Wednesday, February 8, 2012

PA Court Weighs in on Employee vs. Independent Contractor

Employee or Independent Contractor? How employers classify the people who work for them can have important implications for everything from taxes to wage and hour issues. The IRS has its take, and there are tons of court opinions weighing in on wage and hour issues. This classification also matters for unemployment compensation though. And, a Pennsylvania court provided some helpful insight.

In Pennsylvania, generally claimants who were employees can receive UC benefits, but those who were "self-employed" can not. The analysis is similar to the employee vs. independent contractor analysis. Under PA UC law, an individual is an independent contractor where:
(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).

In Hartman v. UCBR (opinion here), the Pennsylvania Commonwealth Court applied that legalese gobbledygook to a real-life situation. I love it when a court comes right out and states the holding:
We conclude that, as a matter of law, where an employer supplies all equipment, pays a fixed rate even when a job does not take place, requires that its business cards be distributed and other business cards be collected, and even goes so far as to determine how early a person must arrive at a job and what clothing a person is to wear, that employer is exercising significant control over the manner in which Claimant is performing his duties. Accordingly . . . Employer did not meet its burden of proving that Claimant was an independent contractor. 
This decision provides some helpful guidance for making the right call in the always tricky field of worker classification.

Image: Photo of Centre County CareerLink (where UC referee hearings are held) by P. Miles.

Posted by Philip Miles, an attorney with McQuaide Blasko in State College, Pennsylvania in the firm's civil litigation and labor and employment law practice groups.