Articles Posted in Unemployment Benefits

In East Bay Drywall, LLC v. Department of Labor & Workforce Development 2022 N.J. LEXIS 671 (2022) the New Jersey Supreme Court reaffirmed that an alleged employer must satisfy each element of the ABC Control test to establish they properly classified their workers as independent contractors as opposed to employees. N.J.S.A. 43:21-19(i)(6)(A) to (C).  The specific question before the Supreme Court was whether a drywall installation company named East Bay Drywall had properly classified its workers hired on a per job basis as independent contractors under New Jersey’s Unemployment Compensation Law. Following an audit performed by the Department of Labor and Workforce Development (DLWD) finding some of those working for East Bay Drywall were improperly classified as independent contractors, the company appealed the findings which made its way to the Commissioner of the DWLD who concluded that the sixteen workers at issue were misclassified by East Bay Drywall as independent contractors. Further appeals of the Commissioner’s decision eventually ended up before our state’s highest court where it was concluded that East Bay Drywall failed its burden to satisfy each element of the ABC test.

The text of N.J.S.A. 43:21-19 establishing the ABC test reads as follows:

Services performed by an individual for remuneration shall be deemed to be employment . . . unless and until it is shown to the satisfaction of the division that:

If you are unemployed and you left your New Jersey job because you reasonable believed you would be fired or laid off, you may still be eligible for unemployment benefits. Generally, employees who voluntarily quit working may not qualify for unemployment benefits because “the purpose of the New Jersey Unemployment Compensation Act [UCA] is to provide some income for the worker earning nothing, because he is out of work through no fault or act of his own….” Battaglia v. Bd. of Review, 14 N.J. Super. 24, 27 (App.Div.1951); see also Yardville Supply Co. v. Bd. of Review, 114 N.J. 371, 375 (1989). The specific language in the UCA states, an individual employee shall be disqualified for benefits if he or she has left work voluntarily “without good cause attributable to such work.” “Good cause attributable to such work” means a reason related directly to the individual’s employment, which was so compelling as to give the individual no choice but to leave the employment.” N.J.A.C. 12:17-9.1(b). Put differently, the employer must be “at fault” for the employee’s quitting. This can be further conceptualized in two ways.

First, an employee who leaves work for a personal reason, or a reason not connected directly to the work, would likely be ineligible for unemployment benefits. The statute references several examples of what would constitute leaving work for personal reasons such as: a lack of transportation; care of children or other relatives; school attendance; self-employment; lack of housing; relocating to another area for personal reasons; relocating to another area to accompany a spouse, a civil union partner, or other relatives; voluntary retirement; to accept other work; or incarceration. N.J.A.C. 12:17-9.1(b)

Second, an employee who leaves work because of mere dissatisfaction with working conditions will likely be ineligible for unemployment benefits unless the work conditions are so unsafe or unhealthy that no reasonable person could withstand working in such an environment, and no remedial action was taken by the employer upon the employees’ complaint of the condition. N.J.A.C. 12:17-9.1(b). To illustrate the distinction, an office employee who complains of the office they work in being too warm or cold could not leave for good cause for such a reason because most reasonable employees would consider office temperature to be a slight discomfort. By contrast, if a construction worker were required to operate an electrical equipment to fix leaky roof may leave work for good cause if the worker can show they complained to their employer about the danger of being electrocuted and the employer made no effort to fix the condition.

In Haley v. Bd. of Review, DOL, 2021 N.J. LEXIS 223* (Decided March 17, 2021) our New Jersey Supreme Court held that pretrial detention is not an absolute bar to receiving unemployment compensation benefits for the time following dismissal of the criminal charges and release from detention. Based on the specific facts presented, the Court concluded the Unemployment Compensation Law (UCL) and its regulatory analogs required the New Jersey Department of Labor and Workforce Development Department (DWLD) to review the totality of the circumstances surrounding claimant Haley’s detention and release to determine whether he “left work voluntarily.” Because this was not done, the Court ordered the DWLD to do so.

Between May and December 2017, the claimant Clarence Haley was employed. In December 2017, authorities arrested Haley, charging him with a number of serious offenses. Haley was jailed pretrial, and his employer was informed of Haley’s predicament by his mother, who requested them to keep his job open because he intended to get the charges dismissed shortly. Two months after his arrest, a grand jury declined to indict Haley and the prosecutor dismissed all charges releasing Haley from detention. Thereafter, Haley filed an application for unemployment benefits arguing he was entitled to unemployment insurance benefits because his pretrial incarceration was not a voluntary departure from employment. The DLWD denied the application, finding that Haley left his job voluntarily for personal reasons. The Appeal Tribunal, Board of Review, and Appellate Division each affirmed. The New Jersey Supreme Court granted certification.

Under the UCL, an individual who “has left work voluntarily without good cause attributable to such work” is “disqualified for benefits” until certain conditions are met. N.J.S.A. 43:21-5(a). N.J.A.C. 12:17-9.1(e) provides guidance as to what may, upon review, be deemed “voluntarily” leaving work. The reasons for leaving work set forth in N.J.A.C. 17-9.1(e) is a fact-sensitive analysis and has observed that it did not “intend that this rule automatically result in a finding of voluntarily leaving work without good cause attributable to the work when the leaving was due to the reasons listed.” It has stated, regarding separation through incarceration, that “the relevant circumstances of the individual’s incarceration will be considered in deciding the voluntary or involuntary nature of the separation.”  Relatedly, incarceration – like the other reasons listed under N.J.A.C. 12:17-9.1(e) — is not, in and of itself, an absolute bar to unemployment benefits. Haley v. Bd. of Review, DOL, 2021 N.J. LEXIS 223, at *18 -*19.

The unemployment rate in the United States has soared to 14.7%, the highest since the Great Depression of the 1930s, and is expected to continue to increase. In just the past few weeks alone, more than 1 million people have filed unemployment claims in New Jersey. In response to this pandemic caused economic crisis, the United States Congress created the Payroll Protection Program (PPP), a loan program originating from the Coronavirus Aid, Relief and Economic Security (CARES) Act. PPP is designed to provide a direct incentive for small businesses to keep their employees on payroll. Under PPP, loans granted by the Small Business Administration (SBA) to businesses will be forgiven if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.

More specifically, PPP requires the employer to pay out at least 75% of the monies loaned in payroll. Because of this, many employers believe they can recall furloughed employees back to work at only 75% of the employees’ prior wage. This is very pleasant news for workers who while on unemployment have been receiving supplemental CARES Act unemployment insurance stimulus monies of $600.00 per week together with traditional unemployment insurance benefits. The maximum unemployment insurance benefit rate in New Jersey is currently $713.00 per week. This means many in New Jersey are collecting $1,313.00 per week (this comes to a yearly wage rate of $68,276) while home on unemployment. It is fair to state that this is likely more money than many of these workers have ever earned in wages during their adult life. Against this backdrop, consider the reaction of these same unemployed workers when notified they must return to work and accept a 25% pay cut because their employer who just received their PPP loan monies has no financial means other than the PPP loan to make payroll. Consequently, many furloughed employees called back to work face the ugly prospect of not only having to give up their traditional unemployment insurance benefits plus the $600 in weekly stimulus monies they’ve been receiving, but also must now endure a 25% cut in pay upon returning to work. Such a horrifying turn of events would leave an affected New Jersey worker to wonder whether they can refuse to return to work under such circumstance and continue to receive his/her unemployment benefits.  As is often the case, the answer depends on the controlling facts.

Generally, an individual will be disqualified from benefits if he or she fails to accept suitable work. N.J.A.C. 12:17-11.5(a). However, suitability of work in terms of wages means 80% of the individual’s average weekly wage, including the value of the individual’s benefits, during the base year of pay. Id. Moreover, no work may be deemed suitable, and an individual will not be disqualified for benefits because of his or her refusal to accept work if the wages, hours, or other conditions of work offered are substantially less favorable than those prevailing for similar work in the labor market area. N.J.A.C. 12:17-11.5(b).