Can I Collect Unemployment in Pennsylvania If My Business Fails?

Business Owners Who Run Their Own Company May Not Collect Unemployment in Pennsylvania

If you are either a business owner of, or a controlling principal in, a business that fails, you may not collect Unemployment Benefits in Pennsylvania. I am not sure why this is the case, but it is the law, and generally there is no way around it.

Here are some issues and/or exceptions to the rule to be aware of:

If you have a full time job, and are also a business owner, and you lose your full-time job, you may still be eligible to collect Unemployment Benefits.  You win benefits in such a case by proving that, although you are a business owner, your main income was through the job that you lost.  In essence, in such cases one makes a "Sideline Business" argument.

Here is how the situation comes about. 

You are fired from your job, and file for unemployment.  In making your application (or in making subsequent applications for benefits every two weeks), you identify that you do some work as owner/operator of the business that you owned all throughout your employment with the company that recently terminated your employment.  Advise unemployment that you have owned your business for a while, and that it has never been and is not now your primary source of income.  Inform unemployment further that you have not increased the amount of time or effort spent owning/operating your business since you became unemployed.  The Unemployment Service Center should determine that you are eligible for unemployment on the grounds that your ownership in your own business constitutes sideline employment.

If the determination of the Service Center goes against you on this point, file an appeal and obtain a Hearing before an Unemployment Referee.  The Sideline Employment argument is somewhat technical, so you may want to retain counsel for the hearing.

With regard to the "controlling ownership" situation, this test is even more technical.  Sometimes people who were once controlling owners in a business lose their control to investors, or via dissolution of stock ownership.  Again, the key is to tell the Service Center the facts and, if you disagree with their determination, file an appeal and obtain a hearing before a Referee.

Have other questions concerning Unemployment Benefits in Pennsylvania?  Click Here to read our answers to FAQs.

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