EMPLOYED OR SELF-EMPLOYED
Pennsylvania’s Commonwealth Court recently issued an opinion, which, while arising in the unemployment compensation arena, may have broader implications for today’s contingent workforce. In Lowman v. Unemployment Compensation Board of Review (January 24, 2018), the Court was called upon to decide whether a claimant, who had been laid off from his job as a behavioral health specialist, engaged in self-employment by becoming a driver for Uber. To perform his duties for Uber, the Claimant used his own phone and car, paid for all related expenses (fuel and maintenance), had to have insurance, a driver’s license, and vehicle registration, set his own hours, could refuse assignments, and could drive for others. Additionally, he earned approximately $350 per week, showing a frequent and prolonged relationship with Uber—not occasional and limited to earning some extra money on the side.
The question before the Court was whether the Uber driver was (1) free from control or direction in the performance of his services, and (2) engaged in an independently established trade, occupation, or business. In making this analysis, the Court had to determine whether the Claimant engaged in an activity in an entrepreneurial spirit with the intent of starting a new business, trade, or profession. To do so, it looked at whether he formed a business entity, provided meaningful capital for equipment, advertising, and insurance, or listed a phone number, all of which would be indicia of self-employment. Alternatively, performing functions during off hours (nights/weekends), not having a business card, and investing little capital in the venture would demonstrate a sideline activity, not an independent business venture.
Applying this analysis to the facts of this case, the Court concluded that the Claimant was not self-employed and therefore was entitled to unemployment compensation benefits.
Whether the Court’s analysis will be limited to an interpretation of Pennsylvania’s Unemployment Compensation Law remains to be seen. Significant to the determination of whether members of the Twenty-First Century’s contingent economy are employees is that the Court found irrelevant the question of whether the Claimant was an employee or an independent contractor; even though one would assume the latter to be engaged in an independent business venture. Similarly, it appears that the Court did not consider routine activities of present day life—the utilization of one’s cell phone and vehicle, and absorbing the related expenses, or compliance with various statutory requirements (registration/insurance)—to evidence the engagement in a business venture. Of more significance, however, is the fact that the independence of being able to reject assignments and the ability to work for others, activities which would result in the termination of an employee, did not carry the day. Few of today’s contingent workers incorporate or formalize a business entity, invest significant capital in their activity beyond what is normal for modern everyday life (a computer, printer, and scanner), engage in marketing activities beyond LinkedIn, Facebook, and similar sites, or perform services for one entity on a long-term basis. Applying this decision and the facts out of which it arose to today’s typical contingent worker might well support the conclusion that he may be found to be your employee—with all of the attendant employment law and tax consequences.