Wednesday, February 15, 2012

Cutting Out of Work Early

By Nicole Killoran

St. Martin v. Department of Labor, 2012 VT 8 (mem.).

Ah, the joy of payday!  You’ve slaved away all week, suffered the petty tantrums of your boss, politely entertained your annoying coworkers political rants, and shaved a few minutes off your life expectancy with that 9th cup of coffee you needed just to make it past the 3 PM hour.  You deserve a paycheck for being one of millions of worker drones in this hive of office space.
So what would you do if you were privy to your employer’s financial information, knew that the company was folding, and had been told by the company’s president that the paycheck you’ve just accepted is almost guaranteed to bounce?  You would probably do what the claimant in today’s case did: take the paycheck, quit the company, and immediately deposit your labor-soaked earnings in the bank just in case your boss was messing with you.

Claimant in today’s case was employed as an assistant financial supervisor, and was responsible for processing payroll.  Claimant first got wind of her company’s eminent demise when the weekly payroll submission date was moved back to later in the week.  In October 2010, Claimant’s employer realized that the business’s brewing financial difficulties had come to a deep and frothy head: the company would not be able to cover the costs of payroll that week and was apparently suddenly financially insolvent. 

There ensued a back and forth between the company president, who tried unsuccessfully to get a loan to cover payroll, and the company’s chief of operations, who convinced the floundering president to give up the ghost.  Claimant was given permission to process that week’s payroll and distribute the checks to employees.  After the company president informed Claimant that the payroll checks would bounce, Claimant quit.  The business closed its doors that day.  The dire predictions of bounced checks did not prove true, at least for Claimant: her paycheck, and the one that followed, her last, cleared the bank.

Claimant was denied unemployment benefits when she applied, and appealed the decision to the Employment Security Board, who likewise denied the application.  The Board’s decision was based on two conclusions of the Administrative Law Judge who heard the case below: Claimant’s belief that she would not be paid was based on a mere “possibility,” and under Kasnowski v. Dep’t of Emp’t Sec., 137 Vt. 380 (1979), no award will be given if the employee quits “for something that is only a future possibility.”

On appeal, the SCOV narrows its analysis to whether Claimant had good cause to voluntarily terminate employment.  Claimant argued that she had good cause because she was told her paycheck would bounce, and that this gave her a “present, reasonable expectation” that she would not be paid.  The employer insisted that Claimant need not have quit when she did, that there was work yet available, and that Claimant quit on the basis of a mere future possibility.

A claimant may only receive unemployment benefits if she had good cause for terminating employment.  To demonstrate this, a claimant must show that she had sufficient reason to justify quitting, and that these reasons were “attributable to the employer.”  As usual, the court applies a reasonableness standard to these facts, and will find good cause for terminating employment where a reasonable person in similar circumstances would be expected to do the same.  In reviewing the Board’s decision below, the SCOV grants great deference to the Board and will only reverse if it was clearly erroneous in its conclusions.

In Kasnowski, the SCOV elaborated on this standard and distinguished between “a quit for something that is a mere ‘future possibility’” and a quit for a “present and actual” event.  The SCOV denied benefits to the claimant in Kasnowski because he had quit after being denied a guarantee that he would have enough time to sleep between shifts during the busy season.

On the basis of these facts, the SCOV easily distinguishes Claimant’s case from that of the claimant in Kasnowski, putting the proverbial smack down on the Board’s narrow interpretation of its precedent.  Unlike the claimant in Kasnowski, Claimant in this case was told in no uncertain terms that she would not be paid for her services.  Thus, the SCOV concludes, Claimant’s decision to quit was the result of a “present and actual” event, not just a “mere future possibility.”  Even given the high threshold of deference given the Board’s decision, the SCOV reverses.  To side with the employer in this situation, the SCOV admonishes, is to ignore the remedial purpose of the unemployment compensation scheme and common sense.

The SCOV’s analysis could likely have ended here, as the basis of the dispute seems to have been the applicability of Kasnowski to the present facts.  However, the SCOV takes a moment to elaborate on its reasonable person standard in employment compensation cases.  The SCOV notes that Claimant’s “special knowledge about her employer’s grim financial situation” combined with her company president’s unequivocal statement that her paycheck would bounce, would justify any reasonable person in believing they should terminate employment.

As a parting shot, the SCOV also clarifies that a reasonableness determination in this context must be based on the facts available to the Claimant at the moment she decided to quit, and not “later-occurring events.”  Thus, the fact that Claimant’s paychecks later cleared did not render invalid Claimant’s decision to quit given the facts at her disposal when she made her decision.

In a way, today’s opinion affirms the belief that when it comes to leaving a sinking company, we can all be Italian ship captains.   

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