCE DRAKE ROGGENSACK join this opinion. 
 
 
 
No.  2005AP685.dtp 
 
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