EMPLOYMENT SECURITY ACT ‑- CLAIMS FOR UNEMPLOYMENT COMPENSATION ‑- UNEMPLOYMENT ‑- SELF-EMPLOYMENT
One who is self-employed is not unemployed within the meaning of the Employment Security Act. Whether or not a particular claimant is self-employed and by reason thereof, ineligible for benefits under this act, depends upon the facts and circumstances of the individual case.
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December 31, 1953
Honorable Peter R. Giovine
Employment Security Department
Old Capitol Building
Olympia, Washington Cite as: AGO 53-55 No. 189
We have your letter of November 30, 1953, in which you inquire as to the benefit rights under the Employment Security Act of individuals who are in some form of self-employment. You request an opinion on the following specific questions:
(1) Under the provisions of the Employment Security Act may an individual be considered both "self-employed" and "unemployed?"
(2) If the answer to question (1) is in the affirmative, what criteria must be used in ascertaining whether or not a particular self-employed individual is entitled to benefits under the act?
In our opinion it seems evident, in the abstract, that these terms must be considered to be mutually exclusive. Thus, if a person is self-employed within the meaning of the Employment Security Act, he is not eligible for benefits. [[Orig. Op. Page 2]] The term "self-employed" is not defined in the statute. It is our considered opinion that the issue of whether or not a particular claimant is self-employed within the meaning of this act, is a question which may only be resolved by analysis of the facts in each individual case.
The Employment Security Act defines the term "unemployed" in RCW 50.04.310 which provides as follows:
"An individual shall be deemed to be 'unemployed' in any week during which he performs no services and with respect to which no remuneration is payable to him, or in any week of less than full time work, if the remuneration payable to him with respect to such week is less than his weekly benefit amount. The commissioner shall prescribe regulations applicable to unemployed individuals making such distinctions in the procedures as to such types of unemployment as the commissioner deems necessary."
In the preamble of the act, section 2, chapter 35, Laws of 1945, the legislature declared
"* * * this act shall be liberally construed for the purpose of reducing involuntary unemployment * * * to the minimum."
That benefits under the Employment Security Act are to be regarded as insurance benefits rather than public assistance awards is well recognized. RCW 50.20.130 provides for an $8.00 weekly incentive to persons who accept part-time time employment which pays less than their weekly benefit amount. The rule employment which pays less than their weekly benefit amount. The rule time employment which pays less than their weekly benefit amount. The rule is stated in 81 C.J.S. 240, Social Security and Public Welfare, § 156, as follows:
"The eligibility of an employee for unemployment compensation ordinarily does not depend on his economic needs or on the nonexistence of other means of support."
[[Orig. Op. Page 3]]
RCW 50.20.010 (1953 Supp.) provides that an unemployed individual shall be eligible to receive benefits under the act if the commissioner finds that he meets five listed conditions precedent. The most significant conditions are that the applicant must be unemployed and available for work. InHermsen v. Employment Security Department, 39 Wn. (2d) 903, the court said:
"To be available for work, an unemployed individual must be 'ready, able, and willing, immediately to accept any suitable work which may be offered to him andmust be actively seeking work.'" (Italics by Court)
This brings us back to the crucial inquiry, namely: What type of activity may an applicant engage in and still be considered unemployed within the meaning of the statute. It is manifest that an applicant must not engage in activities which will render him unavailable for work within the statutory definition. The term "self-employment" is not defined in the act. RCW 50.20.080 (1953 Supp.) provides in part as follows:
"An individual is disqualified for benefits, if the commissioner finds that he has failed without good cause, either to apply for available, suitable work when so directed by the employment office or the commissioner, or to accept suitable work when offered him, or to return to his customary self-employment (if any) when so directed by the commissioner. * * *"
The context in which the term "self-employment" is used in this section strongly suggests that the legislature regards the status of being self-employed as incompatible with the status of being unemployed. This brings us to the ultimate issue: What activity may a person engage in without attaining the status of being self-employed? InPeople v. Nest, 128 P. (2d) 444, the court pointed out that the California act defines "employment" as services performed for wages or under any contract of hire. It appeared that the defendant in a criminal proceeding under the fraud provisions of the act was in the clothing business which produced no profit. Hence the court held him to be still unemployed within the meaning of the act. InPhillip v. Michigan Unemployment Commission, 35 N.W. [[Orig. Op. Page 4]] (2d) 237, the Michigan court reached the opposite result under similar facts. The court held that the fact of self-employment as an attorney precluded the claimant from being unemployed under the unemployment compensation act although he alleged that he had derived no net income from his practice. Slocum Straw Works v. Industrial Commission, 286 N.W. 593, was a Wisconsin decision involving the same issue. The court held the fact that a woman applicant did the cooking and housework for her father with whom she and her family lived constituted "customary self-employment" within the meaning of the Wisconsin act even though her only compensation consisted of a rent-free house in which to live. Dellacroe v. Industrial Commission, 138 P. (2d) 280, 146 A.L.R. 745, involved the claim of an unemployed coal miner. The Colorado court held the claimant, who was a co-owner of a farm on which he performed no labor and with respect to which he had no voice in the management, had no "customary self-employment" to resume, and was therefore eligible for benefits. Claim of Emery, 120 N.Y. Supp. (2d) 142, was a 1953 case in which the court flatly stated that one who is self-employed is not unemployed within the meaning of the statute. The New York Act does not define "unemployed." The court held that notwithstanding an express finding that the claimant was available for work at all times, that his activities in operating a liquor store precluded him from being considered unemployed under the act.
Analysis of these cases is not helpful in formulating a rule. None goes any farther than to decide that under these facts this claimant was, or was not, eligible for benefits. It is our conclusion that "unemployment" and "self-employment" are mutually inconsistent terms under the Employment Security Act. Whether or not a particular claimant is self-employed within the meaning of the act is a question of fact to be determined by the administrators of the act. In resolving this issue the following considerations appear to be pertinent but should not be considered to be exclusive:
(1) Availability of applicant for resumption of regular employment.
(2) Hours per week devoted to activity in question.
(3) Net income earned from such activity.
(4) Nature of regular employment.
[[Orig. Op. Page 5]]
(5) Does the applicant engage in the same activities during the course of his regular employment and, if so, to what extent?
Having in mind the provision in the preamble of the act prescribing a liberal construction, it would appear that many instances of activities engaged in by applicants during periods of unemployment may properly be regarded as appropriate situations for the application of the de minimis rule, that is to say, "the law takes no notice of trivial things."
Very truly yours,
Assistant Attorney General