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Wednesday, February 2, 2011

Getting Unemployment Benefits in Pennsylvania? Be Very Careful About Becoming an "Independent Contractor."

IN PENNSYLVANIA, IF YOU ARE SELF-EMPLOYED, YOU ARE INELIGIBLE FOR UNEMPLOYMENT BENEFITS

IN PENNSYLVANIA, IF YOU ARE WORKING AS AN INDEPENDENT CONTRACTOR, YOU ARE DEEMED TO BE SELF-EMPLOYED

Ok, the theory that unemployment operates under is as follows: if someone who is on unemployment works as an independent contractor, FOR EVEN A SINGLE DAY, they are deemed to be self-employed and no longer eligible for benefits (you can and should appeal a decision from the Service Center making such a finding; then, you will get a hearing before an unemployment referee).

Independent Contractor = Self-Employed = Ineligible for UC Benefits. End of proverbial story. 

Why? 

Because, in order to be eligible for unemployment, you must be available for full-time work.  If you are self-employed, then you are deemed to be engaged in a full time occupation, and thus are ineligible for unemployment. 

This is what we in the legal business refer to as a "bright-line rule."  One cannot easily get around the rule by arguing that he/she only worked a day or a week as an independent contractor, which, if one was employed on a part-time basis (read: a w-2 employee), would result, in the worst case, in a simple disqualification from receiving benefits for the week in question, or even better maybe a small reduction in benefits, or no reduction at all. 

So, why doesn't the unemployment want to let you simply prove that you only worked for a day or a week, and are not engaged in self-employment???  Well, some Unemployment Referees' will credit that argument and find in your favor if you can prove that you only took a single assignment as an independent contractor (we just one a case like that this week).    But some won't.  Why?

Well, the Pennsylvania Courts have not really explained themselves on this issue, but have issued some decisions that suggest that the general rule is:  if you work as an independent contractor while you are on unemployment, you are disqualified from receiving benefits.  And many Referees follow that general rule.

The lesson?  Try to avoid working as an independent contractor if you are on unemployment in Pennsylvania.  Sad, but true.  If, however, you do work as in independent contractor, you should report your earnings to the Service Center (you avoid a fraud claim that way).  If you are then disqualified from receiving benefits via a Notice of Determination from the UC Service Center, you should appeal that Determination and fight the issue at an unemployment hearing before an Unemployment Referee.  There, you can present a number of possible defenses, all of which we have blogged on before (use the Search Key on this Blog to find more information). 

Here are 3 possible defenses:

1) You are not and never were self-employed, because you do not have a business and only did a sporadic assignment or two;

2) Although you signed an agreement saying you were an independent contractor, you were actually an employee, because the employer controlled the manner and means of your work. Just because the company you work for says you are an independent contractor and you sign a paper that says you are an independent contractor doesn't make it so! If I call a donkey a racehorse, its still a donkey. There is a test for what an independent contractor really is in Pennsylvania (use the Search Key to your right to learn more). This is how we often win cases involving independent contractor disqualification cases....

3) You have a Sideline Business, i.e. prior to becoming unemployed, you used to do similar work for clients from time to time, and you have not increased the amount of time spent doing such work since you became unemployed.  This is a sure-fire winner if you have good evidence.  Click Here to examine a Pennsylvania case that provides the test for a sideline business.

Click Here to read our answers to FAQs relating to Pennsylvania Unemployment law and procedure.

Have more questions, need more answers?  Call us at 610-647-5027, or e-mail me today.

Hope you found this helpful.  If so, please feel free to Post a Comment.

1 comment:

christina said...

Thank you very helpful! I needed clarification on my ability to collect unemployment despite being a part time independent contractor.