Unemployment compensation Featured

8:00pm EDT April 24, 2005
In the wake of the recent Pennsylvania Commonwealth Court decision holding that corporations must be represented by an attorney at unemployment compensation (UC) hearings (Harkness v. UCBR), many employers are struggling with whether the potential impact on their unemployment compensation contribution rates is worth the expenditure of legal fees.

From a pure dollars and cents standpoint, the employer may wish to contact its CFO or accountant to determine how an adverse claim will impact the employer's future contribution rate. However, financial impact alone should never be the basis of an employer's decision on whether or not to fight an employee's claim for benefits. The employer must determine if there are any other overriding concerns, some of which are addressed below.

If there are no overriding concerns, and the impact of the claim on the employer's future contribution rate is relatively small, you may wish to simply make a business decision to permit an employee to receive benefits.

One example in which the employer should contest the claim, however, even if the impact on the employer's future contribution rate is relatively small, is when the employer has reason to believe that the employee might bring a claim of wrongful discharge, including employment discrimination, against the employer.

The employer may use the claim for benefits as leverage to settle the outstanding/future claim. Additionally, at any UC hearing, the employee is generally focused upon his or her claim for benefits and is not thinking strategically about future employment claims.

he hearing provides the employer an opportunity to discover potential evidence. Most employees do not realize that the hearing is under oath and may be admissible in future litigation.

An employer may be able to lock in the employee's testimony about why that person believes he or she was discharged, unrelated to any unlawful or discriminatory motive. However, employers must be sensitive to the fact that the evidence submitted in response to a claim for benefits and testimony presented at the hearing may also be admissible against the employer in any future proceeding.

If a lawsuit against the employer is not at issue, the employer may wish to consider whether there are any other overriding issues to address. If an employee is discharged for violating rules -- for example, he or she was caught stealing -- the employer may wish to send a message to other employees that such acts will not be tolerated or rewarded.

Is the individual an independent contractor?

Individuals who truly are independent contractors are not entitled to UC benefits. However, if the independent contractor meets the legal definition of "common law employee," he or she will be eligible for benefits, regardless of any agreement between the employer and contractor to the contrary. An adverse finding in such an instance may impact the employer's legal relationship with other independent contractors as well.

Some employers contest UC claims as a matter of principle. Before taking such a didactic approach, employers should understand that just because an employee was discharged for legitimate reasons does not mean he or she will be denied benefits because of willful misconduct. For example, absences under a no-fault attendance policy, prior performance and negligent acts generally will not rise to the level of willful misconduct.

Additionally, when an employer contests a legitimate claim for UC benefits, it may force the employee to seek legal counsel, who might suggest the employee pursue other legal claims against the employer.

The decision to fight unemployment must be made on a case-by-case basis after considering all of the relevant facts.

Allan M. Dabrow, a shareholder, and Jennifer L. Petruccelli, an associate, are labor and employment attorneys in the Philadelphia office of Buchanan Ingersoll PC. Reach them at dabrowam@bipc.com or petruccellijl@bipc.com.