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Archive for the tag “eligible”

The Benefits from Sleeping on the Job

Being caught sleeping on the job is almost always grounds to be fired from one’s job and, as a result, being denied Unemployment Compensation; however the recent case Philadelphia Parking Authority v. Unemployment Compensation Board of Review would seem to indicate otherwise in certain circumstances.

The unemployment compensation claimant in the matter-at-issue, Charlene L. Henney (hereinafter “Claimant”) worked the 3:30pm to midnight shift for the Philadelphia Parking Authority (hereinafter “Employer”). Due to the late hours, and the lack of work for her to do, she would occasionally become drowsy. In order to combat her drowsiness, she often requested additional work from Employer for her to do. Despite the Claimant’s efforts to secure additional work, Employer failed to provide any save on two occasions. Claimant eventually developed some health problems, was hospitalized, and diagnosed with sleep apnea.

On at least four separate occasions Claimant fell asleep during her 3:30pm to midnight shift. Employer terminated Claimant’semployment and contested her application for unemployment compensation. At an unemployment compensation referee’s hearing, Employer argued that Claimant committed willful misconduct and demonstrated that Claimant slept on the job, that it had a specific work rule proscribing sleeping on the job of which Claimant was aware, and that it was Claimant’s alleged violation of the rule against sleeping on the job that caused her to be terminated. In response, Claimant did not deny sleeping on the job. Instead, she testified that she suffered from sleep apnea which caused involuntary sleeping. In addition, she further testified that she requested additional work from Employer in order to help her remain awake during the late hours of her shift and Employer failed to provide the work requested.

In making its decision, the Court had to determine what constitutes willful misconduct. In its review of the applicable law, the Court noted that willful misconduct requires a wanton, intentional, or willful disregard for an employer’s interests, deliberate violation of an employer’s rules, and/or intentional disregard for standards an employer can expect from an employee. The employer has the burden to prove that the claimant was aware of the work rule and willfully, intentionally, and/or deliberately violated it. A Court is to review all of the claimant’s actions in light of all the surrounding circumstances, including the reasons for non-compliance with the work rule. If the employer can meet its burden as described above, the burden shifts to the claimant who then has the burden to prove that her decision to violate the employer’s work rule was for good cause. A physical illness can constitute good cause to violate a work rule. If the claimant had good cause to violate the work rule, then a claimant can be eligible for unemployment benefits. A claimant’s own testimony can serve a competent testimony to her own medical problems.

The Court ruled that the Employer did not meet its burden of proof. The Court found that the Claimant recognized that working late hours with little work to do made her understandably drowsy. The Court further found that the Claimant acted in a responsible manner by informing the Employer of her lack of work, and drowsiness, by asking for additional work. The Employer had the opportunity to provide the work, but failed to do so. Based on the all of the surrounding circumstances, the Court ruled that Claimant’s falling asleep at her position was not the result of any willful, deliberate, or intentional act but the natural result of late nights with little to no work to do. In other words, the Court ruled that Claimant did not intentionally go to sleep while on duty. Due to the fact that the Employer did not meet its burden, the Court did not have to engage in any analysis into Claimant’s sleep apnea as the burden never shifted to Claimant.

In the final analysis, when it comes to whether a claimant is eligible for benefits, a Claimant must commit willful misconduct to be deemed ineligible. If the action – though misconduct – was not done willfully, then a claimant will be eligible for unemployment compensation benefits, even if that misconduct was sleeping on the job.

Originally published on May 2, 2012 in “Upon Further Review” and can be found here.

Double Dipping: Unemployment Compensation and Other Benefits

In the episode of the Seinfeld television series called “The Implant,” George is spotted dipping the same potato chip into dip more than once after taking a bite out of it. Annoyed, his girlfriend’s brother, Timmy, approaches him, interrogates him about his “double dip,” and scolds him sharply, saying “just take one dip and end it!” Timmy’s admonition to George may not just apply to those attempting to enjoy a second bite of a dip-covered potato chip, but also to those who collect some other sort of disability benefit while also attempting to collect unemployment compensation (hereinafter “UC”) benefits.

Before moving forward, for the sake of clarity, any references to social security benefits (“SBB”) herein will not refer to the collection of the social security pension benefits (hereinafter “SSPB”) due to one reaching a certain age. There is no conflict between collecting a SSPB and UC at the same time as long as each agency is appraised of the income received from the other.

When comparing UC and SSB, a baseline principle was enunciated by the court when it declared “[u]nemployment compensation is not health insurance and does not cover physically or mentally ill persons during periods they are unemployable.” Carter v. Com, 442 A.2d 1245. In other words, in order to collect UC one must be able and willing to work. However, when applying for SSB, one must allege to the Social Security Administration (hereinafter “SSA”) that s/he is completely disabled as to not be able to work at all to be eligible for benefits. Obviously, a conflict arises between the requirements for UC and SSB: if someone is completely disabled as to render him/her unable to do any work s/he is, by definition, not eligible for UC benefits, although s/he may be eligible for SSB benefits of some sort. In saying that, in practical terms, it is highly doubtful that an employer in a UC matter will request discovery or cross-examine a claimant on the issue of what s/he indicated on an application for SSB benefits. Therefore, many cases may be slipping through the cracks simply because there is incomplete analysis into a claimant’s dealings with the SSA.

Although in the typical case one cannot lawfully collect both UC and SSB simultaneously due to the fact that the requirements for each diametrically conflict, there is an exception where someone can collect both UC and SSB. The exception centers on the definition of “substantial gainful activity” (“SGA”). Under the rules of the SSA, someone can work and receive an income and still be eligible to receive SSB as long as his/her work and income are not SGA due to the claimant’s disability. Much case law has developed over time to determine what SGA exactly is and is not, but at least in terms of income, it is clear. The maximum income one can receive at one’s job before it becomes SGA is determined per the national average wage index, which currently stands at +/-$980/mo. Therefore, by way of example, a person legally determined to be disabled can work part-time at his/her local McDonald’s earning $750/mo. That same person may also be eligible for SSB because s/he makes less than the SGA minimum of $980/mo and can prove s/he has a disability which prevents him/her from being able to do work that qualifies as SGA. If s/he loses his/her McDonald’s job due to no fault of his/her own, and is ready and able to work again at the same or similar job, s/he can apply for and receive UC benefits. S/he may then receive both UC and SSB presuming s/he meets the requirements for UC. As always, s/he will have to inform SSA of his/her UC benefits.

In terms of private disability, one can collect UC and private disability at the same time. Again, UC must be informed of the disability income and the claimant must still be ready and able to work. As with SSB, the possible issue that arises is whether the claimant is disabled. Each private disability insurer has a different definition/standard of what disability is; therefore, not all private disability insurers have definitions/standards for disability that would conflict with the UC definition/standard of being ready and able to work. As with SSB, it is unlikely that an employer in a UC matter would delve into what the claimant indicated on his/her private disability application. However, if UC rules that the claimant’s disability is such that s/he cannot work any job, then s/he will be ineligible for UC benefits. By contrast, if the claimant can work at some sort of job, just not necessarily the same one s/he left, then UC benefits may be awarded absent any other reason for ineligibility.

When it comes to sick leave and/or having to quit a job due to a health reason (physical or mental), a claimant must first inform his/her employer of the condition to allow the employer to make an attempt at an accommodation (as a brief aside, it should be noted that how exactly one goes about informing one’s employer of one’s condition, and who has the right to see the information provided, is a process that is heavily regulated by the Family Medical Leave Act and the Americans with Disabilities Act and will not be discussed herein). If the employer refuses to accommodate or cannot sufficiently accommodate, a claimant will be deemed to have been constructively discharged against his/her will and, therefore, eligible for UC if that same claimant can show s/he is still ready and able to work at some other job as long as his/her disability is or can be accommodated. Sometimes an employer can offer sick leave. If the sick leave is paid at normal salary, then UC benefits will be denied as the claimant’s income is stable. If unpaid or paid at less than normal salary, a claimant will only be eligible for benefits only if s/he maintains a relationship with his/her employer and intends to return to work at the end of the leave interval. In addition, Claimant would have to demonstrate s/he was given leave because of a health condition, which essentially constructively discharged him/her from his/her employment. In other words, the leave would have to be the employer’s method of accommodation of the disability which claimant accepts. The leave can be either under FMLA or any other sort of leave offered by employer. At the end of the leave, claimant would have to resume work or show that the accommodation was insufficient. In showing whether the accommodation was insufficient, Claimant must still be ready and able to find alternative employment to be UC eligible. If s/he cannot work any job, UC will deem him/her ineligible as not being ready and able to work. If, while out on leave, the position one expected to re-assume is eliminated, then the claimant will be considered to have been involuntarily discharged, making him/her eligible for UC, presuming s/he is ready and able to work.

In the current precarious economic climate, it is important to know one’s rights relative to what benefits one may be entitled to when unemployed. If one can receive more than one stream of benefits, the opportunity should be pursued. Perhaps Timmy was wrong; maybe one does not have to “end it” after dipping once.

This article was originally published in Upon Further Review on February 8, 2010 which you can see here or on my website here.

The Secret to Unemployment Compensation Defense

I have litigated dozens, if not hundreds, of unemployment compensation cases.  I represent both claimants and employers but I more frequently represent claimants.  I think it is fair to say that claimants are more likely to win an unemployment compensation case against an employer due the nature of the law, but I think employers could increase their chances of success if they just spent a little more time and effort pursuing, preparing, and presenting their cases.

When I represent claimants I object pretty aggressively to the testimony, documentation, and evidence presented by employers mainly because they almost always are, to some degree if not totally, hearsay.  I think my success in representing claimants is due, at least to some degree, in preventing the employer’s evidence from being presented.

Now, I admit that I don’t want to give my opponents any advantages, but I think some very basic things could go a long way for employers.  Employers just do not present sufficient competent evidence to win.  Documentation, as much as is relevant, is always helpful.  When wondering whether to bring something, it is always wiser to bring it and not need it than the opposite.  Unfortunately, much of the documentation brought as evidence contains the statements of people who do not appear at the unemployment compensation hearing and is, therefore, hearsay.

This leads me to the single biggest error made by employers at unemployment compensation hearings, which is their failure to bring witnesses.  If an employer wishes to have documentation with the statements of others introduced into evidence at an unemployment compensation hearing, then the employer must bring the person(s) who made the statements to the hearing to provide testimony as to the statements in the documentation.  Furthermore, if someone is terminated for cause, then a witness to the incident(s) of misconduct giving rise to the termination is critical to win an employer’s case.  Many employers will bring the “boss,” whether that is the C.E.O. or president or manager or what have you, as a witness.  The problem is that the boss is usually too disconnected to have any personal knowledge of the claimant’s alleged misconduct which gave rise to his termination.  Therefore, any testimony from the boss about the misconduct is hearsay.

Another typical mistake is to bring the human relations person to the hearing.  The same problem with the boss applies to the HR person.  While the HR person can certainly introduce documentation in a person’s employee file, this person too is almost always too disconnected from the claimant’s alleged misconduct to have personal knowledge of it; as a result his testimony is hearsay as well.

When it comes down to it, an employer must bring sufficient witnesses who have personal knowledge of the issues at hand to win its case, otherwise employers will consistently be at a disadvantage at unemployment compensation hearings.

The Hidden Inequity in Unemployment Compensation Law

As everyone knows, the current financial climate is precarious at best, which makes knowing one’s rights under Pennsylvania Unemployment Compensation Law vital to one’s financial future. Conventional wisdom, which is largely correct, is the following: an employer must pay unemployment compensation taxes for employees and those employees can collect unemployment compensation benefits if separated from employment (presuming, of course, they meet the statutory eligibility requirements). For unemployment compensation purposes, an employee is basically defined as someone who is dependant upon the business for which he works for income, works for a fixed rate of remuneration from the business for which he works, and whose work is completely controlled by that same business.

Perhaps an employee is best described by what it is not. In contrast to an employee is an independent contractor. Independent contractors, by statutory definition, are ineligible for benefits. An independent contractor is defined by 43 P.S. § 753(l)(2)(B), and the cases decided thereunder, as the following: (1) being free from the direction and control of a purported employer and (2) having an independent business that is not reliant upon a single source for his business. While the above language means is often determined on a case by case basis, general guidelines have been provided in well established Pennsylvania case law. Characteristics of someone who is free from direction and control include, but are not limited to, the following: the individual (1) does not have his taxes withheld by an alleged employer; (2) can accept or reject work at his own discretion; (3) can work for competing entities without fear of reprisal; (4) can control how a job is performed; (5) works without a fixed rate for remuneration; (6) supplies his own tools and/or supplies to accomplish his work; (7) does not receive “on the job training” from the alleged employer; (8) sets his own hours of work; (9) sets his own parameters for his work; and (10) is not dependant upon a single source for his business. As an independent contractor is not an employee, and therefore not eligible for benefits, if one contracts with an independent contractor no unemployment taxes need be paid for that person.

The general rule is if unemployment compensation taxes are paid for an individual, then that person can collect benefits; in the alternative if someone cannot collect benefits, then the unemployment compensation taxes do not have to be paid for that person. However, is there a situation where the tax must be paid for someone but that individual cannot collect? In the context of Unemployment Compensation, the analysis of what makes an employee, as contrasted from an independent contractor, converges onto an owner of a business in a way that is inequitable. The inequity appears to be derived from exploiting both sides of businesses as legal entities independent from both its owners and employees.

An owner of a business, who works and earns income for the business he owns, is considered to be an “employee” for whom unemployment compensation taxes must be paid because the owner depends upon the business for his income and the business completely controls the owner’s work. However, in reality, as the owner of the business, he controls what work the business does and how it is performed. Therefore, the business owner simultaneously controls and directs the business (fitting the criteria for an independent contractor) on the one hand, while being dependant upon and controlled by the business for both work and income (fitting the criteria for an employee) on the other hand. Taking full advantage of a business owner’s dual role as independent contractor and employee, Pennsylvania Unemployment Law as presently written and interpreted, treats a business owner as either an employee or independent contractor when it most benefits the government as opposed to the owner. Therefore, although a business owner pays unemployment compensation taxes on his own income from his business because he fits the criteria of an employee, if that same business owner becomes separated from the business for any reason (except for the exception detailed below) then that business owner is ineligible to collect unemployment benefits because he also meets all of the criteria for an independent contractor listed above. Therein lays the hidden inequity: a business owner must essentially pay a tax for which he cannot receive the benefit.

The only exception that would allow a typical business owner to collect unemployment benefits is if he is forced to terminate his relationship with the business through an involuntary bankruptcy. An involuntary bankruptcy is considered to be analogous to the involuntary termination of one’s employment from an employer. Perhaps this is a clue as to the rationale behind the general rule that business owners must pay for but cannot collect unemployment benefits for themselves. A business owner is essentially his own employer and could hire himself and lay himself off repeatedly at will, theoretically making himself eligible for unemployment benefits over and over again. Perhaps lawmakers believed a business owner holds too much control over the employment relationship with the business itself to allow him to collect benefits.

It is interesting to note that, aside from the above exception, a Pennsylvania statute specifically carves out an exception for real estate and insurance agents in 43 P.S. § 753(l)(4)(17). The statute specifically indicates that although real estate and insurance agents may own, at least in part, the businesses for which they work, unemployment compensation law will specifically deem them to be exclusively independent contractors as opposed to simultaneously employees. Therefore, there is no requirement under Pennsylvania statute for real estate and insurance agents to pay unemployment compensation taxes. Thus far, the cases decided under 43 P.S. § 753(l)(4)(17) have not expanded its application beyond the specific exceptions for real estate and insurance agents to include individuals in other professions but with the same sort of owner/employee arrangement relationship.

Most people expect to have the safety net of unemployment compensation benefits if they unfortunately lose their job. However, if one owns a business and pays unemployment compensation taxes for oneself, he should be aware that the payment of the tax does not entitle him to collect the benefit. This may be clearly inequitable on its face, but until it is changed it is imperative that business owners be aware that the safety net they may be hoping for will not catch them if they can no longer work for their business.

Originally published in “Upon Further Review” on October 8, 2009 and can be found here and on my website here.

Employed or Not Employed? That Is the Question

It might seem obvious that one of the primary criteria used to determine whether an individual is eligible for Unemployment Compensation is for that individual to have been actually employed by the perceived “employer” he was “working for” before his/her separation from said perceived employer. Although colloquial parlance equates “working for” someone/something with employment, Unemployment Compensation Law makes a distinction between those who “work for” someone/something under an employment relationship and those who have an independent contracting relationship. Consequently, when an individual applies for and is denied Unemployment Compensation, he may be shocked to learn that his denial is due to the fact that the person/entity he had been “working for,” for however long or short period of time, was never actually his “employer”. While some may say that this distinction appears to be mere hair splitting, its impact on whether an Unemployment Compensation claimant is granted or denied benefits is ultimately dispositive. That is, an individual who has an independent contractor relationship with an individual/entity is not eligible for Unemployment Compensation benefits if that relationship is terminated. It matters not whether the contracting relationship was terminated for “cause” or was “voluntary” – the mere existence of an independent contractor relationship renders the potential claimant ineligible for benefits. Therefore, it is crucial to know and understand the distinction between employment and independent contracting in the context of Unemployment Compensation and this article will lay out the criteria for the definition of independent contracting as it applies to the collection of Unemployment Compensation benefits.

Under Pennsylvania Unemployment Compensation Law, if one is an independent contractor, then one is considered to be self-employed. Although the statute defines neither independent contractor nor self-employment, the statute does define “employment” essentially as follows: ” [s]ervices performed by an individual for wages shall be deemed to be employment subject to this act”. 43 P.S. § 753 (l)(2)(B). The statute continues, establishing basic guidelines as to what employment is not: “[one is deemed employed] 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 the contract for 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).

While describing what employment is not, the above quoted basic guidelines, conversely, establish the essential criteria for self-employment (i.e. independent contracting). Consequently, the Pennsylvania Courts use the following two-part test to determine whether an individual is self-employed (i.e.: independently contracting): (1) whether the claimant was free from control and direction in the performance of the work; and (2) the business is one that is customarily engaged in as an independent trade or business. (Venango Newspapers v. Com., Unemployment Compensation Board of Review, 158 Pa. Cmwlth. 379, 631 A.2d 1384 (Pa. Cmwlth. 1993), holding that where claimant did not receive on-the-job training, supplied his own tools and had no taxes deducted from the sums received, claimant was not an employee.) As the claim that an individual is not an employee but rather an independent contractor is essentially an affirmative defense made by the alleged employer against the claim for benefits, the alleged employer generally has the burden to prove that the claimant is not an employee.

To determine whether an individual is free from the control and direction of an employer in the performance of work, the Pennsylvania Courts frequently look to eight factors. No one factor is determinative as to whether an individual is an employee or independent contractor, and the Court generally considers and weighs all eight factors in the employment relationship.

The eight factors considered by the Court are as follows: first, the Court examines how the job was performed. Specifically, the Court is more likely to decide that an individual is an independent contractor if he sets his own hours, creates his own work/task agenda, and/or decides how many other workers are needed for a particular task. Second, the Court looks at whether there was a fixed rate of remuneration. Who decides the cost of the services being provided? Who decides when/if raises are granted? A worker who establishes his own pay rate and decides when his own pay rate increases or decreases is functioning more like an independent contractor than employee. Third, the Court notes whether taxes are deducted from the claimant’s remuneration. The Court is more likely to rule that a worker is an independent contractor if the worker receives a 1099 form and is able to deduct expenses and be responsible for paying his own taxes. Fourth, the Court also notes whether the alleged employer supplies the tools necessary to carry out the services being provided. If the worker must provide and use his own tools to carry out his tasks, the Court is more likely to rule that the worker is an independent contractor. Fifth, the Court ascertains whether the alleged employer offers on-the-job training. If an alleged employer provides on-the-job training, the Court is more likely to rule that there is an employment relationship. Sixth, the Court discerns whether there were regular meetings with the alleged employer. Regular meetings generally will signify an employment relationship. Seventh, the Court inquires into whether the claimant suffers risk of loss when claimant’s expenses exceed income. In other words, if the business fails, will the alleged employee merely lose his job, or will the alleged employee have the responsibility to satisfy the business “potential creditors If the alleged employee merely loses his job, and has no responsibility to address the business’ creditors, then the Court is likely to rule that he is an employee rather than an independent contractor. Eighth, the Court investigates into whether the claimant was compelled to look only to the employer for further employment. If a worker regularly sought and/or acquired the same or similar work from other sources, while already engaged with an alleged employer, then the Court is likely to rule that the worker had independent contracting relationships with his “employers. See, e.g., Venango, 157 Pa. Cmlwth. 379, 631 A.2d 1384 (Pa. Cmwlth. 1993); Kelly v. Comm., Unemployment Compensation Board of Review, 107 Pa. Cmwlth. 261, 528 A.2d 294 (Pa. Cmwlth. 1987) (holding that claimant was self-employed where claimant was paid a lump sum for his performance, and he was not compelled to look only to general contractor for further employment); Pavalonis v. Comm., Unemployment Compensation Board of Review, 57 Pa. Cmwlth. 289, 426 A.2d 215 (Pa. Cmwlth. 1981) (holding that claimant was self-employed when claimant supplied all of his tools and materials, did not receive any on-the job training, did not receive a fixed hourly wage and had no taxes deducted from the sums received from employers).

To determine whether a business is one which is customarily engaged in as an independent trade or business, the Pennsylvania Courts consider two factors: (1) whether the claimant is capable of performing the activities in question for anyone who wish to avail themselves of the services; and (2) whether the nature of the business compel the individual to look only to a single employer for the continuation of such services. See, e.g., Venango Newspapers, 631 A.2d 1384 (Pa. Cmwlth. 1993); Kelly, 528 A.2d 294 (Pa. Cmwlth. 1987); Pavalonis, 57 Pa. Cmwlth. 289, 426 A.2d 215 (Pa. Cmwlth. 1981).

The two above-mentioned factors essentially revolve around a worker’s loyalty to the individual/entity providing him with the work. Is the worker permitted to do the same work for two different (even competing) individuals/entities simultaneously? Does the worker recieve all of his work from a single individual/entity? May/must the worker seek work from more than one source? Perhaps most importantly, who decides where the worker can perform his services? If a worker is constrained to work for a single individual/entity and/or cannot select himself where he will perform his services, then the Court will weigh these factors in favor of the worker being in an employment relationship rather than an independent contracting relationship.

Significantly, the amount of money a worker receives is not a determinative factor in these analyses, as even a small sum earned does not automatically remove the designation of “independent contractor”.

Ultimately, all of the above factors can essentially be reduced to a single word: freedom. Does the worker have the freedom to set his own schedule? The freedom to establish his own pay rate? The freedom to work for competing businesses simultaneously? As a corollary, does the worker have to bear the responsibilities associated with this freedom, such as deducting his own taxes, using his own tools, and bearing the risk and burden of financial loss in the business? In the end, the more freedom a worker has the more likely the Court will find that he is an independent contractor (self-employed); the less freedom a worker has the more likely the Court will rule that the worker is an employee.

This article appeared in The Legal Intelligencer on March 30, 2006 and can be found here.

It can also be found here on my firm’s website.

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