Linda's Cleaning Consultants, Inc. v. Dep't of Lab. & Indus.

308 A.3d 962

LINDA’S CLEANING CONSULTANTS, INC., Petitioner

v.DEPARTMENT OF LABOR AND INDUSTRY, Office of Unemployment Compensation Tax Services, Respondent

No. 457 C.D. 2021

Commonwealth Court of Pennsylvania.

Submitted on Briefs December 4, 2023

Decided January 18, 2024

Appealed from Nos. 16-R-0312-4 & 16-R-0313-4, Department of Labor and Industry.

Barry J. Goldstein, Wayne, for Petitioner.

Katherine S. Petruczok, Assistant Counsel, Harrisburg, for Respondent.

BEFORE: HONORABLE RENÉE COHN JUBELIRER, President Judge, HONORABLE CHRISTINE FIZZANO CANNON, Judge, HONORABLE ELLEN CEISLER, Judge

OPINION BY JUDGE FIZZANO CANNON

Linda’s Cleaning Consultants, Inc. (Employer) petitions for review of the March 26, 2021, decision and order of the Department of Labor and Industry (Department). The Department denied Employer’s petitions for reassessment of its required contributions to the unemployment compensation (UC) system after concluding that certain of Employer’s workers were em- ployees and not independent contractors. Upon review, we affirm.

I. Factual and Procedural Background

In November 2016, the Department’s Office of Unemployment Compensation Tax Services (Office) issued notices to Employer assessing roughly $24,000 in UC contributions, interest, and penalties for all quarters of calendar years 2012 through 2015 and roughly $6,500 for the first three quarters of 2016.¹ Department’s Final Decision and Order, 3/26/21, at 1-2; Certified Record (C.R.) #24. After Employer filed petitions for reassessment, the matters were consolidated, and a hearing officer conducted a hearing on November 8, 2018. Id. at 2.

Biju Varukunnel (Varukunnel), a UC tax agent, testified for the Office. Reproduced Record (R.R.) at 14a. He audited Employer’s records and prepared the notices of assessment. Id. at 15a. The 2012-15 assessment was based on Employer’s records during those years, and the 2016 assessment was an estimate based on the 2015 records.² Id. at 16a. The investigation and audit process began when an individual filed a claim for UC benefits, but that person’s wage information was not in Employer’s reported records. Id. at 19a. Varukunnel discovered during his audit that although Employer is registered as a cleaning consultant, its disbursement records indicated that workers were being paid for construction activities (including painting and flooring). Id. at 21a & 52a-53a. He also found that Employer’s workers did not invoice Employer for their remuneration. Id. at 22a. Varukunnel concluded that Employer primarily provided cleaning services, but if a customer asked for home improvement work, Employer sent someone to do it and paid that person directly. Id. at 54a. Varukunnel stated that he also based his conclusions on documents he received from Employer during the audit and from UC-110 forms sent to Employer and to worker-claimants; the UC-110 form asks for the type of work performed and whether the claimant has his own independent trade or business. Id. at 58a-61a.

Linda Goldstein (Goldstein) testified for Employer. R.R. at 67a. She is Employer’s officer and principal. Id. She started the business as a house cleaning service and obtained clients by word of mouth. Id. at 68a. She would go to see a house, talk to the customer, assess a price, and offer the job to one of her cleaners. Id. The cleaners did not work for her on a full-time basis, and they did not have to take an offered job. Id. They would let her know their schedule on a weekly basis and she would offer them jobs that fit their availability. Id. She charged customers a flat fee for cleaning and the cleaner would get a share of that charge; customers did not know how much of a job would be her fee and how much went to the cleaner. Id. at 69a & 117a-18a. Customers were to provide cleaning supplies although the cleaners could bring their own if they wanted. Id.

Goldstein did not train her cleaners, go on cleaning jobs with them, or review their work after it was done. R.R. at 69a & 71a. She emphasized that her cleaners were experienced and "good in the industry" and that if she got a complaint from a customer, "the girls have to take care of it. They’ll go back. If a customer calls and says, ‘You know, she missed this.’ I say, ‘okay,’ and I call [the cleaner] and say, ‘You’ve got to go back,’ and they do." Id. She did not provide transportation or phones and the cleaners did not stop in her office or check in with her before or after jobs. Id. at 70a-71a. They could reschedule with the customer without checking with her. Id. at 70a. They paid their own taxes. Id. Their hours and days of the week varied as needed. Id. Goldstein did not provide them with uniforms but asked them to "dress appropriately" when they did jobs for her. Id. at 71a. She stated that most of her cleaners also did cleaning work for other customers outside of her arrangements with them, but she did not know if they advertised. Id. at 72a & 107a.

On cross-examination, Goldstein explained that for her cleaning customers, she took 10%-20% of the total charge. R.R. at 75a & 106a. For example, she might charge the customer $100, of which the cleaner would get $80, and she would get $20. Id. at 76a. She reiterated that her cleaners could say no when she offered them a job and that they liked the freedom of the arrangement. Id. The customers usually paid the cleaner at the time of the job, but if they didn’t, she would follow up with a phone call or an email to the customer; she would send a bill if necessary. Id. at 77a. Some customers would give the cleaner a check and the cleaner would bring it and other customer checks to her office once a week; she would add up the receipts and pay the cleaners. Id. at 78a. She also received cash and electronic checks from customers’ bank accounts. Id. at 79a.

Goldstein stated that customers’ rates for cleaning and the cleaners’ rate or percentage of the charged amount remained the same; she kept a chart of that information but did not have it with her at the hearing. R.R. at 81a-82a. If a customer built an addition to their house or got a pet that created more work for the cleaners, she would talk to the customer and either increase the charge or lessen the cleaner’s duties for the same charge as before. Id. at 83a. Cleaners could tell her if they thought she should increase a customer’s charge and could opt out of doing that job if Goldstein was unable to raise the charge. Id. at 102a-03a. Cleaners could keep tips from customers. Id. at 84a. Goldstein got Social Security numbers from all her cleaners, who came to her by word of mouth from her current cleaners; she did not advertise for cleaners to come work for her. Id. at 90a. Sometimes cleaners would put up fliers and get their own responses and potential clients, then reduce their availability for her to send them to her customers. Id. at 91a.

Regarding Employer’s construction work, Goldstein stated that some cleaning customers would ask her if she knew anyone able to do painting, window washing, hanging pictures and window treatments, and carpet cleaning. Id. at 68a & 72a. She knew individuals with those skills already and connected them with her cleaning customers. Id. She did not set those prices, schedule the work, or supervise the workers. Id. at 68a. Instead, she took a "limited finder’s fee" after the job was done and paid for by the customer; she considered herself a "concierge" providing her clients with whatever they needed that she was able to provide for them. Id. at 68a. If a customer did not pay the worker directly for home improvement services, she would send the customer a bill and once it was paid, she would send the worker the money after taking out her percentage for the referral. Id. at 72a-73a. The workers usually told her how much of the total would be her fee for the referral. Id. at 120a-21a.

She recalled no disputes over that amount or any instance where a worker went behind her back to avoid paying her fee; she figured they had the right to do that, but they wanted to keep good relations with her for future referrals. Id.

Goldstein testified that the individuals she referred to her customers for construction or renovation jobs worked for themselves; they had limited liability companies (LLCs) or corporations, carried their own insurance, and had their own vehicles, supplies, and tools. R.R. at 73a. She did not supply anything to them, supervise them, or review their work, but they knew she expected them to do good work for her customers. Id. at 74a-75a. If she got a complaint from a customer, she would immediately call the worker about it and the worker would take care of the problem with the customer. Id. at 75a & 93a.

On cross-examination, Goldstein stated that her referral fee for construction services was usually 10%-15% of the total charge. Id. Sometimes her customers paid the workers directly but sometimes they sent her a check for the work because she made the referral and they felt more comfortable paying her; she would pay the worker out of that amount, less her fee. Id. at 87a & 112a-13a. She obtained the workers’ Social Security numbers, federal employer identification numbers (FEIN), and copies of insurance certificates but admitted she had not provided those certificates to the Department during the audit process. Id. at 89a & 94a. She had signed contracts with some of them, which had been provided to the Office during the audit, but not with others if she issued them a 1099 tax form or if they had their own LLC or corporation. Id. at 89a, 93a & 100a. Some of the workers she used advertised and had social media sites, but she had longstanding relationships with most of them based on having used them herself or by word-of-mouth referrals. Id. at 92a. If one of the workers broke something at the customer’s house, she worked with the individual and customer to fix or replace it. Id. at 94a. She did not have an exclusive relationship with these workers, and they did not...