Opinion
No. 1706 C.D. 2011
05-25-2012
Peggy Lichty & Associates, Inc., Petitioner v. Unemployment Compensation Board of Review, Respondent
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE SIMPSON
Peggy Lichty & Associates, Inc. (Employer) petitions for review from an order of the Unemployment Compensation Board of Review (Board) that reversed a referee's decision and granted Linda G. Krizner (Claimant) benefits under Sections 402(h) and 4(l)(2)(B) of the Unemployment Compensation Law (Law) (relating to self-employment). Employer contends the Board erred in determining Claimant was an employee rather than an independent contractor. Upon review, we affirm.
Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. §§ 802(h), 753(l)(2)(B).
I. Background
From November 2006 through July 2010, Claimant worked as a sales associate for Employer. Upon the termination of their business relationship, Claimant applied for unemployment benefits, which were initially denied. Claimant appealed, and a hearing ensued before a referee.
At the hearing, Employer presented the testimony of Peggy Lichty, Employer's President, and two sales associates, and Claimant testified on her own behalf. Additionally, a Department of Labor and Industry (Department) tax agent presented testimony. Thereafter, the referee determined Claimant performed her job as an independent contractor rather than as an employee. Additionally, the referee imposed a fault based overpayment penalty because Claimant failed to properly disclose her employment status to the Department. Claimant appealed.
On appeal, the Board made its own findings concerning Claimant's job responsibilities and Employer's level of control over Claimant's work. Specifically, the Board found in pertinent part:
2. [C]laimant was paid by 100% commission.
3. [E]mployer is a manufacturer's representative for a number of product lines.
4. When [C]laimant was hired, [Employer's President] explained to [C]laimant that she was being hired as an independent contractor.
5. [C]laimant and [E]mployer did not enter into a written independent contractor agreement.
6. [E]mployer provided unpaid training on the software used, the vendors, and the products sold.
7. [E]mployer communicated via telephone, e-mails, webinars, and conference calls.
8. [C]laimant worked from home.
9. [C]laimant provided the computer she needed to perform her work.
10. [E]mployer required [C]laimant to obtain a dedicated telephone and fax line.
11. [C]laimant set her own schedule and made her own appointments.
12. [C]laimant had to keep [E]mployer apprised of her appointments.
13. [C]laimant had to keep [E]mployer apprised of her progress with sales.
14. If [C]laimant could not make a meeting or conference call, she had to clear it with [E]mployer.
15. In 2009, [E]mployer changed its business model. Effective January 1, 2009, [E]mployer eliminated all past sales positions and territories, and [C]laimant now represented all vendors represented by [E]mployer.
16. [E]mployer provided [C]laimant with a list of assigned retailers.
17. [C]laimant would be paid on all orders for assigned retailers, provided [E]mployer was paid and minimum expectations were met by [C]laimant.
18. [C]laimant was expected to submit a quarterly/annual business plan for each assigned retailer. [E]mployer would provide the forms necessary. [E]mployer provided feedback to [C]laimant on her business plans.
19. [E]mployer would pre-qualify leads and assign them to the sales associates.
20. If [C]laimant wrote an order of a non-assigned retailer at a [trade] show, [C]laimant would be paid as long as [E]mployer was paid and pursuant to vendor contractual commission structure for shows.Bd. Op., 8/11/11, Findings of Fact (F.F.) Nos. 2-25.
21. [E]mployer required minimum expectations for assigned retailers including: [1] [C]laimant must have a relationship with every assigned retailer; [2] all assigned retailers should have a minimum of one or two face-to-face meetings each year; [3] account activity includes sales, service, training, problem solving and relationship building; [4] all assigned retailers should have a logical "regular" call cycle; [5] [C]laimant should secure show appointments with assigned retailers for all markets; [6] [C]laimant should present and sell multiple vendors to all assigned retailers; [7] [C]laimant should partner with all assigned retailers; and [8] [C]laimant must maintain regular communication and feedback on all assigned retailers with [E]mployer.
22. If [C]laimant wrote an order at a trade show that was not on her assigned list, the account would not be put on her list until an account review session with [E]mployer. [C]laimant could request the retailer be put on her list in writing in advance of an account review.
23. [E]mployer set a minimum sales goal of $10,000 per week per vendor. When [C]laimant was not meeting her goal, [E]mployer would send [C]laimant e-mails reminding her of her goal and asking what was wrong.
24. [E]mployer required [C]laimant to attend trade shows in Atlanta.
25. [E]mployer did not withhold taxes from [C]laimant's pay, and at the end of the years, [C]laimant received a Form 1099 for tax purposes.
Based on these findings, the Board concluded Claimant worked under Employer's control and direction as an employee. As the Board determined Claimant was under Employer's control, it declined to address whether Claimant engaged in an independent trade or business. As a result, the Board also vacated the referee's assessment of an overpayment penalty. In conclusion, the Board ordered the Department to issue a new determination regarding whether Claimant was eligible for benefits based on her separation as opposed to her employment status. Employer petitions for review.
Our review is limited to determining whether the necessary findings of fact were supported by substantial evidence, whether errors of law were committed, or whether constitutional rights were violated. Oliver v. Unemployment Comp. Bd. of Review, 5 A.3d 432 (Pa. Cmwlth. 2010) (en banc). A determination regarding the existence of an employer/employee relationship is a question of law. Res. Staffing, Inc. v. Unemployment Comp. Bd. of Review, 961 A.2d 261 (Pa. Cmwlth. 2008). As such, our scope review of this issue is plenary, and our standard is de novo. Pocono Manor Investors, LP v. Pa. Gaming Control Bd., 592 Pa. 625, 927 A.2d 209 (2007).
II. Issue
Employer contends the Board erred in determining Claimant was an employee rather than an independent contractor. Specifically, Employer asserts that in light of their entire relationship, it did not exercise sufficient control and direction over Claimant to constitute an employer/employee relationship. Furthermore, although the Board did not reach the issue, Employer argues Claimant conducted her work as an independently established business.
At the outset of its brief, the Board contends Employer did not preserve a challenge to the Board's findings of fact. In response, Employer agrees it waived that issue. As such, we confine our discussion to whether, based on the facts as found by the Board, Claimant worked for Employer as an employee or an independent contractor. --------
III. Discussion
Section 402(h) of the Law provides an employee "shall be ineligible for compensation for any week ... in which he is engaged in self-employment." 43 P.S. §802(h). The General Assembly did not define the term self-employment in Section 402 of the Law. Therefore, this Court utilizes the language of Section 4(l)(2)(B) of the Law (related to independent contractors) to fill the gap. Beacon Flag Car Co., Inc. v. Unemployment Comp. Bd. of Review, 910 A.2d 103 (Pa. Cmwlth. 2006) (the clear purpose of Section 402(h) of the Law is to exclude independent contractors from coverage).
Section 4(l)(2)(B) of the Law provides in pertinent part:
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 and 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). Both prongs of Section 4(l)(2)(B) of the Law must be satisfied before an individual is considered an independent contractor. C.A. Wright Plumbing Co. v. Unemployment Comp. Bd. of Review, 293 A.2d 126 (Pa. Cmwlth. 1972) (en banc). A strong presumption exists that an individual receiving wages for his services is an employee, and the burden to overcome that presumption rests on the employer. Sharp Equip. Co. v. Unemployment Comp. Bd. of Review, 808 A.2d 1019 (Pa. Cmwlth. 2002).
As to the first element, case law provides general guidelines to apply to an employment relationship to determine whether the employer exercised control over the worker. Hammermill Paper Co. v. Rust Eng'g Co., 430 Pa. 365, 243 A.2d 389 (1968). However, because each determination requires an examination of the actual working relationship between the worker and the employer, each case is fact specific and all factors and considerations may not be present. Id. Furthermore, although "every job, whether performed by an employee or by an independent contractor, has parameters and expectations," our analysis hinges on whether such expectations are with regard to a final work product, or to the manner it is accomplished. C E Credits OnLine v. Unemployment Comp. Bd. of Review, 946 A.2d 1162, 1168 (Pa. Cmwlth. 2008).
In the context of a commissioned salesperson, this Court considers several factors to be determinative of whether an employer exercised control over the salesperson. Electrolux Corp. v. Dep't of Labor & Indus., 705 A.2d 1357 (Pa. Cmwlth. 1998). These factors include: (1) the employer requiring a number of client interviews within a time period; (2) the employer demanding the salesperson file regular progress reports; (3) mandatory attendance at meetings; and, (4) the salesperson's assignment to a particular territory. Id.; D.K. Abby Marketing, Inc. v. Unemployment Comp. Bd. of Review, 645 A.2d 339 (Pa. Cmwlth. 1994) (citing Alstrom v. Unemployment Comp. Bd. of Review, 481 A.2d 1238 (Pa. Cmwlth. 1984)).
In weighing the relevant considerations, our analysis in Electrolux is instructive. There, the sales representatives, much like Claimant, had no set hours, worked away from their employer's premises, did not receive training or health benefits, and paid their own work-related expenses. However, unlike Claimant, the sales representatives had no sales quotas, and they were not required to attend any meetings or submit sales reports. Furthermore, they were free to employ whatever sales methods they chose without direction or supervision. Thus, in Electrolux, we determined the employer did not control the sales representatives as employees.
Here, unlike in Electrolux, Employer required Claimant to adhere to set minimum expectations regarding the frequency of her meetings with retailers. F.F. No. 21. Moreover, Employer required that Claimant attend regular conference calls and tradeshows and that she notify Employer if she could not be present. F.F. Nos. 14, 24. While these meetings and tradeshows may have been arranged by clients, it was Employer that demanded Claimant's participation. Id. Furthermore, Employer maintained regular communication with Claimant demanding weekly sales reports, updates about Claimant's meetings and progress, and quarterly/annual business plans for each retailer. F.F. Nos. 7, 12-13, 18, 23; R.R. 39a, 66a.
Additionally, the structure of Employer's business further evidences Employer's control over how Claimant sold product lines to retailers. Although Employer did not assign Claimant to a set geographic territory, it assigned retailers to Claimant. Also, it prequalified and assigned leads among the sales representatives. F.F. Nos. 15-16, 18. Employer's President testified she had the authority to take accounts away from sales representatives. R.R. at 41a. Furthermore, any new account Claimant signed was subject to Employer's review and approval. F.F. Nos. 20, 22. Cf. Electrolux (the employer's review of a sale was limited to examining the contract's accuracy and completeness). Employer's assignment of work, although not geographic in nature, is equivalent to assigning a salesperson to a territory.
As such, the conditions of Claimant's employment weigh heavily in favor of Claimant being an employee under the factors identified in Electrolux. Moreover, these findings evidence Employer's level of control over the manner in which Claimant sold product lines to retailers. See C E Credits OnLine.
Further, although Employer explained to Claimant that she was an independent contractor, the parties did not reduce their agreement to writing. F.F. Nos. 4-5. Moreover, here, the existence of an understood independent contractor agreement, and the use of federal income tax form 1099, are not determinative on the issue of control. Kurbatov v. Dep't of Labor & Indus., 29 A.3d 66 (Pa. Cmwlth. 2011) (use of 1099 tax form and executing an independent contractor agreement is not dispositive in light of evidence of an employer's actual control); Glatfelter Barber Shop v. Unemployment Comp. Bd. of Review, 957 A.2d 786 (Pa. Cmwlth. 2008). As these factors reflect how Employer attempted to operate its business, rather than the level of control it exercised over Claimant, neither is persuasive in light of the overwhelming evidence of Employer's control. See Kurbatov. Thus, the Board did not err in determining Employer maintained control and direction over Claimant.
As Employer did not establish Claimant worked free from its control and direction, it failed to overcome the presumption that Claimant worked as an employee. See Sharp Equip. Co. Therefore, we need not consider, under Section 4(l)(2)(B) of the Law, whether Claimant customarily engaged in an independently established trade or business in rendering her services. Thus, we discern no error in the Board's determination that Claimant was Employer's employee.
Accordingly, we affirm.
/s/_________
ROBERT SIMPSON, Judge ORDER
AND NOW, this 25th day of May, 2012, the order of the Unemployment Compensation Board of Review is AFFIRMED.
/s/_________
ROBERT SIMPSON, Judge