Liberty Transportation, Inc. v. UCBR ( 2016 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Liberty Transportation, Inc., :
Petitioner :
:
v. : Nos. 391, 392, 393 C.D. 2016
: Submitted: November 18, 2016
Unemployment Compensation :
Board of Review, :
Respondent :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE DAN PELLEGRINI, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY
SENIOR JUDGE PELLEGRINI FILED: December 22, 2016
Liberty Transportation, Inc. (Liberty) petitions for review of orders of
the Unemployment Compensation Board of Review (Board) finding Jason Saniga
(Claimant) not ineligible for unemployment compensation benefits under Sections
402(h) and 402(e) of the Unemployment Compensation Law (Law)1 because he was
1
Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. §§
751–918.10. Section 402(h) provides that an employee will be ineligible for compensation for any
week:
In which he is engaged in self-employment: Provided, however, That
an employe who is able and available for full-time work shall be
deemed not engaged in self-employment by reason of continued
participation without substantial change during a period of
unemployment in any activity including farming operations
(Footnote continued on next page…)
not self-employed and was not discharged due to willful misconduct.2 For the
reasons that follow, we affirm.
I.
Liberty is a dispatch company that has contracts with various clients,
such as Sears, to arrange for delivery drivers to deliver and install merchandise.
Liberty contracts with individuals to perform the requested delivery and installation
services, and does not classify the delivery drivers as employees or own any of the
trucks used to perform the delivery services.
(continued…)
undertaken while customarily employed by an employer in full-time
work whether or not such work is in “employment” as defined in this
act and continued subsequent to separation from such work when
such activity is not engaged in as a primary source of livelihood. Net
earnings received by the employe with respect to such activity shall
be deemed remuneration paid or payable with respect to such period
as shall be determined by rules and regulations of the department.
43 P.S. § 802(h). Section 402(e) precludes an employee from compensation for any week:
In which his unemployment is due to his discharge or temporary
suspension from work for willful misconduct connected with his
work, irrespective of whether or not such work is “employment” as
defined in this act[.]
43 P.S. § 802(e).
2
We granted the Board’s Motion for Consolidation of Cases and consolidated Liberty’s
three appeals.
2
In October 2009, Claimant executed a Contractor Agreement
(Agreement) with Liberty to perform delivery and installation services for Sears’
customers. Under the Agreement, Claimant was designated as a “contractor” who “is
the owner and/or lessee of certain motor vehicle(s) hereinafter described and desires
to provide services to Liberty….” (Reproduced Record (R.R.) at 508a.) The
Agreement provided that Claimant had the ability to hire employees or helpers at his
own expense and discretion; that he had the freedom to accept or refuse loads; that
Liberty did not guarantee minimum stops or payments; that Claimant had to pay all
direct costs incidental to the vehicle; and that Liberty would pay Claimant a
contracted rate as set forth by Liberty’s contract compensation schedule but would
not provide any benefits or insurance, including, but not limited to, vacation pay, sick
leave, disability, health benefits or holiday pay. Claimant bought his own box truck
and was permitted to use it for his personal and other business use. He received a
Form 1099 for tax purposes each year.
Sears schedules deliveries with its customers and provides them with a
two-hour delivery window. It creates routes and manifests based on customer
locations and delivery windows, and then provides the routes and manifests to a
dispatcher at Liberty the night before the scheduled deliveries. Liberty’s dispatcher
calls and offers the manifests to its contracted delivery drivers, and the delivery
drivers have the option to accept or decline the manifests. The drivers are
compensated per delivery at a rate set by Sears, which the drivers cannot negotiate.
Sears offers monetary incentives to drivers for good customer service and good
customer survey scores, and the incentives are received from Sears by Liberty and
then distributed to the drivers. The drivers’ work schedules are dictated by the Sears’
3
manifests and customer delivery windows. Sears requires that the drivers have a
helper on their truck and the drivers are responsible for compensating the helpers.
Sears also requires that the drivers wear a navy polo shirt with a Liberty or Sears’
logo, which the drivers must purchase.
Although Claimant believed that he was free to refuse a manifest, on
certain occasions Liberty’s General Manager threatened to terminate his contract
when he requested time off for a vacation or Fridays off to tend to his mother who
was suffering from cancer. Claimant began questioning whether he was truly an
independent contractor and took his concerns about the General Manager to Liberty’s
Senior Vice President, after which the General Manager accused Claimant of going
over his head. Claimant then consulted with an attorney and began talking to other
delivery drivers about his concern that they may be misclassified as independent
contractors. During this time, Claimant never refused to continue accepting Sears’
manifests or making deliveries for Sears. The General Manager then informed
Claimant that Liberty no longer needed his services because of his negativity on the
dock and bad influence over the other drivers.
The General Manager offered Claimant the opportunity to resume work
as an independent contractor provided that he sign a statement agreeing not to see an
attorney, not to take any action against Liberty and to stop talking to the other drivers
about their independent contractor status, but Claimant refused to sign the statement
to continue working as an independent contractor. Liberty subsequently terminated
the Agreement, following which Claimant sold his truck. Claimant filed for UC
4
benefits and the Erie UC Service Center (Service Center) notified him that he was not
financially eligible for benefits. Claimant appealed.
In a notice dated August 4, 2015, the Service Center determined that
Claimant was indeed eligible for benefits. The Service Center also mailed two other
determinations on August 18, 2015. One determination found Claimant was not
ineligible for benefits under Section 402(h) of the Law because he was not free from
direction or control in the performance of his job and, therefore, was not self-
employed. The other determination found that there was insufficient evidence that
Claimant had been discharged as a result of his attitude alone or as a result of a
specific incident of willful misconduct and, thus, Claimant was ineligible for benefits
under Section 402(e) of the Law. Employer appealed all three Service Center
determinations, asserting that as an independent contractor, Claimant was ineligible
for UC benefits.
After making 100 findings of fact, the Referee3 affirmed the Service
Center’s determinations, finding Claimant to be financially eligible for UC benefits
because Claimant was Liberty’s employee and not disqualified under Section 402(h)
of the Law. Reasoning that the preponderance of evidence demonstrates a significant
amount of direction and control by Liberty and Sears, the Referee noted:
[Claimant’s] hours were dictated by Sears scheduling and
manifests and [Liberty] had the authority to assign
[Claimant’s] manifest to another Delivery Driver if
3
The Referee held three hearings, which were attended by Claimant and his attorney,
Liberty’s attorney, and various witnesses.
5
[Claimant] did not show up at the loading dock on time to
deliver the manifest within the designated delivery
windows. [Claimant] was provided training by another
Driver and his helper and this training was facilitated by
[Liberty] which paid [Claimant] an hourly rate during the
training period. [Claimant’s] work was closely monitored
and supervised by [Liberty] and Sears through the use of
GPS monitoring software and electronic manifest. Sears
and [Liberty] provided additional training to [Claimant] at
morning standup meetings through Sears’ vendors who
provided product information and necessary installation
instructions and [Liberty’s] employees who discussed safety
issues and ways to improve customer satisfaction results.
While [Liberty] argues that [Claimant] was free to refuse or
accept manifests without repercussion, [Claimant] provided
credible testimony to demonstrate that the General Manager
threated [Claimant] with termination of his contract when
[Claimant] attempted to take a vacation when it was
inconvenient for [Liberty] and when [Claimant] attempted
to take Fridays off in order to assist his ailing mother.
[Claimant] further provided credible testimony to
demonstrate that the General Manager exercised direction
and control by denying [Claimant] the ability to use certain
helpers because of personal conflicts with these individuals.
(R.R. at 481-482a.)
The Referee also found that the services Claimant performed as a
delivery driver are an integral part of Liberty’s principal business activity to get
products delivered for its business customers, and that Claimant’s specific skills
associated with driving and delivering appliances are more closely aligned to a
laborer’s skill set rather than those of a business entrepreneur. The Referee reasoned
that Claimant was not free from direction and control over the performance of his
services provided to Liberty and was not engaged in an independently established
trade, occupation, profession or business. Moreover, finding that Liberty terminated
6
Claimant because he questioned whether he was being misclassified as an
independent contractor and because he voiced his concerns to other delivery drivers,
and that there is no evidence that Claimant knowingly or deliberately violated any
employer policy or rule and no evidence that he refused to continue performing
services for Liberty under the terms of the Agreement, the Referee concluded that
Claimant’s discharge was not due to his willful misconduct and benefits cannot be
denied under Section 402(e) of the Law.
On further appeal, the Board affirmed the Referee, adopting and
incorporating the Referee’s findings and conclusions as modified. 4 The Board
emphasized that “Liberty’s [G]eneral [M]anager admitted if a driver declined to take
a route when called, Liberty might retaliate by not offering them [sic] a route on
another occasion.” (R.R. at 497a.) The Board further noted that the General
Manager “admitted that if a driver refused to accept routes for two or three days in a
row, the driver’s contract would probably be terminated.” (Id.) Reasoning that the
General Manager’s statements corroborated Claimant’s testimony that he was
repeatedly threatened with termination when he wanted to take time off, the Board
found that Claimant was not free from Liberty’s direction and control. With regard to
whether Claimant was “customarily engaged” in an independently established trade,
occupation, profession or business as required under Section 4(l)(2)(B) of the Law,
the Board found that Claimant was not customarily engaged because he did not offer
his driving services to any entity other than Liberty. Because Claimant had legitimate
4
The Board noted that Claimant was not free to change delivery times as reflected in the
Referee’s Finding of Fact No. 33, “as he was admonished by Liberty’s [G]eneral [M]anager for
doing so, even though he had obtained the prior consent of the Sears customer.” (R.R. at 497a.)
7
questions concerning his and his fellow drivers’ status with Liberty as independent
contractors and did not refuse to continue working under the terms of the Agreement,
the Board concluded that Claimant did not violate any specific rule or standard of
behavior and was not discharged due to willful misconduct. This appeal followed.
II.
A.
On appeal,5 Liberty generally contends that the Board’s determination
that Claimant was not an independent contractor was not based on substantial
evidence.
“Generally, there is a presumption in the Law that an individual
receiving wages is an employee and not an independent contractor engaged in self-
employment.” Pasour v. Unemployment Compensation Board of Review, 54 A.3d
134, 137 (Pa. Cmwlth. 2012). However, an employer can overcome this presumption
by establishing that the claimant was: (1) free from control and direction in the
performance of his service; and (2) customarily engaged in an independent trade or
business as to that service. Id. “Unless both of those showings are made, the
presumption stands that one who performs services for wages is an employee.”
5
Our review is limited to determining whether the Board’s findings of fact are supported by
substantial evidence in the record, whether errors of law were committed, whether agency
procedure was violated, or whether constitutional rights were violated. Gillins v. Unemployment
Compensation Board of Review, 633 A.2d 1150, 1153 (Pa. 1993). We have defined “substantial
evidence” as such “relevant evidence that a reasonable mind might consider adequate to support a
conclusion.” Palladino v. Unemployment Compensation Board of Review, 81 A.3d 1096, 1100 n.3
(Pa. Cmwlth. 2013).
8
Minelli v. Unemployment Compensation Board of Review, 39 A.3d 593, 596 (Pa.
Cmwlth. 2012).
First, we must determine whether the claimant was free from control. In
reviewing this question, we consider many factors, such as whether compensation
was at a fixed rate and whether taxes were deducted; whether the putative employer
supplied the tools necessary for the job; and the terms of the written contract between
the parties. Resource Staffing, Inc. v. Unemployment Compensation Board of Review,
961 A.2d 261, 264 (Pa. Cmwlth. 2008). No single factor is controlling. Id.; Venango
Newspapers v. Unemployment Compensation Board of Review, 631 A.2d 1384, 1387-
88 (Pa. Cmwlth. 1993). Claimant’s hours were established by Sears and Liberty had
the authority to assign Claimant’s manifests to another driver if he did not show up to
the loading dock on time. Liberty also provided Claimant with training, during which
time he was paid and monitored and supervised his work. Sears also set the rate of
compensation which Claimant was not able to negotiate and required that Claimant
wear a certain uniform. Thus, the Board and Referee did not err in determining that
the first prong was not satisfied.
Because Claimant was not free from Liberty's control and direction, we
next have to determine whether the Board erred in finding that Claimant was not
customarily engaged in an independent trade or business. In making that
determination, courts have generally considered: (1) whether the individual was
capable of performing the activities in question to anyone who wished to avail
himself/herself of the services and was not compelled to look to only a single
employer for the continuation of such services; (2) whether the individual was
9
dependent on the presumed employer for employment; and (3) whether the individual
was hired on a job-to-job basis and could refuse any assignment. Osborne
Associates, Inc. v. Unemployment Compensation Board of Review, 3 A.3d 722, 728
(Pa. Cmwlth. 2010).
As to the second prong, although Claimant was free to refuse manifests,
on certain occasions when he tried to refuse manifests, he was threatened by Liberty
with termination or not being offered a route on a different occasion. Liberty’s
General Manager also acknowledged that if a driver refused work multiple days in a
row, the driver would likely be terminated. Moreover, though Claimant could use his
truck for his personal use or other business, Claimant only worked for Liberty, and as
soon as he was terminated, he sold the truck. As such, the second prong is also not
satisfied.
B.
Liberty then contends that even if Claimant is deemed to be an
employee, his discharge resulted from his willful misconduct because he “declared
himself as an employee, which is a direct violation of the Contractor Agreement”
which states that “[t]he parties intend to create by this Agreement a relationship of
Liberty and Independent Contractor and not that of the Employer and Employee.”
(Liberty’s Brief at 50-51.)
10
The employer bears the burden of proving willful misconduct if the
claimant has been discharged.6 Guthrie v. Unemployment Compensation Board of
Review, 738 A.2d 518, 521 (Pa. Cmwlth. 1999) (citing Sacks v. Unemployment
Compensation Board of Review, 459 A.2d 461 (Pa. Cmwlth. 1983)). In willful
misconduct cases involving violation of a work rule, the employer bears the burden of
proving the existence of a reasonable work rule and the fact that the claimant violated
the work rule. Guthrie, 738 A.2d at 521; Brunson v. Unemployment Compensation
Board of Review, 570 A.2d 1096, 1098 (Pa. Cmwlth. 1990). Once these elements
have been established, the burden then shifts to the claimant to prove that he had
good cause for his actions, meaning that his actions were justified or reasonable under
the circumstances. Guthrie, 738 A.2d at 522 (citing Frumento v. Unemployment
Compensation Board of Review, 351 A.2d 631, 634 (Pa. Cmwlth. 1976)).
Outside of Liberty’s claim that Claimant “declared himself as an
employee,” (Liberty’s Brief at 50), there is no evidence to show that this is the case.
6
Although the Law does not define the term “willful misconduct,” the courts have defined it
as:
(1) wanton or willful disregard for an employer’s interests; (2)
deliberate violation of an employer’s rules; (3) a disregard for the
standards of behavior which an employer can rightfully expect of an
employee; or (4) negligence indicating an intentional disregard of the
employer’s interest or an employee’s duties or obligations.
Philadelphia Parking Authority v. Unemployment Compensation Board of Review, 1 A.3d 965, 968
(Pa. Cmwlth. 2010). Where a claimant is discharged for a work rule violation, the employer has the
burden to show that the claimant was aware that the work rule existed and that the claimant violated
the rule. Id. The employer must also establish that the claimant’s actions were intentional and
deliberate, and the employee’s actions must be considered in light of all the circumstances,
including the reasons for his or her non-compliance with the employer’s directives. Id.11
Rather, while Claimant was questioning his work status with Liberty by talking to
those at Liberty, other drivers and an attorney, he continued to accept Sears’
manifests and continued his delivery services until Liberty discharged him. His
conduct in questioning his employment status and attempting to figure out whether
his status was appropriate by talking to others does not rise to the level of willful
misconduct. Moreover, although the Agreement states that the parties’ intention is to
create an independent contractor relationship, Claimant’s conduct did not violate that
provision.7
Accordingly, we affirm the Board’s determinations finding that Claimant
is not ineligible for unemployment compensation benefits pursuant to Sections 402(h)
and 402(e) of the Law, 43 P.S. §§ 802(h), 802(e).
________________________________
DAN PELLEGRINI, Senior Judge
7
Liberty also argues various due process violations. Specifically, that a representative from
the UC Tax Bureau attended the hearing and testified; that the Referee precluded expert testimony
from two of Liberty’s expert witnesses; and that a lack of pre-hearing discovery of facts constituted
a deprivation of Liberty’s due process rights. Before the Referee, Liberty failed to object to the
representative’s ability to testify or raise the issues of its witnesses not being able to testify and the
lack of pre-hearing discovery. Review of an issue is waived by failing to raise it before the referee
when there is an opportunity to do so. Schaal v. Unemployment Compensation Board of Review,
870 A.2d 952, 954-955 (Pa. Cmwlth. 2005).
12
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Liberty Transportation, Inc., :
Petitioner :
:
v. : Nos. 391, 392, 393 C.D. 2016
:
Unemployment Compensation :
Board of Review, :
Respondent :
ORDER
AND NOW, this 22nd day of December, 2016, the orders of the
Unemployment Compensation Board of Review dated February 12, 2016, at Nos. B-
586414, B-586415 and B-586416, are affirmed.
________________________________
DAN PELLEGRINI, Senior Judge