Unemployment Compensation – Sideline Exception Applies – Claimant Entitled To Benefits Even Though Claimant Had No Earnings From Sideline Work Until After Termination From Full-Time Employment

Employees who are terminated from full-time employment often face difficult decisions. Employees who decide to start their own business (i.e. engage in self-employment) after being terminated are not entitled to unemployment benefits because Pennsylvania unemployment compensation law provides as soon as one makes any effort towards self-employment, there is no eligibility. This law stymies entrepreneurship and is always shocking to claimants who assume they actually have to make money before they are no longer entitled to unemployment compensation. An exception to this rule is the Sideline Exception, as long as a claimant can meet the 4-part test: (1) the self-employment began prior to the termination of the individual’s full-time employment; (2) the self-employment continued without substantial change after the termination; (3) the individual remained available for full-time employment; and (4) the self-employment was not the primary source of the individual’s livelihood.

While it’s always been understood that the Sideline-Exception applies if an employee performs the same work before and after termination from full time employment, Claimants and attorneys often do not understand the great breadth of the Sideline Exception. In Lello v. Unemploy. Comp. Bd., 2013 Pa. Commw. LEXIS 26 (January 22, 2013)(McCullough, J.), the court found that the fact that sideline activity before termination resulted in no earnings does not matter. In Lelo, after termination from full-time employment, the Claimant performed copy editing assignments as an independent contractor on a freelance basis for which he was paid while continuing to look for full-time work. Prior to termination from full-time employment, the claimant spent a few hours each week submitting album reviews and interviews for a music website, wrote articles for a music publication and informally contributed to entertainment websites operated by friends and acquaintances but he was never paid for any of the work.

In Lello, the Commonwealth Court reversed the Board of Review which had found Claimant was self-employed and denied unemployment benefits, relying in part on Rise v. Unemployment Compensation Board of Review, 35 A.3d 79 (Pa. Cmwlth. 2012), where the Court held that the claimant’s involvement in a sideline activity did not substantially change even when the claimant increased his hours and his earnings from the sideline work doubled. In Rise the court concluded that even though those changes were substantial, the claimant did not seek to expand his business, find new clients or engage in marketing activities, and only worked when he received a call from someone, the evidence established that the claimant’s sideline business activity did not substantially change. Thus, in Lallo, the court similarly concluded that it is not relevant if the sideline work resulted in no earnings before termination from full-time employment.

The moral of this story is clear. If a claimant has any evidence of performing any type of sideline work before termination from full-time employment, even if there were no earnings before the termination, or much more earnings after termination, do not rule out the possibility of collecting unemployment benefits. For more information about Pennsylvania Unemployment Compensation Claims and Abramson Employment Law see http://www.job-discrimination.com/lawyer-attorney-1491925.html


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