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Gifts, Loans, and Child Support

Child support is typically based on the respective incomes of the parents of the children for whom support is sought; but what counts as income? Some people are fortunate enough to be the beneficiary of sizable gifts or loans from family and friends which help pay one’s bills and financial obligations. Should such loans and gifts be considered in developing a child support order? The recent case of Suzanne D. v. Stephen V., 65 A.3d 965 (Pa.Super.2013) attempts to answer this question.

In Suzanne D. Father was ordered to pay child support to Mother pursuant to a guidelines calculation based on their respective incomes. In addition, the Court assessed Father the entire cost of extracurricular activities and medical expenses for certain years and deviated from the guidelines upward to account for Father’s significant gifts from his own father (“Grandfather”). Father received regular monthly funds from Grandfather that were approximately equal to Father’s actual earned income. The parties disputed whether the funds received from Grandfather were gifts or loans and whether they should be considered in developing a child support obligation.

Father argued that the funds received from Grandfather were loans. Specifically, Father argued that Grandfather provided him a series of loans which he is obliged to repay, and, if he does not, the loaned money could be deducted from his inheritance from Grandfather. Father even produced a demand note to prove the existence of the loan.

Mother, by contrast, contended the sums given to Father were gifts, not loans. She argued that the demand note produced by Father does not necessarily even require the sums to be paid back to Grandfather. Further, Mother argued that the sums given to Father, being nearly equal to his earned salary, were exorbitant and, on their face, should warrant a deviation.

The Court, when reviewing the evidence presented, did not find Father’s assertion that the funds given were loans to be credible. The Court noted that Grandfather had a long history of giving money to Father, both regularly and on Father’s demand, and it was only after the parties’ marriage separated that Grandfather’s gifting generosity suddenly turned to lending, and Grandfather was Father’s employer, which, on its face, shed a suspicious light on the status of the monies given to Father. The Court did not find the demand note persuasive enough to cast the given funds as loans that required repayment. Further, perhaps justifying the Court’s determination of Father’s lack of credibility, Grandfather’s testimony about the demand note during a hearing conflicted with his deposition testimony on the subject and he demonstrated that he was unfamiliar with the demand note and its terms. Similarly, Father was unfamiliar with his own monthly expenses, likely due to them having been paid by Grandfather for so long. Based on the above, the Court ruled that the funds given to Father by Grandfather were gifts.

After the Court ruled the funds referred to above were gifts, the Court next had to determine whether these gifts ought to have any effect on the child support order. Father argued that since 23 Pa.C.S.A Section 4302, which determines what income is for the purposes of child support, does not include gifts, so the funds he received from Grandfather ought not be included as income for the purposes of child support.

The Court acknowledged that the funds could not be categorized as income based on the plain language of the statute cited above, but the gifts could be considered in order to warrant a deviation from the basic child support guidelines. The Court ruled that since the gifts from Grandfather were frequent, could be given on demand, had been given for many years, and nearly doubled Father’s income, it clearly warranted a deviation from the child support guidelines, especially as it put Mother at an extreme disadvantage as her base salary was only about twenty (20) percent of the joint parental income not including the gifts made by Grandfather.

Finally, extra-curricular activities and medical expenses are generally divided between the parents proportionate to their incomes; however, in this case, Grandfather, for a number of years, paid for all of the extra-curricular activities and medical expenses himself without contribution from either Father or Mother. As Father did not incur any of the expenses for extra-curricular activities and medical expenses for those years, the Court, therefore, ruled that Mother was not obliged to reimburse Father for her proportionate share of those expenses for that time.

The Court of Suzanne D. makes it abundantly clear, while gifts cannot be included as income for the purposes of a child support guidelines calculation, if large enough, they can warrant a deviation from those same guidelines.

Originally published in Upon Further Review on April 16, 2014 and can be found here.

Alcohol Putting Unemployment Compensation to the Test

In the matter of Dillon v. Unemployment Compensation Board of Review, 2013 WL 2991042, the Commonwealth Court of Pennsylvania interpreted Pennsylvania Unemployment Compensation Law to include alcohol consumption within the meaning of 43 P.S. Section 802(e.1).

The Claimant in Dillon worked for the employer as a pipe fitter for about one (1) year. During that time, the Claimant tested positive in a random blood alcohol test and was provided a last-chance agreement in lieu of termination. Not long after the aforesaid test Claimant was subjected to another random blood test, tested positive again, and was terminated from his employment as a result of the positive test. Upon his termination, Claimant attempted to secure unemployment compensation benefits and was deemed ineligible due to having committed willful misconduct. Ultimately, the Court ruled that the Claimant is ineligible for unemployment compensation benefits. Strangely, however, instead of merely affirming the Board of Review and Referee’s findings that Claimant is ineligible, the Court embarked on what seems to be an unnecessary decision regarding which provision of the Unemployment Compensation law rendered the Claimant ineligible.

Under 43 P.S. Section 802(e), an unemployment compensation claimant is ineligible for benefits if he is terminated due to willful misconduct. The Court pointed out that as long as the employer in the instant matter can prove that the Claimant was aware of, and violated, a work rule (which the Court found the employer did prove), the Claimant could be determined ineligible for benefits. This seems to affirm the Unemployment Compensation Board of Review and Referee, yet the Court proceeded to rule that, although ineligibility could have been determined through the route just described, the Claimant was actually ineligible under 43 P.S. Section 802(e.1), which specifically addresses drug use.

The Court appeared to say that now that 43 P.S. Section 802(e.1) is available to use, it would not employ 43 P.S. Section 802(e) in drug and alcohol cases, even though the matter could reach same result. According to the Court, perhaps the most important application of 43 P.S. Section 802(e.1) over 43 P.S. Section 802(e) is that 43 P.S. Section 802(e.1) allows for ineligibility due to violation of a substance abuse policy absent any showing of willful misconduct.

43 P.S. Section 802(e.1) provides that a claimant can be determined ineligible for benefits if discharged for failing to pass a “drug test.” The issue clarified by the Dillon Court was whether alcohol, which is the substance abused by the Claimant, is a “drug” as contemplated by the aforesaid statute. The opinion of the Board of Review was that the language of the statute is clear: the word “drug” is used and not “alcohol,” therefore the Claimant cannot be deemed ineligible under 43 P.S. Section 802(e.1). In the Board’s view, if the legislature wanted to use the word “alcohol” it would have done so; as the legislature elected not to use it, it is not appropriate to read it into the law.

The Court, after an analysis which included looking at the definition of “drug” in both Black’s Law Dictionary and Webster’s Third New International Dictionary, concluded that alcohol can properly be considered a “drug” as the term is typically used and, indeed, read into the law. The Court further concluded, as a result, that the legislature intended to include “alcohol” as part of the definition of the word “drug” in 43 P.S. Section 802(e.1). Finally, the Court did not believe any analysis which would exclude alcohol from the definition of the word “drug” due to drugs being illegal and alcohol legal is persuasive. The Court pointed out that just as over-the-counter drugs are legal, but able to be abused, alcohol is also legal and able to be abused. In the Court’s estimation, it is the abuse of a substance that is relevant, not its legality.

In sum, then, while a claimant can be deemed ineligible for unemployment compensation benefits for violation of a drug and/or alcohol test on the basis of willful misconduct (pursuant to 43 P.S. Section 802(e)), the Court ruled that now that the statute is available, the ineligibility must now be pursuant to 43 P.S. Section 802(e.1) which speaks directly to issue of drugs.

Originally published in Upon Further Review on August 19, 2013 and can be seen here.

Is Working on the Sidelines Out of Bounds for UC?

As the economy remains precarious, unemployment compensation benefits remain vital to keeping many Pennsylvanians afloat. Of course, many applicants for unemployment compensation benefits attempt to make ends meet by doing some sort of job on the side, such as flea marketing or landscaping on the weekends for a few dollars here and there. The issue the courts have struggled with is attempting to determine whether that flea marketer or landscaper is an independent contractor or merely engaged in a sideline activity.

Under Pennsylvania unemployment compensation law, an independent contractor is considered to be self-employed and, therefore, ineligible for unemployment compensation benefits. An independent contractor is generally someone who is free from the control or direction of an employer but, rather, works for himself or herself. As the independent contractor is not an employee, he or she is ineligible for benefits if no further work is available under his or her contracts. The issue, of course, is that someone who works at a sideline activity is also similarly free from the control or direction of an employer. Would that person be similarly ineligible for benefits? The courts have generally indicated that engaging in a sideline activity does not render one ineligible for benefits, but the precise definition of what constitutes a sideline activity is still being developed.

The primary lines of distinction between independent contracting and a sideline activity include when the activity was first undertaken and whether someone is “customarily engaged” in the activity per the language of 43 P.S. Section 753(l)(2)(B) defining “employment.” The courts have ruled that earning money or engaging in a money-making enterprise for a few hours per week or month does not necessarily equate to independent contracting. The question is, after findings of fact, whether someone could be considered “customarily engaged” in the sideline activity. In fact, it is significant to note that a potential claimant engaged in a sideline activity may even consider himself or herself an independent contractor; however, this claimant’s self-identification is irrelevant, as the analysis is exclusively based on the factual underpinnings of each case.

For example, if someone, say a truck driver, loses his job and elects to work a few hours landscaping thereafter in order to earn some money to tide him over, does that make him a contractor or engaged in a sideline activity? It all depends on whether this former truck driver is now pursuing a new business venture as a landscaper or just trying to earn a little money to scrape by before he can engage actual employment. Obviously, the analysis to determine the difference between a new business venture and sideline activity is extremely fact-intensive and focuses on the number of hours spent at the work done and the amount of investment the person makes into the work. For instance, does this former truck driver help mow his neighbor’s lawns for $20 a cut every other week, or has he established “Ryan’s Lawncare” and purchased materials and advertising toward it? It likely goes without saying that the former is a sideline activity, which would not render him ineligible for unemployment compensation benefits, while the latter would be considered establishing a business (i.e., becoming an independent contractor), rendering him ineligible for benefits.

The other relevant issue in determining whether something is independent contracting or a sideline activity is when and how the work was established. If it began while one already had an established full-time job, it is more likely to be considered a sideline activity. For example, after a few years of practice, a full-time accountant may discover he enjoys doing Web design in the evenings or on the weekends for a few hours here or there for limited compensation. Would he be considered as customarily engaged as a Web designer? The likely answer would be no, as the Web designing a few hours per week arose while he was otherwise employed as a full-time accountant as opposed to after he became unemployed from his position as an accountant. Further, the accountant’s income and time is overwhelmingly because of being an accountant and, more than likely, when asked what he does for a living, he identifies as an accountant.

Finally, it should be noted that the precise number of hours or rate of compensation is not necessarily relevant to the analysis as neither is specified by the law. Take our accountant above as an example: If his five or six hours per week of Web design expanded to 10 or 15 after he lost his job as an accountant, the Web designing would likely remain a “sideline activity” and not render him ineligible for benefits. As far as compensation is concerned, someone who works on commission and, therefore, has compensation delayed for months, perhaps weeks, could be considered employed despite having no compensation for a long period of time, as compensation is contemplated in the future for the present work.

As the cases continue to be decided on the issue, the definition of “customarily engaged” will become more refined and clear. The fact pattern of each subsequent case will further refine and crystallize what a sideline activity is and help guide potential claimants in deciding whether to undertake such an activity. Of course, before embarking on an activity that could potentially risk one’s eligibility for unemployment compensation, it is always recommended that a claimant consult with an attorney first.

Some cases on this issue that the reader may find helpful include the following: Crocker v. Unemployment Board of Review, 63 A.3d 496 (Pa.Cmwlth. 2013), Minelli v. Unemployment Compensation Board of Review, 39 A.3d 593 (Pa.Cmwlth. 2012), and Kelly v. Unemployment Compensation Board of Review, 840 A.2d 469 (Pa.Cmwlth. 2004).

Originally published in The Legal Intelligencer Blog on August 2, 2013 and can be viewed here.

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