Does Gig Work Affect Unemployment Benefits?

It is hard to understate the effect of COVID-19 on Pennsylvania’s economy. The most recent figures show that Pennsylvania’s unemployment rate is 13.0% — higher than the nationwide rate of 11% — and approximately 90,000 Pennsylvanians who have applied for unemployment benefits between March 15 and June 20 are still awaiting payments. Given this dire situation, it is unsurprising that many individuals who have been laid off are turning to work in the “gig economy” through services like Uber and Grubhub to try and make ends meet. But are those individuals self-employed and therefore ineligible for unemployment compensation benefits?

The Pennsylvania Supreme Court answered this question last week in its decision in Lowman v. Unemployment Compensation Board of Review. In Lowman, the claimant was laid off from his job as a behavioral health specialist. While his application for benefits was pending, the claimant signed up to drive for Uber and earned approximately $350.00 per week in this role. The claimant reported his Uber earnings to the Unemployment Compensation Services Center, which issued a Notice of Determination finding him ineligible for continued benefits because he was self-employed. The claimant appealed this determination to a referee and, subsequently, the Unemployment Compensation Board of Review, both of which found that he was self-employed and therefore ineligible for benefits.

Undeterred, the claimant appealed to the Commonwealth Court. In a published en banc decision, the court reversed, concluding that the claimant was not self-employed because it was not shown that his Uber driving was an independent business venture. This conclusion was based on the court’s determination that did not take any “positive steps” to hold himself out as a commercial driver or prepare for a driver-for-hire business.

The Pennsylvania Supreme Court affirmed the Commonwealth Court’s decision by a 5-2 vote, but rejected the Commonwealth Court’s “positive steps” test. The Supreme Court noted that Section 753(l)(2)(B) of the Unemployment Compensation Law contains the appropriate test for determining whether or not an individual is in self-employment. Pursuant to that section, services performed by an individual for wages are deemed to be “employment” rather than “self-employment” unless it is shown that: (a) the 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” (i.e., the “control factor”) and (b) as to such services the individual is “customarily engaged in an independently established trade, occupation, profession, or business” (i.e., the “independence factor”).

The Supreme Court ruled that the claimant was not free from Uber’s direction or control because Uber monitored and supervised his provision of services through GPS and passenger reviews in the Uber app. It also determined that the claimant’s activities did not constitute an “independently established” business, as he had no ability to set his compensation for providing a ride, communicate independently with customers, or hire someone else to provide services to a passenger made available to him by Uber. Having ruled that the claimant was engaged in “employment” rather than “self-employment” and was therefore eligible for benefits, the court remanded for the purpose of determining whether his wages exceeded his partial benefit credit.

The Lowman decision serves to remind Pennsylvania employers that their laid off employees will not necessarily lose unemployment benefits because they are engaged in “gig” work while looking for new employment. For questions about this or any other labor and employment issues, please do not hesitate to contact the attorneys at Hoffman & Hlavac.  To stay updated on the key labor and employment law developments that affect your workplace, subscribe to our blog and follow us on social media.