The opinion of the court was delivered by: Patricia A. McCULLOUGH, Judge
Submitted: August 3, 2012
BEFORE: HONORABLE BERNARD L. McGINLEY, Judge
HONORABLE ROBERT SIMPSON, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge
OPINION BY JUDGE McCULLOUGH
Michael J. Lello (Claimant) petitions for review of the December 23, 2011 orders of the Unemployment Compensation Board of Review (Board) affirming four decisions of a referee, who determined that Claimant was ineligible for benefits under section 402(h) of the Unemployment Compensation Law (Law) *fn1 for the compensable weeks ending April 2, 2011 through August 6, 2011, resulting in a fault overpayment of $7,266 subject to recoupment, and imposing a 16-week penalty. We reverse.
In February 2011, Claimant began receiving unemployment benefits based upon his termination from employment with Wilkes Barre Publishing Company (Employer). Beginning April 1, 2011, Claimant submitted written assignments to Issue Media Group (IMG) and, beginning May 1, 2011, Claimant performed copy editing assignments for American Online (AOL), working as an independent contractor. (Notes of Testimony (N.T.) at 8.) Claimant called the Scranton service center to clarify that he was not employed full-time but had accepted freelance work with IMG and AOL. The service center then initiated an investigation during which Claimant reported his income from IMG and AOL. (N.T. at 9; Record Item No. 2.) On August 15, 2011, the Department of Labor and Industry (Department) issued two Notices of Determination (Notices) finding that Claimant was self-employed and denying benefits to Claimant pursuant to section 402(h) of the Law. (Record Item No. 5.) The Notices listed AOL and IMG as Claimant's putative employers.*fn2 (Record Item No. 5.)
Claimant timely appealed the Notices, explaining on each of his appeal petitions that he "[was] not seeking [benefits] based on this employer. He did only very limited part-time freelance work for this employer." (Record Item No. 6.)
Despite being provided proper notice, neither AOL nor IMG appeared at the referee's October 3, 2011 hearing. (Record Item No. 11.) Claimant acknowledged that he began working for AOL and IMG after he was terminated by Employer. (N.T. at 3.) He was paid at the rate of $125 or $200 per article written for IMG and $7.50 per article edited for AOL. (N.T. at 3.) Claimant testified that he was "sometimes" assigned articles if he was available, he could accept or reject the assignments, and he completed the assignments from his home, using his personal computer and other items that he already had for his personal use. (N.T. 4-5.) In response to the referee's questions, Claimant testified that he believed he was entitled to continuing benefits based on his previous separation from employment with Employer because he spent only an insubstantial amount of time on this part-time work, which he considered to be a sideline activity. (N.T. at 6.)
Claimant testified that while he was employed with Employer, he spent a few hours each week submitting album reviews and interviews for TopManners.com, a music website, and writing articles for Guacovision, a music publication. He also informally contributed to entertainment websites operated by friends and acquaintances. (N.T. at 7-8.) Claimant said that he was not paid for that work, but he submitted the assignments in the hope of obtaining similar work for pay. (N.T. at 7.) Claimant stated that while he was working for Employer, he spent about five hours per week on unpaid freelance work and after his separation from Employer, he spent roughly the same amount of time on the freelance work he submitted to AOL and IMG. (N.T. at 8.) Claimant described his income from AOL and IMG as "slight" and, based on the minimal time expended, he considered that work to be a sideline activity relative to his primary livelihood. The record does not reflect how many assignments Claimant accepted and completed or how much Claimant earned from AOL and IMG. (N.T. at 10.)
The referee issued two essentially identical decisions on October 4, 2011, and the referee's relevant findings of fact may be summarized as follows. Claimant was attached to IMG as a freelance writer at a rate of $125-$200 per article from April 1, 2011 to May 26, 2011, and he was attached to AOL as a copy editor at a rate of $7.50 per article edited from May 1, 2011 to June 30, 2011. Claimant had previously been employed by Employer as an editor from July 3, 2007 until February 25, 2011; his separation from that employment is not at issue in these appeals. Claimant, IMG, and AOL considered Claimant to be an independent contractor with respect to the work he performed for those entities.
AOL and IMG provided Claimant with a form 1099. Claimant was free from direction and control in the performance of his assignments with AOL and IMG. Because Claimant uses his own computer, internet services, pens, paper, and other office materials, he has an investment in the business. He works from home, sets his own hours, and receives no benefits from either AOL or IMG. (Record Item No. 12.)
Based on these findings, the referee concluded that Claimant was an independent contractor, was customarily engaged in an independently established trade, and therefore, was self-employed. The referee rejected Claimant's contention that he should not be disqualified from continuing to receive benefits based on this part-time, sideline activity on the grounds that the activity at issue did not continue without change after his separation from Employer, but, rather, only began after that separation. Relying on section 402(h) and section 4(l)(2)(b) of the Law, the referee affirmed the Department's determinations that Claimant was ineligible for benefits. (Record Item No. 12.)
Claimant appealed to the Board, arguing that the referee's findings were unsupported by substantial evidence and that the referee erred when he found that Claimant's work was not a sideline business. (Record Item No. 13). The Board issued separate orders affirming the referee's decisions and adopting the referee's findings and conclusions. Claimant then appealed to this Court,*fn3 and we granted the Board's request to consolidate the appeals.
Claimant argues that his uncontradicted testimony established that his work for AOL and IMG was a sideline activity that does not render him ineligible for benefits pursuant to section 402(h) of the Law. In relevant part, section 402(h) provides that an employee is ineligible ...