Can I collect unemployment benefits if I am an independent contractor?
Under 402(h) of the unemployment compensation law (“Law”), an individual who is self-employed does not qualify for unemployment benefits (“UC Benefits”). Independent contractors fall into the category of self-employed. Therefore, if you are an independent contractor, you will not be eligible for UC Benefits. But what is an independent contractor?
One of the main distinguishing factors of whether an individual is an employee or independent contractor is taxes. An employee files a W-2 while an independent contractor files a 1099 Form. However, in general, there are two prongs that must be satisfied for an individual to be classified as an independent contractor for unemployment purposes.
First, the individual must be free from control or direction over performance of services BOTH under contract and in fact. For example, if an individual DOES any of the following, he/she is likely an independent contractor for unemployment purposes:
1. Set their own work hours;
2. Choose which jobs or tasks to complete;
3. Have their office or place of business wherever they choose; or
4. Make the termination of their employment subject to contractual agreement.
This list is NOT all-inclusive but just a few examples.
On the flip side, if an individual DOES the following, he/she is likely NOT an independent contractor for unemployment purposes:
1. Hire, supervise, and pay assistants for the employer;
2. Do their work on employer’s premises;
3. Do their work in the sequence set by employer;
4. Have their hours set by the employer; or
5. Have to comply with employer’s instructions about the work.
Remember, these lists are NOT all-inclusive but just some examples of what an individual does in order to be classified as an independent contractor.
The second prong to qualify as an independent contractor requires that the individual be customarily engaged in an “independently established trade, occupation, profession or business.” Such examples of an independent contactor would be a lawyer, accountant, IT specialist, etc. Generally, for work to qualify as an “independently established trade, occupation, profession or business,” the following are a few requirements that would need to be met:
1. You possess the essential tools, equipment and other assets necessary to perform the services independent of the person for whom the services are performed;
2. You realize a profit or loss as a result of performing the services; or
3. You maintain a business location that is separate from the location of the person for whom the services are being performed.
This list is NOT all-inclusive but just some examples of what qualifies as an “independently established trade, occupation, profession or business.”
Remembering these two prongs will help you in determining whether you are in fact an independent contractor and whether you are eligible for UC Benefits.