Ala. Admin. Code r. 480-4-3-.24

Current through Register Vol. 42, No. 7, April 30, 2024

Section 480-4-3-.24 - Benefit Eligibility As Affected By Self-Employment

(1) Self-employment is disqualifying under Section 25-4-78(11) of Alabama Unemployment Compensation Law. While the law itself does not provide a definition as to what constitutes "self-employment", it's dictionary definition is: "a remunerative activity of a personal, self-directed nature". Determination policy is that an individual is not automatically disqualified because he engages in such an activity, but is deemed to be self-employed only if he devotes a "substantial and considerable amount of time all is construed to mean an amount exceeding fifty percent of a normal work week. The amount or absence of income from the activity is totally immaterial. Disqualification, if imposed, is based upon the amount of time devoted to the activity.

(2) Self-employment may consist of many, widely divergent activities, all of which come within two broad, but generally distinguishable categories. One category consists of the performance of services for another in the capacity of an independent contractor. The other category consists of business ventures such as the production of crops, the manufacture and sale of a product, buying and reselling merchandise, etc.

(a) Performance of Services as an Independent Contractor. A distinction between the performance of "services" as an independent contractor and the performance of "personal services" must be made, since remuneration for personal services constitutes "wages" for disqualification under Section 25-4-71 of unemployment compensation law, wherein a claimant is deemed "not unemployed".

1. Independent Contractor. Payments made for services rendered by an independent contractor are not "wages". Income from this category of self-employment is not remuneration for the performance of personal services and therefore does not come within the definition of "wages". If the individual is not disqualified as being self-employed, such income has no effect upon eligibility.

Services performed by an independent contractor are under the control of the contractor. Usually an agreement is made to perform specific work for a price agreed upon in advance, and related expenses are the responsibility of the contractor. He controls how, when, where, and whom the services are performed. He may hire, direct and pay assistants. He may have an office, maintain supplies and equipment, hold a license, and advertise his services.

To be an independent contractor, a worker must be in a position to suffer a loss or realize a profit as a result of his services. This differs considerably from the position of an employee whose sole function is to provide personal services in return for wages.

2. Performance of Personal Services. "Personal Services" is defined as "the expenditure of human effort in the performance of an act or task". The performance of personal services indicates an employer- employee relationship--the employee providing personal services, the employer providing direction and control. Under the common-law test, a worker is an employee if the person for whom he works has the right to direct and control him in the way he works, both as to final results and as to the details of when, where, and how the work is to be done. The employer need not actually exercise control; it is sufficient that he have the right to do so.

(b) Business Ventures. Business ventures such as farming, manufacturing, and retail trade are deemed to be self-employment if the individual engaged in the activity devotes a "substantial and considerable" amount of time to the activity. The amount or absence of profit or income from the business venture is immaterial. Consequently, any such individual so engages would be disqualified under Section 25-4-78(11) as being self-employed.

In a typical self-employment situation consisting of buying and re-selling goods, title to and ownership of the goods at some point pass to the claimant who in turn re-sells the goods and transfers ownership to a third party. In such cases the claimant has bought and either paid for or incurred a liability for payment of the purchase price.

(3) Each case must be evaluated on an individual basis, considering all the facts and circumstances. Special attention should be given to whether or not substantial change in a sideline business has occurred after separation from work, and to whether the activity becomes the individual's primary source of livelihood. Availability for work should be considered in every instance.

(4) Determination on a Weekly Basis. Self-employment, like ability to work and availability for work, is determined on a week-to-week basis.

Author: Joan Hinson, Chief of Benefits

Ala. Admin. Code r. 480-4-3-.24

Effective March 18, 1993.

Statutory Authority:Code of Ala. 1975, §§ 25-2-7, 25-2-8, 25-4-111, 25-4-78.