• David Manes

The “Sideline Activity” Exception


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Will having a side job render me ineligible for unemployment benefits?

According to Section 402(h) of the Pennsylvania unemployment law (“law”), self-employed individuals are not eligible for unemployment compensation benefits (“UC benefits”). If you meet the criteria for self-employment (e.g., you work as an independent contractor) you are ineligible for UC benefits.

The criteria for self-employment are the following:

  1. The individual has been and will continue to be free from control or direction over the performance of his/her services, both under his/her contract of hire and in fact

  2. As to such services, the individual is customarily engaged in an independently established trade, occupation, profession or business

How does the law apply to those employees who have a sideline business, then? Many people work side jobs for extra cash. Side jobs include working at a weekend flea market and cutting grass for neighbors, for example. Are these individuals considered self-employed? They usually are not. There is an exception in Section 402(h) that allows individuals engaged in sideline activities to be eligible for UC benefits.

If ALL FOUR of the following conditions are met, an employee can be eligible to receive UC benefits:

  1. The self-employment (“sideline”) activities must have been conducted while engaged in employment

  2. The earnings from employment must exceed the net profit from the sideline activities

  3. There cannot be a substantial increase in involvement in sideline activities

  4. The claimant must be able and available for full-time suitable employment

The burden of proof in cases involving sideline activity rests with the claimant. In other words, the claimant, oftentimes represented by his or her employment attorney, must provide evidence proving his or her self-employment venture is solely a sideline activity. This evidence may include, for example, proof that the earnings from the self-employment venture do not equal or exceed the earnings from employment. After all, the individual is requesting UC benefits due to separation from the employment that provided his or her major source of income.

Example of a sideline activity and eligibility for benefits

Suppose you work as a truck driver for a living. On the weekends, you cut grass for your neighbors. This earns you some extra money but your employment as a truck driver is your major source of income and you identify as a truck driver, not a landscaper. If you lose your truck driving job but continue to earn money from cutting grass, you can prove that you are engaged in a sideline activity but should not be considered “self-employed” under the law.

Example of self-employment and ineligibility for benefits

On the other hand, let’s say you choose to become a landscaper after you lose your truck driving job. You advertise your business and buy equipment to use in your new profession like a new lawnmower and other landscaping tools. You are now establishing a business and could be considered an independent contractor. This would render you ineligible for benefits.

Remember, if you engage in the self-employment activity while employed, it is more likely to be considered a sideline activity. An employment attorney can look into your individual situation and help you better understand your eligibility for, and rights to, UC benefits.

#sidelinebusiness #selfemployment #402h #sidelineactivity #independentcontractor

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