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Ladlie v. Industrial Sealing & Lubrication, Inc.

Court of Appeals of Minnesota

September 3, 2013

Debra Ladlie, Respondent,
Industrial Sealing & Lubrication, Inc., Relator, Department of Employment and Economic Development, Respondent.


Department of Employment and Economic Development File No. 30006749-3

Michael J. Minenko, Edina, Minnesota (for respondent Ladlie)

Philip G. Villaume, Jeffrey D. Schiek, Villaume & Schiek, P.A., Bloomington, Minnesota (for relator)

Lee B. Nelson, Amy Lawler, Department of Employment and Economic Development, St. Paul, Minnesota (for respondent department)

Considered and decided by Hooten, Presiding Judge; Kalitowski, Judge; and Cleary, Judge.


Relator-employer challenges the determination of an unemployment law judge (ULJ) that respondent-applicant was an employee rather than an independent contractor. We affirm.


Relator-employer Industrial Sealing & Lubrication, Inc. (ISL), based in Kansas, sells "maintenance reliability products" from about 50 manufacturers to end users. ISL is operated by a father and son: David A. Consiglio is the father and the company's president, while David N. Consiglio is the son and vice-president.[1] Respondent-applicant Debra Ladlie testified that she was offered a job with ISL in April of 2010, and, after a lengthy training period, began working on her own in October of 2010. Ladlie's last day was March 22, 2012, and she requested unemployment benefits starting May 20, 2012.

Respondent Minnesota Department of Employment and Economic Development (DEED) initiated a field audit of ISL to determine if Ladlie had an employment relationship with ISL. Both ISL and Ladlie submitted information and documentation regarding the employment relationship. ISL submitted Ladlie's weekly sales report from the week prior to her termination in March of 2012, an e-mail from Ladlie to the Consiglios regarding her daily activities, and tax forms (1099-MISC) for 2010 and 2011 indicating that Ladlie was paid "nonemployee compensation" from ISL. ISL also submitted an earning information worksheet indicating what Ladlie earned from the company.

Ladlie submitted a copy of the termination letter she received from ISL, which demands that she return a vehicle, a cell phone, demonstration equipment, product samples, literature, customer lists, business cards, and "any other ISL property" in her possession. Ladlie also submitted several e-mails she received from ISL, some of which indicated that Ladlie "need[ed] to call [Dave] ASAP per his request" because she had not checked in that morning and her voicemail box was full; that ISL sent Ladlie a new cell phone and that she needed to send back her old one; that Ladlie was to be provided computer help by a third party so that she could access a shared computing space; that ISL had learned Ladlie was "involved in an accident in our vehicle on 3/20/12"; that ISL needed to be "made aware of [Ladlie's] daily activities and [her] timely call reports"; that Ladlie and ISL had a conversation about sales goals and the need to have more sales activity; that weekly call reports needed to be sent to ISL by 8:00 a.m. each Monday; and that an inventory of product was requested from Ladlie. Ladlie also submitted an ISL memorandum regarding a sales meeting in March 2011, with product demonstrations from several manufacturers, and with information regarding rooms at a specific hotel that are "under [ISL]/David Consiglio." In addition, Ladlie submitted copies of gas, food, and office supply receipts reimbursed by ISL.

Based on this documentation and information, DEED determined that Ladlie was employed by ISL. This resolution was summarized by the field auditor, who stated that it was "very apparent that [the] company wants them treated as 'IC's' but also very apparent that they want to control the worker as much as an employee." ISL appealed this determination, and a telephonic hearing was scheduled before a ULJ.

The ULJ heard testimony from David N. Consiglio about ISL's business, and Ladlie's role of "[s]ales consulting, making sales calls, [and] presenting products to the customers." Consiglio testified that the company had seven employees, three of which were "sales representatives", and six independent contractors, which were all "sales consultants." Consiglio distinguished the sales-representative employees from the sales-consultant contractors by stating that ISL "directly control[s] the employees, [and] are able to dictate when they go, where they go and how they get there, " and noting that the employees were provided with vacation and paid time off.

According to Consiglio, Ladlie was contracted to sell their manufacturers' product lines in Minnesota and surrounding areas, and that she was "[f]ree to call on whomever she wished and expand those sales at her discretion on her own timeline." Consiglio testified that he believed that Ladlie "could represent any other company that did not sell directly competing product[s], " but did not know whether Ladlie had any other clients while she worked with them. As to compensation, Consiglio agreed that Ladlie "was paid a flat rate every month, " with "the opportunity to earn commission above that" of 30% of the gross profit of her sales to the extent that such profits exceeded the flat rate of $2, 800.

Consiglio testified that Ladlie signed a copy of the independent-contractor agreement from ISL, but that the signed copy was destroyed by water from a leaking roof. Consiglio acknowledged that he was not personally present when Ladlie signed the contract, but testified that his father, the president of ISL, was present. Consiglio testified that the covenant-not-to-compete language in the unsigned contract submitted by ISL was meant to protect ISL so that Ladlie could not share what she had learned about the products and markets with ISL's competitors. Consiglio testified that ISL requested a "weekly synopsis of events" and "a daily check-in typically in the morning . . . so that if a customer did contact the office directly and needed to talk to her, " they would be able to direct the call or give ...

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