IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Pathways Counseling Services, LLC, :

Petitioner :

:

v. : No. 1332 C.D. 2018

: ARGUED: April 10, 2019

Commonwealth of Pennsylvania, :

Department of Labor and Industry, :

Respondent :

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge

HONORABLE ROBERT SIMPSON, Judge

HONORABLE P. KEVIN BROBSON, Judge 

HONORABLE PATRICIA A. McCULLOUGH, Judge

HONORABLE ANNE E. COVEY, Judge

HONORABLE CHRISTINE FIZZANO CANNON, Judge

HONORABLE ELLEN CEISLER, Judge

OPINION BY JUDGE CEISLER FILED: July 12, 2019

Pathways Counseling Services, LLC (Pathways) petitions for review from a 

decision and order of the Department of Labor and Industry, Office of 

Unemployment Compensation Tax Services (Department) denying Pathways’ 

petition for reassessment. Pathways argues it is not the employer of the professional 

counselors who provide services in its building and to whom it provides client 

referrals. Accordingly, Pathways contends the Department erred in assessing

unemployment compensation (UC) taxes related to those counselors. After thorough 

review, we reverse.

I. Background

A. Counselors’ Contracts with Pathways

Pathways has contracts with a number of insurance companies to provide 

referrals for counseling, the costs of which are covered by insurance. Insurers do 
2

not contract directly with individual psychologists or counseling practices. Instead, 

Pathways contracts with the counselors and provides them with referrals from the 

insurers. The counselors are then compensated through Pathways with funds paid 

by the insurers for the counseling services provided to their insureds.

Pathways also has clients who are referred for counseling by other agencies 

or providers. Pathways in turn refers those clients to the counselors. Payment is 

made through Pathways by the clients for those services as well.

Pathways provides office space to each counselor with whom it contracts. 

Pathways provides each office with telephone and fax service, as well as limited 

furniture. However, counselors supply most of their own office furnishings.

Pathways also provides billing service. Although counselors are not required to use 

that service, they generally do take advantage of it. Counselors are responsible for 

their own professional licensing and fees, as well as professional liability insurance. 

Pathways does not provide any employment benefits.

In return for its referrals, office space, and other services, Pathways retains a 

percentage of the fees it receives on behalf of each contracting counselor. The 

percentage retained varies individually between 30% and 40%. If for any reason an 

insurer or client does not pay for service, the counselor who provided that service is 

not paid by Pathways. Thus, each counselor bears the primary risk of any 

nonpayment for services by or on behalf of a client, although Pathways also risks 

losing its 30-40% fee for unpaid services.

Counselors are free to, and do, accept counseling clients from sources other 

than Pathways. Counselors are likewise free to, and do, enter into services contracts 

with entities other than Pathways, providing services at various institutions.

1

 

1 For example, one counselor sees clients two days each week at his office in Pathways’ 

building but also provides in-house counseling at a private residential facility.
3

Counselors choose their own business card designs, as well as the information 

to be included on the business cards. They are not required to identify any affiliation 

with Pathways on their business cards. Pathways features its counselors on its 

website, but individual counselors may market their practices separately as well.

Counselors decide which referrals to accept from Pathways, as well as what 

other clients and contracts to accept. Counselors may decline referrals from 

Pathways at their discretion without adverse consequences, although Pathways 

acknowledged its business model would not work if the counselors did not accept 

any of its referrals. 

Counselors set their own hours and control their own schedules. They have 

their own keys to the building and are free to schedule appointments outside normal 

business hours if they wish.

Further, Pathways does not set the amounts of clients’ fees; counselors and 

clients determine the fee amounts, presumably subject to limits on insurance 

coverage amounts if applicable. A counselor may also freely choose to provide 

service to a client at a reduced fee, or no fee.

Pathways requires counselors to be professionally licensed, but does not 

provide any training or hold any meetings. Pathways does not evaluate or otherwise 

monitor counselors’ performance. Other than a general contractual agreement to use 

their best efforts, counselors are not subject to any control or direction from 

Pathways regarding the performance of their professional services.

Counselors are free to compete directly with Pathways for clients. However, 

if they leave Pathways, a non-solicitation provision in their contracts with Pathways 
4

prohibits them for a period of six months2from recruiting other counselors to leave 

Pathways and join a competing practice.

B. Department Assessment

In November 2016, the Department issued a notice against Pathways,

assessing UC contributions and interest against Pathways for calendar years 2012 

through 2015 and the first quarter of 2016. Pathways filed a reassessment petition 

with the Department challenging the assessment. Following a fact-finding 

conference and briefing by the parties, the Department rejected Pathways’ 

reassessment petition. Pathways then filed a timely petition for review in this Court.

II. Issues

On appeal,3 Pathways lists seven issues, but actually they are all sub-parts of 

a single overarching legal issue. Pathways argues the counselors are independent 

contractors, not employees, for purposes of determining Pathways’ obligations to 

pay UC tax on the compensation paid to the counselors. Pathways contends the 

Department committed legal error and the record lacked substantial evidence to 

support the Department’s factual findings.

III. Discussion

The existence of an employer-employee relationship is a question of law, 

based on the specific facts of each case. Danielle Viktor, Ltd. v. Dep’t of Labor & 

Indus., 892 A.2d 781 (Pa. 2006); Clark v. Unemployment Comp. Bd. of Review, 129 

 

2 Prior to 2013, the non-solicitation agreement was for three years rather than six months.

3 Our review is limited to determining whether the Department committed an error of law, 

whether necessary findings of fact are supported by substantial evidence, or whether the 

petitioner’s constitutional rights were violated. A Special Touch v. Dep’t of Labor & Indus., 192 

A.3d 1238 (Pa. Cmwlth. 2018), appeal granted on other grounds, (Pa., No. 615 MAL 2018, filed 

Mar. 13, 2019), 2019 Pa. LEXIS 1525 (unreported).
5

A.3d 1272 (Pa. Cmwlth. 2015). Whether an individual is an employee or an 

independent contractor is governed by the two-part test set forth in Section 4(l)(2)(B) 

of the Unemployment Compensation Law (UC Law)4:

Services performed by an individual for wages shall be deemed to be 

employment subject to this act, unless and until it is shown to the 

satisfaction of the [D]epartment that - - (a) such individual has been and 

will continue to be free from control or direction over the performance 

of such services both under this contract of service and in fact; and (b) 

as to such services such individual is customarily engaged in an 

independently established trade, occupation, profession or business.

43 P.S. § 752(l)(2)(B).

A. Freedom from Control or Direction

In its written decision, the Department acknowledged that analyzing the issue 

of control includes factors such as:

whether there was a fixed rate of remuneration; whether taxes were 

withheld from the [counselor’s] pay; whether [Pathways] supplied the 

tools necessary to carry out the services; whether [Pathways] provided 

on-the-job training; whether [Pathways] set the time and location for 

work; whether [Pathways] had the right to monitor the [counselor’s] 

work and review performance; and whether [Pathways] held regular 

meetings that [the counselor] was expected to attend.

Reproduced Record at a6945(citations omitted). See, e.g., Pasour v. Unemployment 

Comp. Bd. of Review, 54 A.3d 134 (Pa. Cmwlth. 2012).

The Department correctly observes that no single factor is controlling. See 

Pasour. Here, however, not one of the listed factors is present. Counselors set their 

own rates of compensation. Pathways withholds no taxes from its payments to 

counselors. The record does not indicate that “tools” are needed by counselors, but 

 

4 Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. 

§§ 751 – 919.10.

5 For clarity, we follow the numbering format used by Pathways in the reproduced record.
6

in any event, Pathways provides none. Pathways provides no training. Counselors, 

not Pathways, set work schedules. To the extent counselors are required to provide 

services at Pathways’ offices, that requirement is imposed by the insurers, not by 

Pathways. Pathways does not monitor counseling sessions or review counselors’ 

performance. Pathways holds no meetings with counselors.

The Department, while purporting to consider the totality of the 

circumstances, see Pasour, actually relies on a few facts of limited relevance to 

justify its determination that the counselors are Pathways’ employees. For example, 

the Department points to testimony by one counselor that he assumed, without 

asking, that he was permitted to receive outside mail at his Pathways address. The 

Department infers from that statement that Pathways had the ability to control 

whether counselors received mail at its offices. That inference is unfounded. To the 

contrary, the fair inference of the testimony is that Pathways did not control what 

mail the counselors received there. 

Similarly, although the unrefuted testimony of the counselors and Pathways’ 

principal was that counselors are free to accept or reject any referral, the Department 

focuses instead on an acknowledgment by Pathways’ principal that the business 

probably could not continue if none of the counselors accepted any referrals. The 

Department springs from that statement to a conclusion that the counselors were not 

free to reject any assignment. Such a conclusion is equally unfounded as the 

inference concerning mail delivery. Obviously a referral business cannot stay in 

business if no one accepts any of its referrals. However, that fact bears no logical 

relation to the question of whether the referring company controls the performance 

of those who accept its referrals.
7

This Court has held referral services are not employers under facts similar to 

those here. For example, in Pasour,

6 a licensed attorney signed an independent 

contractor agreement with Abelson, a referral service that matched attorneys with 

clients seeking legal help on specific assignments. Payment was made through 

Abelson. However, Abelson did not supervise the contracting attorney or require 

status reports. Abelson provided no training. The contracting attorney was free to 

accept or reject assignments, as well as to accept work from clients not referred by 

Abelson. Clients, not Abelson, set the attorney’s hours and compensation rates. 

Abelson withheld no taxes, instead issuing an IRS Form 1099 regarding 

compensation paid to the contracting attorney. This Court concluded the contracting 

attorney was not subject to Abelson’s direction or control. Id.; see also Krum v. 

Unemployment Comp. Bd. of Review, 689 A.2d 330 (Pa. Cmwlth. 1997) (attorney

not subject to direction or control by referral service), cited with approval in Danielle 

Viktor.

White-Butler v. Unemployment Compensation Board of Review (Pa. Cmwlth.,

No. 622 C.D. 2010, filed September 29, 2010), 2010 Pa. Commw. Unpub. LEXIS 

657 (unreported) is also analogous.7 White-Butler involved a referral service for 

various social services, including counseling services. The petitioner was a mental 

health service provider. The referral service entered into independent contractor 

agreements with service providers to whom it referred clients. Service providers 

could accept or reject referrals and were free to have other employment, even with 

 

6 Pasour involved a claim by a putative employee for UC benefits, rather than a 

reassessment petition by a putative employer. However, as this Court observed in Pasour, the 

analysis of whether an individual is an employee or an independent contractor applies the same 

analytical framework of Section 4(l)(2)(B) of the UC Law, regardless of whether a UC claim or a 

reassessment petition is involved.

7 We cite this unpublished opinion as persuasive pursuant to 210 Pa. Code § 69.414.
8

competing referral services, although the petitioner did not do so. They were free to 

market their services by other means as well. Clients determined the hours needed 

and rates they were willing to pay. The referral service provided no training; service 

providers determined the means, manner, and method by which to perform services 

for clients. This Court found the service providers were not subject to the direction 

or control of the referral service. Id.

We find Pasour, Krum, and White-Butler persuasive here. We conclude that 

the counselors with whom Pathways contracts are free from its direction or control,

as provided in Section 4(l)(2)(B) of the UC Law. Therefore, Pathways has satisfied 

the first prong of the independent contractor analysis.

B. Independently Established Profession

In analyzing the second prong of Section 4(l)(2)(B) of the UC Law, this Court 

primarily considers whether the putative employee “was able to perform ‘the 

activities in question to anyone that wished to avail themselves of the services’ and 

‘whether the nature of the business compelled the [putative employee] to look to 

only a single employer for the continuation of such services.’” Pasour, 54 A.3d at 

138 (quoting Resource Staffing, Inc. v. Unemployment Comp. Bd. of Review, 995 

A.2d 887, 890 n.6 (Pa. Cmwlth. 2010)); see also Krum. Although no single factor 

is controlling, professionals contracting with referral services to obtain clients, and 

who hold themselves out as providing their professional services to those who want 

them, are generally viewed as customarily engaged in an independent trade or 

profession, within the meaning of Section 4(l)(2)(B). See, e.g., Pasour (citing 

Krum). Further, one who practices in a “free[-]standing” profession and whose 

arrangement with a referral service is “non-exclusive” is “not compelled to look to 
9

only a single employer,” and thus satisfies the second prong of Section 4(l)(2)(B). 

Pasour, 54 A.3d at 139.

In addition to the two primary considerations discussed above, other relevant 

factors, even though not required under the UC Law, may also inform the analysis 

of the second prong of Section 4(l)(2)(B). For example, the ability to accept or reject 

assignments is relevant to both prongs of the analysis. See Danielle Viktor. Further, 

a professional who brings with him the “necessary perquisites” of providing his 

services (such as a professional license), and who bears some risk of financial loss 

in connection with providing his services, has indicia of independent contractor 

status for purposes of the second prong of Section 4(l)(2)(B). Danielle Viktor, 892 

A.2d at 798, 802. Notably, the contracting professional need not be in business for 

himself and need not own the assets of the business. Id. at 798, 800. Moreover, 

even where the professional performs most or all of his services for the contracting 

referral service, that does not preclude a finding that he is customarily engaged in an 

independently established profession for purposes of Section 4(l)(2)(B). Danielle 

Viktor (citing Dep’t of Labor & Indus. v. Aluminum Cooking Utensil Co., 82 A.2d 

897 (Pa. 1951)).

Here, the evidence showed counselors contracting with Pathways hold 

themselves out as providing their professional services to those who want them. As 

professionally licensed counselors, they practice in a free-standing profession. Their 

arrangement with Pathways is non-exclusive. They have the ability to accept or 

reject assignments. They bring with them the necessary prerequisites of their 

practices, in that they obtain their own professional licenses and liability insurance 

coverage. Because they do not receive payment through Pathways for any 

counseling servicesfor which clients or insurers fail to pay, the counselors bear some 
10

risk of financial loss in connection with providing their services. We find these 

factors demonstrate that the counselors are customarily engaged in an independently 

established profession. Therefore, Pathways has satisfied its burden of meeting the 

second prong of the Section 4(l)(2)(B) analysis.

IV. Conclusion

Based on the foregoing discussion, we conclude Pathways has satisfied both 

prongs required to demonstrate independent contractor status of the counselors under 

Section 4(l)(2)(B) of the UC Law. We find the Department committed legal error 

in determining otherwise. Accordingly, we reverse the Department’s assessment of 

UC taxes and related interest against Pathways in relation to the counselors.

__________________________________

ELLEN CEISLER, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Pathways Counseling Services, LLC, :

Petitioner :

:

v. : No. 1332 C.D. 2018

:

Commonwealth of Pennsylvania, :

Department of Labor and Industry, :

Respondent :

O R D E R

AND NOW, this 12th day of July, 2019, the order of the Department of Labor 

and Industry, Office of Unemployment Compensation Tax Services, is REVERSED.

__________________________________

ELLEN CEISLER, Judge