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Pathways Counseling Services, LLC v. Commonwealth, Department of Labor and Industry

Commonwealth Court of Pennsylvania

July 12, 2019

Pathways Counseling Services, LLC, Petitioner
v.
Commonwealth of Pennsylvania, Department of Labor and Industry, Respondent

          ARGUED: April 10, 2019

          BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE P. KEVIN BROBSON, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE ANNE E. COVEY, Judge, HONORABLE CHRISTINE FIZZANO CANNON, Judge HONORABLE ELLEN CEISLER, Judge.

          OPINION

          ELLEN CEISLER, JUDGE.

         Pathways Counseling Services, LLC (Pathways) petitions for review from a decision and order of the Department of Labor and Industry, Office of Unemployment Compensation Tax Services (Department) denying Pathways' petition for reassessment. Pathways argues it is not the employer of the professional counselors who provide services in its building and to whom it provides client referrals. Accordingly, Pathways contends the Department erred in assessing unemployment compensation (UC) taxes related to those counselors. After thorough review, we reverse.

         I. Background

         A. Counselors' Contracts with Pathways

         Pathways has contracts with a number of insurance companies to provide referrals for counseling, the costs of which are covered by insurance. Insurers do not contract directly with individual psychologists or counseling practices. Instead, Pathways contracts with the counselors and provides them with referrals from the insurers. The counselors are then compensated through Pathways with funds paid by the insurers for the counseling services provided to their insureds.

         Pathways also has clients who are referred for counseling by other agencies or providers. Pathways in turn refers those clients to the counselors. Payment is made through Pathways by the clients for those services as well.

         Pathways provides office space to each counselor with whom it contracts. Pathways provides each office with telephone and fax service, as well as limited furniture. However, counselors supply most of their own office furnishings. Pathways also provides billing service. Although counselors are not required to use that service, they generally do take advantage of it. Counselors are responsible for their own professional licensing and fees, as well as professional liability insurance. Pathways does not provide any employment benefits.

         In return for its referrals, office space, and other services, Pathways retains a percentage of the fees it receives on behalf of each contracting counselor. The percentage retained varies individually between 30% and 40%. If for any reason an insurer or client does not pay for service, the counselor who provided that service is not paid by Pathways. Thus, each counselor bears the primary risk of any nonpayment for services by or on behalf of a client, although Pathways also risks losing its 30-40% fee for unpaid services.

         Counselors are free to, and do, accept counseling clients from sources other than Pathways. Counselors are likewise free to, and do, enter into services contracts with entities other than Pathways, providing services at various institutions.[1]

         Counselors choose their own business card designs, as well as the information to be included on the business cards. They are not required to identify any affiliation with Pathways on their business cards. Pathways features its counselors on its website, but individual counselors may market their practices separately as well.

         Counselors decide which referrals to accept from Pathways, as well as what other clients and contracts to accept. Counselors may decline referrals from Pathways at their discretion without adverse consequences, although Pathways acknowledged its business model would not work if the counselors did not accept any of its referrals.

         Counselors set their own hours and control their own schedules. They have their own keys to the building and are free to schedule appointments outside normal business hours if they wish.

         Further, Pathways does not set the amounts of clients' fees; counselors and clients determine the fee amounts, presumably subject to limits on insurance coverage amounts if applicable. A counselor may also freely ...


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