Uber car. Photo: Jason Doiy/ALM

Out-of-work Pennsylvanians who drive for a ride-hailing service in their spare time are not automatically ineligible for unemployment benefits, a Pennsylvania appellate court has ruled.

An en banc panel of the Commonwealth Court ruled 7-1 Wednesday that a former behavioral health specialist should be entitled to unemployment benefits, despite earning money as a driver for Uber after he lost his job. The decision reversed a holding from the Unemployment Compensation Board of Review.

The UCBR had determined that the driver, Donald Lowman, could not receive the benefits because driving for Uber constituted “self-employment.”

The court said that Lowman's earnings could defray the amount of benefit received but were not a disqualifier. The ruling comes on an apparent matter of first impression and deals with one way the gig economy intersects with traditional economic benefits.

President Judge Mary Hannah Leavitt, however, said the board's reasoning was flawed, and there was no indication that he planned to enter into an independent business venture as an Uber driver.

A side job, Leavitt indicated, was a side job, even if entered into after loss of full-time work.

“Uber permitted claimant to drive for other ridesharing entities, and claimant was able to accept or refuse assignments. These findings, which focused solely on claimant's relationship with Uber, do not reflect 'a positive step' toward establishment of an independent business,” Leavitt said. “Simply, his actions did not reflect 'an entrepreneurial spirit' or 'intentions of starting a new business or trade.'”

Although the court remanded the case back to the unemployment compensation referee to calculate Lowman's unemployment benefits, Leavitt noted that the amount of his earnings as an Uber driver will need to be factored in to offset what he receives in benefits.

Judge Patricia McCullough issued a concurring and dissenting opinion, saying she disagreed with the majority's rationale, but agreed with its holding.

According to Leavitt, Lowman worked as a behavioral health specialist, but lost his job and applied for unemployment compensation benefits in June 2015. While he was awaiting a determination he entered into a software license and online service agreement with Uber's parent company, and began working as an Uber driver in July 2015.

About a month later the Unemployment Compensation Service Center determined that Lowman was not entitled to benefits, finding that his agreement with Uber made him ineligible.

Focusing on the degree of dependence between Lowman and Uber, the review board also determined that Lowman was ineligible for the benefits. The board found that he was not a subordinate in the company, and could refuse assignments if he wanted, or could provide similar services for other companies.

Leavitt, however, said that analysis “misses the mark.”

“The question here is whether claimant took a positive step to embark on an independent trade or business, thereby disqualifying himself for benefits,” Leavitt said.

Julia Simon-Mishel of Philadelphia Legal Assistance represented Lowman, Janet Tarczy represented the review board and Paul Lantis of Littler Mendelson represented Uber. Philadelphia Legal Assistance, a spokeswoman for the Department of Labor and Industry and Lantis each did not return a call seeking comment.