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Supreme Court Rules in Favor of Job-Switching Workers in Unemployment Benefits Appeal

New Jersey Supreme Court Justice Barry Albin
New Jersey Supreme Court Justice Barry Albin

New Jersey Supreme Court Justice Barry Albin. Photo by Carmen Natale/NJLJ

The state Supreme Court has clarified whom the Unemployment Compensation Law is intended to protect by ruling in favor of two employees who sought unemployment benefits after they got new job offers and resigned from their old jobs, only to see the offers rescinded before their start dates.

In two consolidated appeals where courts below reached divergent rulings, the Supreme Court on Monday affirmed an Appellate Division panel’s ruling to award benefits to school teacher Patricia J. McClain, and reversed a second appellate panel's decision denying benefits to Cynthia Blake, a cook.

The court concluded that both are entitled to benefits.

“McClain and Blake fall within the category of workers the Legislature intended to protect by the amendment” to the Unemployment Compensation Law, wrote Justice Barry Albin, who delivered the opinion for the court.

Albin was joined by Chief Justice Stuart Rabner and Justices Jaynee LaVecchia, Anne M. Patterson, Faustino J. Fernandez-Vina, Lee A. Solomon, and Walter Timpone in the opinion, which remands the matters for further proceedings before the New Jersey Department of Labor's Board of Review.

The court concluded that McClain and Blake are entitled to unemployment benefits because they qualified for such benefits at their former employment at the time of their departure; they were scheduled to commence their new jobs within seven days of leaving their former employment; and their new job offers were rescinded through no fault of their own before the start date.

“Providing UI benefits to an employee who voluntarily leaves her first employment based on an equal or better offer from a second employer, who then rescinds the offer before the start date of her new employment, fulfills the Legislature’s objective in amending N.J.S.A. 43:21-5(a),” the court said. “We therefore determine that the two employees in the cases before us have earned the right to UI benefits.”

Attorney Alan W. Lesso of South Jersey Legal Services Inc. in Camden argued for Blake.

"We are obviously very happy with the ruling and feel it was the right decision," Lesso said. "We think it will make life easier for a number of people who are out of a job through no fault of their own, and we believe the intent of the law was to help those people all along."

Cassandra Stabbert, who handled McClain v. Board of Review up to the Appellate Division and then worked with colleagues Kenneth Goldman and Lesso on the brief for South Jersey Legal Services, said, "We're thankful we have such great clients and hopeful it will help other workers in New Jersey in similar situations. It was a great decision to help workers looking for a better opportunity so it doesn't prevent them from seeking new jobs to better themselves."

Melissa Dutton Schaffer, an assistant attorney general, argued for the Department of Labor. The Attorney General’s Office, through spokesman Lee Moore, declined to comment on either appeal.

Alan H. Schorr of Schorr & Associates in Cherry Hill argued for the amicus National Employment Lawyers Association of New Jersey in both cases. NELA-NJ frequently appears as a friend of the court on behalf of unrepresented New Jersey workers.

“There was a black hole in the law where employees who left their job to take a better job did not become at any point voluntarily unemployed, and they would start a new job and would be terminated within the first eight weeks for any number of reasons,” Schorr said on Tuesday in a phone interview. “That black hole has now been closed."

He added that Monday’s decision “recognized that our Unemployment Compensation Law must be liberally construed in favor of claimants seeking unemployment benefits,” noting that the statute "was enacted during the Great Depression in order to provide a safety net for employees who lost their jobs through no fault of their own."

Under New Jersey’s law, an employee terminated from employment after working a certain number of weeks is ordinarily entitled to unemployment insurance benefits. An employee who voluntarily leaves employment without just cause, however, is not entitled to such benefits.

The court said the Legislature recognized the inequity facing those employees who worked long term with one employer and then voluntarily left for an equal or better opportunity with another employer, only to be terminated shortly afterward.

To remedy that problem, the Legislature in 2015 passed an amendment to the UCL, which provided that an employee who was qualified for unemployment benefits during his or her tenure with a previous employer would not be disqualified from such benefits if terminated shortly after beginning work for a second employer.

McClain and Blake each accepted an offer of employment from a second employer, only to have the offer rescinded before actually starting the new job.

According to the decision, McClain had worked at Learning Edge Academy Inc., teaching toddlers from January 2013 to October 2015, at a rate of $8.63 per hour for 40 hours per week. She resigned from that job and accepted an offer on Oct. 12, 2015, as a preschool teacher at Kids Choice Academy making $9.25 an hour for 40 hours per week. McClain’s new job was to begin seven days later.

But on Oct. 13, 2015, one day after taking the job, Kids Choice called McClain and rescinded the offer because the teacher she was to replace was returning.

The circumstances were similar for Blake, who worked as a cook for Laurel Healthcare from September 2013 to August 2015, making $10.70 per hour during a 40-hour workweek. Blake accepted a full-time job as a cook for Alaris Healthcare, where she would earn $12.96 per hour for 40 hours a week.

Blake resigned from Laurel and was to begin work at Alaris seven days after leaving Laurel. Two days before her scheduled start date, Blake was notified by Alaris that the company was hiring someone else and rescinding the job offer to her, the court explained.

Both women filed for unemployment benefits with the state Department of Labor, but the deputy director of unemployment insurance denied their claims. In both cases, the appeal tribunals affirmed the denials because McClain and Blake had not commenced their new employment within seven days of leaving their former employer, thus disqualifying them for benefits under N.J.S.A. 43:21-5(a), the court noted.

The department's Board of Review affirmed the appeal tribunals in both cases.

McClain and Blake separately appealed.

In McClain’s case, the Appellate Division reversed, reading N.J.S.A. 43:21-5(a) to conclude that so long as the employee accepts a job offer, which is set to begin within seven days of leaving the first employer, she is entitled to UI benefits if the offer is rescinded and she is rendered unemployed. The panel determined that the clear language of the statute governs and is supported by the legislative history and the remedial purposes of the UCL.

In Blake’s case, the Appellate Division affirmed the Board of Review’s decision to deny Blake benefits because Blake voluntarily quit her job with her first employer and never started her second employment.

“The panel construed the phrase ‘employment which commences’ to mean that the employee must actually begin work with the second employer to be entitled to UI benefits,” Albin noted.

The Blake panel also reasoned that the first employer’s unemployment insurance account would be charged for benefits to Blake even though she became unemployed as a result of the second employer’s rescission of the job offer.

The Supreme Court granted a petition for certification in each case and consolidated them for arguments.

Albin wrote in Monday's decision: “In enacting the UCL, the Legislature declared that 'economic insecurity due to unemployment is a serious menace to the health, morals, and welfare of the people of this state’ and that the general welfare of the state required the 'setting aside of unemployment reserves to be used for the benefit of persons unemployed after qualifying periods of employment.'"

Before 2015, a general exclusion of benefits applied to voluntary resignations. But the Legislature amended the UCL to protect job-switching employees quickly terminated from their new jobs.

“The Board of Review in McClain and Blake give dueling plain-language interpretations of N.J.S.A. 43:21-5(a),” wrote Albin. “In the Board’s view, the triggering event for UI benefit eligibility is the commencement of the new employment; in McClain and Blake’s view, it is the acceptance of new employment.

“McClain and Blake claim that entitlement to UI benefits merely requires that an employee accept an offer of employment scheduled to begin seven days after leaving her former employment," he wrote, noting that the Blake panel’s interpretation of the UCL amendment meant that McClain and Blake could have collected benefits if they had actually started new jobs and were fired the next day, but not in the case of a rescission of offer.

“That absurd result is not one that the Legislature likely envisioned or intended and is completely at odds with the enlightened purposes of the UCL,” wrote Albin.

The court said the resignation date is when the seven-day clock begins.

“The facts are not in dispute,” Albin wrote for the court. “McClain and Blake both tendered their resignations upon accepting an offer of work with a new employer. They both accepted positions that promised higher hourly wages than their old jobs.

“Their new employment, moreover, was scheduled to commence within seven days of their final day at their old jobs,” added Albin. “The only remaining issue is whether their new employers’ rescission of their accepted job offers before the start date disqualified them from receiving UI benefits under N.J.S.A. 43:21-5(a).”

The court determined it did not.

“Based on legislative history, we cannot conclude that the Legislature intended to disqualify UI benefit protection to the class of employees, such as McClain and Blake, who earned UI benefit eligibility at their former jobs but were rendered unemployed through no fault of their own because of the rescission of an accepted offer of new employment that was scheduled to commence within seven days,” the court said.

Albin rejected the Blake panel's reasoning that granting benefits would cause the first employer to bear the financial consequences of the second employer's rescission. He said N.J.S.A. 43:21-7(c) makes clear that an employer’s unemployment insurance account is not charged when an employee voluntarily quits his or her current job, and that an applicant for benefits must go through a process to give credibility to the claim that a job offer was taken back.

“Last, the Court does not harbor the concerns expressed by the Blake panel about the difficulty of exposing the hypothetical employee who might feign a rescinded offer to qualify for UI benefits because the employee must satisfy the burden of establishing that she is entitled to UI benefits through an adversarial process,” the court said.