Total and Partial Unemployment TPU 415.3
This category deals with the specific problems connected with the employment status of salespersons.
It is necessary to determine whether a claimantis an employee or an independent contractor since this may determine his/her employment status. (See TPU 415.05)
A claimant who is self-employed, or an independent contractor is unemployed and entitled to benefits under Section 1279 if his/her earnings are not XE. A claimant who is determined to be an employee is fully employed if he/she is working full-time irrespective of the amount of his/her earnings. There is an exception for commission salespersons whose selling jobs are secondary occupations. This situation will be discussed in this category.
A salesperson can be either self-employed or an employee depending on the terms under which he/she is hired. If there is a contract of hire, stated or implied, and a measure of "control" by the employer, the claimant is an employee. If there is no "control" by the employer, and the claimant is free to determine the manner and means of accomplishing the result desired, he/she is self-employed, or an independent contractor.
A salesperson may exercise considerable discretion in the manner of performing the work. However, this alone will not establish that the claimant is self-employed, or an independent contractor, for if the right of control by the employer is there, even if it is not used the individual is an employee.
In Benefit Decision 5791, the Board considered the case of a licensed business opportunities broker. He established a connection with an investment company which maintained and advertised lists of businesses for sale. The claimant was furnished with a desk and telephone at the company’s establishment and allowed office expenses. His duties consisted of representing the firm in dealing with customers who called regarding meat markets, vegetable and fruit stands, and cafes, which had been listed for sale with the company. The claimant exercised considerable discretion in negotiations with the company’s customers but all contracts of sale were negotiated and signed by him in behalf of the firm and subject to its approval. The claimant spent part of each day at the company’s establishment and also spent considerable time in the field showing properties to prospective purchasers. His broker’s license was continuously attached to the company. The claimant was paid certain commissions for his services but for those weeks in which he had earnings he did not certify for benefits. It is the claimant’s contention that he was at all times an independent contractor and not an employee of the company. In holding that the claimant was an employee, the Board said:
"The evidence establishes in this case that the claimant was engaged in selling business opportunities as a representative of the investment company on a commission basis. It cannot be said that he was an independent contractor since it does not appear that he was engaged in a distinct business for himself or that he was free from direction and control by the investment company to which his license was attached. The evidence establishes that the company had the right to control the manner and means of accomplishing the results expected of the claimant and although that right was not exercised with respect to the details of performance it is nonetheless evidence tending to establish an employer-employee relationship. . . The claimant dealt with the customers of the investment company and signed all contracts for and in behalf of the company. Although he set his own hours of work and exercised considerable discretion in his negotiations, these factors alone are not indicative of an independent contractor status as they stem from the very nature and character or his work . . . We hold, therefore, that the claimant was not unemployed during the period involved herein . . . The fact that the claimant earned no wages during the periods for which he certified for benefits did not qualify him for such benefit because . . . an individual must both perform no services and have no wages payable to him in order to qualify as totally unemployed."
In Benefit Decision 5909, the Board considered the employment status of cosmetic saleswomen. Both claimants originally became associated with the company as consultants and while engaged in that capacity were admittedly employees. The company was in the process of changing its method or business from operating company controlled offices and consultants, to the establishment Or wholesale franchise distributorships. The claimants had individually submitted a "Formal Application for Promotion", on a form supplied by the company. Upon approval by the company or the claimants’ applications, the claimants individually entered into an agreement with the company under the terms of which they were assigned specific territories in which they were to sell the products or the company. It was the company’s practice to assign one of its divisional managers at company expense one day each week to visit with and assist distributors such as the claimants herein. This individual screened applicants for subdistributors and referred those apparently acceptable to the distributor in charge, or if it appeared to that individual expedient, to other distributors. These activities were conducted in the office maintained by the individual distributors. On at least one occasion, claimant Mackey was reprimanded when her office was not immediately available to the divisional manager. The Board concluded that the claimants were employees since they were not free from control of the company, and said:
"Considering the facts and circumstances of these cases, it is our opinion that the claimants were at all times employees of the company. The latter not only had the right of control over the results to be accomplished but also over the manner and means by which the claimants performed their functions as distributors. Clearly, the distributorships were considered to be in the nature of promotions. It was contemplated that proper performance as distributors could well result in further promotion within the company’s sales organization. The discretion exercised by the claimants when they worked as distributors did not exceed the discretion of supervisory employees."
The claimants in the above cases were held not to be unemployed because they were devoting all of their time to their selling jobs - this was their primary occupation. It is possible that a claimant, who is a commission salesman, could be an employee and still be "unemployed" for the purpose of unemployment insurance benefits. This is true of claimants whose commission selling is their secondary occupations. The Board covered this in Precedent Benefit Decision 201 (formerly Benefit Decision 6718), when it said:
"If an individual normally makes his living in one occupational field such as the garment industry and merely supplements his income by spare time efforts as a commission salesman as in the present case, it is our opinion that he is ‘unemployed’ when he is temporarily laid off from his work in his usual full-time occupation even though he continues to devote some of his time to his usual spare-time work. His primary occupation is his normal full-time work, and it is the loss of this work and the desire to obtain more of such or similar work which causes him to claim unemployment benefits; and it is this work in which he has built up wage credits to entitle him to file a valid claim.
On the other hand, if the individual’s normal pattern of earning a living is to devote his entire working time each week to work as an employee commission salesman, he is fully employed without regard to his ‘wages’ whether during a particular week he works 80 hours or 20 hour. ‘Part-time’ work may well be a claimant’s usual and customary work.
If an individual, during a period of unemployment, becomes an employee commission salesman in an attempt to secure some funds until he is able to obtain work in his usual occupational field which is other than commission sales, it is our opinion that whether he is or is not ‘unemployed’ depends not so much on whether he devotes 20 hours or 80 hours in this field of fluctuating hours and income but on whether he may realistically be considered as still ‘unemployed’ insofar as his usual occupational field is concerned or be considered as having changed his normal work pattern to the new occupational field of commission sales. Because of the myriad variations in patterns of employment, each situation must be considered separately to determine as a practical matter what is the claimant’s primary occupation: has he remained unemployed insofar as that or similar occupations are concerned, or has he obtained temporary or permanent substitute work with which he fills all of his normal working hours considering the nature of the work."
In Benefit Decision 5810, the Board again considered the problem of whether the claimant was an employee or an independent contractor. The claimant was employed as a route man in the sale and distribution of the appellant’s products, to wit, cookies, candy, tobacco and other fountain supplies, to the appellant’s customers in specifically designated areas for a period or over two years until June 1.
On June 1, the appellant implemented a change of operations by converting his business to a wholesale supply house and eliminating the distributing phase of operations. The appellant offered the claimant the opportunity to sell and distribute his products as an independent operator. He also offered the claimant the choice of purchasing or renting his truck or purchasing a truck elsewhere and advised the claimant that effective June 1, the claimant could purchase the appellant’s merchandise at wholesale prices and sell and distribute it to the retail establishments in the area assigned to him; that his remuneration would be such profits as realized after taking into consideration the cost of the merchandise to him and his operating expenses. The appellant also advised the claimant that deductions for income tax, social security, etc., would no longer be made and the claimant should keep his own financial records for income tax purposes. The claimant elected to rent the appellant’s truck and agreed to operate in the designated area on the new basis. At or about that time, the appellant notified his customers of the fact that the claimant was no longer his employee. The Board held that the claimant in this case was an independent contractor, and said:
"In the instant case, we are of the opinion that the claimant was not an employee of the appellant on and after June 1, 1949. The appellant had a franchise with respect to the sale and distribution of his principal item of merchandise in a given area, and, on June 1, 1949, he went out of the retail distributing phase of his operations and effected a bona fide conversion of his business to a wholesale supply house. His agreement with the claimant clearly contemplated the termination of the previous employer-employee relationship, and the granting to the claimant, in effect, a subfranchise for the distribution of his products in a given area. The evidence establishes that the claimant fully appreciated and understood his new relationship. He was no longer supplied with a truck and merchandise for the sale and distribution of merchandise to specified customers in a specified area on a specified schedule at a fixed salary and commission and under the supervision of a sales manager. He was given the choice of securing his own truck or renting the appellant’s truck. He chose the latter and thenceforth purchased merchandise from the appellant and resold it within his own area to such customers as he desired without further supervision as to the manner and means of conducting his operation. That the claimant was fully aware of and intended to assume and carry on the relationship of an independent contractor is further established by the personal records which he maintained in the regular course of his business. These records enumerate the cost to him of the merchandise purchased by him from the appellant, his operating expenses, his sales, and his profits. He was not in any manner required to account to the appellant . . .
We conclude, therefore, that the preponderance of the evidence establishes that effective June 1, 1949, the claimant became an independent contractor . . ."
Since the claimant was determined to be an independent contractor, he was "unemployed" and eligible to claim benefits.
A claimant who is working as a door-to-door salesperson is no different from the individual discussed above. He/she is either an employee or an independent contractor depending on the terms of hire.
B. Real Estate Salesperson
Real estate salespersons may work either as employee or independent contractors. Basically their employment status is determined in the same manner as other types of salesmen. However, factors unique to selling occupations in general, and real estate sales in particular, sometimes make it exceedingly difficult to determine whether an employer-employee relationship exists.
Under Section 650 of the Code, services performed by real estate salespersons who are paid solely by commission cannot be considered as "employment" for purposes of UI coverage. Consequently, such wages cannot be used in the computation of an award. However, although this code section exempts these services from coverage, it does not establish as a matter of statute whether the salesman is an employee or an independent contractor.
To determine whether services are performed as an employee or an independent contractor, it is necessary to examine not only the method of compensation, but also the terms of the contract of hire, the intent of the parties in establishing the contract, and the presence or absence of the principal’s right to control the manner and means of accomplishing the work. For example, where the compensation is by salary, salary plus commission, or commission plus override, and the salesperson is required to work set hours, put in mandatory floor time, attend sales meetings, train or supervise other employees, obtain listings in the name of the realtor, etc., he/she is generally an employee. Other factors that would tend to establish an employment relationship include the requirement for escrows to be opened and deals closed in the name of the realtor, and the realtor’s right to retain listings obtained by the salesperson in the event that the salesperson is separated from the firm. Where the realtor has paid UI contributions on the individuals earnings and made deductions for purposes of withholding, disability insurance, OASI, etc., this is added evidence that the worker is an employee.
A salesperson compensated by commission only, may still be an employee, even though his/her service are exempt form coverage. Where a combination of factors as discussed in the preceding paragraph evidences that the realtor retains the right to control the manner, method, and means by which the salesperson conducts sales activities, he/she is probably an employee. Particularly if the salesperson recognizes the right of the realtor to regulate his/her hours, duties, methods, territory, etc., and feels sufficiently threatened by the possibility of discharge to yield to such control.
On the other hand where both claimant and realtor profess that services are performed as an independent contractor, and compensation is strictly by commission with no withholding or deductions made from earnings, these factors are generally indicative of an independent contractor relationship. Further evidence that the salesperson is not an employee includes the responsibility on his part to pay his/her own expenses, develop his/her own leads, and the freedom to schedule his/her time and select the methods, territory, etc., by which the end result is to be accomplished.
As can be seen from these examples, it is a cumulative overall view rather than the presence or absence of any single factor which identifies whether an employment relationship exists. However, when an objective weighing of the factors involved does not clarify the claimant’s employment status, any doubt must be resolved by the Employment Tax Field Office nearest to the employer’s place of business.
Once it is established that the claimant is performing services as an employee, whether or not he/she may be considered "unemployed" and entitled to benefits is dependent upon whether or not real estate sales is his/her primary occupation. If he/she customarily earns his living in this fashion, he/she is fully employed without regard to his "wages" or hours worked in a particular week. However, if the claimant customarily sells real estate to supplement earnings from his regular occupation and devotes only part time to this activity, he/she is employed and may be eligible under Section 27 if gross earnings are not XE.
By the same token, where it is established that the claimant is an independent contractor he/she is unemployed and may be eligible under Section 1279 in any week his/her earnings are not XE. However, if the claimant is devoting full time to selling activities, there is a strong presumption that he he/she is not available. (See AA 415.05).