Business Workshop: Self-Employed Can’t Get Unemployment

People laid off from jobs who work even a few hours on the side as an independent contractor may be putting their unemployment benefits in jeopardy.Under Pennsylvania law, individuals receiving unemployment compensation benefits are permitted to work as employees and have what they earn offset their unemployment compensation. But, the Pennsylvania unemployment compensation law mandates that individuals who are self-employed are not eligible for unemployment compensation.

A recent line of Pennsylvania appellate cases suggests that taking some side jobs while a claimant is engaged in seeking full-time employment will not automatically disqualify claimant from receiving an unemployment check.

“Self-employment” is not defined in Pennsylvania unemployment compensation law, so courts have looked to the law’s definition of “employment” for guidance. Under Pennsylvania law, a person is employed unless: 1) the individual is free from control or direction of an employer; and 2) the individual is providing services and is “customarily engaged in an independently established trade, occupation, profession or business.”

The recent court decisions have placed emphasis on the second characteristic — whether the individual is “customarily engaged” in a business. If the income is sporadic or temporary, courts are more inclined to rule that the individual is not customarily engaged in business, so that they can continue receiving benefits. If, however, the individual is trying to make a living with a recently started business, instead of simply using it as a side activity, then the courts take a much harsher view, regardless of whether the individual has generated any income.

The bottom line is that individuals seeking to open a new business after being laid off should consider if their activities will disqualify them from receiving unemployment compensation.

For more information on this topic, please contact Beth A. Slagle at [email protected].

This article originally appeared in the Pittsburgh Post-Gazette’s Business Workshop section. Business workshop is a weekly feature from local experts offering tidbits on matters affecting business.

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