unemployed in pennsylvania? think long and hard before you freelance

The afternoon I lost my job, I hopped on the Web site for the Pennsylvania Department of Labor and Industry and filed for unemployment pay. About a week later I got a letter saying I was entitled to $352 in benefits each week I was out of a job. I could receive part of that if I earned between $141 and $493 during a given week.

My next step was to start looking for work as a freelance writer, which many out-of-work journalists do. It would add a few lines to the resume I’ve since sent out more times than I care to count, connect me to new editors and allow me to learn more skills. The money would be helpful too, of course. And although it hasn’t happened yet, maybe freelancing would lead to a job on someone’s payroll.

I didn’t expect it to cost me my unemployment benefits.

But the last week of July, the $634 the state had been depositing in my checking account every other week didn’t show up. When I called Labor and Industry for an explanation, the representative told me I wouldn’t get any more unemployment compensation because I became self-employed after writing my first freelance story in June.

My husband and I had to take money out of our savings account to pay July’s bills. Without his income I might not have been able to cover the rent.

This section of state law was my downfall:

An employe shall be ineligible for compensation for any week   . . . In which he is engaged in self-employment

Indeed, the packet of information I received after filing for benefits includes this paragraph:

You may be ineligible for benefits if you are self-employed, setting up a business, or have ownership interest in a business. However, you may be entitled to benefits if you are engaged in a sideline business prior to becoming unemployed from your regular employer, report that you operate a business to the UC Service Center when filing your initial Application for Benefits, do not substantially change your participation in the sideline business while unemployed, and do not derive a primary source of livelihood from the sideline business.

I didn’t understand. I hadn’t become a freelancer because I wanted to, but because I lost my job. I wouldn’t object if the state didn’t give me unemployment pay during weeks where I earned more than $493, but most weeks my earnings fell below that threshold. I faithfully filed for benefits every two weeks, reporting every dollar of income I earned even if the checks wouldn’t come for a few months.

In August I received another letter from Labor and Industry. This one said I owed the state $897, plus interest, in unemployment benefits I had wrongly received after I began freelancing. The envelope included an “Agreement of Restitution” to send with my check. If I didn’t repay the $897, the letter assured me it could get it back by putting a lien on my property or throw me in prison.

I was livid.

Here I was, trying to make an honest living without hiding anything from the government, and the bureaucracy was treating me like as if I had deliberately defrauded Pennsylvania’s taxpayers. The state clearly wanted me to find a full-time job, but I was being punished for using freelancing as part of my search for one.

Stephen Pincus, a Pittsburgh attorney who focuses on employment law, said this isn’t an isolated case.

“It’s, without a doubt, not fair,” he told me recently. “It happens a lot with attorneys who get terminated from their firms and they hang out their shingle.”

And Pincus corrected my misunderstanding that I became ineligible for unemployment pay once I turned in my first freelance article. Actually, the law says I lost eligibility once I told someone I was willing to work as a freelancer – which happened sometime April 30.

But I wouldn’t have lost my benefits if I’d started freelancing while working for the Reading Eagle and kept up the same level of sideline income after my layoff. Pincus said the state views those situations the same way it would if a person had two part-time jobs and lost one.

I called Labor and Industry for an explanation spokesman David Smith refused to offer.

“That’s the law,” he said more than once.

So what’s my advice for others who aren’t working on the side, get laid off and can’t afford not to get regular income? Whatever you do, don’t freelance. Catch up on your DVDs while you look for a job.

Pincus said the only way to eliminate this problem is to change the law, which hasn’t been updated in about 60 years.

State Rep. Tim Seip, a Democrat who sits on the House’s Labor Relations committee, said he’d never considered situations like mine until I called him for his take. But he agreed my loss of benefits didn’t make sense.

“You’re going from being an employee of a business to a business owner by default,” Seip said. “I think maybe there should be a different category, like an involuntary transition.”

Republican state Sen. Mike Folmer, who sits on the Senate’s Labor and Industry committee and happened to be my state senator when I got laid off, said Pennsylvania’s unemployment compensation laws have to be fixed. But legislators have to be careful when they do that. For one thing, he said reforms need to guard against people who game the system, like school bus drivers who collect benefits each summer.

He and Seip agreed that I didn’t get the right information before deciding to freelance. Folmer said a workforce development program may have helped me, although he couldn’t say how. Seip said my situation shows how citizens can be hurt when they need social services and aren’t connected to a person who can explain things.

In August I appealed the state’s demand for $897. In October I had two hearings before James A. Norris, a referee for the Unemployment Compensation Board of Review. During each Norris questioned me, along with representatives of two newspapers I had been writing for regularly, about my freelancing arrangements.

After Christmas I received Norris’ decisions. He decided I wasn’t eligible for benefits but didn’t have to repay the $897 since the overpayment wasn’t my fault. But the state can take that money out of future unemployment pay if I receive it again.

I called Norris’ office to ask how he made his decision. His office pointed me to the Labor and Industry press office, where spokesman Smith said there was no way I’d talk to the referee.

“That’s not possible and highly inappropriate,” Smith said.

I asked Smith if he could answer my questions, but he said he couldn’t talk about individual cases – even to a journalist asking about her own hearings.

I could have appealed Norris’ rulings to the state Unemployment Compensation Board of Review but decided not to. There’s a chance the board would decide he was wrong and I am, in fact, eligible for benefits since I’m still looking for a full-time job. But my husband and I decided we weren’t willing to pay a lawyer to take that chance. Norris’ decision, while not everything I hoped for, is something I can live with.

My ultimate goal is to work full-time for a news organization again. That would mean regular income and, more importantly, make it much easier for me to grow as a reporter. But for now, the truth my husband keeps telling me I have to accept is that I do have a full-time job. Freelance writing certainly takes up as many hours as the Reading Eagle did, and the money I earn now is often above the threshold that would have allowed me to receive unemployment compensation when I first filed.

But could I have gotten to this point if I had only my own income available to pay the bills? Probably not.

In this recession that’s devastated so many people, there has been a lot of talk about the importance of the social safety net. How fair is it that in Pennsylvania, this piece of the safety net might disappear when a laid-off worker tries to work herself out of needing it?

31 comments to unemployed in pennsylvania? think long and hard before you freelance

  • Wow, I am so sorry to hear about your situation Rebecca. I want to say that it’s unbelievable that they would do that to you, but after having been on unemployment and dealing with the state for the past couple of months, I can definitely believe it. Thank you so much for writing about this! I think it will definitely cause others to think twice before engaging in anything that could be considered self-employment.

  • Jeannette Scott

    So glad you posted this as I am filing for unemployment today! I won’t be freelancing!!!!!!

  • Paula Goff

    Rebecca, thanks for trying to blaze a trail on this issue. I learned my lesson the hard way, too, and had to stop freelancing. But when the Inquirer called me back, temporarily, on two occasions, that was OK in the eyes of the bureaucy. I didn’t collect compensation during the full-time temp work, and got reduced payments when working part-time, but at least I remained eligible.

  • Kay Stephens

    Rebecca,
    This is a great story that you might want to consider forwarding to Theresa Hegel for the PWPA newsletter. You provided a lot of valuable information. One other thing I’m aware of — and I’m sure you’ve picked up on this — is that freelancers have to set aside about 25 percent of their income for fed/state taxes, social security payments, etc. — someone offering payment doesn’t always think about that impact…..Good luck…Kay

  • Already submitted, Kay. And I actually set aside 40 percent of my freelance income in a special account to pay taxes. Get back to me after our taxes are done and I’ll let you know how that worked out. :)

    Thanks for the comments, everyone!

  • JH

    Thank you for the well written and informative article. I’m about to get laid off from my regular job but have been freelancing of and on for several years. I guess that under PA’s law (I’m in a neighboring state) I would still be eligible for unemployment, but I’m very worried that the bureaucracy and/or complexity of UI law will somehow conspire to rob me of my benefits. It would be a real conundrum to have to decide between my occasional freelance gigs and a steady check from the state.

    Thanks again for your article.

  • KO

    There’s an exception in the law for freelance newspaper people. You should have won!

  • KO – Your Whois information tells me you’re in Pennsylvania, so tell me more. Any links or case law to back up your comment?

  • KO

    read section 4 of the unemployment law.

  • KO

    Employment shall not include…

    (17) Service performed by an individual for an employer as an insurance agent or real estate salesman or as an insurance solicitor or as a real estate broker or as a solicitor of applications for, or salesman of, shares of or certificates issued by an investment company, or as an agent of an investment company, if all such service performed by such individual for such employer is performed for remuneration solely by way of commission, or services performed by an individual as an unsalaried correspondent for a newspaper, who receives no compensation, or compensation only for copy accepted for publication.

  • Rebecca VanderMeulen

    Interesting. I assume the magazines and Web sites I’ve written for wouldn’t count as employment either?

  • I’m sorry I didn’t find this when you first wrote it, but it’s of interest to me because I’m always being asked about it. I usually advise people to ask the unemployment department before leaping because even similar laws can be interpreted quite differently depending on what state is of concern.

    I find it ironic this is happening in one of seven states progressive enough to offer self-employment assistance. http://workforcesecurity.doleta.gov/unemploy/self.asp

    I searched The Unified Judicial System of Pennsylvania and found this decision .. http://www.pacourts.us/OpPosting/Cwealth/out/1876CD03_1-16-04.pdf

    It may help explain the “test” used to determine these types of decisions about freelancing as self-employment.

  • Chris – Thanks for the information. Looks like that self-employment assistance could have been helpful, although I’ll have to look more into that. Once I get through this particularly busy period of freelancing, of course.

    I do find it interesting that neither of the lawmakers I spoke to mentioned that program and your mention is the first I’ve heard of it.

  • I’m not surprised. It’s not really a “promoted program”, but based on a profiling system of unemployment recipients. I think you have to be chosen for it.

    I talk to lots of unemployed people and I have yet to run across one who has been chosen. So, although available in PA .. I’m not so sure about the level of activity devoted to it.

    It’s good you’re busy:)

  • [...] anyone I could find. At that time I couldn’t afford to be selective — especially when my unemployment compensation disappeared thanks to a little-known snippet of state [...]

  • chrisann

    my husband was laidoff from his job also. he is, or should i say receiving unemployment. he has gone back to school and now that he is on this special teir, (not sure about this, he knows more), they are not sending him anymore money. he has tried to call the numbers they have given him, and said they would get back to him. that was a week ago. unemployment now owes him around $2000. i myself work, but i work for the county of Berks, and do not make enough money to pay ALL the bills, and we also have 2 children. it is SO frustrating when you do not know whom to call….

  • Rebecca VanderMeulen

    Chrisann – That is frustrating. I hope he’s had luck getting through by now. It’s tough to get answers from L&I.

  • Mel

    I’m relocating to PA from Ohio in the Fall and would totally appreciate assistance or the help in finding resources for being a freelancer in a new state.

    Feel free to email me directly: melinda.c.urick@gmail.com

    Thanks!

  • Marci

    Thanks for this. I previously freelanced and worked, but I didn’t report this on my initial filing. . . Not sure there was a spot for it, so I’m going to call L&I. Excellent article. I’m sorry for your experiences and this is one of my fears. I’ve spoken to many who are doing freelancing–with varying issues and some folks not at all–so it seems really hard to follow. Excellent: re: section four. I think you should appeal based on that law!!!

  • Angee

    My husband had to quit his job (our only car blew up, office over 50 miles away, etc.) so he filed for unemployment in the hopes it would help get us by until we could get our car situation fixed and he could find another job. Well….it’s been 8 weeks now and still no decision as to whether or not he will receive it. He’s spoken to I don’t know how many “supervisors” about this, politely explaining that we had exhausted all possibilities to try and get reasonable transportation and we now have 2 months back bills to pay so we are on our last leg. We have 3 kids to feed, and at this point I’m afraid we will end up in a shelter. I would work, but due to poor health I can’t. So lost and so angry at PA.

  • Angee:

    Sorry to hear what happened to you and I hope everything works out.

    I’m not a lawyer, but my understanding is that workers aren’t generally eligible for unemployment pay if they quit their jobs. Sometimes you are eligible if you had a problem with transportation, but I don’t know the details. This link might help: http://www.portal.state.pa.us/portal/server.pt?open=514&objID=599970&mode=2#tp

  • I wish I had found this article before filing my unemployment claim. I got my letter of determination today after almost 4 months of being unemployed that I was ineligible for benefits because I was trying to help support my family by doing freelance PC repair. Thankfully I did not receive benefits for the entire 4 months, it was pretty much in review the entire time. I hope other people find this article before it is too late.

  • Walt

    There once was a time when this country stood for free market and free enterprize, …..when it was encouraged to start your own business or be responsible for yourself to be proactive to better yourself.
    ….Enter corruption and bate! I had just purchased and loaded a very expensive program on my home computer to maybe break into the Freelance scene. Just this morning I thought i better check to see if documentation had to be filed with the state of PA prior to trying to help yourself, and your family, get off the tax payer dollar and Government only to see and peruse this blog. I am furious at our politicians who have gotten us to this, seemingly, intersection where we are now being made to be slaves to the government, where it is punishment for trying to do the right thing and be proactive and set a good example to younger generations to follow. I, truly, wonder how the laws would be different if our, at one time, small government did not get special laws given them and special priveleges voted for by themselves, …..if when they were voted out of office, they had to live with the same laws and benefits they enforce on us. …..this includes all of their family members and extended family.
    What once was freedom is now making a fast fade to socialism. Sorry all, that as a Citizen of these United States, I didn’t fully do my part to make sure our government stayed small and in the boxes they were meant to stay confined to. Perhaps, we would all be Freelancing, right now, and be looked up to for being upstanding citizens seizing the opportunities our past generations left their homelands for, so many generations ago, to embrace and be a part of.

  • Susan

    My partner just received a letter stating she needs to repay over $32,000.00 due to “self-employment”. The “self-employment” is listing shoes & purses on ebay!! We thought we were doing the right thing to reduce the weekly claim by the little we pull from eBay sale. Guess honesty is not always the best way to do things. Sad that those who are trying to make enough to NOT use government resources, such as food stamps, are not encouraged to do so. Rather penalized. From what I have read we are going to appeal, since this was a side-business even when my partner had a full-time job. If I am reading things correctly. Would be nice if laws were written for everyone to understand!!

  • Michele

    Wow…thanks for the advice…I got a little scared reading this. I actually reported my wedding photography freelancing when I initially applied so I guess I’m safe according to what you shared. Now I’m too scared to even report a job that might come my way. :-/

  • Max

    I have found a website that has a great blog that addresses these types of unemployment issues.
    http://unemploymentrevolution.com

  • Had you appealed, according to my attorney, the state would just staple a letter affirming the referee’s decision. This part of the law isn’t clear or fair — and some attorneys on YouTube even said things that encouraged my extremely minor freelancing activity (about 3 hours a week for one month) — it says you aren’t eligible for those weeks, but then in my case they took away many months of payments just because my name was listed on a website during that period of time. This was considered ‘being in business’ and not ‘sideline activity’ even though the job was tutoring and the amount of time spent was miniscule and occurred on weekends.

  • Kathy

    I am dealing with the same situation. I did tutoring for 5 weeks last year after I had been approved for unemployment. I did not know the independent contractor rule so I reported the income (less than $400). They froze my payments for two months while they investigated. They decided in my favor, but now they have made me file a new claim and are investigating it again! They asked me if I reported the income on my taxes. I realized I hadn’t because there had been no W-2! I am really worried about what is going to happen. They have frozen my payments again. I was unemployed for a year and just last week started a part-time job, but the pay is less than the unemployment benefits! If I lose them, or worse, have to pay them back, I will be financially ruined. I have an appointment with a lawyer next week.

  • Kathy: Best of luck to you! That is certainly a rough situation and I hope L&I rules in your favor. Another case of a responsible person being penalized for trying to support herself by finding a way to earn money.

    Did you receive any 1099s for your work? If a single client pays you at least $600 in a calendar year after engaging you as an independent contractor, you are required to receive one for the purposes of tax reporting.

  • Jeff

    Very informative. Don’t bother working if you can burden taxpayers. Forget being self sufficient – that’s for suckers with self respect and a work ethic!

  • Donna

    Rebecca, I am a Insurance Agent. I was termination from my position based on my production. I called UC Customer Service to inquire why a determination hasn’t been made 7 weeks after my initial claim. In my conversation, I asked the representative if I decided to sell plans as an “Independent Agent” if I should just go claim the income once I become eligible. After reading your article Rebecca, I think I just admitted to being self employed?!!!

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