J. Robinson, t/d/b/a PSU KnowHow v. L&I, Office of Unemployment Tax Svcs. ( 2016 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Jeremy Robinson, t/d/b/a PSU :
KnowHow, :
Petitioner:
:
v. :
:
Department of Labor and Industry, :
Office of Unemployment Tax :
Services, : No. 1711 C.D. 2015
Respondent : Argued: March 7, 2016
BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE DAN PELLEGRINI, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY
SENIOR JUDGE PELLEGRINI FILED: March 31, 2016
Jeremy Robinson, trading and doing business as PSU KnowHow
(Petitioner), petitions for review of an order of the Department of Labor and
Industry (Department) denying its petition for reassessment regarding
unemployment compensation contributions and interest on the basis that from
2009–2013, Petitioner qualified as an “employer” for purposes of the
Unemployment Compensation Law (Law).1 For the reasons that follow, we affirm
the Department’s order.
I.
In July 2013, the Office of Unemployment Compensation Tax
Services (Office) filed a notice of assessment against Petitioner, a private tutoring
company owned by Mr. Robinson, assessing a total of $83,481.00 in
unemployment contributions and interest owing with regard to employees
Petitioner engaged from 2009–2013. Petitioner then filed a petition for
reassessment (petition), asserting that the Office erred in classifying approximately
300 independent contractors as employees.2
At a hearing on the petition held before the Presiding Officer, the
Office presented the testimony of Richard Schreiber, an unemployment
compensation tax agent with the Office, whose responsibilities include performing
audits and wage investigations and collecting unemployment taxes. He testified
that one of Petitioner’s former workers applied for unemployment compensation,
but because there existed no record of earnings, a wage investigation was initiated
1
Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. §§
751–918.10.
2
The then-Deputy Secretary for Administration dismissed the petition because Petitioner
failed to attach copies of the notice for assessment and statement of assessment as per 34 Pa.
Code § 63.26(d)(1) and 1 Pa. Code §§ 33.32–.37. Subsequently, Petitioner filed a petition for
reconsideration, contending that it did not receive notice that its pleading was deficient, which
the Deputy Secretary granted.
2
to determine why Petitioner had not reported its workers’ earnings on a quarterly
basis.
Following the wage investigation, Mr. Schreiber audited Petitioner,
reviewing its federal tax returns and Form 1099s, all cash disbursements, bank
statements, the “Independent Contractor Agreement” (Agreement) it entered into
with its workers, and a questionnaire completed by Mr. Robinson regarding
Petitioner’s positions. Mr. Schreiber noted that Petitioner’s bank records showed
bi-weekly withdrawals for payroll, in the form of one line item exhibiting the gross
amounts paid to individuals during a two-week period. Based on his review of the
records, he determined that Petitioner made payments to individuals for services
rendered and issued an assessment in the amount of $83,481.00, listing the amount
of gross and taxable wages per quarter.
On cross-examination, Mr. Schreiber conceded that the Agreement he
reviewed was entitled “Independent Contractor Agreement.” (Certified Record,
11/21/14 Hearing Transcript, at 19.) He stated that in performing an audit, he
determines as an initial matter whether those engaged by an entity are employees
or independent contractors. In terms of payroll withdrawals, he stated that the term
“payroll” appeared on the bank’s records but was not a term used by Mr.
Robinson.
In support of its petition, Petitioner presented the testimony of Mr.
Robinson, who discussed the various categories of jobs filled by Petitioner.
Although formal job titles do not exist, he generally described the positions as
3
private instructors/tutors, review session leaders, office managers, desk assistants,
print coordinators, advertisers, and note takers, although the last position no longer
existed as of the time of his testimony.
With respect to tutors, he stated that not all of the workers filling this
position are Penn State University (PSU) students. “When it comes to the tutors,
[the] majority of them were not students. Maybe had been a student, but most of
them are not. And it just kind of depends on the position. There’s some that are,
some that are not.” (Id. at 112.) Mr. Robinson acknowledged that as per
Petitioner’s website, the tutors are required to maintain a minimum 3.8 grade point
average. He advised that after a student contacts Petitioner regarding the need for
services, the student will be assigned to a specific tutor according to expertise, “at
which point, it’s up to the independent contractor, the tutor, to create a schedule
with the individual, and—that would best meet both their needs, and proceed to
work with them [sic] toward achieving their [sic] goal of a better grade in the
course.” (Id. at 29.)
Further, he explained,
I have no control over that [the manner and method of
providing tutoring instruction]. I have my own students
that I will meet with, and I, then, schedule with them.
But as far as other students within the PSU KnowHow, it
would be solely up to them to decide scheduling and
manner.
(Id.)
4
He also stated that the instructors choose where to schedule the
sessions—either onsite or offsite. With regard to training, he testified that after an
individual signs the Agreement, Petitioner “proceed[s] to forward them the
students who may be coming in for the discipline, and they take it over from there.
No training is provided for them whatsoever. It’s assumed that they’re going to be
able to handle whoever may be forwarded their way.” (Id. at 31.) He testified that
each of the individuals whose status as independent contractors is disputed
executed the Agreement, with the wage provided, stating as follows:
INDEPENDENT CONTRACTOR AGREEMENT
***
3. Independent Contractor Status: Robinson and
Contractor agree that Contractor is an independent
contractor and in particular, Robinson does not exercise
control over the manner or method in which the tutoring
is administered to the student by Contractor.
4. Manuals: Contractor may use his/her own
manuals and other materials.
5. Scheduling: Contractor has flexibility in
scheduling sessions.
6. Contractual Rate: Robinson will pay Contractor
at the rate of $____ per working hour without any
deductions or withholdings for all satisfactory completed
hours.
7. Insurance not Provided: No workers’
compensation insurance or unemployment compensation
insurance is paid for or provided by Robinson.
***
12. Non-Compete: Contractor agrees that during the
term of this Agreement and for a period of eighteen (18)
months following the termination or expiration of this
Agreement, Contractor will not, directly or indirectly,
5
either as principal, agent, manager, employee, partner,
director, officer, consultant, shareholder, or proprietor, on
his/her behalf or on behalf of any other entity:
a. Tutor students for pecuniary gain; or
b. Become associated or affiliated with,
employed by, or financially interested in any
business which engages in tutoring services;
or
c. Make any effort, directly or indirectly, to
solicit, encourage, or induce any
student/client or perspective student/client to
obtain business and/or tutoring services
from any entity providing activity
competing with Robinson’s business; or
d. Cause or attempt to cause any present or
prospective student/client or Robinson to
reduce his or her business with Robinson.
***
17. Entire Agreement. The parties affirm and agree
that this Agreement sets forth the entire Agreement
between the parties and supersedes all prior or
contemporaneous agreements or understandings between
the parties with respect to the subject matter contained
herein. There are no promises, representations,
warranties, guarantees, arrangements, or understandings,
either oral or written which are not expressed herein. No
alternation or other modification of this Agreement shall
be effective unless made in writing and signed by the
parties.
(Reproduced Record [R.R.] at 52a–55a.)
6
The Agreement’s non-compete clause applies to all of Centre County,
Pennsylvania, and Mr. Robinson stated that its purpose is to ensure that the
workers “are not taking away any students that will have come in through PSU
KnowHow, that the students that have come in are part of PSU KnowHow, and
they’re not to be taken or directed elsewhere for profit.” (Certified Record,
11/21/14 Hearing Transcript, at 35.) Tutors, review session leaders, and office
managers were provided with e-mail addresses bearing an “@psuknowhow.com”
handle, from which they could contact prospective or current clients.
Mr. Robinson denied that the individuals are forbidden from working
with or for other entities, and he stated that he makes this clear with potential
workers when he reviews the Agreement with them. By way of example, he
explained that one of his current workers is currently employed by Mathnasium, a
competing tutoring service focusing on math courses, and he introduced an e-mail
dated June 26, 2014, from Rachel Chin, advising that she “[is] currently employed
at Mathnasium of State College.” (R.R. at 50a.)
He also indicated that most workers engage in work with other outside
entities while still engaged with Petitioner, even if they are not competitors. To
this end, Petitioner presented an e-mail dated June 18, 2014, sent by Haley
Randolph, stating, “During semesters and the summer, I work in a lab specializing
in genetics research…. The lab is part of the biology department in the Eberly
College of Science.” (Id. at 51a.) He also presented an e-mail dated June 24,
2014, from Jennifer Cummings, advising:
7
Outside of contract work with psuknowhow, I
work part time with a psychologist (10-20 hours per
week), as well as with a catering company (as needed).
I am able to coordinate between my schedules with
psuknowhow and with the psychologist due to flexibility.
I am able to plan my work around each other in order to
satisfy the needs of both. I work with the catering
company for larger events only when I have free time.
(Id. at 49a.) Regardless of whether workers are employed by competitors, he
claimed there were no repercussions for their outside work.
With respect to supervision, Mr. Robinson stated, “[t]here is no
supervision whatsoever.” (Certified Record, 11/21/14 Hearing Transcript, at 39.)
He expounded that although Petitioner has no ability to control where its
instructors meet:
[t]here is a center provided. Being that we’re at the
college level of private instruction, it is a little more
difficult to have a place. The university, itself, is off
limits to operating for profit gain, and therefore, there
isn’t [sic] a lot of locations to go within the university
itself, so I do provide a center where it can be done.
They are not required to work there. As a matter of fact,
several of the individuals have opted to work outside of
there, as they see fit, meeting within a coffee shop or
within an individual’s room as needed.
(Id. at 40.) Regardless, he stated, he does not have control over the meeting
location and further detailed that in the event a student drops a class or does not
attend a scheduled instruction, the tutor bears the risk of loss.
8
Mr. Robinson testified that he does not require the private tutors to
use any specific teaching materials in their instruction, but that “[t]hey are able to
use whatever materials they see fit. As a matter of fact, most of them bring their
own laptops, their own textbooks to be able to be used.” (Id. at 40–41.) Mr.
Robinson testified that on a daily basis, he does not have contact with the private
instructors, in part because his time is dedicated to preparing his own materials for
use in his private tutoring sessions.
Mr. Robinson explained that review session leaders are private tutors,
and therefore, he exercises the same amount (or lack) of control over the two
groups of workers. Review session leaders prepare sets of problems or review sets
to use in a particular review session, which students may or may not opt to attend.
The review session leaders are not paid for their time preparing but are only paid in
the event students attend the review session, and therefore, the workers bear the
risk that the session may be cancelled due to lack of attendance. Mr. Robinson
stated that he does not dictate what the review materials should consist of, how to
prepare, how to deliver the session, or how to organize the session. While review
session leaders are free to use the lecture hall at the center, they are not required to
do so, but it is often not feasible to meet on campus as doing so is “against Penn
State’s code.” (Id. at 45.) He reiterated that scheduling of review sessions remains
up to the review session leader.
Petitioner also hires print coordinators who design and print
advertisements and review materials, the bulk of which are Mr. Robinson’s. He
denied monitoring the method or manner in which the print materials are organized
9
or edited, and stated that he does not schedule jobs for them or dictate where the
work is performed. Likewise, he stated that he allows each print coordinator to
choose the software and computer to be used. However, he clarified that if need
be, they have the ability to use equipment in the center.
Additionally, Petitioner hires advertisers who promote upcoming
review sessions or private instruction services and work mainly on campus by
distributing materials provided by Petitioner to students and informing them of
available services. The advertisers are permitted to set their own schedules and
may accept or decline work as they see fit. While he assumes that they are on
campus performing their jobs for the hours claimed, he does not actually observe
them working. With respect to print coordinators and advertisers, Mr. Robinson
testified that he has no supervision over them and confirmed that like all other
workers, they are required to sign the Agreement and are compensated based upon
the time sheets they provide.
Mr. Robinson stated that desk assistants primarily perform
maintenance and general upkeep of the center on an as-needed basis. Less
frequently, for about twenty minutes per day, they receive payments for review
sessions and hand out the materials to students. As he explained, “there is a desk
at the review center, and they will sometimes be at the desk, but that’s certainly not
the—the bulk of their work.” (Id. at 53–54.) No supervision is provided, and
particular methods, tools, equipment, or schedules are not prescribed. On average,
desk assistants work about five to eight hours per week.
10
Finally, Mr. Robinson testified that via e-mail, the two office
managers assign students seeking services to private tutors based on discipline and
record invoices and receipts as well as the accompanying monetary amounts. In
terms of matching students with tutors, Mr. Robinson stated that he has no role and
does not control the manner or method in which the office manager pairs
individuals. Again, he stated that he does not set the schedules for office
managers, does not require them to work from the center, and does not supervise
their work. He testified that at the present time, Petitioner employed two office
managers, both of whom also served as private tutors and filled the additional
position to obtain extra work. He stated “they oftentimes do work within their
homes or elsewhere and bill [him] for the services.” (Id. at 57.)
With regard to Petitioner’s bank documents, he stated that Petitioner
does not have a payroll. Although Mr. Robinson initially paid the workers by
check, he later switched to direct deposit, which the bank lists as payroll, a
description with which he disagrees. Regardless of position, he reiterated that
none of the workers receive training of any type. Petitioner also submitted the
questionnaire Mr. Robinson completed for the audit, detailing each position in ten
points and providing an overview of why, in his opinion, Petitioner cannot operate
with an employee-based system.
On cross-examination, Mr. Robinson explained that in past years, he
also hired note takers who took notes during the PSU classes in which they were
already enrolled and provided the notes to Petitioner, who posted them for sale.
He stated that the workers recorded their hours on a sheet and were paid bi-weekly
11
via direct deposit for the total number of hours worked. He clarified that while
most are paid hourly, review session leaders and note takers were paid by the
session or class.
He acknowledged that Petitioner’s old website contained a hyperlink
labeled “employment,” which listed the positions Petitioner had available at a
given time. He stated over the course of a semester, approximately 150 students
received tutoring services. He described the center as containing 12 individual
rooms as well as his personal office and a review center on two separate floors.
Students and workers could use the rooms, so long as they were available, but the
rooms were not reserved in advance. Thus, if a private tutor and student intended
to use a room but discovered that it was not available, they had to work externally.
In the event that Mr. Robinson received a complaint about a tutor, he
typically reassigned the student to another tutor but compensated the tutor for work
performed and generally allowed the tutor to be assigned work with other students.
If, however, a recurring problem resulted, the tutor was not assigned future work.
Likewise, if a tutor failed to attend a scheduled session, the student was reassigned
and the tutor was not compensated. A single failure to attend did not affect a
tutor’s ability to obtain future work, unless it became a recurring problem. If a
print coordinator made a mistake in printing materials, Mr. Robinson advised,
“‘Hey, I need, you know, to make sure that this error, you know, isn’t going to
continue with this material. Let’s make sure to fix it in the future.’” (Id. at 93.) If
the print coordinator did not correct the error, Mr. Robinson corrected it himself.
12
In terms of equipment at the center, Mr. Robinson stated that
Petitioner provides tables, chairs, computers, printers, and copiers, which the print
coordinators could use to print advertising materials. He explained, however, that
the coordinators could also use outside facilities to print the materials, but when
they did so, they were responsible for paying out-of-pocket costs for which they
were not reimbursed. Conversely, if they printed at the center, they were not
charged for the copies made. In the event a student did not pay for a tutoring
session, the private tutor was not compensated, but Mr. Robinson attempt to follow
up with and obtain payment from the student.
He stated that he arrived daily in the afternoon to begin his own
tutoring sessions, at which point there may be many or very few other people
present. The tutors and office managers each have keys for access. He denied
posting Petitioner’s hours of operation and admitted that due to this, he misses out
on some business opportunities. He further emphasized that Petitioner has never
withheld taxes from its workers and never provided insurance or fringe benefits to
them. Petitioner does provide payments via direct deposit and issues federal 1099
tax forms.
After cross-examination, the Presiding Officer inquired how an
advertiser, without instruction or training, knows what to promote to the student
body. Mr. Robinson explained, “how they know what they’re actually promoting
is they have a flier that they would be promoting with, that would name exactly
what they’re to be promoting.” (Id. at 106.) He reiterated that many of
Petitioner’s workers come through its website. In terms of individuals who are
13
already employed as independent contractors elsewhere, Mr. Robinson stated that
they are interested in working with Petitioner because it has additional work
available.
He also clarified that Ms. Chin’s e-mail is indicative of how all tutors
operated, in that they established independent businesses of their own and were
specifically involved in tutoring. He explained, “I can attest that a good number of
them [private instructors] have or are working as private instructors elsewhere.”
(Id. at 112.) He further stated that some of these individuals registered for and
obtained tax identification numbers and that a majority of the tutors were not
current students. Nonetheless, the ones who were students held their own positions
in independently established businesses, registered with tax IDs, while studying at
the university and maintaining at least a 3.8 GPA.
Regarding the process by which Mr. Robinson assigned print or copy
jobs, he testified:
I need—for example, the review session materials, that’s
usually what I would personally need, I would say,
“Here’s some review session materials. I would need
these by this date.” And leave it up to them to take over
and do whatever they get a chance to do. Sometimes I
might say, “I need this to be redesigned and then printed
by this date.” And, once again, just hand it over, let them
redesign and print it out as they see fit.
(Id. at 115–116.)
14
In response to an inquiry regarding whether any of Petitioner’s
workers engaged in a competing business, Mr. Robinson stated, “[A]s a matter of
fact, one of them is currently running a competing tutoring business….Grant Mc—
Grant—I think his name, if I remember correctly, starts with an M. I would have
to refresh my memory on it.” (Id. at 89-90.) He explained that this was the only
individual operating a competing business in the State College area. He further
clarified:
Q. So, all these individuals have their own business,
and they’re promoting themselves as tutors.
A. Correct.
Q. Do you have any documentation to support that?
A. I would be able to come up with documentation
to—
Q. Today, do you have any?
A. I don’t have anything today.
***
A. I know the majority of them work elsewhere.
So—I don’t know the means by how they go about it
every time, but I know that they have.
Q. Do they have their own tax ID numbers?
A. I’m not sure if all of them do. I know some of
them do.
(Id. at 90-92.)
The Presiding Officer inquired if students enrolled at PSU and serving
as tutors, who had the responsibility of maintaining a 3.8 GPA also held their own
independently established businesses that were registered with tax IDs, to which
15
Mr. Robinson replied, “Yeah. It’s certainly possible. I know that’s how I, myself,
got started with this, and I would assume that that’s also going on. They’re
certainly free to do so, if they wish. And I know that a number of them have.” (Id.
at 113.)
Following the hearing, the Executive Deputy Secretary of the
Department issued an order denying the petition pursuant to Section 4(l)(2)(B) of
the Law.3 Specifically, because he determined that Petitioner’s workers performed
services in exchange for fixed wages, he weighed the following factors to analyze
whether Petitioner exercised the requisite control over its workers such that they
should be deemed employees for purposes of the first prong of Section 4(l)(2)(B)
of the Law: (1) method of remuneration; (2) whether payroll taxes were withheld;
(3) whether Petitioner supplied the tools necessary to carry out the services
rendered; (4) whether Petitioner provided on-the-job training; (5) whether
Petitioner set the time and location for work; (6) whether Petitioner had the right to
3
Section 4(l)(2)(B) of the Law provides:
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).
16
monitor the workers’ work and review performance; and (7) whether Petitioner
held regular meetings that its workers were expected to attend.
The Department concluded that the first and third factors weighed in
favor of an employment relationship while the second and seventh factors favored
an independent-contractor relationship and the fourth, fifth, and sixth factors were
ambiguous. Although the Department found that Petitioner’s right to control was a
close call, it ultimately found in favor of an employment relationship, reasoning
that after the Office demonstrates the performance of services for wages, the
burden shifts to the taxpayer to prove its entitlement to an exemption.
Further, in determining whether purported employees were engaged in
an independent trade for purposes of the second prong of Section 4(l)(2)(B), the
Department considered the putative employees’ proprietary interest in business and
the Agreement’s prohibition against workers engaging in the same line of work for
18 months after termination or expiration of the Agreement. It found that based
upon these factors and the fact that Petitioner provided no evidence that its workers
were customarily engaged in independent businesses, even they were sporadically
engaged, Petitioner clearly failed to satisfy the second prong of the test and
therefore did not meet its burden of proving that its workers were independent
contractors rather than employees. This appeal followed.
II.
Pursuant to the Law, employers are required to pay contributions in
the form of a tax to the Unemployment Compensation Fund with respect to
17
employees they engage. Section 4 of the Law, 43 P.S. § 753. Contributions,
however, need not be paid if an independent-contractor rather than an employment
relationship exists. Id. Section 4(l)(1) of the Law defines “employment” as “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(l)(1). This broad
definition of “employment” encompasses all services performed for remuneration,
subject to the enumerated exceptions. Department of Labor and Industry v.
Aluminum Cooking Utensil Co., 82 A.2d 897, 898–99 (Pa. 1951). Thus, there
exists a statutory presumption that “one who receives wages for services is
employed,” and a putative employer seeking to demonstrate the existence of an
independent-contractor relationship bears the “heavy burden” of satisfying both
prongs of Section 4(l)(2)(B) of the Law. Kauffman Metals, LLC v. Department of
Labor and Industry, 126 A.3d 1045, 1050 (Pa. Cmwlth. 2015); Electrolux Corp. v.
Department of Labor and Industry, Bureau of Tax Operations, 705 A.2d 1357,
1360 (Pa. Cmwlth.), appeal discontinued, 705 A.2d 1357 (Pa. 1998).
On appeal,4 Petitioner does not dispute that the Office demonstrated
that Petitioner’s workers received wages in exchange for services rendered.
Rather, Petitioner argues that the Department erroneously determined that it did
4
Our scope of review of the Department’s decision is limited to determining whether its
necessary findings of fact are supported by substantial evidence or whether it committed an error
of law or a constitutional violation. Cameron v. Department of Labor and Industry, Bureau of
Employer Tax Operations, 699 A.2d 843, 845 n.1 (Pa. Cmwlth. 1997); Section 704 of the
Administrative Agency Law, 2 Pa. C.S. § 704.
18
not satisfy its burden with regard to each of the prongs under Section 4(l)(2)(B) of
the Law.
A.
First, Petitioner contends that the Department erred in determining
that the workers were not free from Mr. Robinson’s control because substantial
evidence does not support the conclusion that the time and location of work,
training, and monitoring factors were ambiguous. Petitioner argues that when
these factors are weighed in favor of an independent-contractor relationship, the
first prong of Section 4(l)(2)(B) is satisfied.
1. Supply of Tools
a. Private Instructors/Tutors
With respect to tutors, Petitioner claims that the only facts of record
demonstrate that although Petitioner made its facility available to tutors, there
existed no requirement that they use it, and as for the other tools, tutors used their
own textbooks and study materials during the tutoring sessions. As such,
Petitioner argues that the Department’s finding of ambiguity in this regard is not
supported by substantial evidence. We disagree.
Mr. Robinson testified that while tutors were not required to use
Petitioner’s center, a two-floor center comprised of twelve private meeting rooms,
a waiting room where students can be greeted, and a larger lecture hall were
available for their use. He explained that as per PSU’s policy, for-profit
corporations were not permitted on campus, and therefore, the facility proved a
19
useful meeting place, particularly with regard to larger groups that met in the
lecture hall, although some tutors elected to meet in coffee shops or nearby
restaurants. Additionally, the tutors were provided keys to the facility and
therefore had unfettered access to it. The facility also provided tables, chairs,
computers, printers, and copiers. Each tutor was given an e-mail address with the
“psuknowhow.com” extension for communication purposes. Further, Mr.
Robinson stated, “most [tutors] bring their own laptops, their own textbooks to be
able to be used,” thereby implying that with regard to tutors who do not use their
own textbooks, materials are provided. (Certified Record, 11/21/14 Hearing
Transcript, at 40–41) (emphasis added).
Therefore, the Department’s finding that Petitioner supplies tools to
its tutors is supported by substantial evidence. The fact that the tutors were free to
reject these tools and use their own does not affect our analysis, as our inquiry
turns upon whether workers were required to provide their own tools—not on
whether they were permitted to do so. See Weaver Hauling and Excavating, LLC
v. Department of Labor and Industry, Office of Unemployment Compensation Tax
Services, A.3d , (Pa. Cmwlth. No. 266 C.D. 2015, January 6, 2016), slip op.
at 22 n.9 (noting that the relevant inquiry with respect to this factor is whether a
putative employer’s workers “actually had been required” to provide their own
tools, equipment, or supplies or to pay for the items provided by the putative
employer); see also Krum v. Unemployment Compensation Board of Review, 689
A.2d 330, 332 (Pa. Cmwlth. 1997) (“[T]he ability to control and not actual control
is determinative[.]”).
20
Nonetheless, Petitioner argues that the Department’s consideration of
“whether [tutors] purchase their own laptops and texts as business investments,
specifically to perform tutoring, or whether they already had laptops and texts as
students or former students, and thus used existing resources” is irrelevant.
(8/18/15 Final Decision and Order of the Department of Labor and Industry, at 18.)
In the context of the tools factor, we agree that the reasons for which workers come
into possession of the personal tools they are required to utilize in performing a job
is of no importance. See, e.g., Osborne Associates, Inc. v. Unemployment
Compensation Board of Review, 39 A.3d 443, 450 (Pa. Cmwlth. 2012) (noting that
the evidence was inconclusive with regard to tools where the putative employer
supplied expendable supplies such as shampoo, perm solution, and dyes, and the
worker supplied hardware such as scissors, brushes, curling irons, and a hair dryer,
without any discussion of why the worker obtained that equipment). However, the
Department discussed this factor with respect to the second prong of Section 753 4
(l)(2)(B), not to the tools factor, and regardless, even if this discussion is
eliminated, the Department’s conclusion is supported by substantial evidence
because tutors were not required to use their own computers and textbooks.
b. Other Positions
Next, Petitioner argues that like tutors, the print coordinators were
free to use their own tools. It asserts that advertisers required no tools, office
managers used their own tools, and because there was no evidence regarding
21
whether desk assistants used tools, this factor favors the finding of an independent
contractor relationship.5
Although print coordinators were permitted to make copies at any
facility at out-of-pocket cost, Petitioner provided a facility at which they could
perform their copying duties for free. Regardless of whether the print coordinators
elected to take advantage of this free tool, Petitioner made it available. With
respect to advertisers, the Department found that they required no tools. Therefore,
to the extent it determined that this factor tilted toward a finding of employment,
that finding does not apply to advertisers.
Regarding office managers, the Department emphasized that they had
keys to Petitioner’s center and inferred that “they work at Petitioner’s center and
use its files or computers to perform bookkeeping-type work and to match private
instructor/tutors to student clientele….[o]therwise, the requisite uniformity
necessary for the effective processing of these transactions would be
compromised.” (8/18/15 Final Decision and Order of the Department of Labor and
Industry, at 19.) In this case, there is no evidence regarding the uniformity of
Petitioner’s transactions. To the contrary, Mr. Robinson testified that the workers
performed their assignments as they saw fit, regardless of whether their
performances were uniform. Therefore, the Department’s inference that office
managers worked at Petitioner’s facility and used its equipment is not supported by
5
Petitioner did not address the Department’s application of the tools factor to review
session leaders or note takers, and therefore, its conclusions are upheld with regard to those
positions.
22
substantial evidence. Still, the fact that office managers were provided unfettered
access to the facility and its equipment through the provision of keys as well as
work e-mail extensions demonstrates that Petitioner provided the essential tools for
office managers’ use, regardless of whether they actually used them. Accordingly,
the Department’s conclusion that the tools factor favors a finding of employment
with regard to office managers is supported by substantial evidence. See Weaver
Hauling and Excavating, A.3d , (Pa. Cmwlth. No. 266 C.D. 2015, January
6, 2016), slip op. at 22 n.9; see also Krum, 689 A.2d at 332.
The Department found that no evidence was presented regarding
whether Petitioner or the desk assistants provided their tools. However, rather than
finding this factor ambiguous, the Department determined that Petitioner failed to
satisfy its burden regarding it, and therefore, that it favored a finding of
employment. We disagree. The Petitioner must prove that on balance, the totality
of the factors favor an employment finding. If, on balance, the factors are
ambiguous, then Petitioner has failed to carry its burden and loses its case.
However, the ambiguous nature of a factor does not necessitate an adverse
inference. Rather, an ambiguous factor weighs in favor of neither an employment
nor an independent-contractor relationship. Accordingly, the Department erred in
equating its finding of ambiguity regarding desk assistants with an indication of an
employment relationship.
In summary, with respect to the tools factor, the Department’s finding
that an employment relationship is indicated is upheld with respect to tutors, print
23
coordinators, and office managers. Regarding advertisers and desk assistants, this
factor is ambiguous.
2. Time and Location of Work
“[A]n employment relationship is suggested when an employer
controls the workers’ work hours.” Peidong Jia v. Unemployment Compensation
Board of Review, 55 A.3d 545, 548 n.4 (Pa. Cmwlth. 2012) (alteration in original)
(internal quotation marks and citation omitted). Where the putative employer has
“dictated the time, place and manner for performance” by setting a “specific
schedule, declaring a specific work-day and a specific location…where [a worker]
must perform work during business hours” and “require[s] permission to deviate
from those schedules,” this factor indicates an employment relationship. Id.
In this case, the Department found this factor to be ambiguous,
reasoning that although tutors could select their hours and location of work, as a
practical matter, they were more or less confined to the center due to PSU’s code
which prohibited them from working on campus. The Department also determined
that review sessions were held at the facility and that Mr. Robinson scheduled
them. Emphasizing the phrases “office” manager and “desk” assistant, and noting
that the information required to perform these jobs was located at the facility and
that these jobs included the responsibility of answering the phone, the Department
inferred that much of this work occurred at Petitioner’s center, and therefore, this
factor was unclear.
24
Substantial evidence does not support the Department’s finding. First,
the relevant inquiry is whether Petitioner dictated the time and place of
performance. The undisputed evidence indicates that the occupants of all positions
set their own hours. Indeed, they did not communicate their hours to, let alone
have to obtain permission to change their hours from, Mr. Robinson, who learned
of their hours only when they submitted timesheets. The Department’s conclusion
that Mr. Robinson set the hours for the review session leaders, likewise, is
unsupported by substantial evidence. While he testified that he served as one of
two review session leaders and set his own hours, at no point in time did he state
that he dictated the hours the other leader worked. To the contrary, he expressly
stated that review session leaders set their own schedules. Similarly, they are not
required to work at the facility, regardless of how feasible it may be to locate an
alternative workspace. In light of these facts, it is not surprising that Mr. Robinson
testified that he does not post hours of operation at the center, as it cannot be
predicted with any certainty if or when workers will be present there.
The Department further erred in placing undue emphasis on the labels
Mr. Robinson applied to Petitioner’s positions, which he noted were not official
job titles. The fact that he referred to positions as “office manager” and “desk
assistant” do not dictate that the associated duties must be performed at Petitioner’s
facility, particularly where the uncontroverted evidence indicates that Petitioner
does not require office managers to work from the center. His testimony
established that the crux of their work, coupling prospective students with tutors
and inputting receipts and amounts made, is done electronically and may be
performed from home. Moreover, there is absolutely no evidence showing that
25
either office managers or desk assistants are required to answer phones. While the
former must respond to e-mails, this task can be accomplished from offsite, and
Petitioner does not dictate their presence at its facility. Accordingly, because
Petitioner dictated neither the time nor the place that its work was performed, the
Department’s conclusion that this factor was ambiguous is not supported by
substantial evidence.
3. Training
In terms of on-the-job training, Mr. Robinson stated that Petitioner
provided none, yet, a printout of Petitioner’s website stated that it “train[s] each
potential instructor…” (8/18/15 Final Decision and Order of the Department of
Labor and Industry, at 19.) The Department placed greater weight on the
documentary evidence than on Mr. Robinson’s testimony and concluded that with
respect to tutors and review session leaders (a position for which being a tutor was
a pre-requisite), the documentary evidence was entitled to greater weight. Because
it is within the Department’s purview to weigh evidence and resolve such conflicts,
we will not revisit this evidence. Kurbatov v. Department of Labor and Industry,
Office of Unemployment Compensation Tax Services, 29 A.3d 66, 72 (Pa. Cmwlth.
2011). However, the only evidence provided with respect to Petitioner’s other
positions was Mr. Robinson’s undisputed testimony that no training is provided
because he assumed that the individuals holding these positions knew how to
perform their assignments. Therefore, with respect to office managers, desk
assistants, print coordinators, advertisers, and note takers, the Department’s
conclusion that the training factor is ambiguous is not supported by substantial
evidence.
26
4. Right to Monitor Work and Review Performance
In resolving that Petitioner had the right to control its workers despite
the lack of day-to-day supervision it exercised, the Department highlighted
Petitioner’s ability to reassign students in the event of student complaints,
Petitioner’s ability to cancel tutoring or review sessions, and the instruction
provided to print coordinators regarding the materials that needed printed,
designed, or created. The Department further opined that it “seems implausible
that Petitioner would not have the right to exercise some degree of control over 12-
20 desk assistants cleaning or maintaining its center on an ‘as-needed basis’” and
that “it is hard to envision that Petitioner would not determine the classes for which
notes would be posted for sale.” (8/18/15 Final Decision and Order of the
Department of Labor and Industry, at 22.)
Simply informing a worker of general project requirements or
ensuring that those requirements are satisfied does not indicate that a putative
employer monitors work or reviews performance. Resource Staffing, Inc. v.
Unemployment Compensation Board of Review, 995 A.2d 887, 892 (Pa. Cmwlth.
2010). Merely “exercis[ing] the minimal amount of control necessary to ensure the
quality of services provided” does not tilt this factor in favor of an employment
relationship. Id. (holding that where a worker spoke to his supervisor, who only
ensured that he satisfied the general project requirements, every other month and
met with her twice during the period, the organization satisfied its burden of
proving that it did not exercise the requisite degree of control over its workers).
Further, as we stated in SkyHawke Technologies LLC v. Unemployment
27
Compensation Board of Review, our analysis does not turn upon the fact that a
worker may face consequences for providing unsatisfactory work because:
“[c]ontrol” 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, because every job, whether
performed by an employee or independent contractor, has
parameters and expectations…. Thus, we conclude that
this factor does not transform [an entity] into [an]
employer because work performed as an independent
contractor must be acceptable to whoever has requested
the services or products.
27 A.3d 1050, 1056–57 (Pa. Cmwlth. 2011) (alteration in original) (internal
quotation marks and citation omitted); see also Osborne Associates, Inc. v.
Unemployment Compensation Board of Review, 39 A.3d 443, 450 (Pa. Cmwlth.
2012).
The fact that Petitioner was able to reassign students when their tutors
were not providing a satisfactory work performance is not indicative of Petitioner’s
ability to supervise the tutors’ work. Rather, as we indicated in Resource Staffing
and SkyHawke, this action only evidences an organization’s ability to ensure the
quality of services provided. Further, in instructing print coordinators regarding
which items needed printed or designed, Mr. Robinson did not “supervise” them,
but only provided assignments. Similarly, when it engaged note takers, Petitioner
undoubtedly determined the classes for which notes would be posted for sale and
based upon its decision, engaged individuals in those courses to provide their
notes. The fact that it acted in this manner does not, in any form, evidence that it
28
“supervised” or “reviewed work” of its workers. Indeed, there is no evidence
showing that Mr. Robinson oversaw the performance of any worker in any
capacity other than to provide general quality control. The Department’s findings
to the contrary distort the evidence and are not supported by substantial evidence.
In summary, the remuneration factor indicates an employment
relationship; the lack of tax withholdings, lack of regular meetings, timing and
location of work, and right to monitor work and review performance factors
indicate an independent-contractor relationship; the tools factor indicates an
employment relationship with respect to tutors, review session leaders, print
coordinators, office managers, and note takers but is ambiguous regarding desk
assistants and advertisers; and the training factor indicates an employment
relationship with regard to tutors and review session leaders, only, and an
independent-contractor relationship as to the other positions.
In balancing these factors, the scales tilt heavily toward a finding of
an independent-contractor relationship with respect to print coordinators, office
managers, desk assistants, advertisers, and note takers. Further, although
Petitioner’s case may not be as clear-cut regarding tutors and review session
leaders, Petitioner nonetheless satisfied its burden in this respect as well.
Therefore, we reverse the Department’s findings with regard to the first prong of
Section 4(l)(2)(B) of the Law as unsupported by substantial evidence.
29
B.
Regarding Section 4(l)(2)(B)’s second prong, Petitioner argues that
the Department applied the wrong standard in determining whether the workers
were engaged in an independent trade insofar as it focused on whether the workers
had a proprietary interest in other businesses which would enable them to operate
freely from the control of Petitioner. In construing the second prong, the following
three factors are relevant: “(1) whether the individuals are able to work for more
than one entity; (2) whether the individuals depend on the existence of the
presumed employer for ongoing work; and (3) whether the individuals were hired
on a job-to-job basis and could refuse any assignment.” Gill v. Department of
Labor and Industry, Office of Unemployment Compensation Tax Services, 26 A.3d
567, 570 (Pa. Cmwlth. 2011).
1. Ability to Work for More than One Entity
With respect to the first factor, the Department reasoned that the
Agreement specifically prohibited all individuals from providing any tutoring
services or otherwise working for competitors, not only while engaged in work for
Petitioner but also for a period of eighteen months following termination or
expiration of the Agreement. While such non-compete clauses are not dispositive
for purposes of Section 4(l)(2)(B), they are an important consideration. SkyHawke
Technologies LLC, 27 A.3d at 1058. Nonetheless, Petitioner argues that “Mr.
Robinson’s testimony was clear that the contractors are free to perform their
services for themselves or another individual or entity at any time” and that the
three e-mails in which Petitioner’s workers acknowledged they held jobs elsewhere
30
establishes “uncontroverted” evidence sufficient to tilt the first factor in favor of an
independent-contractor relationship. (Brief for Petitioner, at 34.)
We disagree. As we previously discussed, the Department as
factfinder has the duty to weigh conflicting evidence and resolve conflicts.
Kurbatov v. Department of Labor and Industry, Office of Unemployment
Compensation Tax Services, 29 A.3d 66, 72 (Pa. Cmwlth. 2011). In this case, the
Department placed greater weight on the non-compete clause than on Mr.
Robinson’s conflicting testimony. It likewise found unavailing Petitioner’s
invitation to extrapolate from three individuals’ e-mails that the majority of over
300 workers were able to work for entities other than Petitioner, despite the
Agreement’s express language to the contrary, particularly where the e-mails
evidenced only one individual who worked for a competitor. Moreover, those
individuals’ e-mails were dated 2014, after the relevant tax years and provided no
historical insight. Likewise, although Mr. Robinson stated that Grant M. was
operating a competing business in State College, no one by the name of Grant was
named on the list of positions for which the audit was conducted. See Danielle
Viktor, Ltd. v. Department of Labor and Industry, Bureau of Employer Tax
Operations, 892 A.2d 781, 801 (Pa. 2006) (holding that whether workers are able
to work for competitors is relevant). But see SkyHawke, 27 A.3d at 1052
(explaining that a non-compete clause did not preclude a worker from performing
global positioning satellite mapping services for more than one entity when the
non-compete applied only to golf courses). The Department’s finding is further
supported by paragraph 17 of the Agreement, which states that it cannot be altered
or modified orally. Therefore, to the extent Petitioner claims that the non-compete
31
clause was modified by Mr. Robinson’s oral instructions to workers, this argument
violates the express language of the Agreement.
2. Dependence on the Putative Employer for Ongoing Work
With respect to the second factor, the Department determined that
workers were dependent upon Petitioner because, as per the non-compete clause,
they could not work elsewhere. Further, because at least a portion of the workers
were PSU students who worked only part-time and sought hours from Petitioner,
they were dependent upon it for ongoing work in this field. The foregoing
constitutes substantial evidence upon which the Department’s conclusion was
based.
Petitioner relies on the facts that Mr. Robinson’s testimony
established the existence of other private tutoring businesses in the area and that
the vast majority of workers earned less than $1,000.00 per year from Petitioner. It
cites Applied Measurement Professionals, Inc. v. Unemployment Compensation
Board of Review, for the proposition that the workers’ low compensation
compelled them to look to many sources to make a living wage. 844 A.2d 632,
636 (Pa. Cmwlth. 2004) (en banc). There, in evaluating the second factor, we
noted that the putative employer did not bind its workers to an exclusivity
agreement and that there were approximately forty additional companies for which
the workers could perform services. We also explained that it would be
impractical for the subject worker to perform services only for the putative
employer because, even if she performed all of the work available, she could earn
only about $1,000.00 per year.
32
First, the pertinent inquiry is whether the Board’s conclusion is
supported by substantial evidence, not whether there exists evidence to support an
alternate conclusion. See Hoffmaster v. Workers’ Compensation Appeal Board
(Senco Products, Inc.), 721 A.2d 1152, 1155 (Pa. Cmwlth. 1998). Regardless,
Applied Measurement Professionals, Inc. is inapplicable to the case at hand. While
the Department did not dispute that competitors existed for which the workers
theoretically could work, for the reasons discussed above, it determined that in
actuality, the workers were precluded from working for those entities. Unlike in
Applied Measurement Professionals, Inc. where the non-compete clause was
limited with respect to one type of location, i.e. golf courses, here, the covenant
precluded workers from tutoring students with regard to any subject and is not so
narrowly tailored. Furthermore, unlike in that case, here, there is evidence that an
unknown portion of the workers were students enrolled at PSU. The argument that
they had to earn more than $1,000.00 per year in order to survive, particularly
where Petitioner required them to maintain 3.8 GPAs, is misplaced.
Additionally, Petitioner relies upon the three e-mails it submitted and
Mr. Robinson’s testimony that the majority of workers engage in outside work.
The e-mails do not pertain to the relevant time period and therefore do not aid
Petitioner’s case. Moreover, two of them involve outside jobs held in different
fields—that is, in an on-campus science laboratory and at a psychologist’s
office/catering company—but the relevant inquiry pertains to work within the
same field. See 43 P.S. § 753(l)(2)(B) (“Services performed by an individual for
wages shall be deemed to be employment subject to this act, unless and until it is
shown…that…(b) as to such services such individual is customarily engaged in an
33
independently established trade, occupation, profession or business.”); Applied
Measurement Professionals, Inc., 844 A.2d at 636 (analyzing whether exam
proctors were compelled to rely upon one organization for ongoing work when
over forty other testing companies existed); Gill v. Department of Labor and
Industry, Office of Unemployment Compensation Tax Services, 26 A.3d 567, 570
(Pa. Cmwlth. 2011) (evaluating whether additional flooring installation work was
available for flooring installers). Therefore, these additional e-mails do not assist
Petitioner.
3. Hiring on a Job-to-Job Basis and Ability to Refuse
Assignments
The third factor is satisfied where a worker is provided work on an as-
needed basis and where he is free to accept or reject work, at his discretion. Gill,
26 A.3d at 570. The Department distorted the standard by determining that
although there was evidence that workers could turn down assignments, the record
was devoid of evidence regarding how often this occurred. However, the pertinent
inquiry is “whether the individuals were hired on a job-to-job basis and could
refuse any assignment.” Id. (emphasis added). Indeed, the conclusion that
workers were not free to refuse work has absolutely no support in the record and is
not even supported by the Department’s own factual finding.
4. Customary Engagement in an Independently Established
Trade, Occupation, Profession or Business
Finally, as we established in Minelli v. Unemployment Compensation
Board of Review, “the Law requires an additional element, that the [worker] be
34
customarily engaged in such trade or business” or be “engaged in ongoing business
activities rather than an isolated or sporadic job(s).” 39 A.3d 593, 598 (Pa.
Cmwlth. 2012) (en banc). In its decision below, the Department reasoned that
Petitioner’s e-mails were not reflective of independent businesses and that the
“sampling of three individuals comes across as rather meager in comparison to the
listing of approximately 300 individual offered into evidence by Petitioner.”
(8/18/15 Final Decision and Order of the Department of Labor and Industry, at 26.)
With respect to the workers who were also PSU students, the Department
emphasized the difficulty these individuals would encounter attending class,
tutoring, maintaining a 3.8 GPA, and establishing independent businesses in which
they customarily engaged. For these reasons, the Department’s conclusion is based
upon substantial evidence with regard to this additional factor.
Finally, Petitioner suggests that the Department placed undue
emphasis upon whether each worker demonstrated a proprietary interest in a
business that he can operate freely from the control of other individuals in
determining whether the workers were in independently established trades. In this
regard, our Supreme Court has cautioned not to place too much emphasis upon the
“proprietary” interest factor and explained that a proprietary risk of financial loss is
not necessary to establish a worker’s status as an independent contractor. Danielle
Viktor, Ltd. v. Department of Labor and Industry, Bureau of Employer Tax
Operations, 892 A.2d 781, 794 (Pa. 2006). “[T]he ownership of the assets of the
enterprise, although not a definitive factor, may be relevant to determining
independent contractor status.” Id. at 800.
35
The Department explained that although workers may lose an
opportunity in the event a client does not attend a tutoring or review session, this
comes in the form of lost work rather than in the form of a proprietary risk.
Further, noting that there was no evidence to demonstrate that the workers made
any monetary investment in business assets or bore any risk of loss, the
Department found this factor in favor of employment status. Although we find the
Department’s conclusion supported by substantial evidence, this additional factor
does not change the overall balance of the factors, which already favors an
employment relationship.
Accordingly, because the Department’s conclusion that Petitioner did
not establish that its workers are independent contractors under the second prong
of Section 4(l)(2)(B) of the Law is supported by substantial evidence, we affirm its
denial of the petition for reassessment.
DAN PELLEGRINI, Senior Judge
36
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Jeremy Robinson, t/d/b/a PSU :
KnowHow, :
Petitioner:
:
v. :
:
Department of Labor and Industry, :
Office of Unemployment Tax :
Services, :
Respondent : No. 1711 C.D. 2015
ORDER
AND NOW, this 31st day of March, 2016, the order of the Department
of Labor and Industry dated August 18, 2015, denying Jeremy Robinson, t/d/b/a
PSU KnowHow’s petition for reassessment is hereby affirmed.
DAN PELLEGRINI, Senior Judge