Unemployment Compensation Board of Review v. Finn

Opinion by Judge Blatt, On or about September 13, 1973, Catherine D. Finn (claimant) was laid off from her employment after sixteen years with T. R. W., Inc., Sunbury, Pennsylvania and her application for unemployment compensation benefits, dated June 30,1974, was denied on September 26, 1974 by the Bureau of Employment Security (Bureau). The Bureau found that on June 3, 1974 “the claimant became a partner and part-owner with her husband” of a hotel and bar, it being admitted that her name was on the title to the real estate and the liquor license, and, therefore, the Bu [514] reau determined that, pursuant to Section 402(h) of the Unemployment Compensation Law1 (Act), 43 P.S. §802(h), the claimant was self-employed and so ineligible for' benefits.2 On her appeal to the Unemployment Compensation Board of Review (Board) a referee was designated .to hold a hearing, after which he denied benefits and, npon further appeal, the Board issued an order affirming and adopting the referee’s decision. In this appeal from the Board’s order, our scope of review is limited to a resolution of questions of law and, absent fraud, to a determination of whether or not the necessary findings of fact are supported by the evidence. Book v. Unemployment Compensation Board of Review, 24 Pa. Commonwealth Ct. 36, 354 A.2d 4 (1976). [515] The legal issue presented here is whether or not the claimant is self-employed and so ineligible for compensation pursuant to Section 402(h) of the Act by virtue of her admitted one-half ownership of the hotel, bar, and liquor license. The referee made a finding that the “claimant receives no income from the hotel directly and she and her husband provide for themselves from the operation of the hotel and bar. ’ ’ He reasoned that, even if she did not participate in the operation of the business, she was engaged in self-employment because of her ownership interest in the business. Self-employment is not defined in the Act, and a review of the relevant cases does not provide a working definition. Leary v. Unemployment Compensation Board of Review, 14 Pa. Commonwealth Ct. 409, 322 A.2d 749 (1974). Both ownership and active participation in a private enterprise have been deemed to constitute self-employment.3 This case, however, presents a matter of first impression in that the [516] claimant-owner here did not actively participate in the operation of the business.4 In Salis Unemployment Compensation Case, 200 Pa. Superior Ct. 548, 190 A.2d 579 (1963), the claimant entered into an agreement on July 21, 1961 with a partner to operate a clothing store which he eventually opened for business on September 15,1961. The court held in Salis that the claimant was engaged in self-employment from the day that he entered into the said agreement. “The mere fact that claimant did not actually draw any salary when he started his activities on July 21, 1961 is immaterial.” Salis, supra, 200 Pa. Superior Ct. at 552, 190 A.2d at 581. In Leary, supra, we held that the claimant became self-employed on the date, May 12, 1972, when he formed a corporation for the purpose of entering the construction industry and that the act of incorporation alone was a sufficiently positive act in the establishment of an independent business enterprise to constitute self-employment under the unemployment compensation law. We are persuaded by the above-cited cases that the positive act of establishing an independent business enterprise is sufficient here to render the claimant ineligible for benefits, pursuant to Section 402(h) of the Act, as being self-employed. We believe that in this case the claimant is not exposed to the rigors of unemployment which the law is designed to alleviate, See Section 3 of the Act, 43 P.S. §752, and that “[t]he purpose of the Unemployment Compensation Law is to benefit those who become unemployed through no fault of their own. . . . Those who are engaged in business for themselves must be considered [517] to have removed themselves from the class of unemployed. . . .” Alick Unemployment Compensation Case, 194 Pa. Superior Ct. 28, 31, 166 A.2d 342, 344 (1960); Wax Unemployment Compensation Case, supra. Our construction of the Act here is based upon the guidelines and declaration of public policy found in Section 3 of the Act, upon which the individual sections must be interpreted and construed. Lybarger Unemployment Compensation Case, 418 Pa. 471, 211 A.2d 463 (1965). The appellant’s reliance upon Martin Unemployment Compensation Case, 174 Pa. Superior Ct. 412, 101 A.2d 421 (1953) is misplaced because (1) that ease does not deal with the question of self-employment and (2) there is no doubt here as to the joint ownership of both the real estate and the liquor license.5 We note that benefits were claimed for the weeks ending July 13, 1974 through September 21, 19746 all of which were subsequent to June 3, 1974, when the claimant must be deemed to have become self-employed. We, therefore, issue the following Order And, Now, this 16th day of July, 1976, the order of the Unemployment Compensation Board of Review, dated February 7, 1975, is hereby affirmed and the appeal of Catherine D. Finn is dismissed. Footnotes [1] Section 402(h) of the Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. §751 et seq. provides, inter alia, that “[»]« employe shall be ineligible for compensation for any week— “(h) In 'Which ha is engaged in self-employment: Provided, however, That an employe who is able and available for full-time work shall be deemed not engaged in self-employment by reason of continued participation without substantial change during a period of unemployment in any activity including farming operations undertaken while customarily employed by an employer in full-time work whether or not Such work is in ‘employment’ as defined in this act and continued subsequent to separation from such work when such activity is not engaged in as a primary source of livelihood.” (Emphasis added.) The proviso in this section is not alleged to be applicable and, indeed, the facts would not support such an allegation. [2] The Bureau aíso ruled that the claimant was ineligible for compensation pursuant to- Section 401(d) of the Act, 43 P.S. §801 (d) because- she was not able to work and available for suitable work. This basis for disqualification was eliminated by the referee, who made a finding of fact that the “[cjlaimant is able and available for suitable work.” [3] In Martin Unemployment Compensation Case, 200 Pa. Superior Ct. 542, 189 A.2d 907 (1963), the claimant who owned a business equally with his partner, was denied benefits on the basis that he was self-employed although it appears that he was seeking other employment, was not receiving any remuneration from the business and was engaged in the business only to the extent of attempting to dispose of it. In Kapera v. Unemployment Compensation Board of Review, 178 Pa. Superior Ct. 508, 116 A.2d 238 (1955), the claimant and his wife owned a farm and some livestock and although the claimant had been employed elsewhere for almost ten years, and the farm had been almost exclusively operated by his wife and a hired helper, the court denied benefits, holding that the farm was operated for the claimant’s own benefit and that he was engaged in business for himself. In Wax Unemployment Compensation Case, 189 Pa. Superior Ct. 196, 149 A.2d 191 (1959), an owner of a hotel who took an active part in the management thereof was held to have been engaged in business for himself. See Edelman v. Unemployment Compensation Board of Review, 10 Pa. Commonwealth Ct. 275, 310 A.2d 707 (1973). [4] The claimant testified that she took no part in the operation of the bar and hotel. Although the referee did not make a finding on this issue, her statement was apparently accepted by him as it was included in the “Reasoning” portion of his decision. [5] In Martin, supra, the fact-finders had not made a finding as to joint ownership of the business and the claimant had been disqualified from benefits because he was deemed to be (1) unavailable for suitable work and (2) not unemployed. We point out that the court ordered the matter remanded for further consideration. [6] In order to be eligible to receive compensation, a claim for benefits must be filed with the Bureau. See Section 401(c) of the Act, 43 P.S. §801 (c) ; 34 Pa. Code §65.31 et seq. The claimant did not file for benefits until June 30, 1974 and, therefore, consideration of eligibility need only be given for the weeks indicated.