Lowman v. Unemployment Comp. Bd. of Review

• Decision Date: 24 July 2020
• Docket Number: No. 41 EAP 2018,41 EAP 2018
• Citation: 235 A.3d 278
• Parties: Donald LOWMAN, Appellee v. UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, Appellant
• Court: Pennsylvania Supreme Court

235 A.3d 278

Donald LOWMAN, Appellee

v.UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, Appellant

No. 41 EAP 2018

Supreme Court of Pennsylvania.

Argued: September 11, 2019

Decided: July 24, 2020

OPINION

JUSTICE DONOHUE

In this case of first impression, the Court is asked to decide the appropriate test to determine whether a claimant who is otherwise entitled to receive unemployment compensation benefits due to a separation from employment becomes ineligible for those benefits as a result of being self-employed pursuant to Section 402(h) of the Unemployment Compensation Law (the "Act"),¹ 43 P.S. §§ 751 – 919.10, the self-employment exclusion. We hold that Section 4(l)(2)(B), 43 P.S. § 753(l)(2)(B), contains the appropriate test for determining whether or not an individual is in self-employment. If an individual is not in "self-employment," then he remains eligible for benefits. Applying that test to the facts of this case, we affirm the ruling of the Commonwealth Court that the claimant was not self-employed.

I. INTRODUCTION

The Act does not define the term "self-employment." Yet, the determination that an individual is self-employed is highly consequential: the individual who is otherwise eligible for benefits due to separation from employment receives no benefits for any week of self-employment. 43 P.S. § 802(h). This is in contrast to the same individual who is found, instead, to be employed while receiving benefits. In such a case, the individual remains eligible to receive benefits with an offset for the remuneration received from the post-separation provision of personal services. See 43 P.S. § 804(d)(1).

As will be described in detail below, claimant Donald Lowman ("Lowman") began driving for Uber Technologies, Inc. ("Uber")² shortly after his separation from employment. We anticipate that the resort to this opportunity to supplement unemployment compensation benefits will routinely arise given the ease with which an individual can become a driver-for-hire under the auspices of an entity like Uber.

The Act was enacted in 1936 because "the public good and the general welfare of the citizens of this Commonwealth require the exercise of the police powers of the Commonwealth in the enactment of this act for the compulsory setting aside of unemployment reserves to be used for the benefit of persons unemployed through no fault of their own." 43 P.S. § 752. The General Assembly amended the Act in 1959 to include the self-employment exclusion,³ which provides as follows:

An employe shall be ineligible for compensation for any week ...

(h) In which he is engaged in self-employment: Provided, however, That an employe who is able and available for full-time work shall be deemed not engaged in self-employment by reason of continued participation without substantial change during a period of unemployment in any activity including farming operations undertaken while customarily employed by an employer in full-time work whether or not such work is in "employment" as defined in this act and continued subsequent to separation from such work when such activity is not engaged in as a primary source of livelihood. Net earnings received by the employe with respect to such activity shall be deemed remuneration paid or payable with respect to such period as shall be determined by rules and regulations of the department.

43 P.S. § 802(h).

Although the Act does not define the term "self-employment," it does define "employe" and "employment":

(i) "Employe" means every individual, whether male, female, citizen, alien or minor, who is performing or subsequent to January first, one thousand nine hundred thirty-six, has performed services for an employer in an employment subject to this act.

(l)(1) "Employment" means all personal service performed for remuneration by an individual under any contract of hire, express or implied, written or oral, including service in interstate commerce, and service as an officer of a corporation.

43 P.S. §§ 753(i), (l)(1). Within this section of the Act, the General Assembly provides an additional definition of the term "employment" in Section 753(l)(2)(B) :

§ 753. Definitions

* * *

(2) The term "Employment" shall include an individual's entire service performed within or both within and without this Commonwealth, if--

(A) The service is localized within this Commonwealth, or

(B) The service is not localized in any state but some of the service is performed within this Commonwealth and (a) the base for operations or place from which such service is directed or controlled is in this Commonwealth, or (b) the base for operations or place from which such service is directed or controlled is not in any state in which some part of the service is performed, but the individual's residence is in this Commonwealth. Service shall be deemed to be localized within this Commonwealth if--(a) the service is performed entirely within this Commonwealth, or (b) the service is performed both within and without this Commonwealth, but the service performed without this Commonwealth is incidental to the individual's service within this Commonwealth as for example where it is temporary or transitory in nature or consists of isolated transactions. Services performed without this Commonwealth shall not be included within the term "Employment" if contributions are required and paid with respect to such services under an unemployment compensation law of any other state.

Services performed by an individual for wages shall be deemed to be employment subject to this act, 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 his contract of service and in fact; and (b) as to such services such individual is customarily engaged in an independently established trade, occupation, profession or business.

(C) The term "Employment" shall include an individual's services wherever performed within the United States, the Virgin Islands or Canada if--(i) such service is not covered under the unemployment compensation law of any other state, the Virgin Islands or Canada, and (ii) the place from which the service is directed or controlled is in this Commonwealth.

43 P.S. § 753(l)(2)(B) (emphasis added).

At issue in this case is the highlighted portion of Section 753(l)(2)(B). Subpart (a) will be referred to as the "control factor" and subpart (b) as the "independence factor."

II. BACKGROUND

Lowman was separated from his job as a behavioral health specialist with Resources for Human Development. He filed a claim for unemployment compensation benefits. While his application was pending, on July 1, 2015, Lowman electronically signed a Software License and Online Services Agreement ("Agreement") with Uber, a transportation network company.⁴ N.T. (Referee Hearing), 10/29/2015, at 22. The Agreement granted Lowman a "non-transferrable license to install and use" Uber's mobile lead generation application ("Driver App"⁵ ) for the provision of rides to passengers in Philadelphia ("Transportation Services"). N.T. (Referee Hearing), 10/29/2015, Uber Exhibit 1 (Agreement, ¶¶ 1.6, 1.12, 2.62, 5.1). In return, Lowman agreed to pay Uber "a service fee on a per ... [ride] basis calculated as a percentage of the Fare ... as provided or otherwise made available by [Uber] ...." Agreement, ¶ 4.4.

Uber provided Lowman with "software, websites, payment services ... and related support services systems" ("Uber Services"). Agreement, ¶ 1.13; N.T. (Referee Hearing), 10/29/2015, at 9; Board Decision, 4/22/2016, ¶ 3. As part of its Uber Services, Uber offered Lowman guidance on how to earn the most money and provide the best driver-for-hire service. N.T. (Referee Hearing), 10/29/2015, at 16, 24–25, 26, 38, Lowman Exhibits 6–9, 12, 15, 17 (Uber emails to Lowman with suggestions); Board Decision, 4/22/2016, ¶ 8. Lowman began using the Driver App on July 1, 2015, and was still driving as of October 28, 2015, the night before the hearing in this case. N.T. (Referee Hearing), 10/29/2015, at 5; Board Decision, 4/22/2016, ¶ 16. During that four-month period, Lowman worked "[p]art-time hours as were available" and received "between $15 and $22 an hour" depending on the number of trips. N.T. (Referee Hearing), 10/29/2015, at 5.

Lowman used his own vehicle and cell phone to provide transportation services, but Uber required that the vehicle and cell phone meet its criteria to be authorized for use. Agreement, ¶¶ 1.16, 1.17, 2.6.23.1–3.3; N.T. (Referee Hearing), 10/29/2015, at 8, 10, 13; Board Decision, 4/22/2016, ¶¶ 9, 10. Lowman had to use the Driver App "at least once a month to maintain an active Driver profile;" otherwise, Uber could deactivate Lowman's access to the Driver App. Agreement, ¶ 2.1. As a driver, Lowman could "not contact any [passenger] for any reason except for the purposes of fulfilling Transportation Services." Id. ¶ 2.2; N.T. (Referee Hearing), 10/29/2015, at 28. He was "solely responsible for determining the most effective, efficient and safe manner to perform each instance of Transportation Services" and for providing "all necessary equipment, tools and other materials, at [his] own expense, necessary to perform Transportation Services." Agreement, ¶ 2.2; N.T. (Referee Hearing), 10/29/2015, at 11, 37, 38.

Lowman had "the sole responsibility for any obligations or liabilities to [passengers] or third parties that [arose] from [his] provision of Transportation Services[,]" including maintaining adequate insurance. Agreement, ¶ 2.3; Board Decision, 4/22/2016, ¶ 4. The Agreement, provided that Uber "does not, and shall not be deemed to, direct or control [Lowman] generally or in [his] performance under this Agreement." Agreement, ¶ 2.4. Lowman retained "the sole right to determine when and for how long [he] will utilize the Driver App or the Uber Services," and he exercised that right. Id. ; N.T. (Referee Hearing), 10/29/2015, at 23. He...