Consulting v. Unemployment Comp. Bd. of Review ( 2018 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
HPM Consulting, :
Petitioner :
:
v. :
:
Unemployment Compensation :
Board of Review, : No. 652 C.D. 2017
Respondent : Submitted: February 5, 2018
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE ELLEN CEISLER, Judge
OPINION BY
JUDGE COVEY FILED: April 13, 2018
HPM Consulting (HPM) petitions this Court for review of the
Unemployment Compensation (UC) Board of Review’s (UCBR) April 25, 2017 order
reversing the Referee’s decision and granting Terry J. Jerin, Jr. (Claimant) UC benefits.
The sole issue before this Court is whether Claimant is ineligible for UC benefits under
Section 402(h) of the UC Law1 (Law).2
Claimant worked for HPM as a safety consultant from August 15, 2016
through October 28, 2016. HPM hired Claimant because he already possessed the
skills and certifications necessary to perform a job for a client in Minnesota.
Claimant’s previous employers paid for his certifications; he did not pay for any
himself. HPM set Claimant’s pay rate and did not deduct taxes therefrom. At the job
1
Act of December 5, 1936, Second Ex.Sess., P.L. (1937) 2897, as amended, 43 P.S. § 802(h)
(ineligibility for self-employment).
2
In HPM’s Statement of Questions Involved (Statement), HPM also includes the following
issue: “Was [HPM’s] Petition for Review with this Court filed untimely?” HPM Br. at 4. (Because
HPM’s brief pages are not numbered, the Court assigned page numbers beginning with HPM’s
Statement of Jurisdiction.) However, because this question has not been raised other than in HPM’s
Statement, it does not appear to be an issue before the Court. Notwithstanding, since the UCBR’s
order is dated April 25, 2017 and HPM filed its appeal on May 25, 2017, HPM’s appeal was timely
filed.
site, Claimant was supervised by a site safety manager who dictated Claimant’s work
hours and daily activities. The site manager required Claimant to participate in daily
safety meetings, the morning flex/stretch program, badge in and out at the work site,
complete daily safety reports, and submit a weekly timecard. Claimant has always
worked as an employee and does not hold himself out as being in business for himself.
Claimant separated from HPM on October 28, 2016.
On December 20, 2016, Claimant applied for UC benefits. On January 4,
2017, the Scranton UC Service Center determined that Claimant was eligible for UC
benefits as he was not disqualified under Section 402(h) of the Law. HPM appealed
and a Referee hearing was held on February 3, 2017. On February 7, 2017, the Referee
reversed the UC Service Center’s determination. Claimant appealed to the UCBR. On
April 25, 2017, the UCBR reversed the Referee’s decision and granted Claimant UC
benefits. HPM appealed to this Court.3
HPM argues that Claimant is not eligible for UC benefits under Section
402(h) of the Law because he was not an employee of HPM,4 but rather, he was self-
employed as an independent contractor. Specifically, HPM contends that because: (1)
3
“Our scope of review is limited to determining whether constitutional rights were violated,
whether an error of law was committed, or whether the findings of fact were unsupported by
substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa.C.S. § 704.” Turgeon v.
Unemployment Comp. Bd. of Review, 64 A.3d 729, 731 n.3 (Pa. Cmwlth. 2013).
4
The UCBR expressly determined:
While the [UCBR] concludes that [C]laimant was not self-employed,
the [UCBR] does not hold that [C]laimant was an employee of
HPM. Under Section 509 of the Law, 43 P.S. § 829, the [UCBR’s]
conclusion that [C]laimant was not self-employed and is eligible for
benefits under Section 402(h) of the Law is not conclusive as to HPM’s
liability for contributions in [UC] taxes unless the Department [of
Labor and Industry’s] Office of UC Tax Services provided special
notice that the [UCBR’s] benefit decision would be conclusive on the
contribution issue and HPM was given an opportunity to offer evidence
on that issue.
UCBR Dec. at 2 (emphasis added).
2
the language of the agreement between HPM and Claimant specified that Claimant was
an independent contractor; (2) Claimant was issued an Internal Revenue Service (IRS)
Form 1099, as opposed to an IRS Form W-2; (3) Claimant paid for and provided his
own certifications and qualifications; (4) Claimant established his hourly work rate; (5)
HPM did not train or supervise Claimant; and, (6) Claimant was free to accept or
decline assignments, Claimant was self-employed during the duration of his agreement
with HPM. HPM relies exclusively on Krum v. Unemployment Compensation Board
of Review, 689 A.2d 330 (Pa. Cmwlth. 1997), to support its position.
At the outset, this Court finds Krum inapposite for various reasons. First,
the Krum Court clarified that “the [UCBR] expressly stated that it did not consider
[S]ection 402(h) [of the Law] as its basis for denying benefits. Instead, the issue in
[that] case [wa]s whether [the claimant] was an employee of [the agency.]” Krum, 689
A.2d at 333. In the instant case, the UCBR espoused the opposite: “While the [UCBR]
concludes that [C]laimant was not self-employed, the [UCBR] does not hold that
[C]laimant was an employee of HPM.” UCBR Dec. at 2. Second, the Krum Court
expressly opined: “We have disposed of [the claimant’s] arguments in some detail and
may summarize that, simply put, [the agency] is a referral agency and those it refers
are not its employees under the referral arrangement.” Krum, 689 A.2d at 333. Here,
there is no record evidence nor did HPM argue that it was merely a referral agency.
Initially,
[p]ursuant to Section 402(h) [of the Law], a claimant is
ineligible for [UC] benefits in any week ‘[i]n which [he] is
engaged in self-employment.’ 43 P.S. § 802(h). Section
402(h) [of the Law] does not define the term ‘self-
employment’; however, Section 4(l)(2)(B) of the Law
defines ‘employment’, in pertinent part, as follows:
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
3
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.
43 P.S. § 753(l)(2)(B). The purpose of Section 4(l)(2)(B) [of
the Law] ‘is to exclude independent contractors from
coverage.’ Beacon Flag Car Co., Inc. (Doris Weyant) v.
Unemployment Comp[.] [Bd.] of Review, 910 A.2d 103, 107
(Pa. Cmwlth. 2006). ‘This provision presumes that an
individual is an employee.’ Id. However, ‘this
presumption may be overcome if the putative employer
sustains its burden of showing that the claimant was free
from control and direction in the performance of [his]
service and that, as to such service, was customarily
engaged in an independent trade or business.’ Id. ‘Unless
both of these showings are made, the presumption stands that
one who performs services for wages is an employee.’ Id.
Minelli v. Unemployment Comp. Bd. of Review, 39 A.3d 593, 595-96 (Pa. Cmwlth.
2012) (italic and bold emphasis added). Further, “in analyzing whether a claimant was
an employee or independent contractor, we have repeatedly held that the existence of
an independent contractor agreement is not dispositive of the work relationship,”
Lello v. Unemployment Comp. Bd. of Review, 59 A.3d 1153, 1159 (Pa. Cmwlth. 2013)
(emphasis added). Indeed, the UCBR’s only reference to the contract is in finding of
fact number two, wherein, the UCBR stated: “HPM hired [C]laimant on contract
because he already possessed the skills and certifications necessary to perform the job
for a client in Minnesota.” UCBR Dec. at 1. This finding does not support a legal
conclusion as to whether Claimant was self-employed or an employee. Moreover,
“[t]he mere fact that Claimant did not receive [a] W-2 Form[] . . . is not conclusive
of self-employment.” Clark v. Unemployment Comp. Bd. of Review, 129 A.3d 1272,
1277-78 (Pa. Cmwlth. 2015) (emphasis added).
4
With respect to the second prong of Section 402(h) of the Law,5 Claimant
related: “I never in my life have been a [Form] 1099 employee. I have no desire to be
a [Form] 10[99] employee. I do not perform self -- I do not solicit work for myself,
and it’s something I have no desire to do.” R.R. at 56. In fact, when Employer’s
witness was asked whether he had any reason to know whether Claimant “ever
performed or is currently performing similar type of service for anybody else,”
Employer’s witness responded: “The same type of work as far as – yeah, he does [sic]
the same type of work for previous years. As far as an independent, I’m not clear
on that.” R.R. at 54 (emphasis added).
In addition, Claimant did not pay for his own certifications and
qualifications. Claimant explained:
The companies I worked for paid for the certificates. When
I worked for Shaul (phonetic) they [sic] sent me to training.
When I worked for Day Zimmerman, they [sic] provided me
with my first aid [cardiopulmonary resuscitation training]. It
was part of the (inaudible). I had to have it when I was on[-
]site and they paid for it.
R.R. at 58. Finally, Claimant testified that HPM set his rate of pay. Specifically,
Claimant expounded: “I was sent a contract that stated I would get $35 an hour. I did
not set the rate of $35 an hour; [HPM] did.” R.R. at 56. Claimant clarified: “Why
would I set a rate for $5 an hour less than I normally work when federal taxes were not
taken out?” Id.
The law is well-established:
[T]he [UCBR] is the ultimate fact-finder in [UC] matters and
is empowered to resolve all conflicts in evidence, witness
credibility, and weight accorded the evidence. It is
irrelevant whether the record contains evidence to
support findings other than those made by the fact-
5
For reasons that will become clear herein, we will address the second prong before the first
prong.
5
finder; the critical inquiry is whether there is evidence to
support the findings actually made. Where substantial
evidence supports the [UCBR’s] findings, they are
conclusive on appeal.[6]
Ductmate Indus., Inc. v. Unemployment Comp. Bd. of Review, 949 A.2d 338, 342 (Pa.
Cmwlth. 2008) (emphasis added; citations omitted). Here, the UCBR concluded,
“[b]ased on [C]laimant’s credible testimony, none of which HPM disputed,”7
“[C]laimant does not hold himself out as being in business for himself and has always
worked as an employee.” UCBR Dec. at 2 (emphasis added).
The Dissent asserts that the UCBR capriciously disregarded the
following evidence: two contracts between Claimant and HPM, an email and
Claimant’s Questionnaire.8 First, the Dissent maintains: “HPM’s amended petition for
6
This Court has explained:
Substantial evidence is relevant evidence upon which a reasonable
mind could base a conclusion. In deciding whether there is substantial
evidence to support the [UCBR’s] findings, this Court must examine
the testimony in the light most favorable to the prevailing party, . . .
giving that party the benefit of any inferences which can logically and
reasonably be drawn from the evidence.
Sanders v. Unemployment Comp. Bd. of Review, 739 A.2d 616, 618 (Pa. Cmwlth. 1999).
7
The Dissent maintains the UCBR erred by stating HPM did not dispute that Claimant did
not hold himself out as being in business for himself. However, as stated above, when Employer’s
witness was asked whether he had any reason to know whether Claimant “ever performed or is
currently performing similar type of service for anybody else,” Employer’s witness responded: “The
same type of work as far as – yeah, he does [sic] the same type of work for previous years. As far as
an independent, I’m not clear on that.” R.R. at 54 (emphasis added). The Dissent further asserts:
“The [UCBR]’s characterization was not, as the [M]ajority observes, limited to the narrower issue of
whether Claimant held himself out as being in business for himself.” Dissenting Op. at 5 n.4.
However, the Majority did not limit the UCBR’s statement to that issue, but rather, the Majority was
citing the UCBR’s conclusion in reference to that issue. Thus, the Majority limited the quote for that
purpose only.
8
As stated above, the issue is not whether the record contains evidence to support findings
other than those made by the UCBR, but rather, whether there is evidence to support the findings
actually made. See Ductmate Indus. Here, reviewing the record evidence “in the light most favorable
to [Claimant],” as we must because Claimant was the prevailing party below, and “giving [Claimant]
the benefit of any inference that can logically and reasonably be drawn from the evidence,” this Court
6
review states that the [UCBR] erred by failing to consider a litany of evidence,
including Claimant’s written agreement with HPM.” Dissenting Op. at 1 n.2.
However, HPM does not raise this averment as an issue in its Statement of Questions
Involved, see HPM Amended Br. at 4,9 nor does HPM discuss the same in its Summary
of Argument, see HPM Amended Br. at 7-8, or in its Argument.10 See HPM Amended
Br. at 8-12.
[W]hen a party appeals, but fails to address an issue in the
brief, the issue is waived. McDonough [v. Unemployment
Comp. Bd. of Review, 670 A.2d 749 (Pa. Cmwlth. 1996)].
holds that there is substantial evidence to support the UCBR’s findings. Sanders v. Unemployment
Comp. Bd. of Review, 739 A.2d 616, 618 (Pa. Cmwlth. 1999).
The Dissent rejoins: “The foregoing axiom of appellate review does not mean that we may
abandon our duty to remand ‘where the factfinder has refused to resolve conflicts in the evidence . . .
or has completely ignored overwhelming evidence without comment.’ Wise v. Unemployment
Comp[.] [Bd.] of Review, 111 A.3d 1256, 1263 (Pa. Cmwlth. 2015).” Dissenting Op. at 7 n.6. As the
UCBR did resolve the conflicts in evidence and, as discussed herein, did not ignore any evidence,
remand for that purpose is not required. Further, the Dissent cites Wise to support its position that
this Court has a duty to remand where the fact-finder refuses to resolve conflicts in the evidence
or completely ignores overwhelming evidence. However, in Wise the claimant/appellant specifically
raised the issue of capricious disregard of evidence and the quoted portion was merely reciting the
only circumstance wherein an agency’s adjudication can be disturbed for a finding of capricious
disregard. Such circumstance is not present here.
9
HPM’s Amended Brief’s pages are not numbered, thus this Court will refer to the page
containing the Statement of Jurisdiction as page one and continue consecutively.
10
The Dissent insists that HPM raised the issue of capricious disregard of evidence by pointing
to the fact that “HPM argue[d], generally, that the [UCBR] erred in ruling that Claimant is not
ineligible for benefits under Section 402(h) of the Law.” Dissenting Op. at 1 n.2. Clearly, that is not
a capricious disregard of evidence argument. Further, the Dissent claims “HPM specifically cites two
pieces of evidence the [UCBR] did not address: the agreement between Claimant and HPM that
explicitly states he was an independent contractor and ‘correspondence’ he sent to HPM
acknowledging both his independent contractor and 1099 status.” Dissenting Op. at 2 n.2 (emphasis
added). However, HPM never asserted that anything was “not addressed”, but rather HPM contended
that the independent contractor agreement and the fact that Claimant was a 1099 employee support
the first prong of Krum. Both of these factors were testified to by Claimant. Finally, the Dissent
states: “HPM identified the [UCBR]’s error as the disregard of critical evidence, i.e., the written
contract[,]” Dissenting Op. at 2 n.2 (emphasis added), but HPM never made that argument nor
anywhere in its brief used any of the above bolded words as the Dissent claims. Notably, the Dissent
does not cite to HPM’s brief with respect to those words.
7
This Court, in McDonough, held that an issue raised in the
Petition for Review but not addressed in the petitioner’s
brief on appeal, was waived[.]
Jimoh v. Unemployment Comp. Bd. of Review, 902 A.2d 608, 611 (Pa. Cmwlth. 2006)
(emphasis added). Accordingly, this issue is not properly before the Court.
Second, the Dissent opines: “First and foremost, HPM offered copies of
two contracts it executed with Claimant.” Dissenting Op. at 5 (emphasis added).
However, HPM never identified the contracts at the hearing or had Claimant and/or its
witness testify therefrom.11 Notwithstanding, even if the two contracts between
Claimant and HPM, the email and Claimant’s Questionnaire were considered, the result
would be the same. The contracts contain ample evidence supporting Claimant’s
presumptive employee status which HPM, who had the burden, did not overcome. For
example, the contracts specified Claimant’s hourly rate of pay as well as his overtime
rate of pay, and per diem expenses. See R.R. at 37, 45. In addition, the contracts
expressed that Claimant’s home trips “will be scheduled with approval from the job
site” and he consented to drug testing at the jobsite. See R.R. at 37. Further, they
provided that Claimant was responsible for his steel tip boots and clothing but would
be furnished all necessary equipment at the jobsite. Id. With respect to the email,
11
The Dissent asserts that the contracts were entered into evidence as Exhibit 10 at the
beginning of the Referee hearing. However, the exhibits are not attached to the Hearing Transcript
and the contracts and the email are included with documents labeled “Employer Documents for
Telephone Hearing.” R.R. at 35. Further, Exhibit 10 was referred to as “letters sent from the attorney
or Claimant.” R.R. at 52. Moreover, the contracts and the email were never specifically identified
or testified from at the hearing.
The Dissent maintains that “[t]he 46 pages of relevant documents faxed by the moving party
to the Referee as ‘employer exhibits to be included’ in the record were ignored by the [UCBR]. R.R.
36. This is yet another reason to remand for a review of the complete record.” Dissenting Op. at 5
n.5. However, the fact that 46 pages of documents may have been admitted, does not translate to a
remand to consider said documents. The Referee is not an adversary for HPM and is not required to
comb through and comment on documents that were not testified to or argued about before him. As
HPM’s Counsel did not refer to the documents, the UCBR was not required to address them.
8
wherein Claimant acknowledges he is an independent contractor based on the contract,
it is no more dispositive than the contract itself stating it therein.
Relative to Claimant’s Questionnaire, Claimant’s answers support a
finding that Claimant was an employee as opposed to an independent contractor.
Specifically, Claimant stated that he had no financial investment in his employment,
he was not customarily engaged in an independently established trade, occupation,
profession or business, he did not set his own work hours, he could not begin and end
a job independently and he was not free from direction and control in the performance
of his work. See R.R. at 10. Further, Claimant communicated in his Questionnaire
answers that he did not provide his own tools, he did not buy his own supplies, and
most importantly, he was not considered an independent contractor at the time he
did this work before working in his current occupation. See R.R. at 11.
Disturbing an agency’s adjudication for a capricious
disregard of evidence is appropriate only where the factfinder
has refused to resolve conflicts in the evidence, has not made
essential credibility determinations or has completely
ignored overwhelming evidence without comment. Hinkle
v. City of Philadelphia, 881 A.2d 22, 27 (Pa. Cmwlth. 2005).
In Hinkle, this Court, citing Wintermyer [v. Workers’
Compensation Appeal Board (Marlowe), 812 A.2d 478, 487
(Pa. 2002)], explained that:
‘Capricious disregard’ then is just another name for
the agency abusing its discretion and is an error of
law when the agency fails to give an indication that
it has examined countervailing substantive testimony
that had to be considered at arriving at its decision.
The capricious disregard standard then is nothing
more than a shorthand way of referring to an
amalgam of existing overlapping legal and
constitutional standards mentioned above that
safeguard against arbitrariness by state and local
administrative agencies by requiring a meaningful
explanation of why the losing party’s overwhelming
evidence was not accepted.
9
Id. (footnote omitted). An appellate court conducting a
review for capricious disregard of material, competent
evidence may not reweigh the evidence or make
credibility determinations.
Applying the above principles to the case sub judice, we
conclude that the [UCBR] did not capriciously disregard
competent and relevant evidence. It did not ignore [HPM’s]
‘overwhelming evidence’ without comment.
Wise v. Unemployment Comp. Bd. of Review, 111 A.3d 1256, 1263 (Pa. Cmwlth. 2015)
(emphasis added; citations omitted).
This Court holds that HPM did not overcome the strong presumption of
Claimant’s status as an employee. See Famularo Catering, Inc. v. Dep’t of Labor &
Indus., 125 A.3d 866, 869 (Pa. Cmwlth. 2015) (quoting Electrolux Corp. v. Dep’t of
Labor & Indus., Bureau of Employer Tax Operations, 705 A.2d 1357, 1359–60 (Pa.
Cmwlth. 1998) (emphasis added) (“[A] person receiving remuneration for services
rendered is presumed to be employed and therefore to have ‘employment’ within the
meaning of the [Law] . . . .”)). “[T]he record here lacks any evidence that Claimant
customarily engaged in an independent business . . . .” Jia v. Unemployment Comp.
Bd. of Review, 55 A.3d 545, 549 (Pa. Cmwlth. 2012). “Claimant’s testimony is clear
that he was not so engaged, and there is no contrary evidence.” Id. “The test an
employer must satisfy to overcome the presumption of an employment relationship is
simply not met here.” Id.
Notwithstanding, relative to the first prong of Section 402(h) of the Law,
the UCBR found as facts:
5. At the job site, [Claimant] was supervised by the site safety
manager, who dictated [Claimant’s] work hours and daily
activities.
6. The site manager required [Claimant] to participate in
daily safety meetings, the morning flex/stretch program,
badge in and out at the work site, complete daily safety
reports, and submit a weekly timecard.
10
UCBR Dec. at 1.12 Based thereon, the UCBR concluded that Claimant “was not free
from direction and control.” UCBR Dec. at 2.
The Dissent cites C E Credits OnLine v. Unemployment Compensation
Board of Review, 946 A.2d 1162, 1168 (Pa. Cmwlth. 2008), for the factors to be
considered in determining the issue of control. See Dissenting Op. at 3. Specifically,
the Dissent quotes the following factors:
[W]hether there is a fixed rate of remuneration; whether
taxes are withheld from the claimant’s pay; whether the
[putative] employer supplies the tools necessary to carry out
the services; whether the [putative] employer provides on-
the-job training; and whether the [putative] employer holds
regular meetings that the [individual is] expected to attend.
C E Credits OnLine . . . , 946 A.2d [at] 1168 . . . .
Dissenting Op. at 3. These factors reveal that HPM and/or its client, did in fact control
and direct Claimant’s work performance. First, Claimant was paid a “fixed rate of
remuneration[,]” HPM and/or its client “supplie[d] the tools necessary to carry out the
services[,]” and Claimant was expected to attend daily safety meetings. Dissenting Op.
at 3 (quoting C E Credits OnLine, 946 A.2d at 1168). HPM had the burden to prove
that Claimant was free from control or direction over his work performance, and HPM
did not meet its burden. Accordingly, the first prong of Section 402(h) of the Law was
not met.
12
The Dissent opined:
First, it is unclear that [Claimant’s on-site supervisor Brad] Hoke’s
directives were anything more than the quality control directive that is
imposed on any independent contractor. See C E Credits Online [v.
Unemployment Comp. Bd. of Review], 946 A.2d [1162,] 1169 [(Pa.
Cmwlth. 2008)]. Second, it is not clear whether Hoke was issuing
directives on behalf of HPM or [its client] AZCO, Inc.
Dissenting Op. at 4. However, the UCBR’s above-quoted findings are clearly more than quality
control and it is irrelevant whether Hoke’s directives were on behalf of HPM or AZCO, Inc., only
that Claimant was under the direction and control of another.
11
However, it is not clear from the record whether Claimant’s on-site
supervisor Brad Hoke (Hoke) was an HPM employee. Claimant testified that he did
not know who paid Hoke, see R.R. at 57, and HPM’s witness declared that although
Hoke was not an HPM employee, HPM contracted with Hoke to service that client.
See R.R. at 59. Therefore, since it was not established under whose direction and
control Claimant was subject, the identity of Claimant’s employer remains
undetermined. Accordingly, as stated by the UCBR, the issue of whether HPM was
Claimant’s employer was not resolved. See UCBR Dec. at 2.
Further, according to the record, Claimant declined two additional jobs
HPM offered him after the Minnesota client’s job was completed. See R.R. at 54. If
HPM is determined to be Claimant’s employer, HPM is to be given the opportunity to
argue that Claimant is ineligible for UC benefits pursuant to Section 402(b) of the
Law, 43 P.S. § 802(b), because he did not have a necessitous and compelling reason to
decline those jobs. HPM did not have the opportunity to argue Claimant’s ineligibility
for benefits under Section 402(b) of the Law or any other applicable provision because
the “Notice of Telephone Hearing” specified that the only issue before the Referee was
“[w]hether [C]laimant was engaged in self-employment.” R.R. at 31. Accordingly,
this Court remands the matter to the UCBR for additional fact-finding to determine
whether HPM is liable for UC benefits as Claimant’s employer and, if so, whether
Claimant is ineligible for benefits under Section 402(b) of the Law and/or any other
disqualifying Sections of the Law.
12
For all of the above reasons, the UCBR’s order finding that Claimant was
not self-employed is affirmed, the UCBR’s order granting Claimant UC benefits is
reversed, and the matter is remanded for additional fact-finding in accordance with this
opinion.
___________________________
ANNE E. COVEY, Judge
13
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
HPM Consulting, :
Petitioner :
:
v. :
:
Unemployment Compensation :
Board of Review, : No. 652 C.D. 2017
Respondent :
ORDER
AND NOW, this 13th day of April, 2018, the Unemployment
Compensation (UC) Board of Review’s (UCBR) April 25, 2017 order finding Terry J.
Jerin, Jr. (Claimant) not ineligible for UC benefits under Section 402(h) of the UC Law,
43 P.S. § 802(h), is affirmed, and the UCBR’s order granting Claimant UC benefits is
reversed.
The matter is remanded to the UCBR for further fact-finding consistent
with this opinion.
Jurisdiction is relinquished.
___________________________
ANNE E. COVEY, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
HPM Consulting, :
Petitioner :
:
v. : No. 652 C.D. 2017
: Submitted: February 5, 2018
Unemployment Compensation Board :
of Review, :
Respondent :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE ELLEN CEISLER, Judge
DISSENTING OPINION
BY PRESIDENT JUDGE LEAVITT FILED: April 13, 2018
Respectfully, I dissent. In rejecting the Referee’s holding that Terry J.
Jerin, Jr. (Claimant) was an independent contractor under Section 402(h) of the
Unemployment Compensation Law (Law), 43 P.S. §802(h),1 the Unemployment
Compensation Board of Review (Board) capriciously disregarded key evidence
introduced at the Referee’s hearing.2 Determining whether Claimant was an
1
Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. §802(h).
2
“A capricious disregard of evidence occurs where the fact finder willfully and deliberately
disregards competent and relevant evidence that one of ordinary intelligence could not possibly
have avoided in reaching a result.” Wise v. Unemployment Compensation Board of Review, 111
A.3d 1256, 1262 (Pa. Cmwlth. 2015). The Pennsylvania Supreme Court has explained that review
for capricious disregard of competent evidence is an “appropriate component of appellate
consideration in every case in which such question is properly before the court.” Leon E.
Wintermyer, Inc. v. Workers’ Compensation Appeal Board (Marlowe), 812 A.2d 478, 487 (Pa.
2002).
I disagree with the majority’s assertion that HPM Consulting (HPM) did not raise this issue.
HPM’s amended petition for review states that the Board erred by failing to consider a litany of
evidence, including Claimant’s written agreement with HPM. In its brief, HPM argues, generally,
that the Board erred in ruling that Claimant is not ineligible for benefits under Section 402(h) of
the Law. See, e.g., HPM Brief at 6 (Statement of Question Involved), 9 (Summary of Argument),
employee of HPM Consulting (HPM) or self-employed as an independent contractor
requires consideration of all the evidence. Accordingly, I would vacate the Board’s
order in its entirety and remand for further findings.
Section 402(h) of the Law provides that an employee shall be ineligible
for compensation for any week “[i]n which he is engaged in self-employment[.]” 43
P.S. §802(h). The Law does not define the term “self-employment”; however,
Section 4(l)(2)(B) of the Law defines the term “employment,” in pertinent part, as
follows:
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.
43 P.S. §753(l)(2)(B). In sum, the statutory presumption that an individual earning
wages for services performed is an employee may be overcome by a showing that:
(a) the individual was free from control and direction in the performance of his work;
and (b) in the performance of his services, the individual was customarily engaged
in an independently established business or occupation. Beacon Flag Car Company,
Inc. (Doris Weyant) v. Unemployment Compensation Board of Review, 910 A.2d
103, 107 (Pa. Cmwlth. 2006).
and 10-11 (Argument). In the argument section of its brief, HPM specifically cites two pieces of
evidence the Board did not address: the agreement between Claimant and HPM that explicitly
states he was an independent contractor and “correspondence” he sent to HPM acknowledging
both his independent contractor and 1099 status. Id. at 13.
HPM identified the Board’s error as the disregard of critical evidence, i.e., the written
contract. The issue is not waived because HPM did not use the adjective, “capricious.”
MHL-2
In this case, the first prong, i.e., the issue of control, involves a
determination of whether HPM, or the client, AZCO, Inc., had the right to control
Claimant’s work and the manner in which he performed it. Krum v. Unemployment
Compensation Board of Review, 689 A.2d 330, 332 (Pa. Cmwlth. 1997). In
reviewing the question of control, courts consider many factors, such as
whether there is a fixed rate of remuneration; whether taxes are
withheld from the claimant’s pay; whether the [putative]
employer supplies the tools necessary to carry out the services;
whether the [putative] employer provides on-the-job training;
and whether the [putative] employer holds regular meetings that
the [individual is] expected to attend.
C E Credits OnLine v. Unemployment Compensation Board of Review, 946 A.2d
1162, 1168 (Pa. Cmwlth. 2008). No single factor is controlling, and, therefore, the
ultimate conclusion must be based on the totality of the circumstances. Resource
Staffing, Inc. v. Unemployment Compensation Board of Review, 961 A.2d 261, 264
(Pa. Cmwlth. 2008).
It is unclear from the record whether any person controlled the manner
in which Claimant performed his services as a “Traffic site manager” at the job site
in Minnesota. Certified Record (C.R.), Item No. 2, at 1; Reproduced Record at 10
(R.R. __). This includes both HPM and AZCO, Inc. In his employee questionnaire,
Claimant stated that he was not supervised “regularly or closely.” Id. In his
testimony, Claimant stated that Brad Hoke was the site manager, and he was not sure
“who pays Mr. Hoke’s salary.” Notes of Testimony, 2/3/2017, at 8 (N.T. __); R.R.
57. Claimant testified that Hoke determined where on the job site he was to do the
work of a traffic site manager. Claimant also described an incident where Hoke
yelled at him for leaving the job site to get a raincoat for another worker.
MHL-3
The Referee found that the relationship between HPM and Claimant
was that of an independent contractor. In reversing, the Board focused upon
Claimant’s testimony about Hoke. The questions are two-fold. First, it is unclear
that Hoke’s directives were anything more than a quality control directive that is
imposed on any independent contractor. See C E Credits OnLine, 946 A.2d at 1169.3
Second, it is not clear whether Hoke was issuing directives on behalf of HPM or
AZCO, Inc.
More problematic is the Board’s determination that Claimant was
eligible for benefits under Section 402(h) because the Board did not address
evidence critical to that determination. In reversing the Referee’s decision to deny
benefits under Section 402(h), the Board explained:
Based on [C]laimant’s credible testimony, none of which HPM
disputed, the Board concludes that [C]laimant was not self-
employed. [C]laimant was directly and closely supervised on the
job site and, therefore was not free from direction and control.
Further, [C]laimant does not hold himself out as being in
business for himself and has always worked as an employee.
3
In C E Credits OnLine, this Court explained:
“[C]ontrol of the result only and not the means of accomplishment” [does] not
transform an independent contractor relationship into an employer-employee
relationship. Every job, whether performed by an employee or by an independent
contractor, has parameters and expectations. “Control” for purposes of Section
4(l)(2)(B) of the Law is not a matter of approving or directing the final work product
so much as it is a matter of controlling the means of its accomplishment.
C E Credits OnLine, 946 A.2d at 1169 (quoting J. Miller Co. v. Mixter, 277 A.2d 867, 871 (Pa.
Cmwlth. 1971)).
MHL-4
Board Adjudication at 2 (emphasis added).4 The Board’s statement that HPM did
not dispute Claimant’s testimony is simply incorrect. HPM offered considerable
evidence on that point, but the Board capriciously disregarded it.
First and foremost, HPM offered copies of two contracts it executed
with Claimant, and they were admitted into the record.5 The first contract concerned
Claimant’s engagement by HPM to provide safety consulting services to AZCO at a
jobsite in Iowa for five months beginning February 8, 2016. The second contract
related to the AZCO project at issue in this case, which commenced in Minnesota
on August 15, 2016, and lasted approximately three months. Both contracts
contained the following relevant provisions:
4
The first sentence of the block-quoted text states that the Board found Claimant’s testimony as
to the ultimate issue of his employment status undisputed. The Board’s characterization was not,
as the majority observes, limited to the narrower issue of whether Claimant held himself out as
being in business for himself. See Majority slip op. at 6 n.8.
5
Contrary to the majority’s assertion, the contracts are part of the certified record. See C.R., Item
No. 8; R.R. 36-47. Prior to the telephonic hearing, HPM’s attorney faxed relevant documents to
the Referee, which included the contracts. At the inception of the hearing, the Referee admitted
the documents in C.R. Item No. 8 into evidence as exhibit number 10, identified as the “letters sent
from the attorney,” i.e., HPM’s attorney. N.T. 3; R.R. 52. The majority discounts the contracts
because they were not attached to the hearing transcript and HPM did not have its witness testify
about them.
First, the contracts were “made part of the record.” Id. The Referee specifically asked
Claimant if he had “any objection to these items being made part of the record?,” to which
Claimant responded, “I do not.” Id. There was no need for testimony about documents already
admitted. Further, the contracts are the best evidence of their content.
Second, this was a telephonic hearing; there was no court reporter present. No transcript is
made unless an appeal is filed. The very nature of unemployment compensation proceedings, as
our Supreme Court has stated, is “by design, brief and informal in nature.” Harkness v.
Unemployment Compensation Board of Review, 920 A.2d 162, 168 (Pa. 2007).
The 46 pages of relevant documents faxed by the moving party to the Referee as “employer
exhibits to be included” in the record were ignored by the Board. R.R. 36. This is yet another
reason to remand for a review of the complete record.
MHL-5
The jobsite [client] will dictate the hours needed on site and will
be adjusted depending upon the needs at the site. Your hours
worked should be submitted via fax to [HPM] every Monday
morning[;]
You will furnish your own steel toe boots and proper clothing.
AZCO Inc. will provide you with the rest of the necessary PPE
[Personal Protective Equipment] at the job site[;]
You understand and agree that you are working as a 1099
contractor through HPM and are solely responsible for any
personal federal and state tax obligations. HPM is not
responsible for and is not withholding monies for tax liabilities
on your behalf and you will receive an IRS Form 1099 from
HPM at the end of the calendar year. It is understood by both
parties that no vacation, holidays, sick time, health insurance,
profit sharing, unemployment benefits, etc. will be part of this
contract[;]
You shall perform this contract as an independent contractor and
not an employee of HPM. Nothing in this contract shall be
construed to be inconsistent with your independent contractor
status …. It is understood that HPM does not use your services
exclusively. It is further understood that you are free to contract
for similar services to be performed for other contractors.
C.R., Item No. 8, at 3, 11; R.R. 37, 45.
A written agreement that describes the claimant as an independent
contractor, although not dispositive, is critical to the independent contractor analysis.
Stage Road Poultry Catchers v. Department of Labor and Industry, Office of
Unemployment Compensation, Tax Services, 34 A.3d 876, 889 (Pa. Cmwlth. 2011).
The above contract terms are certainly relevant to deciding whether Claimant was
an independent contractor or an employee of HPM. By not addressing the contract
language, the Board capriciously disregarded relevant evidence.
HPM also produced an email from Claimant to HPM’s vice president
regarding the Iowa assignment that stated: “I reviewed the contract and am aware
MHL-6
that the position is independent contractor.” C.R., Item No. 8 at 13; R.R. 47. This
email contradicts Claimant’s “credible” testimony that he was never a “1099
employee.” N.T. 7; R.R. 56. The Board erred by capriciously disregarding this
evidence, which was relevant to Claimant’s employment status.
Finally, the Board did not consider Claimant’s own questionnaire,
which contains statements that contradict his testimony that he was an HPM
employee. For example, on his questionnaire, Claimant stated that (1) he was at risk
of sustaining a profit or loss; (2) his work was not supervised regularly or closely;
(3) he was paid as a 1099 employee; (4) he signed a contract stating he was an
independent contractor; (5) he was able to “perform these identical services, or other
services, for others independently”; (6) his “present working arrangement permit[ted
him] to work for several individuals at the same time”; and (7) the “site
superintendent, the owner” is responsible for hiring and firing. C.R., Item No. 2;
R.R. 10-11. The Board should have considered Claimant’s responses in assessing
his credibility and deciding the Section 402(h) issue.6
For these reasons, I would vacate the Board’s adjudication that
Claimant is not self-employed and remand for the Board to consider and address all
of the evidence in the record.
__________________________________________
MARY HANNAH LEAVITT, President Judge
6
The majority excuses the Board’s legal error by stating that we must affirm if there is substantial
evidence to support the Board’s findings. See Majority slip op. at 6 (citing Ductmate Industries,
Inc. v. Unemployment Compensation Board of Review, 949 A.2d 338, 342 (Pa. Cmwlth. 2008)).
The foregoing axiom of appellate review does not mean that we may abandon our duty to remand
“where the factfinder has refused to resolve conflicts in the evidence … or has completely ignored
overwhelming evidence without comment.” Wise v. Unemployment Compensation Board of
Review, 111 A.3d 1256, 1263 (Pa. Cmwlth. 2015).
MHL-7