By Payroll and Entitlements Editorial Staff
Asked to decide in a case of first impression the appropriate test to determine whether a claimant who is otherwise entitled to receive unemployment compensation benefits due to a separation from employment becomes ineligible for those benefits as a result of being self-employed pursuant to the Unemployment Compensation Law’s self-employment exclusion, the Pennsylvania Supreme Court held that Section 753(l)(2)(B) of the Act contains the appropriate test for determining whether or not an individual is in self-employment and “If an individual is not in ‘self-employment,’ then he remains eligible for benefits.” Applying that test to a terminated worker who became an Uber driver after his discharge, the court, affirming the ruling of the court below, found the claimant was not self-employed and thus was not barred from receiving unemployment benefits by virtue of the income he earned as an Uber driver (Lowman v. Unemployment Compensation Board of Review, No. 41 EAP 2018, July 24, 2020).
Background. The claimant lost his job as a behavioral health specialist for a nonprofit human service agency, and he started driving for Uber while awaiting a determination on his eligibility for jobless benefits. The agency denied his application for benefits, concluding he was ineligible because his work as an Uber driver constituted self-employment. A referee affirmed; so did the agency’s board of review, finding he was self-employed and “not just trying to earn some extra money on the side.”
Prior proceedings. On appeal, the claimant emphasized that he had been employed in the behavioral health field and insisted he was not an “independently established commercial driver,” nor was there evidence he was holding himself out as one or looking to launch such a business. The commonwealth court, emphasizing that a claimant who is entitled to benefits from his separating employer may lose his compensation if he takes a “positive step” toward establishing an independent business, found the agency failed to establish that the claimant intended to enter into an independent business venture by becoming an Uber driver and consequently, he remained eligible for benefits as a matter of law.
Self-employment. On appeal, the state high court first noted that pursuant to Section 753(1)(2)(B) of the Act, “Services performed by an individual for wages shall be deemed to be employment subject to this act, unless and until it is shown to the satisfaction of the department that—(a) such individual has been and will continue to be free from control or direction over the performance of such services both under his contract of service and in fact; and (b) as to such services such individual is customarily engaged in an independently established trade, occupation, profession or business.” Given the lack of a definition of self-employment in the Act, the commonwealth court has found that these control and independence factors in Section 752(1)(2)(B) giving rise to an exclusion from “employment,” and thus an exclusion from benefits, have become the default definition of “self-employment,” the court observed.
Thus the question before it, said the court, was whether it was the intention of the General Assembly to equate one who is engaged in “self-employment,” as that term is used in Section 802(h)—which provides that an employee shall be ineligible for compensation for any week in which he is engaged in self-employment—with one who is not in “employment,” as that term is used in Section 753(l)(2)(B).
In sync. Looking to the rules of statutory interpretation, the court first noted that the purpose of the Act is remedial and requires the term “employment” to be broadly construed. Further, it treats “services performed by an individual for wages” as employment until it is proven that the individual is not subject to control and is customarily engaged in an independently established trade, occupation, profession or business. Moreover, said the court, the “General Assembly’s use of the term ‘self-employment’ in Section 802(h) as a benefits ineligibility criteria is in sync with Section 753(l)(2)(B) because if an individual is not found to be in ‘employment,’ he is not an ‘employe’ covered by the Act.”
Test. Thus, the court found that “the General Assembly intended that Section 753(l)(2)(B) provides the test for determining whether an individual is ‘engaged in self-employment’ as that term is used in Section 802(h). Whether an individual is self-employed, as the term is used in 43 P.S. § 802(h), is to be determined through application of the control and independence factors in Section 753(l)(2)(B).” This interpretation, the court explained, “promotes a comprehensive understanding of a claimant’s personal services.”
Interested in submitting an article?
Submit your information to us today!Learn More