Tuesday, February 11, 2020

UC - Board erred in raising an issue not raised by claimant, employer, or Department

Quigley v. UCBR – Commonwealth Court – en banc – reported decision – January 28, 2020

N.B. This case was litigated by Julia Simon-Mishel of PLA.

In a 5-2 en banc decision, the Court held that the UCBR erred when it addressed an issue (claimant’s alleged self-employment v. sideline activity) when neither the separating employer nor the Department had raised the issue.  

The case came before the UCBR when claimant appealed from UCSC and referee decisions finding her eligible for benefits but deducting what claimant believed to be an incorrect amount, based on her sideline earnings.  Also of note: claimant’s request for continuance of the referee hearing was denied, and she did not attend the hearing. 

On appeal to the Board, the UCBR reversed the referee, holding that claimant was not eligible for benefits in any amount, because she had not presented any evidence that she qualified for the sideline activity exception under sec. 402(h) of the UC Law, 43 P.S. sec. 802(h), which says that a person is not eligible to get UC when “engaged in self-employment” provided however, the such work is a sideline activity, that is – it is not the claimant’s “primary source of livelihood.”

Majority opinion

Specifically noting the remedial nature of the UC Law under sec. 3, 43 P.S. sec. 752, the court held that the Board exceeded its admittedly broad right of review of a referee decision, because “Claimant’s eligibility was never in dispute. Both the UC Service Center and the Referee held that she was eligible for unemployment benefits because her self-employment was limited to a sideline activity. Employer did not contest her eligibility, and neither did the Department. Rather than decide the controversy presented, which pertained to benefit calculation, the Board transformed the nature of the controversy to one of benefit eligibility. This was problematic because there was in fact no controversy over Claimant’s eligibility. Consequently, Claimant had no notice that the Board would review her eligibility, because it had not been contested by Employer or by the Department.”

due process – notice – opportunity to be heard -- The court decided that under the circumstances, claimant had been denied due process. “Although the regulation at 34 Pa. Code §101.87 authorizes a tribunal to consider all “issues expressly ruled upon” below, the appeal process must still comport with due process. Thus, there must be a controversy between at least two of the parties at every stage of the appeal. . . .” – not the case here, absent an appeal by either the employer or Department.
After denying the claimant’s request for continuance and in her absence, the UCBR “decided her appeal on the basis of the Department’s records. The Board reversed because Claimant did not appear at the Referee hearing to prove her eligibility, and then the Board refused to give Claimant an opportunity to explain her nonappearance. Fundamental due process requires notice and an opportunity to be heard, and this constitutional principle must inform the Department’s procedural rules for unemployment compensation appeals.”
The court was careful to note the precise circumstances of the case: “Our holding limited to the circumstances presented in the case sub judicei.e., where the claimant, through no fault of her own, becomes unemployed; where the claimant is found to be eligible for unemployment benefits and no party challenges her eligibility; and where, on review of the claimant’s appeal of the computation of her unemployment benefit amount, the Board sua sponte raises the issue of her eligibility for benefits.”

Due process - commingling of functions – The court agreed with the claimant “the Board applied the Department regulations in a way that improperly commingled the Department’s prosecutorial and adjudicatory functions. This violates due process as our Supreme Court established in Lyness v. State Board of Medicine, 605 A.2d 1204, 1209-10 (Pa. 1992).”
The “UC Service Center determined that Claimant was entitled to benefits under Section 402(h) of the Law, subject to a weekly deduction for her sideline business income. Claimant appealed, challenging only the monetary amount of the deduction. Indeed, Claimant could not have appealed the issue of her eligibility for benefits under the sideline business provision of Section 402(h) of the Law because she was not aggrieved by that determination. The only portion of the UC Service Center determination, and later Referee decision, that Claimant could have appealed was the amount of prorated earnings that determined her weekly deduction. 
The Referee held a de novo hearing, in which the Department could have participated. It did not. Similarly, if the Department had an issue with the Referee’s decision to affirm the UC Service Center’s eligibility determination, it could have appealed to the Board. It did not. The Board reversed Claimant’s eligibility even though that issue could not have been raised by Claimant, but only by the Department or Employer. By doing so, the Board put itself in the role of the adversary, and in the case of self-employment, within the prosecutorial role of the Department. Such commingling of prosecutorial and adjudicatory functions is improper.”
The court held that the “ ‘prosecutorial’ actor in all unemployment compensation matters is the Department, and it may challenge any determination on eligibility for benefits. Although it is the employer that typically opposes a claimant’s eligibility, we cannot just ignore the Department’s statutory prosecutorial role, as do the dissenting judges. The Board’s function is solely adjudicatory. It must not take on the Department’s prosecutorial function by revisiting the referee’s holding on benefit eligibility unless the Department raises that challenge.” In UC cases, the “Board’s function is solely adjudicatory.”

The majority thus concluded that
Claimant, through no fault of her own, became unemployed; was ruled eligible for unemployment benefits; and no party challenged her eligibility. On review, the Board sua sponte raised the eligibility issue and prevented Claimant from presenting evidence. Simply, the Board denied Claimant a fair hearing. Further, the Board erred by assuming the prosecutorial role of the Department when it raised the issue of Claimant’s eligibility for benefits and held that she was ineligible. In commingling the prosecutorial and adjudicatory functions, the Board created an appearance of impropriety and bias. The Board’s actions have contravened the remedial purpose of the Law, due process and fundamental fairness. 
For these reasons, we vacate the Board’s order and remand the matter to the Board to remand to a referee to conduct a hearing to determine whether the deduction from Claimant’s weekly benefit amount for her sideline business income was properly calculated. 

Dissent of Judge Cohn Jubilerer

The judge felt that the majority “examined this matter sympathetically rather than legally, as reflected in its deviation from the Law, the regulations, and longstanding precedent. . . .”
Section 3 “remedial purpose” language “may not, in ‘the pretext of pursuing its spirit,’ disregard the Law’s clear and unambiguous language. Thus, in addition to excluding those who are unemployed due to their own fault, whether by voluntarily quitting without cause of a necessitous, compelling nature or engaging in willful misconduct connected with their work, the General Assembly excluded those who are engaged in self-employment.. . . . It has long been held that the Law is not intended to protect those who are engaged in business for themselves or who are failed entrepreneurs. . . . Although there is an exception to this exclusion, the sideline business exception, which is at issue here, that exception requires the claimant to establish that the sideline business was not the claimant’s primary livelihood. [editor’s note – there should have been some specific discussion about burden of proof].

The Board has a duty to consider all issues in the case.  There is “nothing in the regulations indicate that the Board’s obligation to review those issues expressly ruled upon is subject to the approval of the parties. 43 P.S. § 824; 34 Pa. Code §§ 101.87, 101.107(b)The Court should also be guided by the long established principle that, in addition to the Board’s fact finding role set forth in Section 504 and the regulations, the Board “has a duty to protect the [UC] fund from ineligible claimants and to investigate all the facts in a given case.” 

A “determination regarding the rate of compensation in self- employment cases by its very nature encompasses the question of eligibility for those benefits under Section 402(h) of the Law. Section 402(h) provides that an employee is ineligible for benefits if the employee engages in self-employment. 43 P.S. § 802(h). The exception to this ineligibility, also found in Section 402(h), is the sideline business exception – which is the exception Claimant relies upon to claim she is not ineligible for UC benefits. 

To qualify for this exception, Claimant had to establish that: (1) the self-employment began prior to the termination of the full- time employment; (2) the self-employment continued without substantial change after the employee’s termination; (3) the employee remained available for full-time employment; and “(4) the self-employment was not the primary source of [her] livelihood.”. . . .Under this standard, the Section 402(h) inquiry considers a claimant’s self-employment income for purposes of both eligibility (that it was not the primary source of the claimant’s livelihood) and the weekly rate of compensation (by how much the claimant’s UC benefits should be reduced) should the exception be established. Therefore, an appeal as to the rate of compensation, which requires a review of the claimant’s self-employment income, necessarily implicates questions of eligibility and vice versa. An appeal as to one is an appeal to both. 

Second, and more importantly, the Board was required to review the question of Claimant’s eligibility under the Law, the regulations, and longstanding precedent because that issue had been ruled upon by both the local service center and the Referee. The Referee specifically held that Claimant was “NOT DISQUALIFIED from receiving compensation under [Section 402(h)].” . . . .As discussed, under Section 504 of the Law the Board is the ultimate fact finder that determines a claimant’s eligibility for benefits based on its de novo review. Per that section, “[t]he [B]oard shall have power . . . on appeal . . . [to] review any claim . . . decided by[] a [R]eferee . . . .” 43 P.S. § 824. . . The Department’s regulations similarly reflect that issues expressly ruled upon by either a local service center or a Referee are subject to the Board’s ultimate review. 

Since 1981, this Court has consistently held that these provisions give the Board jurisdiction to consider any issue expressly ruled upon in the determination being appealed even though the appealing party “did not intend to reopen the inquiry into . . . issue[s that] had been resolved in [the party’s] favor.” . . .  In.Black Lick Trucking, Inc. v. Unemployment Comp. Bd. of Review, 667 A.2d 454, 457 (Pa. Cmwlth. 1995) we explained that these provisions “mean that whatever issues the [local service] center addressed the [R]eferee should likewise address, and the Board in turn should decide all of the issues the [R]eferee considered, regardless of whether a party specifically raised the issue on appeal.” 667 A.2d at 457. 

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