Employers Who “Usually” Employ 3 or More Employees: the Threshold for Mandatory Worker’s Compensation in Wisconsin
By Ruder Ware Alumni
August 2, 2016
In general (i.e. non-farm) employment, Wisconsin’s Worker’s Compensation Act becomes mandatory for employers under either of two circumstances. In the event such an employer pays $500 in wages during any calendar quarter, worker’s compensation becomes mandatory on the 10th day of the next quarter. That’s a “bright line” rule. Alternatively, worker’s compensation becomes mandatory when the employer “usually” employs three or more employees during a calendar quarter (irrespective of the total amount of wages paid) which also becomes effective on the 10th day following that quarter. This alternative threshold criterion is much less clear because the Worker’s Compensation Act does not define the term “usually.”
So what does the term “usually” mean for the small business that once in a blue moon hires one, two, or three people for a small amount of work for which it pays very small wages? The Wisconsin Court of Appeals interpreted the meaning of “usually” in this context in Noyce v. Aggressive Metals, Inc., 2016 WL 4016088 issued on July 28, 2016. The facts on which the Noyce case was based were straight-forward. The employer, Aggressive Metals, offered on December 27, 2010, one week’s worth of work to Noyce to install insulation in its building. Aggressive Metals had been in business for only about 10 months and had only two employees, Neil and Nick Holland, brothers who owned the corporation. Noyce performed the installation work and suffered a serious injury when he fell through a ceiling on the last day of his employment, January 4, 2011.
The work had begun before December 31, 2010, which meant that as of the fourth quarter in 2010, Aggressive Metals had in its employment three employees (the Holland brothers and Noyce). Presumably, any wages paid for services during that quarter did not equal or exceed the sum of $500. Under the Worker’s Compensation Act, worker’s compensation would become mandatory on January 10, 2011, i.e. the 10th day in the next succeeding quarter, i.e. the first quarter of 2011. Noyce sought coverage under the Act for his injuries. Noyce argued that a case decided by the Wisconsin Supreme Court in 1947 was binding precedent, but the court of appeals pointed out that the current version of the Worker’s Compensation Act on this very point had been amended by the legislature after the 1947 case.
It still remained, however, for the court of appeals to interpret the meaning of “usually” because the legislature did not define that term in the statute. The court of appeals did what courts do in that circumstance – consulted a well-recognized dictionary. The court of appeals relied on Black’s Law Dictionary (10th ed.2014) (“ordinary; customary”) and Webster’s Third New International Dictionary ( (1) “by or according to habit or custom” and (2) “more often than not”). The court of appeals noted that Aggressive Metals had been in business for only 10 months during which period it had only two employees until it offered “limited, short-term work” to a third employee. Under this circumstance, Aggressive Metals was held not to have “ordinarily, customarily, or habitually employ three employees at the time Noyce was injured.” And having a third employee “for a few days” did not suffice to meet the “more often than not” definition of “usually.”
Noyce was not alone in seeking worker’s compensation benefits; his claim was supported by the Department of Workforce Development Uninsured Employers Fund (“UEF”). Evidently, Aggressive Metals had not purchased a worker’s compensation policy on a voluntary basis. Why might a start up business have done so? Because if the UEF is required to pay worker’s compensation benefits (which in this case it did not have to do), it must seek reimbursement from the uninsured employer. Moreover, individual owners of a corporation are not shielded from liability to the UEF, and the standard personal exemptions in bankruptcy are not applicable as against the UEF. Uninsured employers who are found to be required to have mandatory worker’s compensation may face serious and unappreciated, financial risk. Even start up companies on a tight budget should strongly consider obtaining a worker’s compensation policy on a voluntary basis.
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