King’s
Kountry Corner, LLC v. Dept. of Labor and Industry – October 14, 2015 – Cmwlth.
Court – unreported memorandum opinion
The
court affirmed the Department decision that “members” of a limited liability
corp. who worked at its stores as salespersons and doing delivery work were “employees”
of the LLC and should be subject to UC tax as employees, rejecting the LLC
claim that they were independent contractors. One person held a 93% interest in the LLC and
the members each had a 1% interest. KKC
reported compensation paid to members who did sales and delivery work to the
federal tax authorities.
Liberal
construction
The
provisions of the Law must be liberally and broadly construed to achieve its
objectives of ensuring that employees who become unemployed through no fault of
their own are provided with some semblance of economic security. Wedner
Unemployment Compensation Case, 296 A.2d 792, 796 (Pa. 1972).
“Employment”
The
term "employment" is broadly defined as "all personal service
performed for remuneration by an individual under any contract of hire, express
or implied, written or oral, including service in interstate commerce, and
service as an officer of a corporation." Section 4(l)(1) of the
Law, 43 P.S. § 753(l)(1). Once it has been shown that an individual has
performed service for wages, he or she is presumed to be an employee. Section
4(l)(2)(B) of the Law; Cameron v. Dep't of Labor & Indus., Bureau
of Emp'r Tax Operations, 699 A.2d 843, 846 (Pa. Cmwlth. 1997). The burden
then shifts to the employer to establish an exemption from employment. Hoey
v. Dep't of Labor & Indus., Bureau of Emp't Sec., 499 A.2d 1124, 1127
(Pa. Cmwlth. 1985).
Right to
control
It is
the right or authority to exercise control or to interfere with the work of
another, not the actual control, that creates an employment relationship. Cameron,
699 A.2d at 846. In order to discern whether the employees were truly employees
or independent contractors, it is necessary to look beyond the contract between
the employer and the employees to the true facts of the employment. Hoey,
499 A.2d at 1127. Kountry Korner's
managing member had "the authority to … [m]onitor, supervise, manage and
control the business activities of the Company
and its employees," as established by testimony and the LLC’s Operating
Agreement
Because the members performed services for wages, the burden
shifted to Kountry Korner to establish that they were not subject to its
control or direction over their performance and that they were customarily
engaged in an independently established trade, occupation, profession or
business. Section 4(l)(2)(B) of the Law. As the Department correctly
noted, Kountry Korner did not present any evidence to meet its burden.
___________________
An unreported case may not be
cited “binding precedent” but can be cited “for its persuasive value. . . .”
See 210 Pa. Code § 69.414 (a) and Pa. R.A.P. 3716 [45 Pa.B.
3975; Saturday, July 25, 2015]
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