You may be ineligible for benefits if you are self-employed, setting up a business, or have ownership interest in a business.
Self-Employment During the Base Year
Services performed in self-employment do not qualify as base year employment and will not be used to establish financial eligibility for benefits. Independent contractors are self-employed. The following two factors must exist for a claimant to be considered self-employed. 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. If the claimant alleges an employer/employee relationship, but the employer states that the claimant is self-employed, the employer must prove that the claimant is free from control over the performance of the service and customarily engaged in an independently established trade, occupation, profession or business.
Self-Employment While Claiming Benefits
Section 402(h) provides that a claimant is ineligible for any week in which he/she is engaged in self-employment. When a claimant is starting a new business, the claimant becomes self-employed with the first positive step toward starting the business. For example, the claimant would become self-employed when he/she began advertising for business, rented an office, purchased equipment/property, etc.
There is an exception in Section 402(h) for the operation of a sideline business. The courts have provided a four-pronged test for eligibility for an individual engaged in a sideline business. An employee who has a proprietary interest in a sideline business may still receive benefits if it is proven that all four of the following conditions are met:
- Concurrency - the self-employment activities must have been conducted while engaged in employment.
- Primary source of income - the earnings from employment must exceed the net profit from the self-employment activities.
- There cannot be a substantial increase in involvement in self-employment.
- The claimant must be able and available for FULL TIME suitable work.
The burden of proof in a situation involving a sideline business rests with the claimant. The claimant must provide information and documents showing that the self-employment venture is a sideline business and that the claimant is separated from employment that constituted the individual's major source of income.
The information provided on this site does not constitute a determination of eligibility to receive unemployment compensation.