                 IN THE COMMONWEALTH COURT OF PENNSYLVANIA

WIT Strategy,                                   :
                              Petitioner        :
                                                :
                       v.                       :
                                                :
Unemployment Compensation                       :
Board of Review,                                :   No. 1161 C.D. 2016
                    Respondent                  :   Submitted: December 9, 2016


BEFORE:        HONORABLE MARY HANNAH LEAVITT, President Judge
               HONORABLE ANNE E. COVEY, Judge1
               HONORABLE DAN PELLEGRINI, Senior Judge


OPINION NOT REPORTED

MEMORANDUM OPINION BY
JUDGE COVEY                                         FILED: November 27, 2017

               WIT Strategy (WIT) petitions this Court for review of the
Unemployment Compensation (UC) Board of Review’s (UCBR) June 15, 2016 order
affirming the Referee’s decision concluding that Jillian Ivey’s (Claimant) earnings
with WIT are includable in her base year as wages for employment. WIT presents
two issues for this Court’s review: (1) whether the UCBR erred by determining that
Claimant was a WIT employee rather than an independent contractor; and (2)
whether WIT’s due process rights were violated. After review, we affirm.
               On June 13, 2013, WIT extended Claimant an offer of employment as an
associate earning $7,000.00 per month (base salary), plus a $400.00 monthly
healthcare stipend which Claimant accepted. Claimant and WIT did not enter into an
independent contractor agreement. Claimant’s job duties included: media relations,
ghost writing, communication strategy, speaking with the media, performing market


      1
          This case was reassigned to the opinion writer on March 28, 2017.
research,    positioning      client    products,      and    drafting     website     content     and
communication materials. WIT required Claimant to establish a limited liability
company through which it would pay her.2 On July 1, 2013, Claimant registered
Jilletante Creative, LLC (LLC). Claimant is the sole member of the LLC, and it has
no employees.
               Claimant had a WIT e-mail address and a personal e-mail address.
Claimant worked 40 hours per week for WIT, wherein she was responsible for
servicing between five and seven of WIT’s clients. WIT paid Claimant a commission
based on a percentage of the income WIT received from the client accounts Claimant
serviced, which was often over but never under the $7,000.00 per month base salary.
When Claimant’s commissions increased, WIT stopped paying Claimant the $400.00
healthcare stipend.       WIT paid the LLC for Claimant’s services.                    WIT did not
withhold taxes from Claimant’s pay, and issued the LLC a 1099 Tax Form for 2014
evidencing that Claimant earned $154,655.36.
               On October 15, 2013, Claimant e-mailed WIT’s managing partner Mark
Naples (Naples) and asked if she could attend an event at Temple University. Naples
responded: “I don’t care WHERE you spend your time. I only care that you service
your clients to the degree that I promised them.” Notes of Testimony March 4, 2016
(N.T.) Ex. C-2, Reproduced Record (R.R.) at 94a. Notwithstanding, he criticized
Claimant for taking breaks, expressed his dissatisfaction with the amount of time


       2
           The Dissent completely ignores the undisputed fact that WIT required Claimant to form
the LLC. The Dissent compounds this omission by stating that WIT reported Claimant’s payment
for services rendered on a Form 1099 as “an important factor” when in fact a Form 1099 is the only
method to report payment from one corporate entity to another. Dissenting Op. at 6. Because WIT
mandated Claimant to establish an LLC, the method of reporting payment for services based on the
facts of this case is totally irrelevant. Further, the Dissent bases its conclusion that Claimant was an
independent contractor on the fact that Claimant continued to operate as an LLC after her
separation from WIT. However, anything that occurred with the LLC after the period of time at
issue, i.e., the time Claimant worked for WIT, is irrelevant to the issues before the Court.
                                                   2
Claimant was spending with clients, and warned Claimant that she should “consider
[her]self under review.”3 Id.
               In August/September 2014, WIT assigned Claimant managerial duties.
In addition, WIT requested that Claimant perform a task for one of its clients which
required Claimant to perform research as well as understand the client’s reports and
issues, but Claimant could not reach the client. Claimant asked Naples if he could
help her get in touch with WIT’s contact so she could perform the requested work.
Moreover, during this time period, Naples advised Claimant that she was not
responding correctly to e-mails, so he instructed her on the proper protocol.
Dissatisfied with Claimant’s work, WIT demoted Claimant to work as a tactician
which was a complete change in her responsibilities. Her new duties required her to
take notes on calls and engage with reporters, for which she earned less
compensation, between $9,000.00 and $10,000.00 per month.                        WIT ended the
employment relationship on April 1, 2015, due to its dissatisfaction with Claimant’s
tactician work.
               Claimant applied for UC benefits. On May 5, 2015, the Erie UC Service
Center determined that Claimant was not financially eligible for UC benefits because
she had zero wages from employment for base year 2014.4 Claimant appealed and a
Referee hearing was held on July 30, 2015.5 On August 14, 2015, the Referee
vacated the UC Service Center’s determination, and remanded the case to the UC
Service Center to determine if the remuneration WIT paid Claimant through the LLC


       3
          The Dissent disregards this portion of the e-mail and carves out only the first part of the
email as indicia that WIT had no control over the “time, place and manner in which Claimant
completed her projects.” Dissenting Op. at 6. The latter part of the e-mail proves otherwise.
        4
          Although there is a copy of the May 5, 2015 UC Service Center determination in the
record, see R.R. at 108a, the Referee’s decision states that the hearing was the result of a June 29,
2015 UC Service Center determination which does not appear in the record. See R.R. at 104a.
        5
          Claimant appeared at the Referee hearing but WIT did not. WIT claims it did not receive
the hearing notice. Notwithstanding, the certified record does not contain a hearing transcript.
                                                 3
constituted wages for employment. On September 28, 2015, the UC Service Center
issued a revised determination finding Claimant financially ineligible for UC
benefits.6 Claimant appealed from that determination.
              On November 6, 2015, the Referee vacated the UC Service Center’s
determination, and remanded the matter to the UC Service Center to refer the action
to UC Tax Services to determine whether the remuneration WIT paid Claimant
through the LLC constituted wages for employment.7 On December 16, 2015, the
UC Service Center issued a revised determination, again finding Claimant was
financially ineligible for UC benefits.8 Claimant appealed from the UC Service
Center’s determination. However, Claimant’s appeal was inadvertently forwarded to
the UCBR as an appeal from the August 14, and November 6, 2015 Referee
decisions. See R.R. at 98a. On February 10, 2016, the UCBR dismissed the appeal
from the Referee decisions, and directed that Claimant’s appeal from the December
16, 2015 UC Service Center determination be forwarded to a Referee for
adjudication.
              A Referee hearing was held on March 4, 2016. On March 17, 2016, the
Referee ruled that “the remuneration that WIT issued to [C]laimant through [the]
LLC . . . is not excluded from the definition of ‘employment.’ The UC Service
Center . . . must . . . determine the amount of wages paid during each quarter of her
base year to determine her financial eligibility for UC [benefits].” R.R. at 125a.
Accordingly, the Referee vacated the UC Service Center’s December 16, 2015

       6
          The September 28, 2015 determination is referenced in the Referee’s November 6, 2015
decision, see R.R. at 102a, and the UCBR’s February 10, 2016 decision. See R.R. at 98a.
However, the September 28, 2015 determination is not in the record.
        7
          Although the Referee’s November 6, 2015 decision states that a hearing was held, the date
of the hearing is listed as November 16, 2015, which is five days after the decision and there is no
record of said hearing. See R.R. at 102a.
        8
          The December 16, 2015 determination is referenced in both the Referee’s March 17, 2016
decision, see R.R. at 123a, and the UCBR’s February 10, 2016 decision. See R.R. at 98a.
However, the December 16, 2015 determination does not appear anywhere in the record.
                                                 4
determination and remanded the matter to the UC Service Center to issue a revised
notice of financial determination. WIT appealed to the UCBR. On June 15, 2016,
the UCBR affirmed the Referee’s decision and ordered that “[i]f it has not already
done so, the [UC Service Center] shall calculate [C]laimant’s financial entitlement to
[UC] benefits. Thereafter, . . . the [UC Service Center] shall perform an investigation
and determine [C]laimant’s eligibility based on her separation from work with WIT.”
R.R. at 176a. WIT appealed to this Court.9
               WIT first argues that the UCBR erred by determining that Claimant was
a WIT employee rather than an independent contractor. Specifically, WIT contends
this conclusion is contrary to law and unsupported by substantial evidence.
               Initially,

               [p]ursuant to Section 402(h) of the [UC] Law [(Law)10], 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.




       9
          “Our scope of review is limited to determining whether constitutional rights were violated,
whether an error of law was committed, or whether the findings of fact were unsupported by
substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa.C.S. § 704.” Turgeon v.
Unemployment Comp. Bd. of Review, 64 A.3d 729, 731 n.3 (Pa. Cmwlth. 2013).
        10
           Act of December 5, 1936, Second Ex.Sess., P.L. (1937) 2897, as amended, 43 P.S. §
802(h).
                                                 5
            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.
            The burden to overcome the ‘strong presumption’ that a
            worker is an employee rests with the employer. To prevail,
            an employer must prove: (i) the worker performed his
            job free from the employer’s control and direction, and
            (ii) the worker, operating as an independent tradesman,
            professional or businessman, did or could perform the
            work for others, not just the employer. ‘[T]his two-
            pronged test is conjunctive and both prongs must be
            satisfied in order for persons rendering services for wages
            to be considered independent contractors.’ [Kurbatov v.
            Dep’t of Labor & Indus., Office of Unemployment Comp.,
            Tax Servs., 29 A.3d 66,] 70 [(Pa. Cmwlth. 2011)] (quoting
            Electrolux Corp. v. Dep’t of Labor & Indus., Bureau of
            Employer Tax Operations, 705 A.2d 1357, 1360 (Pa.
            Cmwlth. 1998)).
            A determination as to the existence of an
            employer/employee relationship is a question of law that
            depends on the unique facts of each case.

Quality Care Options v. Unemployment Comp. Bd. of Review, 57 A.3d 655, 659-60
(Pa. Cmwlth. 2012) (citations omitted; emphasis added).
            With respect to the first prong, WIT asserts that it did not control the
manner in which Claimant rendered her services, but only the parameters for the
services Claimant provided.     WIT cites Venango Newspapers v. Unemployment
Compensation Board of Review, 631 A.2d 1384 (Pa. Cmwlth. 1993), to support its
position. In Venango, newspaper carriers were considered independent contractors
because the carriers had complete control over the manner in which the papers were
delivered and they did not receive an hourly wage. WIT further maintains that it
merely exercised quality control over Claimant’s work. WIT relies on CE Credits
OnLine v. Unemployment Compensation Board of Review, 946 A.2d 1162 (Pa.
Cmwlth. 2008), wherein the Court held: “‘Control’ for purposes of Section 4(l)(2)(B)
of the Law is not a matter of approving or directing the final work product so much as

                                          6
it is a matter of controlling the means of its accomplishment.”              Id. at 1169
(emphasis added).
            Here, the UCBR opined:

            [T]he [UCBR] does not find that WIT has carried its burden
            of proving that [C]laimant worked free from direction and
            control. [C]laimant worked 40 hours per week servicing
            5-7 of WIT’s clients. There is no evidence that
            [C]laimant procured the clients on her own. When
            [C]laimant began to make more money, WIT
            unilaterally decided to stop paying her the $400[.00]
            healthcare stipend it originally offered her.           WIT
            expressed dissatisfaction at the amount of breaks
            [C]laimant was taking during the day and the amount of
            time [C]laimant was spending with the clients, and
            placed her under review.           WIT gave [C]laimant
            managerial duties, then instructed [C]laimant to
            perform research, understand reports, and understand
            issues in regard to a specific client. WIT instructed
            [C]laimant on how to answer e-mails, and when WIT was
            dissatisfied with [C]laimant’s work, it demoted [C]laimant
            to a tactician. These facts do not evidence a lack of control.
            Rather, it shows that WIT retained control over [C]laimant
            as an employee.

UCBR Dec. at 5 (emphasis added). The factors the UCBR relied upon, i.e., WIT
regulating the number of Claimant’s daily breaks, managing the amount of time
Claimant spent with clients, and instructing Claimant on how to perform research,
understand reports and answer e-mails, in addition to WIT unilaterally terminating
Claimant’s healthcare stipend, reducing Claimant’s base salary, changing Claimant’s
work duties and demoting Claimant, clearly indicate more than WIT merely
controlling the parameters for Claimant’s services and WIT’s mere approval of her
final work product. Rather, they demonstrate that WIT had control over the means of
how Claimant accomplished her work. See Quality Care Options; Venango. “It is
presumed that a person is an employee rather than an independent contractor. [The
putative e]mployer has the burden of proving otherwise.”                 Hartment v.

                                          7
Unemployment Comp. Bd. of Review, 39 A.3d 507, 511 (Pa. Cmwlth. 2012) (citation
omitted). Here, WIT has failed to meet its burden. Accordingly, this Court discerns
no error in the UCBR’s conclusion that WIT retained control over Claimant as an
employee.
              Relative to the second prong, WIT argues that Claimant was engaged in
an independent trade, occupation, profession or business. Specifically, WIT contends
that it permitted and encouraged Claimant to perform services for others. See Applied
Measurement Prof’ls, Inc. v. Unemployment Comp. Bd. of Review, 844 A.2d 632 (Pa.
Cmwlth. 2004) (Evidence that the claimant was capable of performing services for
anyone and the nature of the service was such that the claimant was not compelled to
look to a single employer in order to perform the services was sufficient to conclude
the claimant was customarily engaged in an independent trade or business.). WIT
further asserts that Claimant was not a WIT employee because she has a propriety
interest in the LLC. See Venango.
              In the instant case, the UCBR concluded:
              The [UCBR] does not find that [C]laimant was operating a
              trade or business, customarily or otherwise. The only
              reason [C]laimant formed the LLC was because WIT
              required it, claiming that it needed to pay [C]laimant
              through the LLC. WIT also claimed that doing so was a
              ‘common agency model’ for its kind of agency. The
              [UCBR] does not credit WIT’s testimony.[11] Rather,
              although [C]laimant did perform two projects for other
              entities, each for under $600[.00], there is no evidence that
              [C]laimant solicited business through her LLC since its
              inception in 2013 through her termination in 2015.

       11
          “In [UC] proceedings, the [UCBR] is the ultimate fact finder, and it is empowered to
resolve all conflicts in the evidence and to determine the credibility of witnesses.” Procito v.
Unemployment Comp. Bd. of Review, 945 A.2d 261, 262 n.1 (Pa. Cmwlth. 2008). “This Court’s
review of a decision by the [UCBR] does not permit it to reweigh the evidence or substitute its own
findings for those made by the [UCBR].” Chartiers Cmty. Mental Health & Retardation Ctr. v.
Unemployment Comp. Bd. of Review, 134 A.3d 1165, 1173 (Pa. Cmwlth. 2016).


                                                8
              [C]laimant worked for WIT 40 hours per week and did not
              have employees of the LLC to solicit business for her.
              Further, although WIT claimed that all its team members
              were required to have additional clients through their LLCs
              to share with it, WIT did not prove that [C]laimant had
              such clients. As [C]laimant did not operate a trade or
              business, but rather the LLC was formed as a type of shell
              corporation, the fact that [C]laimant was the single-
              member owner is not dispositive. [C]laimant was not
              customarily engaged in a trade, occupation, profession or
              business.

UCBR Dec. at 5 (emphasis added). Because WIT: (1) required Claimant to form the
LLC, (2) did not prove that Claimant solicited business for the LLC, and (3) did not
prove that the LLC had additional clients, this Court agrees with the UCBR’s
conclusion that the LLC was merely a shell corporation. The fact that WIT may have
permitted or encouraged Claimant to solicit other clients is irrelevant. Importantly,
the LLC was a single-person LLC and Claimant worked 40 hours a week for WIT’s
clients. “Indeed, because Claimant was fully engaged . . . with [WIT], she did not
have the opportunity to serve others.” Sharp Equip. Co. v. Unemployment Comp. Bd.
of Review, 808 A.2d 1019, 1024 (Pa. Cmwlth. 2002). Therefore, Claimant did not
have the time or ability to engage in an independent trade or business.12



       12
           The Dissent in disagreeing with the Majority concerning Claimant not having an
independent trade or business, states: “We have held that the relevant question is whether the
putative employer restricts the claimant from performing services for others, not whether a
claimant actually does so. Stauffer, 74 A.3d at 407. . . .” Dissenting Op. at 10 n.8 (emphasis
added). However, the facts of the instant case clearly reveal that because Claimant worked 40 hours
a week for WIT, the putative employer restricted Claimant’s ability to work for others.
Accordingly, contrary to the Dissent’s assertion, the statement “whether WIT encouraged Claimant
to work for others is irrelevant,” is a correct statement of the law. See Jia v. Unemployment Comp.
Bd. of Review, 55 A.3d 545, 549 (Pa. Cmwlth. 2012) (“despite the fact the claimant could work for
others, the evidence did not show the claimant was customarily engaged in an independent
business”); Sharp Equip. Co. v. Unemployment Comp. Bd. of Review, 808 A.2d 1019, 1024 (Pa.
Cmwlth. 2002) (“because Claimant was fully engaged from 9:00 a.m. to 5:00 p.m. for a full week
with [putative e]mployer, she did not have the opportunity to serve others”).
                                                9
Consequently, the Court holds that the UCBR properly ruled that Claimant was not
engaged in an independent trade or business.
              This Court notes that WIT placed great emphasis on the fact that the
LLC had two clients in addition to WIT’s clients and that Claimant testified that they
were “former clients.” R.R. at 75a. Although WIT’s argument is based on its
interpretation of Claimant’s testimony that the “former clients” were the LLC’s
former clients, the testimony can just as easily be interpreted to mean that Claimant
was referring to WIT’s former clients. Given that we must “examine the testimony
‘in the light most favorable to the prevailing party, [Claimant in this case, and] giv[e]
[her] the benefit of any inference that can logically and reasonably be drawn from the
evidence[,]’” we reject WIT’s interpretation of Claimant’s testimony.13 Johns v.
Unemployment Comp. Bd. of Review, 87 A.3d 1006, 1013 (Pa. Cmwlth. 2014)
(quoting Middletown Twp. v. Unemployment Comp. Bd. of Review, 40 A.3d 217, 223
(Pa. Cmwlth. 2012)). Accordingly, the UCBR properly concluded that Claimant was
a WIT employee rather than an independent contractor.
              WIT next argues that its due process rights were violated because the
Referee considered evidence that was lost or misplaced, and testimony that was taken
in WIT’s absence. “The law is clear that the [UCBR] is the ultimate finder of fact
and arbiter of witness credibility. Thus, as long as the [UCBR’s] factual findings are
supported by substantial evidence, those findings are conclusive on appeal.” Killian-
McCombie v. Unemployment Comp. Bd. of Review, 62 A.3d 498, 500-01 (Pa.
Cmwlth. 2013) (quoting Bruce v. Unemployment Comp. Bd. of Review, 2 A.3d 667,
671 (Pa. Cmwlth. 2010) (citation omitted)). Moreover, “[t]he UCBR, as fact-finder,
is not bound by the [R]eferee’s credibility determinations and can reverse the

       13
          The Dissent states: “Whether these projects were completed for [Claimant’s] former
clients or clients formally associated with WIT is not relevant.” Dissenting Op. at 10 n.7.
However, if the projects were completed for WIT’s former clients, it further evidences that
Claimant was not actively seeking her own clients but rather servicing WIT as opposed to her LLC.
                                               10
[R]eferee’s decision as long as its reasons for reversal are plain from the record and
adequate to permit effective judicial review.” Cumberland Valley Animal Shelter v.
Unemployment Comp. Bd. of Review, 881 A.2d 10, 13 n.4 (Pa. Cmwlth. 2005).
            Here, the UCBR explained:

            WIT argues that the Referee improperly relied on testimony
            from a prior hearing that was not introduced into the record
            and for which WIT never received notice. The [UCBR]
            agrees. The Referee made findings that were not supported
            by the record created at the March 4, 2016[] hearing. To
            the extent that she relied on testimony she recalled from a
            previous hearing, the transcript for which was not made part
            of this record, she erred. However, the [UCBR] denies
            WIT’s request for a remand to a new Referee as the
            [UCBR] makes an independent review of the record.

UCBR Op. at 3. WIT asserts that, notwithstanding the UCBR’s explanation, the
UCBR nonetheless relied on testimony from the prior hearing. However, our review
of the record does not disclose any such reliance, nor does WIT specify which
findings the UCBR made that were not supported by the record created at the March
4, 2016 hearing. “Where, as here, the [UCBR] makes its own findings of fact, it is
the [UCBR’s] determination, rather than the Referee’s, which is subject to our
review.” Viglino v. Unemployment Comp. Bd. of Review, 525 A.2d 450, 453 (Pa.
Cmwlth. 1987). Thus, this Court discerns no violation of WIT’s due process rights.
            WIT further contends:

            In addition to those errors explained in detail above, the
            [UCBR] erroneously concluded (just as the Referee had
            done) that the [UC Service Center] had not conducted a
            wage investigation as ordered, ‘instead deciding that as
            a single-member owner of a limited liability corporation,
            [C]laimant was considered similar to a sole proprietor
            and, thus, was a self-employed businessperson.’ As
            noted above, however, the Referee directed the [UC]
            Service Center, and not the Tax Services Office, to conduct
            an investigation. And, in fact, the UC Service Center did
            conduct an investigation, as memorialized by the Letter of

                                         11
            Explanation Revised Notice of Financial Eligibility Wage
            Discrepancy dated December 14, 2015. As the letter shows,
            the UC Service Center predicated its post-investigation
            determination of ineligibility on its conclusion that
            Claimant was free from WIT’s direction and control. As
            such, the [UCBR’s] claim that the ‘[UC Service Center] did
            not perform an investigation’ is demonstrably false, as is its
            assertion that the [UC] Service Center jumped to an ill-
            informed conclusion about Claimant’s status based solely
            on the fact that her company is a single-member LLC.

WIT Br. at 34 n.14 (citations omitted; emphasis added).
            However, on November 6, 2015, the Referee expressly “ORDERED that
[this] appeal . . . is REMANDED to the Erie UC Service Center to refer to UC Tax
Services to determine whether the remuneration WIT paid [C]laimant through
[the] LLC constitutes ‘wages for employment’ and to issue notice of said
determination in writing to both [C]laimant and WIT.” R.R. at 103a (emphasis
added). At the March 4, 2016 hearing, the Referee questioned the UC Tax Services
Representative with respect to the above order:
            R[eferee] Okay. [UC Tax Services Representative Welbon]
            Billups, I just have a few questions for you first.
            A[gency] R[epresentative] Yes.
            R This document [Printout entitled Wage Investigation
            System] that I marked as Exhibit 17, who made the entries
            that are typed in there?

            AR A tax agent from our office and also myself.

            ....

            R So according to that -- well, first of all, since I’m going to
            assume without having a copy of it that there was a
            Financial Determination issued on December 16th because
            there’s a printout in here . . . that tells me that, and it also
            says no Employer for [Claimant] date April 25, 2015. Did
            your office send the UC Service Center some type of report


                                          12
or information which they reached that conclusion on
December 16th of last year?

AR I believe the Determination was based strictly on the
fact that [Claimant]. . . [.]

R Hang on. You saw what I said earlier. I remanded this
case a couple of times trying to get the [UC] Service
Center to get actual information to do an investigation
as to whether this Claimant was paid wages for
employment in her base year. My question is did that
ever happen?

AR No. We didn’t have to do that.

....

R Yes. Hang on. Let me get the question on the record.
Did the [UC] Service Center refer this case to your office
for an investigation of that subject?
AR Yes.
R Okay. Was there a report done on that subject?

AR Yes.
R When?

AR The report is in that file right there.      That Wage
Investigation. That’s the report.

R Okay. Can you point out. . . [.]
AR That’s our, that’s our Determination.

R Okay. Can you point out where on there the date on
which that would have been transmitted to the [UC] Service
Center because I’m looking at a printout from January?
Obviously they couldn’t have used that when they made
their December Determination. What I’m trying to find out
here is whether [UC] Tax Services informed them of
something before they issued that December 16 Financial
Determination and if so, would that, Exhibit 17, reflect it.


                             13
AR Yes.

R Can you point out where?

AR On the 13th of January.

R That’s not before December 16th. . . . [D]oes that
printout indicate anywhere on it that a tax agent sent
the UC Service Center information prior to or we’ll say
after September 28 and prior to December 16 of which it
could make a new Financial Determination?
AR No.

R Well then again they didn’t comply with my Remand
Order.
AR We didn’t have to because our Determination is that []
Employer, [the LLC], is exempt from our unemployment
tax law.

R Yes. That’s your legal -- hang on. Pass the exhibit back
up, please. That’s your legal position here.
AR Yes it is.

R What I’m asking is did anybody conduct an
investigation as per my Order?

AR Well, actually we. . . [.]
R Can you give any testimony that you. . . [.]

AR No.
R . . . would like to give on that?

AR No I cannot. No.
R So in other words, the UC Service Center did not comply
with the Order instructing it to . . . [.]

AR Well, I don’t work for the UC Service Center.




                                14
R Hang on. As far as you know, they didn’t comply with
the Order instructing them to refer it for - investigation. Is -
that correct as far as you know?

AR I can’t speak for the UC Service Center.

R As far as you know is the question. Is that correct?

AR Yes.

R Okay. Well, is there anything else you would like to add?
AR No.

R Well, let me just ask. You started to make a legal
argument. Basically what you’re saying is that the
Claimant here as a human cannot be treated as the
equivalent as her LLC when it comes to counting the money
that’s paid to her during the base year. Is that correct?
AR No. I’m saying as an LLC, the owner of the LLC,
the wages that the owner earns from the LLC is exempt
from Pennsylvania Unemployment.
....

AR Well, we consider a sole LLC as a sole proprietorship.
It’s one of the things that an individual entity. . . [.]

R Okay. So what you’re telling me is that you consider
an individual to be the same thing as that individual’s
limited liability company that she created?
AR Exactly.

R And the reason why you’re saying that by definition
Section 402(b) [sic] [of the Law] excludes any money
that the LLC makes from the definition of employment?

AR Yes.
....
R Is there anything else you would like to add?

AR No.
                              15
R.R. at 64a-67a (emphasis added).
              The above testimony clearly demonstrates that the Referee and the
UCBR properly concluded that no investigation was conducted because as the UC
Tax Services Representative testified, it was the UC Tax Services’ belief that it was
not necessary since all LLCs are exempt from the definition of employment.14
Accordingly, the Referee and the UCBR properly concluded that, contrary to the
remand order, no wage investigation was performed.
              For all of the above reasons, the UCBR’s order is affirmed.


                                           ___________________________
                                           ANNE E. COVEY, Judge




       14
           The Dissent maintains that because the UCBR referenced the Department of Labor in its
explanation as to why it rejected the Department’s proclamation that wages earned by an LLC can
never be employment, “the hearing has been so tainted that the only appropriate remedy is a remand
for a new hearing[.]” Dissenting Op. at 12. However, the reference to the Department of Labor is
irrelevant to the argument that the Referee relied on the first hearing. Moreover, notwithstanding
the comments relative to the Department of Labor, the UCBR’s conclusion that “[t]he Department
should have performed the investigation as ordered by the Referee” is correct and supported by the
record. UCBR Dec. at 4.
                                               16
            IN THE COMMONWEALTH COURT OF PENNSYLVANIA


WIT Strategy,                          :
                        Petitioner     :
                                       :
                  v.                   :
                                       :
Unemployment Compensation              :
Board of Review,                       :   No. 1161 C.D. 2016
                    Respondent         :


                                     ORDER


            AND NOW, this 27th day of November, 2017, the Unemployment
Compensation Board of Review’s June 15, 2016 order is affirmed.



                                     ___________________________
                                     ANNE E. COVEY, Judge
          IN THE COMMONWEALTH COURT OF PENNSYLVANIA

WIT Strategy,                              :
                    Petitioner             :
                                           :
             v.                            : No. 1161 C.D. 2016
                                           : Submitted: December 9, 2016
Unemployment Compensation                  :
Board of Review,                           :
                 Respondent                :

BEFORE:      HONORABLE MARY HANNAH LEAVITT, President Judge
             HONORABLE ANNE E. COVEY, Judge
             HONORABLE DAN PELLEGRINI, Senior Judge

OPINION NOT REPORTED

DISSENTING OPINION
BY PRESIDENT JUDGE LEAVITT                               FILED: November 27, 2017

             Respectfully, I dissent. As the UC Service Center found, three times,
Jillian Ivey (Claimant) worked for WIT Strategy (WIT) as an independent
contractor, as that term has been defined under the Unemployment Compensation
Law (Law).1 I would reverse the adjudication of the Unemployment Compensation
Board of Review (Board) holding otherwise.
             WIT Strategy provides public relations and communication services to
clients. In 2013, WIT offered to contract with Claimant to provide these services on
referral from WIT. At that time, Claimant formed Jilletante Creative, LLC, and she
is its sole owner. WIT compensated Jilletante Creative different amounts each
month, depending on the amount of work done for WIT accounts. Claimant
described the compensation as “30 to 80 percent of the account retainers for the
accounts that I worked on,” depending on her account responsibilities. Notes of

1
 Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 42 P.S. §§751-
918.10.
Testimony, 3/4/2016, at 16 (N.T. ___); Reproduced Record at 72a (R.R. ___). In
2014, WIT issued a Form 1099 to Jilletante Creative for $154,655.36; individual
income taxes for Claimant were not withheld. During this period of time, Jilletante
Creative also provided consulting services to two clients that were not referred to
her by WIT.
              In September 2014, Claimant did not complete an assignment on a WIT
account. WIT revised her responsibilities to those of a “tactician;” as such, she took
notes at meetings with WIT clients and drafted “byline copy.” N.T. 26; R.R. 82a.
This revision in duties reduced the compensation available to Jilletante Creative to
$9,000 or $10,000 per month. N.T. 25; R.R. 81a. On April 1, 2015, WIT and
Jilletante Creative ended their relationship.
              Dispositive of Claimant’s eligibility for unemployment compensation
is Section 4(l)(2)(B) of the Law, which states, in pertinent part, 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). It is the burden of the putative employer to establish each
prong of the independent contractor exception, and WIT did so.
              The first prong of the Section 4(l)(2)(B) test is known as the “control”
test and considers several factors. A written agreement that describes the claimant
as an independent contractor, although not dispositive, is a significant factor. Stage
Road Poultry Catchers v. Department of Labor and Industry, Office of
Unemployment Compensation, Tax Services, 34 A.3d 876, 889 (Pa. Cmwlth. 2011).
                                        MHL-2
Other relevant factors include: “‘whether there is a fixed rate of remuneration;
whether taxes are withheld from the [individual]’s pay; whether the employer
supplies the tools necessary to carry out the services; whether the employer provides
on-the-job training; and whether the employer holds regular meetings that the
[individual is] expected to attend.’”       Id. (quoting CE Credits OnLine v.
Unemployment Compensation Board of Review, 946 A.2d 1162, 1168 (Pa. Cmwlth.
2008)). No one factor is dispositive of the question of control.
             The Board explained its finding that WIT controlled Claimant as
follows:

             The [C]laimant worked 40 hours per week servicing 5-7 of
             WIT’s clients. There is no evidence that the [C]laimant procured
             the clients on her own. When the [C]laimant began to make more
             money, WIT unilaterally decided to stop paying her the $400
             healthcare stipend it originally offered her. WIT expressed
             dissatisfaction at the amount of breaks the [C]laimant was taking
             during the day and the amount of time the [C]laimant was
             spending with clients, and placed her under review. WIT gave
             the [C]laimant managerial duties, then instructed the [C]laimant
             to perform research, understand reports, and understand issues in
             regard to a specific client. WIT instructed the [C]laimant on how
             to answer e-mails, and when WIT was dissatisfied with the
             [C]laimant’s work, it demoted the [C]laimant to a tactician.
             These facts do not evidence a lack of control. Rather, it shows
             that WIT retained control over the [C]laimant as an employee.

Board Adjudication, 6/15/2016, at 5; R.R. 175a. This explanation is flawed for
several reasons.




                                      MHL-3
               First and foremost, the Board conflated the concept of “quality control”
with the type of control exercised by a true employer. The latter controls the time,
place and manner by which the work is done.2 This Court has explained:

               “[C]ontrol of the result only and not the means of
               accomplishment” does not transform an independent contractor
               relationship into an employer-employee relationship. Every job,
               whether performed by an employee or by an independent
               contractor, has parameters and expectations. “Control” for
               purposes of Section 4(l)(2)(B) of the Law is not a matter of
               approving or directing the final work product so much as it is a
               matter of controlling the means of its accomplishment.

CE Credits OnLine, 946 A.2d at 1169 (quotation omitted).
               Second, the Board’s explanation is not supported by the record. The
Board claims that WIT “instructed” Claimant on “how to respond correctly [to
clients by e-mail].” Board Adjudication, 6/15/2016, at 2, Finding of Fact (F.F.) No.
18; R.R. 172a. This finding of fact is not supported by substantial evidence. WIT’s
witness testified that Claimant sent text and e-mail messages intended for her
husband to persons at WIT. In addition, in her e-mails to news reporters, Claimant
called one reporter by the wrong name.3 Bringing these mistakes to Claimant’s


2
  The failure to distinguish between quality control and actual control began with the Referee. In
determining that Claimant was under WIT’s direction and control, the Referee stated:
        While the [C]laimant worked independently to some extent, WIT maintained
        ultimate control over the work product, since WIT[’]s own clients ultimately had
        to be satisfied with such product. WIT’s managing partner became dissatisfied with
        the [C]laimant’s performance, in part due to one or more clients’ statements.
Referee Decision, 3/17/2016, at 3; R.R. 125a. This analysis supports the opposite conclusion.
WIT had expectations about the work Claimant sent to clients but allowed her to work
independently in its execution, a prime example of quality control versus actual control.
3
  Mark Naples, a principal of WIT, testified that WIT was unsatisfied with the quality of Claimant’s
work:


                                             MHL-4
attention did not constitute “instruction” on how to compose e-mails; it was not “job
training.” WIT was entitled to examine the quality of Claimant’s work as a public
relations professional. See CE Credits Online, 946 A.2d at 1169. For purposes of
the first prong, “control” requires evidence that the putative employer directs the
time, place and manner by which the work is done. It is not “control” to object when
a professional consultant sends text messages to the wrong recipient.
                The Board’s own factual finding established that WIT did not exercise
the control of an employer. When Claimant e-mailed Mark Naples, a principal of
WIT, for permission to speak at Temple University, he responded, “I don’t care
WHERE you spend your time. I only care that you service your clients to the degree
that I promise them.” Board Adjudication, 6/15/2016, at 2, F.F. No. 14; R.R. 172a
(emphasis in original).4 This finding alone establishes that WIT did not control the



       [H]er work had become so sloppy she was sending me text and e-mails that she
       intended for Ross, her husband who is an attorney. She had been sending reporters
       notes that had the other reporters (sic) name on it, sending Mike something intended
       for Jim.
N.T. 27; R.R. 83a.
4
  The majority contends that the latter portion of the e-mail proves that WIT controlled the time,
place and manner in which Claimant completed her projects. Majority, slip op. at 3 n.3. I disagree.
The e-mail, in total, reads:
       Jill –
       I don’t care WHERE you spend your time. I only care that you service your clients
       to the degree that I promise them.
       Seeing as you are back from the break you’re just back from, think this through.
       Are you up to speed on your accounts?
       Should you have sent me this today?
       You need to get smarter on your own internal PR if you want me to trust you more
       on the PR you conduct for our clients. Right now, please consider yourself under
       review. We will discuss what this means moving forward by the end of this week.


                                             MHL-5
time, place, and manner in which Claimant completed her projects. WIT did have
expectations about the quality of the projects, as does every person that engages the
services of an independent contractor.
               The compensation paid to Jilletante Creative was reported on a Form
1099, which is an important factor in the two-prong analysis. Stage Road Poultry,
34 A.3d at 889. In addition, her compensation was not static, but changed monthly.
Id. Initially, WIT guaranteed Claimant compensation of $7,400 per month,5 but this
quickly rose to over $12,000 per month in 2014. Board Adjudication, 6/15/2016, at
2, F.F. Nos. 9, 11; R.R. 172a. The Board simply disregarded these findings of fact
in its control analysis because they do not support its desired conclusion that
Claimant was a WIT employee.
               The record is replete with evidence of WIT’s lack of control over
Claimant. Claimant did not have a desk at any WIT office and was not required to
perform her work at any particular or defined location; she set her own hours. R.R.
7a, 8a, 13a, 17a. WIT did not provide any training to Claimant or exercise any direct
oversight over Claimant’s work. Id. at 7a, 16a, 17a. WIT did not withhold taxes;
did not provide Claimant benefits; and did not reimburse Claimant for her business
expenses.     Id. at 16a-17a.        Finally, WIT allowed Claimant to perform her


       But, I am not happy. You need to take ownership of your accounts ASAP and
       demonstrate to me that you can keep up on Tapad too.
        Mark
R.R. 94a (emphasis in original). The entirety of the e-mail supports the conclusion that Claimant
worked not as an employee but as an independent contractor. Naples stated that Claimant, in broad
terms, had to “take ownership” of her accounts and demonstrate to him that she can handle client
demands. Absent from this email is any direction to Claimant on when, where, or how to
accomplish this goal.
5
  This included what was called a $400 health insurance “stipend.” How Claimant spent this so-
called stipend was for her to decide. Claimant testified that the stipend ended after a few months.
                                            MHL-6
assignments through sub-contractors of her choosing. Id. at 17a. The Board failed
to consider any of these factors, and this was error.
               In short, the Board erred in concluding that WIT’s control over
Claimant was the control of a true employer.            In so concluding, the Board
capriciously disregarded the unrebutted evidence that refuted this conclusion as well
as its own findings of fact.
               The second prong of the independent contractor analysis looks to
whether the claimant was “customarily engaged in an independently established
trade, occupation, profession or business.”       43 P.S. §753(l)(2)(B).    For that
determination, we consider “‘whether the individual was capable of performing the
activities in question [for] anyone who wished to avail themselves of the services
and whether the nature of the business compelled the individual to look to only a
single employer for the continuation of such services.’” Stage Road Poultry, 34
A.3d at 891 (quoting Venango Newspapers v. Unemployment Compensation Board
of Review, 631 A.2d 1384, 1388 (Pa. Cmwlth. 1993)). It is not necessary that the
claimant actually succeed in persuading others to engage her services. Stauffer v.
Unemployment Compensation Board of Review, 74 A.3d 398, 407 (Pa. Cmwlth.
2013).
               The Board offered the following rationale for its conclusion that
Claimant was not engaged in services customarily provided by an independent trade
or business:

               The only reason the [C]laimant formed [Jilletante Creative, LLC]
               was because WIT required it, claiming that it needed to pay the
               [C]laimant through the LLC. WIT also claimed that doing so
               was a “common agency model” for its kind of agency. The
               Board does not credit WIT’s testimony. Rather, although the
               [C]laimant did perform two projects for other entities, each for
               under $600, there is no evidence that the [C]laimant solicited
                                       MHL-7
              business through her LLC since its inception in 2013 through her
              termination in 2015. The [C]laimant worked for WIT 40 hours
              per week and did not have employees of the LLC to solicit
              business for her. Further, although WIT claimed that all its team
              members were required to have additional clients through their
              LLCs to share with it, WIT did not prove that the [C]laimant had
              such clients. As the [C]laimant did not operate a trade or
              business, but rather the LLC was formed as a type of shell
              corporation, the fact that the [C]laimant was the single-member
              owner is not dispositive. The [C]laimant was not customarily
              engaged in a trade, occupation, profession, or business.

Board Adjudication, 6/15/2016, at 5; R.R. 175a.6 The Board went on to observe,
without any evidence in the record, that the United States Department of Labor
believes that some employers are “requiring employees to form single-member
LLCs in order to avoid the protection employees enjoy under various labor laws.”
Id. at 3; R.R. 173a.
              The legal form by which Claimant provided public relations and
communications services to WIT-provided clients and to her own clients is
irrelevant. A sole proprietor may establish a single-member LLC for many reasons,
the obvious being a desire to limit individual liability. It is not known what the
Board meant by a “shell corporation,” and there is no evidence on this point. A
limited liability company is not even a corporation. The Pennsylvania Associations
Code provides as follows:

              One or more persons may act as organizers to form a limited
              liability company ….

15 Pa. C.S. §8821. A single-member LLC, such as Jilletante Creative, is a perfectly
lawful and valid alternative to a sole proprietorship.

6
 Claimant did not refute the testimony of WIT’s principal that WIT operates on a “common agency
model,” even though she is knowledgeable of this industry. N.T. 25; R.R. 81a. The Board ignored
Employer’s testimony by deciding not to credit it.
                                           MHL-8
              Claimant continued to operate as an LLC even after her separation from
WIT. The record includes Claimant’s two-page detailed proposal to a potential
client on “Jilletante Creative, LLC” letterhead, signed as “Jilletante Creative, LLC;
By: Jillian Ivey, sole member.” R.R. 10a-11a. Jilletante Creative is not a sham or
“shell” corporation, and characterizing it as such is a red herring in the analysis of
whether Claimant worked for WIT clients as an employee of WIT or as an
independent contractor.
              Claimant was free and able to provide services to anyone, as she did
before entering into a contract with WIT. The Board acknowledged this inescapable
fact but minimized its significance by noting that Jilletante Creative had a small base
of non-WIT clients. This is not relevant. The pertinent question is whether WIT
restricted Claimant from performing services for others, not whether Claimant, or
Jilletante Creative, actively pursued other clients. See Stauffer, 74 A.3d at 407. That
a claimant may be indolent, unsuccessful in obtaining other clients, or simply
satisfied working with the clients referred by one source does not transform an
independent contractor relationship into that of employer/employee. Id. Claimant
conceded that she was free to do other work and did work for clients with no
connection to WIT. N.T. 13; R.R. 69a.7             Indeed, WIT encouraged Claimant to
develop Jilletante Creative’s own client base.8


7
  The majority states that Claimant’s testimony regarding the projects she completed for “former
clients” could mean she completed projects for WIT’s former clients. See Majority slip op. at 9.
Whether these projects were completed for her former clients or clients formerly associated with
WIT is not relevant. The point is that Claimant did work for clients not referred by WIT who
directly compensated Jilletante Creative for these services.
8
  The majority asserts that “[t]he fact that WIT may have permitted or encouraged Claimant to
solicit other clients is irrelevant.” Id. I disagree. We have held that the relevant question is
whether the putative employer restricts the claimant from performing services for others, not


                                           MHL-9
               Finally, the Board’s finding that Claimant worked 40 hours a week on
WIT accounts does not ipso facto make her an employee of WIT. In Jia v.
Unemployment Compensation Board of Review, 55 A.3d 545 (Pa. Cmwlth. 2012),
this Court held that because the claimant needed employer’s permission to deviate
from the prescribed time or place of work, the claimant was in an employment
relationship. By contrast, here, the Board found, specifically, that Claimant was free
to do her work for WIT clients at the times and place of her choosing. Board
Adjudication, 6/15/2016, at 2, F.F. No. 14; R.R. 172a. Notably, Jilletante Creative
was free to engage subcontractors to complete WIT projects. R.R. 17a.
               WIT carried its burden in establishing that Claimant was free from
WIT’s control and was engaged in an independent business. Accordingly, I would
reverse the decision of the Board.
               WIT contends that even if this Court agrees with the Board, its hearing
violated due process. The essential elements of due process are notice and an
opportunity to be heard. Groch v. Unemployment Compensation Board of Review,
472 A.2d 286, 287-88 (Pa. Cmwlth. 1984). I agree that WIT was not afforded due
process of law.
               The UC Service Center issued three determinations that the
compensation paid by WIT to Claimant, directly or through Jilletante Creative, did
not constitute wages for employment because she provided her consulting services
as an independent contractor. After the UC Service Center initially denied benefits,


whether a claimant actually does so. Stauffer, 74 A.3d at 407 (“The issues in determining whether
the type of work constitutes an independent trade or business are whether the claimant was
restricted from performing the services for others and whether anything in the nature of the work
limits it to a single employer, not whether the claimant chooses to work for third parties.”). Here,
Claimant chose to limit her engagements.


                                            MHL-10
Claimant appealed, and the Referee conducted a hearing on July 30, 2015, at which
only Claimant appeared because WIT had not been given notice. Determining that
Claimant was an employee of Jilletante Creative, LLC,9 the Referee remanded to the
UC Service Center to determine whether compensation paid by WIT to Jilletante
Creative constituted “wages for employment.” On remand, the UC Service Center
again reached the conclusion that the remuneration was not wages for employment
because Claimant was an independent contractor. Following a second appeal from
Claimant, the Referee remanded again to the UC Service Center for another look at
its decision.10 After the second remand, the UC Service Center again found Claimant
to be an independent contractor and ineligible for benefits.
              Claimant appealed, and a second hearing before the same Referee took
place on March 4, 2016, on the UC Service Center’s third determination. In the
meantime, the record of the first hearing had been destroyed.                 Nevertheless,
throughout the second hearing, the Referee referred to the evidence presented at the
first hearing. N.T. 12-13, 15; R.R. 68a-69a, 71a. The Referee’s use of evidence
presented at a hearing, of which WIT had neither notice nor opportunity to
participate, violated due process.
              The Board recognized the due process problem with the Referee’s
conduct in this regard and stated:

9
 In other words, Claimant was self-employed, just as a sole proprietor is self-employed. The
employer and employee are one and the same.
10
  The Referee’s remand order stated:
       On September 28, 2015, the Pennsylvania Department of Labor and Industry
       (“L&I”) issued a Revised Notice of Financial determination again denying the
       [C]laimant benefits on the ground that she had no wages paid to her during her base
       year, but not addressing whether, and why, the remuneration WIT paid the
       [C]laimant through her LLC is not “wages for employment[.]”
R.R. 102a. The Referee appears determined to have Claimant be found an employee of WIT.
                                         MHL-11
             WIT argues that the Referee improperly relied on testimony from
             a prior hearing that was not introduced into the record and for
             which WIT never received notice. The Board agrees. The
             Referee made findings that were not supported by the record
             created at the March 4, 2016, hearing. To the extent that she
             relied on testimony she recalled from a previous hearing, the
             transcript for which was not made part of this record, she erred.

Board Adjudication, 6/15/2016, at 3; R.R. 173a. In spite of this error by the Referee,
the Board denied WIT’s request to remand for a new hearing before a new referee,
asserting that the Board’s review cured the due process violation. Unfortunately, the
Board did not effect a cure. To the contrary, the Board compounded the Referee’s
error by engaging in a discussion of the United States Department of Labor’s belief
that the legal entity known as an LLC is being abused to avoid labor laws. What the
United States Department of Labor believes or suspects is information completely
de hors the record. In sum, the hearing has been so tainted that the only appropriate
remedy is a remand for a new hearing before a new and impartial referee.
             Because WIT established that Jilletante Creative was an independent
contractor, I would reverse the grant of unemployment compensation benefits to
Claimant. At the very least, a remand is necessary to cure the lack of a fair hearing.

                                    ______________________________________
                                    MARY HANNAH LEAVITT, President Judge




                                      MHL-12
