Unemployment Compensation Board; Scope of Review; Board Consideration of Issue Raised Sua Sponte

Quigley v. Unemployment Comp. Bd. of Review, 225 A.3d 914 (Pa. Cmwlth 2020), allocatur granted Aug. 3, 2020, appeal docket 20 EAP 2020

The Pennsylvania Supreme Court granted allocatur in this matter to determine whether Commonwealth Court properly applied the holding in Lyness v. State Bd. of Med., 605 A.2d 1204 (Pa. 1992) regarding the improper commingling of prosecutorial and adjudicatory functions to limit the Unemployment Compensation Board (Board)’s review of an issue of eligibility for benefits that was not raised by either the employer or the Department on appeal.

Quigley (Claimant) was laid off from her full-time employment and filed an application for unemployment compensation benefits, in which she reported income from her sideline business. The UC Service Center determined that she was eligible for benefits but would need to deduct the income expected from the sideline business from the overall allotted unemployment benefits. Claimant appealed the deduction amount, claiming that the amount was in error because the deduction was based on the previous calendar year earnings instead of the anticipated earnings in the current calendar year. Following a hearing where the Claimant failed to appear, the Referee affirmed the UC Service Center’s determination but reduced the deduction amount. Claimant appealed this decision to the Board, challenging the calculation of her sideline business income and the deduction from her weekly benefit payment. 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. The Board reversed the Referee’s decision and found Claimant was ineligible for unemployment benefits in any amount based on her claimed self-employment. The Board denied the Claimant’s request for reconsideration and Claimant petitioned the Commonwealth Court for review.

In an en banc decision, Commonwealth Court held that the UCBR erred when it addressed the issue of Claimant’s alleged self-employment when neither the separating employer nor the Department had raised the issue. Commonwealth Court reasoned that the Board denied Claimant a fair hearing, because it did not provide Claimant with notice or an opportunity to be heard and commingled the prosecutorial role of the Department of Labor and Industry (Department) with the Board’s adjudicatory functions in sua sponte considering the issue of Claimant’s eligibility, creating an “appearance of impropriety and bias” in contravention of the “remedial purpose of the Unemployment Compensation Law, due process, and fundamental fairness” as recognized by the Supreme Court in in Lyness v. State Board of Medicine, 605 A.2d 1204, 1209-10 (Pa. 1992).  Slip Op. at 16.  Commonwealth Court reasoned that there was no controversy over Claimant’s eligibility, thus Claimant had no notice that the Board would review her eligibility in violation of the right to due process. Slip Op. at 10-11. Commonwealth Court also reasoned that the Board put itself in the prosecutorial role, which it found to be improper under Lyness,  because the Board “reversed Claimant’s eligibility even though that issue could not have been raised by Claimant, but only by the Department or Employer.” Slip Op. at 13-14. The majority clarified the limitations of its holding, explaining:

Our holding is limited to the circumstances presented in the case sub judice, i.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.

Slip Op. at 12.

In dissent, Judge Jubelirer concluded that the majority’s examination was a sympathetic holding that deviated from the  General Assembly’s intent that the Board “serve the role of final arbiter of all claims upon which the Department and Referee expressly ruled,” because “[t]he plain language obligating the Board to consider ‘any claim … decided by [] a [R]eferee,’ [citation omitted], or any ‘issues expressly ruled upon,’ [citation omitted], and the longstanding precedent interpreting that language broadly, can be limited in the manner suggested” by the majority (“only those issues that were expressly ruled upon in the determination being appealed and by which the appealing party was aggrieved can be reviewed by the Board”). Dissent Slip Op. at RCJ-10 – 11. Judge Jubilerer also concluded that it did not matter that neither the Employer nor the Department challenged Claimant’s eligibility of benefits because Claimant had the “burden of proving that her sideline business activity was not disqualifying,” thus the UC Service Center and Referee were “required to expressly rule on Claimant’s eligibility, and those rulings fall plainly within the Board’s broad review.” Dissent Slip Op. at RCJ-11. Finally, Judge Jubilerer also concluded that since the majority found that the Board did not extend its scope and followed its obligations, Lyness was not applicable because the Board did not comingle the prosecutorial role of the Department with its adjudicatory function. Dissent Slip Op. at RCJ-15. Specifically, Judge Jubilerer reasoned:

In this case, not only was the issue of eligibility for benefits at issue before the Referee, and inextricably intertwined with the issue of Claimant’s sideline earnings, Claimant herself raised the issue in her appeal to the Board. Moreover, because Claimant did not act with due diligence, she missed the opportunity at the Referee’s hearing to more fully develop the basis for her eligibility.

This Court recently addressed Lyness within the framework established for reviewing UC claims. [Citation omitted]. In finding no violation of due process under Lyness, the Court explained that “neither the referees nor the Board function[] as prosecutors, . . . no prosecution or disciplinary action occurred[, and] . . . no member of the Board had any involvement in the decision-making regarding the merits of [the c]laimant’s claim at any stage prior to the appeal to the Board.” [Citation omitted]. I find this analysis equally applicable in the present matter. Because I would conclude that the Board did not act sua sponte or exceed its scope of review when it addressed the issue of Claimant’s eligibility, there was no appearance of bias or impropriety in its consideration of Claimant’s eligibility. [Citation omitted].

Dissent Slip Op. at RCJ-15 – 16.

Judge Wojcik’s also dissented, concluding that the Court exceeded its authority by deciding issues sua sponte and that the scope of review would vary based on the perceived importance of an issue, that Claimant’s appeal to calculate the benefit placed her eligibility at issue, and that Claimant’s choice not to attend the hearing and not seek representation resulted in consequences that are not for the court to remedy. Dissent Slip Op. at MHW-2 – 3, MHW-6. Specifically, Judge Wojcik reasoned:

As presented by the parties, this is a straightforward case. Claimant was notified of the issues to be considered at the referee’s hearing. Because Claimant did not attend the hearing, she failed to establish eligibility for benefits. That consequence did not result from a denial of due process. Indeed, the referee erred in determining Claimant’s eligibility without considering the relevant criteria and the absence of record evidence. The Board did not. Our Court errs and exceeds its scope of appellate review by injecting new issues into this appeal. [Citation omitted].

Dissent Slip Op. at MHW-6.

The Supreme Court granted allocatur to examine the following:

Did Commonwealth Court violate the Unemployment Compensation Law and this Court’s decision in Peak v. Unemployment Comp. Bd. of Review, 509 Pa. 267, 501 A.2d 1383 (1985) by misapplying Lyness v. State Bd. of Med., 529 Pa. 535, 605 A.2d 1204 (1992) to improperly limit the scope of the Board’s review solely to the issues raised by the appellant?

For more information, contact Kevin McKeon or Dennis Whitaker.