Monday, May 18, 2020

SCOPA: New analysis of independent contractor classification for unemployment compensation

Oh great, one of my favorite topics . . . the 30,000 different tests for employee versus independent contractor classification, each with a few hundred different factors. Okay, perhaps that's an exaggeration. But, seriously, take a look at the existing test for just unemployment compensation in Pennsylvania

Now, the Supreme Court of Pennsylvania (SCOPA) has made it a little more difficult to classify workers as independent contractors in a new case, A Special Touch v. UC Tax Services. The case involves people who worked at a salon, offering nail, skin, massage, and cosmetic services. As with all of these classification cases, the analysis is very fact intensive and not very conducive for succinct blog entries. 

The key takeaway here, however, is pretty simple. The PA UC statute requires in part that independent contractors be "customarily engaged in an independently established trade, occupation, profession or business." SCOPA held: 

[This statutory language is] unambiguous in requiring a putative employer to show that an individual is actually involved in an independent trade, occupation, profession, or business in order to establish that the individual is self-employed . . . . We read nothing in the [statute] to signal that the phrase requires only that an individual be capable of being involved in an independently established trade, occupation, profession, or business.
 Now, you might be thinking that this requires the contractor to actually provide services for others . . . not so fast!
Thus, the analysis under this requirement does not simply turn on the extent to which an individual actually provides his or her services to either the putative employer or third parties, although these considerations are certainly relevant. Rather, the “customarily engaged” language can encompass more activity than actually providing services for others, so long as it is demonstrated that the individual is in some way actually involved in an independently established trade or business. In this respect, we agree with the Department that circumstances demonstrating that an individual is actively holding himself out to perform services for another, such as through the use of business cards or other forms of advertising, even if not actually performing those services during a particular time period at issue, are also relevant to the analysis.
The key takeaway here is to have your contractors print some business cards (I'm about half kidding). It mostly just further reinforces that the UC analysis requires the workers to be in business for themselves.  

First, COVID-19 shut down these salons - now, even when they can re-open, a lot of them will have an additional tax burden (and potentially other issues if the classification analysis carries over into other areas of the law). Definitely a tough few months for them. 

No comments:

Post a Comment