Unemployment Compensation; Ineligibility due to Self-Employment

Lowman v. UCBR, 178 A.3d 896 (Pa. Cmwlth. 2018), allocatur granted Dec. 27, 2018, appeal docket 41 EAP 2018

Donald Lowman petitioned Commonwealth Court for review of an adjudication of the Unemployment Compensation Board of Review (Board) that affirmed the Referee’s decision that Lowman was ineligible for benefits under Section 402(h) of the Unemployment Compensation Law, which renders an employee ineligible for compensation for any week “in which he is engaged in self-employment.” The Board concluded that Claimant’s work as an Uber driver constituted self-employment that rendered him ineligible for unemployment compensation for which he was otherwise entitled by reason of losing his job as a behavioral health specialist. Specifically, the Board found that Lowman was self-employed under his agreement with Uber in accordance with the two-part test provided by Section 4(l)(2)(B) of the Unemployment Compensation Law, which defines “employment” as:

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.

Applying this test, the Board focused on Lowman’s relationship with Uber and the degree of dependence between the two to find that Lowman was not connected to Uber in a subordinate manner or dependent upon Uber’s transportation services; rather, he could refuse assignments and was permitted to provide similar services for other entities.

Considering the case en banc, Commonwealth Court disagreed with the Board’s application of Section 4(l)(2)(B). The court reasoned that because Uber was not the separating employer named in Lowman’s benefit claim, his employment relationship with Uber was “not an issue for this Court to consider.” Slip Op. at 8. The court further explained that:

[s]hort-term work, including self-employment, in which a claimant engages after losing his job, does not render the claimant ineligible for unemployment compensation benefits under Section 402(h) of the Law. Accordingly, whether the claimant performs this work as an employee or independent contractor is not a relevant inquiry. 

Id. at 9-10. Rather, the court reasoned, the relevant question is “whether Claimant took a positive step to embark on an independent trade or business, thereby disqualifying himself for benefits.” Id. at 10. Therefore, because the Department of Labor and Industry failed to demonstrate that Lowman intended to enter into an independent business venture by becoming an Uber driver, Commonwealth Court held that Lowman was eligible for benefits as a matter of law, reversed the Board’s order, and remanded the case for further proceedings before the Referee to calculate the unemployment benefits owed to Lowman, “taking into account any offset for his earnings from Uber.” Id. at 11.

Judge McCullough filed a concurring and dissenting opinion, concurring in the result reached by the Majority, but disagreeing with its analysis of compensation law. Judge McCullough found the Board properly applied the Supreme Court’s three part test set forth in Danielle Viktor, Ltd. v. Department of Labor and Industry, Bureau of Employer Tax Operations, 892 A.2d 781 (Pa. 2006), to decide whether Lowman was operating an “independently established” business: (1) whether the individual depended on the existence of the presumed employer for ongoing work; (2) whether the individual is able to work for more than one entity; and (3) whether the individual was hired on a job-to-job basis and could refuse any assignment. Slip Op. at PAM-7 (citing 892 A.2d at 797-98). However, applying these factors, Judge McCullough would nonetheless conclude that the Board erred in determining that Lowman was conducting a business “independent” of Uber because evidence failed to establish that Lowman (1) was not dependent on Uber for the existence and operation of transportation network services, (2) could refuse assignments without consequence, and/or (3) work for more than one entity.

The Supreme Court granted allocatur on the following issues:

(1) Whether the Commonwealth Court’s departure from a half a century of UC jurisprudence and substitution of a new common law test in derogation of statutory law calls for the exercise of the Pennsylvania Supreme Court’s supervisory authority.

(2) Whether the Commonwealth Court’s departure from precedent, which creates uncertainty as to eligibility for benefits, raises an issue of such substantial importance as to require prompt and definite resolution by the Pennsylvania Supreme Court.