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Resource Staffing, Inc. v. Unemployment Compensation Board of Review

IN THE COMMONWEALTH COURT OF PENNSYLVANIA


May 13, 2010

RESOURCE STAFFING, INC., PETITIONER
v.
UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, RESPONDENT

The opinion of the court was delivered by: Judge McCULLOUGH

Submitted: March 5, 2010

BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge.

OPINION

Resource Staffing, Inc. (RSI) petitions for review of the August 28, 2009, decision and order of the Unemployment Compensation Board of Review (Board), which, on remand, held that Edward W. Bush (Claimant) is not ineligible for benefits pursuant to section 402(h) of the Unemployment Compensation Law (Law).*fn1 We reverse.

Claimant is an experienced Microsoft systems engineer and administrator. RSI, an information technology consulting agency, located Claimant's resume on Monster.com and offered him a six-month contract position. Claimant signed a Contractor Agreement (Reproduced Record (R.R.) at 55a-62a) on October 30, 2006, and he worked for Carpenter Technology (the client), at the client's facility, from November 13, 2006, through September 20, 2007. (Board's Finding of Fact, No. 1.)

Following the completion of the project, the local job center approved Claimant's application for benefits, concluding that Claimant was not self-employed pursuant to section 402(h) of the Law. (R.R. at 1a.) RSI appealed, and a referee conducted an evidentiary hearing at which Claimant and Ms. Hensinger, RSI's representative, testified. The referee affirmed the job center's determination, concluding that RSI failed to meet its burden to show that Claimant was free from RSI's direction or control in the performance of his work. RSI appealed to the Board, which affirmed the referee's decision, adopting and incorporating the referee's findings and conclusions. (R.R. at 78a.) RSI then petitioned this Court for review, and in Resource Staffing, Inc. v. Unemployment Compensation Board of Review, 961 A.2d 261 (Pa. Cmwlth. 2008), we vacated the Board's order and remanded to the Board with instructions to issue additional findings of fact.*fn2

On August 24, 2009, the Board issued a second decision and order, again affirming the referee's determination that Claimant is not ineligible for benefits pursuant to section 402(h) of the Law. In relevant part, the Board found that: (1) RSI required Claimant to work a set schedule; (2) Claimant was required to notify RSI before taking sick or vacation time; (3) RSI admitted that it directly supervised Claimant; (4) Claimant was required to attend meetings on site to discuss the progress of his work with the client and RSI; and (5) Claimant was required to submit timesheets to RSI.*fn3 (Board's Findings of Fact, Nos. 7, 9, 17, and 18; R.R. at 90a.) Based on these findings, the Board concluded that RSI exercised control over Claimant's work. The Board further found that: (1) Claimant performed his work for RSI alone; (2) Claimant did not have time to perform services for anyone else due to the nature of his work with RSI; and (3) Claimant was limited in his ability to seek additional work due to the Contractor Agreement. (Board's Findings of Fact, Nos. 6, 23, and 24; R.R. at 91a.) Based on these findings, the Board concluded that RSI failed to establish that Claimant worked independently.*fn4

On appeal from the Board's August 24, 2009, decision and order, RSI argues that the Board's findings of fact are not supported by substantial evidence and that the Board erred in holding that Claimant was an employee of RSI rather than an independent contractor.*fn5 We agree.

Pursuant to section 402(h) of the Law, an employee is ineligible for benefits for any week in which he is engaged in "self-employment." The Law does not define the term "self-employment"; however, section 4(l)(2)(B) of the Law defines "employment" as follows:

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). Section 4(l)(2)(B) of the Law creates a presumption that an individual working for wages is an employee. Beacon Flag Car Company, Inc. v. Unemployment Compensation Board of Review, 910 A.2d 103 (Pa. Cmwlth. 2006). A putative employer has the burden to overcome this presumption by demonstrating that: (1) the individual was free from control or direction in the performance of his work;*fn6 and (2) the individual was customarily engaged in an independently established trade, occupation, profession or business while providing such services. Id.

We agree with RSI that the record does not support the Board's pertinent findings of fact; to the contrary, the record reflects that RSI did not control or have the authority to control Claimant's work or manner of work. Claimant himself testified that RSI did not provide him with his daily assignments. Instead, Claimant testified that he was given work each day by a manager employed by the client and that he was supervised by numerous individuals who worked for the client.*fn7 (R.R. at 17a, 25a.) This testimony is consistent with the terms of the Contractor Agreement, which state that Claimant shall have the discretion to control the means and manner of his work and that the evaluation of his performance shall be made by the client.*fn8

Nonetheless, the Board determined that RSI exercised control over Claimant, reasoning as follows:

The claimant was required to work a set schedule at a specific location and for forty hours a week. The claimant was required to notify RSI of any sick time and any time taken for vacation. RSI admitted that it directly supervised the claimant's work, both in person and by phone contact and that the claimant was required to attend meetings on site to discuss the progress of his work with the client and RSI. The claimant was required to submit a timesheet for all of his time worked to RSI and that such time was also confirmed by the client.

(R.R. at 90a.)

We conclude that the Board's analysis distorts the evidence, which establishes that Claimant was required to give notice before taking vacation or sick-time so that RSI could ensure the project was completed in a timely manner*fn9 and that Claimant's hours and work locations were dictated by the client. (R.R. at 10a.) Although Ms. Hensigner stated that RSI was Claimant's supervisor, she testified that RSI's supervision of Claimant was limited to payroll matters and obtaining general assurance that the project requirements were being satisfied. (R.R. at 12a.) In fact, according to Claimant, he spoke with Ms. Hensinger every other month and met with her twice during the relevant period. (R.R. at 24a.) Thus, the evidence of record indicates that RSI exercised the minimal amount of control necessary to ensure the quality of services provided to the client.*fn10

Therefore, we conclude that the Board's contrary findings of fact are not supported by substantial evidence*fn11 and that RSI satisfied its burden to demonstrate that it did not control Claimant's work or manner of performance.

The second prong of the independent contractor test focuses on whether a claimant was engaged in an independently established trade. Viktor, Ltd. v. Department of Labor and Industry, 586 Pa. 196, 892 A.2d 781 (Pa. 2006). The following factors are relevant in determining if a claimant operated independently: (1) whether the individual was capable of performing the activities in question to anyone who wished to avail themselves of the services; and (2) whether the nature of the business compelled the individual to look to only a single employer for the continuation of such services. Krum v. Unemployment Compensation Board of Review, 689 A.2d 330 (Pa. Cmwlth. 1997).

The Board concluded that RSI failed to demonstrate that Claimant operated independently based on Claimant's testimony that he performed his work for RSI alone and that he simply did not have any additional time in the day to perform services for anyone else. (Board's Findings of Fact, Nos. 23-24; R.R. at 91.) The Board also concluded that Claimant was limited in his ability to seek work for others through restrictions in his contract with RSI. (Board's Finding of Fact, No. 6; R.R. at 91.)

However, although Claimant spent a considerable amount of time at the client's location, Claimant admitted that his schedule was flexible, (R.R. at 18a), and that the Contractor Agreement permitted him to provide his services to others.*fn12 Therefore, Claimant was not compelled to look to one employer for the continuation of services; Claimant was permitted to provide services to RSI, the client or other employers. In addition, although the Contractor Agreement included a non-compete clause, this Court has repeatedly held that the inclusion of a non-compete clause, by itself, does not establish an employee and employer relationship. Beacon. Thus, we conclude that the evidence does not support the Board's determination but, instead, establishes that RSI satisfied its burden to demonstrate that Claimant operated independently.

Because we conclude that Claimant was an independent contractor, we hold that Claimant is ineligible for unemployment benefits pursuant to section 402(h) of the Law. Accordingly, we reverse the decision of the Board.

ORDER

AND NOW, this 13th day of May, 2010, the order of the Unemployment Compensation Board of Review, dated August 28, 2009, is hereby reversed.

PATRICIA A. McCULLOUGH, Judge


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