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Employment Development Department
Employment Development Department

Total and Partial Unemployment TPU 415.15

Commercial Enterprise

A claimant who is self-employed in a commercial enterprise may be unemployed, but any earnings received from the employment are deductible from his/her benefits.

The Board, in Benefit Decision 6231, considered the case of a claimant who owned and operated a photography business. He arranged the operation of this business to suit his hours when employed. In holding that the claimant was unemployed, the Board said:

"An individual who is self-employed may nevertheless be unemployed within the meaning of section 1252 of the code . . . However, if such an individual is in receipt of income for services performed in an independent business, such income constitutes 'wages' . . . "

If no "services" are performed, the money received from the commercial enterprise is not wages. The Board considered this circumstance in Benefit Decision 6392. The claimant's wife bought a cafe which the claimant considered to be community property. During the period in question, the claimant, his wife, and their son each owned a one-third interest in the partnership. The claimant's son lives with the claimant. No regular salaries were paid but the profits of the cafe were used to pay living expenses of the family. The claimant does not work in the cafe except to light the fire under the grill and coffee water before leaving for his own work. This takes about ten minutes each day. The Board said:

"Whether the claimant’s share of the profits of the cafe is to be considered as 'wages' depends upon whether he received such profits as compensation for personal services performed in the cafe.

In the instant case, the only personal service performed by the claimant in the operation of the cafe was to light the fire under the grill and coffee water. In our opinion, this is a trifling service and does not constitute personal services within the meaning of Section 1252 of the code. Accordingly, any profits received by the claimant would be his share of the distribution of the partnership profits because of his capital investment in the partnership and did not constitute compensation for personal services. We conclude that the claimant did not receive 'wages' within the meaning of Section 1252 of the code and he is entitled to benefits for the period involved herein."