A. Coleman v. UCBR

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Anton Coleman, :
Petitioner :
: No. 210 C.D. 2016
v. :
: Submitted: August 12, 2016
Unemployment Compensation :
Board of Review, :
Respondent :
BEFORE: HONORABLE ROBERT SIMPSON, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE McCULLOUGH FILED: December 21, 2016
Anton Coleman (Claimant) petitions for review of the January 15, 2016
order of the Unemployment Compensation Board of Review (Board) reversing a
referee’s decision holding that Claimant was not ineligible for benefits under section
402(h) of the Unemployment Compensation Law (Law)1 and not subject to a fault
overpayment or penalty weeks/amounts under sections 804(a) and 801(b)-(c) of the
Law.2
1
Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S.
§802(h). Section 402(h) of the Law generally provides that an employee shall be ineligible for
benefits for any week in which he is engaged in self-employment.
2
43 P.S. §§874(a), 871(b)-(c), respectively.
The underlying facts of this case are not in dispute. Claimant worked as
an emergency medical technician for Medcare Ambulance (Employer) from 2008
until 2011 when he was laid off.3 In 2009, Claimant incorporated his own business,
Universal Ambulance. Claimant was the 100% owner of this business. Following
his separation from employment with Employer, Claimant applied for the necessary
licensure and insurance affiliations in order to operate Universal Ambulance.
Universal Ambulance received a certificate necessary for operation in 2011, but did
not receive insurance approval until 2012. While Claimant sought work, he
ultimately hoped to make his own business the primary source of his income.
Claimant did not receive any income from his Universal Ambulance business until
2012. Claimant responded “no” when asked whether he was self-employed because
he was not receiving any income from Universal Ambulance. Claimant received
$8,797.00 in unemployment compensation benefits. (Board’s Findings of Fact Nos.
1-9.)
The Department of Labor and Industry (Department) later issued a
determination that Claimant was ineligible for benefits under section 402(h) of the
Law. The Department also assessed a fault overpayment, penalty weeks, and a
monetary penalty under sections 804(a) and 801(b)-(c) of the Law. Claimant
appealed and a referee held a hearing on November 12, 2015.
Claimant testified as to the facts described above. Claimant stated that
he incorporated Universal Ambulance in 2009 with the hope of opening his own
business in the future. Claimant noted that Universal Ambulance had no revenue
3
The record indicates that Claimant last worked for Employer on November 4, 2011, that
Claimant filed his initial claim on November 6, 2011, and that Claimant received benefits from the
week ending November 19, 2011, through May 12, 2012. Claimant also received Emergency
Unemployment Compensation for the weeks ending June 2 and June 9, 2012.
2
from 2009 through the first part of 2012, that he only received the necessary
certificate to operate from the Pennsylvania Department of Health at the end of 2011,
and that he had to wait another six months to get approval from insurance companies
to be a provider. Claimant denied spending any more time working with his business
after his separation from Employer, indicating that he merely filed paperwork during
that time. Claimant also denied that he was self-employed at the time he was
receiving unemployment compensation benefits. (Notes of Testimony (N.T.),
11/12/15, pp. 3-11.)
Nicholas Hayes, a Department examiner, investigated the matter and
spoke with Claimant. During this conversation, he learned that Claimant had
incorporated Universal Ambulance, which he described as a substantial step in
Claimant starting his own business, and not merely a sideline business. Hayes stated
that when Claimant initiated his claim, he denied that he was engaged in self-
employment. Hayes noted that the unemployment handbook, which Claimant
admitted receiving but not reading, specifies that a claimant is to report self-
employment. (N.T., 11/12/15, pp. 11-12.)
The referee ultimately reversed the Department’s determination,
concluding that Claimant had met the “sideline activity” exception under section
402(h).4 The Department appealed to the Board, which reversed the referee’s
decision and reinstated the fault overpayment, penalty weeks, and monetary penalty.
4
The “sideline activity” exception permits a claimant to engage in self-employment, and
remain eligible for unemployment compensation benefits, if the following conditions are met: (1)
the self-employment activity precedes valid separation from full-time work; (2) the self-
employment activity continues without substantial change after separation; (3) the claimant remains
available for full-time work after separation; and (4) the self-employment activity is not the primary
source of the claimant's livelihood. 43 P.S. §802(h); LaChance v. Unemployment Compensation
Board of Review, 987 A.2d 167, 171 (Pa. Cmwlth. 2009).
3
The Board concluded that Claimant was self-employed other than in a sideline
business and, hence, was ineligible for benefits. The Board also concluded that
Claimant withheld information regarding his Universal Ambulance business in order
to receive benefits to which he was not entitled. The Board held that Claimant
received a fault overpayment of $8,797.00, which was subject to recoupment under
section 804(a). Further, the Board assessed twenty-one penalty weeks under section
801(b), but no additional penalty. Claimant now appeals to this Court.
On appeal,5 Claimant first argues that the Board erred as a matter of law
in concluding that he was self-employed. More specifically, Claimant argues that his
action of establishing a dormant business enterprise which could not operate as a
matter of law did not constitute a sufficient positive act of establishing a business to
justify a denial of benefits under section 402(h) of the Law. We disagree.
Section 402(h) provides that an employee shall be ineligible for benefits:
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 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.
5
Our scope of review is limited to determining whether constitutional rights have been
violated, whether errors of law were committed, or whether findings of fact are supported by
substantial evidence. Procyson v. Unemployment Compensation Board of Review, 4 A.3d 1124,
1127 n.4 (Pa. Cmwlth. 2010).
4
43 P.S. §802(h).
The Law does not define the term “self-employment.” Silver v.
Unemployment Compensation Board of Review, 34 A.3d 893, 896 (Pa. Cmwlth.
2011). Thus, courts look to the definition of “employment” provided by section
4(l)(2)(b) of the Law:
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).
As we explained in Buchanan v. Unemployment Compensation Board of
Review, 581 A.2d 1005 (Pa. Cmwlth. 1990):
If one undertakes an activity in an entrepreneurial spirit
with all intentions of starting a new business, trade,
profession or occupation, he becomes a self-employed
businessman. If subsequently his business fails or proves to
be unprofitable he does not have the option of falling back
upon unemployment compensation benefits because the
Law was not enacted to compensate individuals who fail in
their business ventures and become unemployed
businessmen. The Law is clearly not insurance for
individual business undertakings.
Id. at 1008 (citations omitted).
In this regard, we have repeatedly held that a claimant becomes
ineligible for benefits once he takes a positive step toward establishing an
independent business. Id.; Salamak v. Unemployment Compensation Board of
Review, 497 A.2d 951, 954 (Pa. Cmwlth. 1985); Roberts v. Unemployment
5
Compensation Board of Review, 422 A.2d 911, 912 (Pa. Cmwlth. 1980); Leary v.
Unemployment Compensation Board of Review, 322 A.2d 749, 750 (Pa. Cmwlth.
1974) (en banc).
Indeed, in Leary, we upheld the Board’s order concluding that the
incorporation of a business constitutes such a positive step and serves to disqualify a
claimant from benefits as of the date of incorporation. Additionally, in Salamak, we
upheld the Board’s order concluding that the claimant was engaged in self-
employment when he became a shareholder in a new corporation, even though the
corporation did not commence business until approximately five months later.
Relying on Leary, we rejected the claimant’s argument that his mere association with
a non-operating corporation did not constitute self-employment. Further, in Roberts,
we upheld the Board’s order concluding that the claimants were engaged in self-
employment as of the date of incorporation of a new business. Again relying on
Leary, we specifically rejected the claimants’ argument that this interpretation of the
Law was unfair “because it unrealistically assumes that once a corporation is formed,
it immediately begins to do business and generate income.” Roberts, 422 A.2d at
912.
Further, in Roche v. Unemployment Compensation Board of Review, 503
A.2d 1103, 1105 (Pa. Cmwlth. 1986), we clarified that “[w]hether or not a business is
incorporated is not determinative of whether activity in such business can be
considered self-employment.” (Citation omitted). Instead, we explained that the
Court must look at whether the claimant has performed “a positive act of establishing
an independent business enterprise.” Id. In Roche, we upheld the Board’s order
concluding that the claimant was engaged in self-employment when he and another
individual incorporated a business, opened and made payments from a business
6
checking account, and entered into a lease for business space. More recently, in an
unpublished opinion, we upheld the Board’s order concluding that the claimant was
self-employed as of the date that he registered a fictitious business name with the
Pennsylvania Department of State and received an entity number, even though the
business received no income until several months later. Banyas v. Unemployment
Compensation Board of Review (Pa. Cmwlth., No. 521 C.D. 2009, filed October 14,
2009).6
While Claimant relies on several other decisions from this Court wherein
we concluded that the claimant was not self-employed, including Minelli v.
Unemployment Compensation Board of Review, 39 A.3d 593 (Pa. Cmwlth. 2012);
Silver; Teets v. Unemployment Compensation Board of Review, 615 A.2d 987 (Pa.
Cmwlth. 1992); Buchanan; and Isett v. Unemployment Compensation Board of
Review (Pa. Cmwlth., No. 1026 C.D. 2014, filed March 18, 2015), those cases are
factually distinguishable from the present case. For example, in Minelli and Silver,
we concluded that the claimants’ occasional offers of work for a new employer,
whether reviewing clinical records of hospice patients or consulting on an as-needed
basis, were not enough to conclude that the claimants were engaged in an
independently established trade, occupation, profession, or business.
The remaining cases of Teets, Buchanan, and Isett all involve
employment that this Court concluded amounted to a sideline business, and not self-
employment. In Teets, the claimant, after separation from her employment as an
account executive with an airline company, signed an agreement to distribute
6
Pursuant to section 414(a) of this Court’s Internal Operating Procedures, 210 Pa.Code
§69.414(a), an unreported opinion of this Court may be cited for its persuasive value, but not as
binding precedent.
7
products under a skin care company’s pyramidal sales program. In Buchanan, the
claimant, after being terminated from his position as an assistant finance manager
with a car dealership, bought supplies to make necklaces and bracelets that he
intended to sell at a weekly flea market. In Isett, the claimant, after being laid off
from his full-time employment, performed landscaping and maintenance services for
a neighboring nursery school.
Unlike the claimants in those cases, in the present case, Claimant
incorporated his own business, Universal Ambulance, in 2009. Claimant was the
president and 100% owner of this business. In late 2011, Claimant received a
certificate to operate from the Pennsylvania Department of Health, and in 2012
Claimant received necessary insurance approval.7 Moreover, Claimant was not
performing occasional offers of work for another employer or engaging in a sideline
business. Rather, Claimant testified before the referee that he intended Universal
Ambulance to be his sole source of income. Based on the case law discussed above,
we are constrained to hold that the Board did not err in concluding that Claimant was
self-employed under section 402(h) of the Law.
Claimant next argues that the Board erred in assessing a fault
overpayment because he never intended to provide false or misleading information to
the unemployment authorities. Again, we disagree.
7
The exact dates that Claimant received the certificate to operate and insurance approval are
not clear in the record. However, since Claimant was not laid off from his employment with
Employer until November 4, 2011, it would appear that Claimant at least requested the certificate to
operate prior to that time.
8
Section 804(a) of the Law addresses fault overpayments, providing, in
pertinent part, as follows:
Any person who by reason of his fault has received any
sum as compensation under this act to which he was not
entitled, shall be liable to repay to the Unemployment
Compensation Fund to the credit of the Compensation
Account a sum equal to the amount so received by him and
interest at the rate determined by the Secretary of Revenue.
...
43 P.S. §874(a). This Court recently reiterated that the term “fault” in this section
“connotes an act to which blame, censure, impropriety, shortcoming or culpability
attaches.” Castello v. Unemployment Compensation Board of Review, 86 A.3d 294,
298 (Pa. Cmwlth. 2013) (citing Amspacher v. Unemployment Compensation Board of
Review, 479 A.2d 688, 691 (Pa. Cmwlth. 1984)).
While Claimant relies on his belief that he had no reason to report
anything to the unemployment authorities, especially given his status as a lay person
and his lack of business activity, or income therefrom at the time, he did not dispute
that he regularly answered in the negative when he was asked if he was self-
employed. However, by that time, Claimant had incorporated his own business and
sought the necessary certificate to operate. Further, Claimant admitted before the
referee that he had received the unemployment handbook, which specifies that a
claimant is to report any self-employment. The Board essentially rejected Claimant’s
testimony that he was not aware that he was required to report that he had a
business.8 To the contrary, the Board concluded that “[w]hether he was making any
income or not, [Claimant] knew that he had a business” but he “withheld that
8
The Board is the ultimate fact-finder and arbiter of credibility. Peak v. Unemployment
Compensation Board of Review, 501 A.2d 1383, 1388-89 (Pa. 1985).
9
information from the Department in order to receive benefits to which he was not
entitled.” (Board op. at 3.) This conclusion, coupled with the Board’s exclusive
province over questions of credibility, support the assessment of a fault overpayment
against Claimant.
Accordingly, the order of the Board is affirmed.
________________________________
PATRICIA A. McCULLOUGH, Judge
10
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Anton Coleman, :
Petitioner :
: No. 210 C.D. 2016
v. :
:
Unemployment Compensation :
Board of Review, :
Respondent :
ORDER
AND NOW, this 21st day of December, 2016, the order of the
Unemployment Compensation Board of Review, dated January 15, 2016, is hereby
affirmed.
________________________________
PATRICIA A. McCULLOUGH, Judge