The Pennsylvania Supreme Court has taken up a case that may provide it with an opportunity to determine what constitutes “self-employment” for the purposes of the Unemployment Compensation Law, which does not explicitly define the term.
The justices granted allocatur March 13 in A Special Touch v. Department of Labor & Industry to examine a single issue, as phrased by the defendant-petitioner: “Should this court exercise its supervision to provide the controlling interpretation of the phrase ‘customarily engaged in an independent business’ to define ‘employment’ in the Unemployment Compensation Law in order to resolve the inconsistent interpretations of the Commonwealth Court as to a definition that is fundamental to the administration of the [Unemployment Compensation] program and thus of significant public importance?”
Last August, a three-judge panel of the Commonwealth Court ruled 2-1 to reverse an adjudication of the Department of Labor & Industry that imposed an unemployment compensation tax on plaintiff beauty salon A Special Touch for five people who worked there in various positions. The department had labeled those five individuals as employees, while classifying another five people who worked at the salon in similar positions as independent contractors.
The Commonwealth Court majority, led by President Judge Mary Hannah Leavitt, said the unemployment compensation tax should not have applied to any of those 10 people because all were “customarily engaged in an independently established trade, occupation, profession or business” under Section 4(l)(2)(B) of the Unemployment Compensation Law.
Leavitt said the five people the department determined to be employees, some of whom worked as nail technicians and some of whom performed janitorial, laundry and babysitting services, were actually self-employed independent contractors because they “were able to work for more than one entity; were not limited by the nature of their work for salon, or hours, to a single employer; and were not dependent upon salon’s existence for ongoing work.”
“The department found that the ‘licensed providers were not hired by the job,’” said Leavitt, joined by Senior Judge James Gardner Colins. “However, all five individuals were able to refuse an assignment, which suggests an independent contractor relationship.”
Judge Patricia McCullough filed a dissenting opinion, arguing that “the three individuals (G.S., C.S. and B.G.) who performed occasional babysitting, cleaning/janitorial and laundry work for A Special Touch … and/or its owner were not ‘customarily’ engaged in an independently established trade, occupation, business or profession.”
A determination that those workers were independent contractors, McCullough argued, “disregards the statutory requirement and runs afoul of the Supreme Court’s directive that the Unemployment Compensation Law ‘requires the term “employment” to be broadly construed to provide for the largest possible coverage of employees.’”
Brett Flower of Dethlefs, Pykosh & Murphy in Camp Hill represents A Special Touch and said in an email, “Although, the grant of allocator is not in its self instructive, we cannot help but be disappointed that the court has decided to hear the case wherein a small sole proprietor, with the support of the case law, is entangled against the limitless resources of the government.”
Flower said the government is seeking to “effectively abrogate the status of independent contractor in the Commonwealth.”
A spokesperson for the Department of Labor & Industry said “the department does not comment on court decisions.”