Farinhas Logistics v. UCBR –
Commonwealth Court – December 5, 2016 – *unreported memorandum decision
The above case, though unreported, contains
the following extended exposition of the issue of employee v. independent
contractor
Employment
Relationship
To be
eligible for unemployment benefits, a claimant must show that his wages were
earned from employment. 43 P.S. §§801(a), 753(x).9 Further, section 402(h) of
the Law provides that an employee is ineligible for compensation for any week
in which he is engaged in self-employment. 43 P.S. §802(h). Although
“self-employment” is not defined, we examine the parties’ working relationship
under section 4(l)(2)(B) of the Law,10 the purpose of which is to exclude
independent contractors from coverage. Beacon Flag Car Company, Inc. (Doris
Weyant) v. Unemployment Compensation Board of Review, 910 A.2d 103, 107
(Pa. Cmwlth. 2006).
To show
that a claimant is a self-employed independent contractor, the employer must
satisfy the two-pronged test set forth in section 4(l)(2)(B), which states, in
pertinent part:
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.
43 P.S.
§753(l)(2)(B).
This section creates a strong
presumption that an individual rendering services for wages is an employee. Kurbatov
v. Department of Labor and Industry, Office of Unemployment Compensation, Tax
Services, 29 A.3d 66, 69 (Pa. Cmwlth. 2011). To overcome this presumption,
the employer has the burden of demonstrating that the claimant “is not subject
to the employer’s control and he is engaged in an independently established
trade.” Frimet v. Unemployment Compensation Board of Review, 78 A.3d 21,
25 (Pa. Cmwlth. 2013). Both prongs under section 4(l)(2)(B) must be satisfied
for a claimant to be self-employed under the Law; otherwise, the presumption of
employment stands. Silver v. Unemployment Compensation Board of Review,
34 A.3d 893, 896 (Pa. Cmwlth. 2011).
In determining the existence of an employer/employee
relationship, the court is required to examine the actual relationship of the
parties. Hartman v. Unemployment Compensation Board of Review, 39 A.3d
507, 511-12 (Pa. Cmwlth. 2012). We noted that the terminology used by the
parties to describe their relationship is not dispositive, id., and even
a declaration in a contract stating that the claimant is an independent
contractor may not necessarily satisfy the independent contractor test of
section 4(l)(2)(B), Clark, 129 A.3d at 1277 n.11. Moreover, although the
existence of a non-compete agreement is not determinative of the issue, the
terms of the parties’ agreement must be considered. Kurbatov, 29 A.3d at
72.
Two-Prong Test
As noted above, Putative Employer must show that Claimant has
been, and will continue to be, free from control or direction over the performance
of such services. 43 P.S. §753(l)(2)(B)(a). In analyzing this first prong of
the test, we consider the following relevant factors: how the claimant was paid; how
taxes on the claimant's earnings were paid; whether the claimant or the
person for whom [he] worked supplied tools or equipment necessary to perform
the services; whether the person for
whom claimant worked provided on-the-job training; whether claimant was
required to attend meetings or report on [his] work; who set the time and
location of the work; whether the claimant's work was subject to supervision or
review; the terms of any written contract between the parties; the degree to
which the claimant was directed with respect to the work; and whether the
claimant was free to refuse work assignments without repercussions.
Stauffer v. Unemployment Compensation Board of Review, 74 A.3d 398,
405 (Pa. Cmwlth. 2013)
Importantly, no single factor is controlling and the ultimate
conclusion pertaining to control must be based on the totality of the
circumstances. Quality Care Options v. Unemployment Compensation Board of
Review, 57 A.3d 655, 660 (Pa. Cmwlth. 2012). Further, because each case is
fact-specific, all of these factors need not be present to determine the type
of relationship that exists. Id. However, “‘[w]hile all of these factors
are important indicators, the key element is whether the alleged employer has
the right to control the work to be done and the manner in which it was
performed’ . . . an employer-employee relationship likely exists not only where
the employer actually exercises control, but also where it possesses the right
to do so.” Kurbatov, 29 A.3d at 70 (quoting York Newspaper Company v.
Unemployment Compensation Board of Review, 635 A.2d 251, 253 (Pa. Cmwlth.
1993)) (alteration in original).
As to the second prong of the test, Putative Employer must
demonstrate that “as to such services[,] such individual is customarily engaged
in an independently established trade, occupation, profession or business.” 43
P.S. §753(l)(2)(B)(b). To determine whether a claimant is “customarily engaged
in an independently established trade,
occupation, profession or business,” we look at whether the claimant was
restricted from performing the services for others and whether anything in the
nature of the work limits it to a single employer. Stauffer, 74 A.3d at
407. Evidence that a claimant is engaged in an independent business is an absolute
prerequisite to a determination of self-employment. Quality Care Options,
57 A.3d at 666. As noted by our Supreme Court, “[a] worker can be considered an
independent contractor only if he or she is in business for himself or
herself.” Danielle Viktor, Ltd. v. Department of Labor and Industry, 892
A.2d 781, 798 (Pa. 2006).
Therefore, an employer must show that the claimant took
positive steps toward establishing an independent business. Buchanan v.
Unemployment Compensation Board of Review, 581 A.2d 1005, 1008 (Pa. Cmwlth.
1990). Further, the independent trade established must involve the same type of
services that the claimant provided to the employer, Electrolux Corporation
v. Commonwealth, Department of Labor and Industry, Bureau of Employer Tax
Operations, 705 A.2d 1357 (Pa. Cmwlth. 1998), and the claimant must have
performed those services for others, and not just for the employer, Peidong
Jia v. Unemployment Compensation Board of Review, 55 A.3d 545, 548 (Pa.
Cmwlth. 2012).
We have stressed the importance of an employer to submit
evidence to show that claimant is engaged in an independent business. See id.
at 549 (holding that without evidence that the claimant established an
independent business or performed the same services for others, the employer
could not establish the second prong of the test to overcome the statutory
presumption of employment); see also Clark, 129 A.3d at 1277 (concluding
that the employer failed to satisfy the second prong where there was no
evidence that the claimant established a private enterprise or independent
business through which he provided services to others).
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