Sunday, November 01, 2015

UC - "employee" v. independent contractor

Formularo Catering, Inc.  v. Department of Labor and Industry



Reassessment of employer’s UC taxes upheld by court, which determined that employees which employer claimed were “casual laborers” were “employees” under the UC Law, and not independent contractors.


The court upheld the Department’s conclusion that the individuals were engaged in employment under section 4(l)(2)(B) of the Law, 43 P.S. §753(l)(2)(B), that it had satisfiend its burden of showing that the individuals performed services for wages. Specifically, and that it proved an employer-employee relationship between Famularo and the individuals.


In determining whether an individual is engaged in “employment” or in the work of an independent contractor under section 4(l)(2)(B) of the Law,  the Department bears the initial burden of showing that the individual provided services in exchange for wages.  Tobey-Karg Sales Agency, Inc. v. Pennsylvania Department of Labor and Industry, 34 A.3d 899, 903 (Pa. Cmwlth. 2011). “[A] person receiving remuneration for services rendered is presumed to be employed and therefore to have ‘employment’ within the meaning of the [Law] . . . .” Electrolux Corporation v. Department of Labor and Industry, Bureau of Employer Tax Operations, 705 A.2d 1357, 1359-60 (Pa. Cmwlth. 1998) (emphasis added).


Once the Department meets its burden, the burden shifts to the employer to show that the individual “‘(a) has been and will continue to be free from control or direction over the performance of his or her services [a]nd (b) is customarily engaged in an independent trade.’” Tobey-Karg, 34 A.3d at 903 (citation omitted). Unless the employer proves both elements, the presumption of employment stands. Beacon Flag Car Company (Doris Weyant) v. Unemployment Compensation Board of Review, 910 A.2d 103, 107 (Pa. Cmwlth. 2006).


Here, the Department credited testimony that Famularo issued IRS 1099 tax forms to certain individuals but did not report those individuals’ wages to the Department. Although Famularo’s owner disputed the status of these individuals, he acknowledged that Famularo hired them and paid them for their services. Contrary to Famularo’s argument, the Deparetment need only show that the individuals received remuneration in exchange for their services. Electrolux, 705 A.2d at 1359-60. Based on the testimony of  the Deparment witness and Famularo’s owner, the court agreed that the  e Department met its burden. Although the burden then shifted to Famularo, Famularo failed to argue that it met both elements under section 4(l)(2)(B) of the Law.  Therefore, the Department properly concluded that the individuals at issue were engaged in “employment” under section 4(l)(2)(B) of the Law.




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