Being Denied PA UC Benefits Due to Self-Employment

Section 402(h) is the section of the Pennsylvania Unemployment Compensation Law which states that a claimant is ineligible for unemployment benefits if they are self-employed.

What many people do not realize is that once they become self-employed, they are ineligible to collect unemployment benefits. Most people who have lost their employment and have had trouble regaining employment often try to start their own business. While this feels like the right thing to do, once you decide to take the leap to start your own business, you can no longer collect unemployment benefits. If you claim benefits while you are self-employed, you may be required to pay back any benefits you received while you were self-employed.

Another area where this body of law arises is when the claimant accepts a position with an employer and is classified as an independent contractor and earns wages on a 1099 basis rather than as a W-2 employee. In some cases, the Department of Labor will investigate a claimant’s wage claims and if the claimant receives wages on a 1099 basis, it raises a red flag and the Unemployment Compensation Service Center may issue a determination stating that a claimant is ineligible to receive benefits since they are self-employed. Please be advised that you have the right to appeal this determination by filing an appeal within 15 days.

Just because a worker is labeled an “independent contractor” by an employer doesn’t necessarily make it so, even if there is a written contract stating that the employee is considered an independent contractor. The Department of Labor will look to see whether the claimant was truly an independent contractor or if they should have been classified an employee. The Department of Labor essentially adopts the IRS 20-factor test on employee classification. All the factors used essentially come down to who has the right to control how the job is performed.

If the employer exercises a substantial degree of control over how the job is performed, the worker should be classified as an employee, which may lead to a reversal of the unemployment denial. For example, if the employer sets the workers schedule, tells the worker how to perform the job, and the employer provides tools or materials, the worker should be classified as an employee even if the employer argues that the employee is an independent contractor.

If your unemployment benefits have been denied or contested under Section 402(h) of the law due to self-employment, please call me for a consultation at (484) 362-9286. You must appeal the determination within fifteen (15) days and I would be happy to discuss representing you at your hearing. I am an attorney specializing in unemployment compensation law and primarily represent clients located near Bethlehem, Pennsylvania.

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