Employed? Or Not Employed? That is the Question!

Employed? Or Not Employed? That is the Question!

It may appear obvious that the primary criterion used to determine whether a person is qualified for the Unemployment Compensation is to ensure that the person still works for the presumed “employer” before he/she is separated from the presumed employer. Even if colloquial language means “work for” people, the law on unemployment compensation distinguishes between those who “work for,” and all those who have an independent contractual relation. The law does not apply to “work for” people. Therefore, if private individuals apply for the Unemployment Compensation and are denied the compensation it could be surprised that their refusal is primarily because the person/entity for whom he was “working” has never been his “employer” for any longer or perhaps shorter period of time. Some may claim that this distinction appears to be mere hair breakdown, but its impact is ultimately unassuming whether or not an unemployment compensation claimant is granted benefits. That is, if the relationship is terminated, a person who has independent business relationships with a person/entity is not entitled to the unemployment compensation benefits. It is important that the contracting relationship has either been terminated for ’cause’ or may well have been ‘voluntary’ – the fact that the potential claimant is simply not eligible for benefits because of its independent contractor relationship. The distinction between job and independent contracting in the context of is therefore crucial to know and understand The main elements of the definition of independent contracting as applicable to the collection of unemployment benefit will then appear in this Article and unemployment benefit compensation.

Under the Unemployment Compensation Law of Pennsylvania 1 will be regarded as an employed person if he/she is an independent contractor. Although the statute does not define an independent contractor or a self-employed person, the statute essentially defines “employment” as: ‘[s]ervices performed by a wage-earner are considered to be employment governed by this act.’ §753(l)(2) of P.S. 43 43 (B). The Statute continues, establishing basic guidelines as to which employment does not mean: “(a) the individual has been, and still has, clear of guidance or control as to the performance of such services under both the service contract and the facts, unless and until it has been shown to the Department’s pleasure that such a person has been and will remain customary. § 753(l)(2) forty-three P.S. (B).


The above simple guidelines, while describing what employment is not, create the essential criteria for self-employment (i.e. independent contracting). The following two-part test is used by the Pennsylvania Courts to determine whether an individual employs him/her (ie: self-employed): (One) whether the claimant is undirected and unchecked in the work’s total exercise, and (two) whether the company is a single individual that is usually employed as an independent business or possibly as an undertaking. (Venango Newspapers v. Com., Unemple Compensation Board Review, 158 Pa. Cmwlth. 379, 631 A.2d 1384 (Pa. Cmwlth. 1993), stating that the applicant was not trained, provided his own programs, but had no tax deducted from the sums received. The alleged employer generally has a burden of proving that the claimant is not employee because the allegation that the individual does not become an employee, but an independent contractor, is basically an affirmative defense made by that alleged patron against the benefit claim.

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The Pennsylvania Courts often examine 8 factors in order to determine whether an individual is devoid of the management and direction of an employer in carrying out their work. No factor is determined whether an individual is an independent contractor or a worker, so in the employment relationship the Court usually takes into account and weighs all eight factors.


The Court has taken the following 8 factors into consideration: The Court first looks at how the work was done. In particular, in setting out the hours he or she sets his/her own working/working agenda, and/or deciding how other workers are vital for a particular job, the Court will be far more apt to decide whether an individual will be an independent contractor The Court then examines whether the pay rate was fixed. Who decides the price of the services? Who decides whether or not raises are awarded? A worker who establishes his own wage rate and decides if his wage rate is increasing or possibly diminishing is much more functional than an independent contractor. Thirdly, if the applicant’s remuneration deduct taxes, the Court notes. The Court is far better able to rule that if a workers receive 1099 formula and are able to deduct costs and be responsible for paying taxes, a worker will be an independent contractor. Fourthly, the Court notes that the alleged employer provides the necessary tools to perform the services offered. The Court is much more likely to rule that the employee is an independent contractor if the employee has to provide and use his tools to perform the tasks he performs. Fifthly, the Court determines whether the alleged employer provides training on the job. When an alleged employer offers training on the job, the Court is much more apt to determine that there is a relationship between them. Sixth, the Court determines whether the alleged employer was frequent. Regular meetings will usually mean a relationship with employment. Seventh, if the claimants exceed revenues, the Court investigates whether they are at risk of loss. Simply, if the company fails, the suspected employee simply loses his job or maybe the suspected employee is responsible for satisfying the business creditors’ potential. If the alleged employee just loses his job and also doesn’t have a responsibility to deal with creditors, then instead of an independent contractor, the Court is more likely to rule that he is an employee. Eighth, the Court examines whether the applicant was forced to look for more jobs and then the employer. If an employee regularly sought and/or acquired the same or similar work from some other sources, while working with an alleged employer, it will be decided by the Court that the employee is independent from the ’employers of his employee.’ Pavalons v. com, e.g., Venango, 157 Pa. Cmlwth. 379, 631 A.2d 1384 (Pa. Cmwlth. 1993); Holding the claimants in which they were employed (where they were paid for their performativeness a lump sum not to look and were subsequently the general contractor for more employment); Holding the claimants in which they were self-employed; Pavalonis v. Comm. PA, 157 Cmlwth, 379, 631 Cmwlth.


In order to determine whether the company is one customary independent business or trade, the courts of Pennsylvania take two factors into account: firstly, whether the applicant performs the businesses in question effectively for anyone wishing to use these services; and thirdly: Pavalonis, 50 7 Pa. Cmwlth. 289, 426 A.2d 215 See, for example, the Venango Nekspapers, 631 A.2d 1382; Kelly, 528 A.2d 294 (Pa. Cmwlth, 1987); (Pa. Cmwlth. 1981).

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The two factors above focus essentially on the employee’s loyalty to the person/entity that provides him with the work. Is the worker allowed to carry out similar work simultaneously for 2 different (even competing) people? Is the worker entitled to receive all his work from one person? Is the worker allowed to look for work from a single source? Who will decide, perhaps most importantly, where the worker can serve? If a worker is forced to work with a single individual/entity and/or cannot select exactly where he/she intends to perform his/her services, this will be the Court’s judgment, instead of independent contractual relations.


Significantly, the amount of money a worker receives in these analyzes does not matter as a small amount earned does not eliminate the “independent contractor” designation immediately.


All of the above can ultimately be reduced in essence to just one word: freedom. Does the employee have the flexibility to plan his work? The flexibility to set up your rate of pay? The flexibility to simultaneously work for competing companies? Does the worker, like to deduct his own fees, use his own tools and take the risks and burden of financial losses in the company, have to bear the responsibility associated with this freedom? On the contrary, a worker really can have more freedom in the long run; the more likely a worker is to rule the Court will be to find that he is an independent contractor (self employed).

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