K.L. Cristea v. UCBR

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Karrie L. Cristea, :
Petitioner :
:
v. : No. 1560 C.D. 2016
: SUBMITTED: February 3, 2017
Unemployment Compensation :
Board of Review, :
Respondent :
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE JULIA K. HEARTHWAY, Judge
HONORABLE DAN PELLEGRINI, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY
JUDGE HEARTHWAY FILED: June 14, 2017
Karrie Cristea (Claimant) petitions for review from the decision of the
Unemployment Compensation Board of Review (Board) affirming the decision of
a referee, who dismissed Claimant’s appeal of a Notice of Determination (Notice)
issued by the Department of Labor and Industry (Department). The Board
determined that Claimant was ineligible for benefits under section 402(h) of the
Unemployment Compensation Law (Law)1 because she was engaged in self-
employment. For the reasons set forth herein, we reverse.
1
Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. §
802(h).
Claimant was employed at Holiday Inn from March 31, 2014 until
May 12, 2016 when she filed an application for benefits. (Referee’s
Decision/Order, July 21, 2016, Finding of Fact (F.F.) No. 1.) After her Holiday
Inn employment concluded, Claimant began planning to host a bridal show in
January 2017. (F.F. No. 3.) She planned to contact vendors and rent space in
December 2016. (F.F. Nos. 8 & 9.) Claimant planned to retain any profits
generated from this activity. (F.F. No. 9.) Claimant only intended to host a single
event. (F.F. No. 11.) Believing that she needed a federal employer identification
number (EIN) to host the event, Claimant applied for an EIN from the Internal
Revenue Service on June 10, 2016, under the name “Eventions.” (F.F. Nos. 4 &
5.)
On June 15, 2016, the Department issued a determination that she was
ineligible for benefits under section 402(h) for the week ending June 11, 2016.
Advised by a Department representative that self-employment could jeopardize her
unemployment compensation benefits, Claimant sent a letter to the IRS to
withdraw the EIN request on July 12, 2016. (F.F. Nos. 6 & 10.) Claimant
appealed the Department’s determination that she was ineligible due to self-
employment.
On July 21, 2016, a referee issued a decision and order affirming the
determination of the Department. Claimant appealed to the Board, and on August
2
23, 2016, the Board affirmed the referee, adopting his findings and conclusions.
This appeal followed.2
The issue before this Court is whether the Board erred in determining
that Claimant was engaged in self-employment under section 402(h) of the Law,
which provides that a claimant is ineligible for compensation for any week in
which he or she is engaged in self-employment. 43 P.S. § 802(h). The
determination of whether one is self-employed is a question of law subject to our
review. Unemployment Compensation Board of Review v. Minier, 352 A.2d 577,
579 (Pa. Cmwlth. 1976).
The Law does not define the term “self-employment.” However,
section 4(l)(2)(B) of the Law does define “employment:”
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). This Court has considered the definition of employment
when evaluating whether a claimant is self-employed. See Buchanan v.
2
Our scope of review in an unemployment compensation appeal is limited to determining
whether constitutional rights were violated, whether an error of law was committed, or whether
necessary findings of fact are supported by substantial evidence. Section 704 of the
Administrative Agency Law, 2 Pa.C.S. § 704.
3
Unemployment Compensation Board of Review, 581 A.2d 1005 (Pa. Cmwlth.
1990). “This Court has consistently held. . . that before a claimant will be declared
to be self-employed, the employer bears the burden of proving both elements of
[s]ection (l)(2)(B).” Id. at 1007.
In Buchanan, this Court surveyed a number of cases where post-
employment activity was considered self-employment:
In Leary v. Unemployment Compensation Board of
Review, [322 A.2d 749 (Pa. Cmwlth. 1974)], the Court
held that a claimant who had formed a corporation for the
purpose of construction of buildings after being laid off
from employment, who had elected himself president of
the corporation and thereafter entered into an agreement
to buy a parcel of land was found to be self-employed
and, therefore, ineligible for benefits. The date that self-
employment began, the Court said, was the date of
incorporation because the act of incorporating was the
“only positive move of Leary in establishing his own
business.” Id. [at 750].
In addition, the Court in Balmer v. Unemployment
Compensation Board of Review, [368 A.2d 1349 (Pa.
Cmwlth. 1977)], found that the claimant was precluded
from collecting benefits because he was self-employed.
Specifically, the claimant, after termination of his full-
time job, established an independent elevator servicing
business by providing capital for office equipment,
advertising and insurance. The claimant, who actively
participated in performing services by such business and
who also received income for his labor, was found to be
self-employed, and, therefore, ineligible for
unemployment compensation benefits.
The court again found a claimant to be ineligible for
benefits in Alick v. Unemployment Compensation Board
4
of Review, [166 A.2d 342 (Pa. Super. 1960)], where,
subsequent to separation from his regular job, the
claimant “entered the field of self-employment as an air
conditioner serviceman, advertising his services, and
listing the same in the telephone book.” Id. [at 343].
Moreover, we held that the claimants in Kirk v.
Unemployment Compensation Board of Review, [425
A.2d 1188 (Pa. Cmwlth. 1981)] could not receive
benefits due to their self-employment. The claimants in
that case, after separation from employment, received a
business loan from a bank for the purpose of starting a
landscaping business, purchased a tractor and signed a
contract to begin subcontracting jobs. We found the
claimants to be self-employed as of the time of the
approval of the bank loan because this act was the
requisite positive step in embarking upon an independent
business venture.
Id. at 1008.
In Roche v. Unemployment Compensation Board of Review, 503 A.2d
1103, 1105 (Pa. Cmwlth. 1986), the claimant established a business checking
account used to pay for services and purchases and entered a lease for business
space before forming a corporation in which he served as president and took stock.
The Roche court stated:
Whether or not a business is incorporated is not
determinative of whether activity in such business can be
considered self-employment. See Salis v. Unemployment
Compensation Board of Review, [190 A.2d 579 (Pa.
Super. 1963)]. Likewise, a finding that a claimant
received an income or has a proprietary interest in a
business is not necessary in reaching the conclusion that
such claimant is self-employed. [Watson v.
Unemployment Compensation Board of Review, 491
A.2d 293 (Pa. Cmwlth. 1985)]. A claimant is considered
5
to have embarked on “self-employment” when he
performs a positive act of establishing an independent
business enterprise. Kirk v. Unemployment Compensation
Board of Review, [425 A.2d 1188 (Pa. Cmwlth. 1981)].
Id. at 1105. The Court concluded that “starting a checking account, running
errands and signing the lease were all positive acts of establishing an independent
business enterprise.” Id.
In other cases, this Court has concluded that a claimant’s activity was
insufficient to constitute self-employment. In Parmalee, Miller, Welsh & Kratz v.
Unemployment Compensation Board of Review, 405 A.2d 1052 (Pa. Cmwlth.
1979), a claimant was not self-employed where he considered establishing a
private law practice before reversing course without performing legal services. In
Centorame v. Unemployment Compensation Board of Review, 474 A.2d 1220 (Pa.
Cmwlth. 1984), after separation from a previous employer, the claimant printed
business cards and advertised as a provider of home improvement services. This
Court found the claimant eligible for benefits, ruling that where no actual work is
performed, “public advertisement of a pursuit, without more, does not in itself
amount to the launching of a new enterprise.” Id. at 1221. In Zegel v.
Unemployment Compensation Board of Review, (Pa. Cmwlth., No. 1294 C.D.
2011, filed April 9, 2012),3 an attorney incorporated, filed for an EIN, and opened
a business bank account, but she never performed any legal services for
remuneration (the claimant stated that she only intended to perform pro bono
3
Pursuant to Commonwealth Court Internal Operating Procedure 414, 210 Pa. Code §
69.414, an unreported panel decision of the Commonwealth Court, issued after January 15, 2008,
may be cited for its persuasive value.
6
work). Though the Board determined that the act of incorporation alone rendered
the claimant ineligible for benefits, this Court disagreed, concluding that the
claimant’s activities were more akin to a sideline activity than self-employment.
Id., slip op. at 2.
In the instant case, the Board found that Claimant took the action to
initiate a business by applying for an EIN; by planning to host a bridal show in
January 2017; by planning to contact vendors; by planning to rent space; by
planning to advertise the event; and by planning to retain any profit realized from
the event. However, the Board also found that Claimant withdrew her request for a
tax ID number and only planned the bridal show as a one-time event. Claimant
argues that applying for an EIN, in addition to mere planning for the bridal show,
was not enough to constitute positive steps toward self-employment, absent an
intention to continue the business venture beyond a one-time event.
The Board argues that Claimant’s act of filing for an EIN with the
name “Eventions” is tantamount to filing for incorporation, constituting a positive
step to establish an independent business venture. But in Roche we determined
that incorporation in itself was “not determinative of whether activity in such
business can be considered self-employment.” 503 A.2d at 1105. Therefore,
contrary to the Board’s position, evidence of a mere request for an EIN likewise is
not enough to establish that Claimant was self-employed.
Moreover, some of the factors the Board relied upon were no more
than actions contemplated by Claimant. She planned to contact vendors and
7
advertise for the show, but had not done so. Evidence of an intention to start an
independent business venture through advertisement does not constitute the actual
undertaking of that venture. Centorame. As a result, Claimant’s intentions to
advertise or contact vendors do not constitute positive acts toward self-
employment.
Additionally and significantly, the Board found that Claimant
intended for the bridal show to be a one-time event. In order to be self-employed,
a claimant must be both free from control or direction over the performance of
such services both under her contract of service and in fact; and be customarily
engaged in an independently established trade, occupation, profession or business.
Buchanan, 581 A.2d at 1008. There, a claimant was found to not be self-employed
when he rented a booth at a flea market to sell jewelry on a temporary basis. Id. at
1009. Although we noted in Buchanan that we may have decided that case
differently if the claimant sold jewelry on a more consistent basis, this Court
ultimately determined that renting a space alone does not constitute customary
engagement under section 4(l)(2)(B). In Buchanan, Claimant’s actions are even
less indicative of customary engagement in an independently established trade,
occupation, profession or business. She only applied for an EIN and made some
plans to host a one-time bridal show.
Accordingly, we find Claimant’s actions are much more closely
aligned with those cases finding insufficient evidence of self-employment. Under
the circumstances of this case, the Board erred as a matter of law in its
determination that Claimant was ineligible for benefits under section 402(h) of the
8
Law because she was engaged in self-employment. For these reasons, we reverse
the order of the Board.
__________________________________
JULIA K. HEARTHWAY, Judge
9
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Karrie L. Cristea, :
Petitioner :
:
v. : No. 1560 C.D. 2016
:
Unemployment Compensation :
Board of Review, :
Respondent :
ORDER
AND NOW, this 14th day of June, 2017, the order of the
Unemployment Compensation Board of Review in the above-captioned matter is
reversed.
__________________________________
JULIA K. HEARTHWAY, Judge