Unemployment Compensation Hearings: Sometimes You Get a Do-Over

Thursday, 26 March 2015 20:24 Written by  Patricia Collins

By Patricia C. Collins, Esquire, Reprinted with permission from the March 23, 2015 issue of The Legal Intelligencer. (c) 2015 ALM Media Properties. Further duplication without permission is prohibited.

Recently, the United States District Court for the Eastern District of Pennsylvania, in Mathis v. Christian Heating and Air Conditioning, Inc., 13-3747 (March 12, 2015), examined the effect of factual findings in unemployment compensation proceedings in Pennsylvania on discrimination claims filed in federal court.  The conclusion?  The discrimination case is a “do over,” and nothing determined by the tribunal (including the Unemployment Compensation Board of Review and the Commonwealth Court) will collaterally estop either party, presumably, from taking a contrary position in the subsequent wrongful termination suit. 

 The facts are these:  Mr. Mathis was employed at Christian Heating and Air Conditioning (“Christian Heating”) for nearly two years.  During that time, Mr. Mathis had placed black tape over part of his identification badge.  The objectionable part of the card professed the company’s mission statement to, inter alia, run the business in a way that was “pleasing to the lord [sic]….”  Mr. Mathis’s supervisor and the owner of the business required him to remove the tape from the back of his badge.  Mr. Mathis refused to do so, and contended that he was terminated as a result. 

As these stories go, Mr. Mathis then applied for unemployment compensation.  His benefits were denied and he filed an appeal.  His appeal was likewise denied based on the factual findings of the Unemployment Compensation Board of Review, as follows:  that his employer told Mr. Mathis to remove the tape from his badge or “he could leave”; and that Mr. Mathis chose to leave, thus ending the employment relationship.  According to the Board of Review, Mr. Mathis had voluntarily quit and was not entitled to unemployment benefits under the applicable law.
 Mr. Mathis appealed this decision to the Pennsylvania Commonwealth Court.  The decision was affirmed, based on the findings of the Board of Review.  The Commonwealth Court also concluded that Mr. Mathis did not quit for “necessitous and compelling reasons” - if he had shown such reasons for choosing to quit, he would have been entitled to unemployment compensation.
Thus, the question for the Board of Review and the Commonwealth Court was whether or not Mr. Mathis had voluntarily quit his job, and, if so, whether he did so for necessitous and compelling reasons.  The conclusion, to the delight of Christian Heating, was that he had quit, and that he possessed no necessitous and compelling reason to do so – a tidy result should the employer ever be sued for employment discrimination.

And, indeed, Mr. Mathis did sue Christian Plumbing under Title VII and the PHRA claiming that he was denied a reasonable religious accommodation and that he was terminated in retaliation for his religious beliefs, for requesting the accommodation and for his complaints of religious discrimination. 

Christian Plumbing filed, successfully, a motion to dismiss the Complaint, arguing that the complaint was barred by collateral estoppel.  The District Court held that the findings of the Commonwealth Court barred Mr. Mathis’ claim that Christian Heating had failed to accommodate his religious beliefs.  The court further held that Mr. Mathis was estopped from re-litigating the factual findings of the Board of Review and the Commonwealth Court with regard to his retaliation claim, but allowed that claim to proceed, subject to the factual findings of the Board of Review.  During the litigation, Christian Heating would have the benefit of the factual finding that Mr. Mathis had chosen to leave his employment rather than remove the tape from his badge. 

If the analysis had stopped here, employment litigators might change their strategy with regard to unemployment proceedings.  Perhaps an appeal to the Board of Review or the Commonwealth Court to cement factual findings would be a wise strategic choice in that setting, where the stakes are lower, the costs are lower, and there is, among other things, no jury. 

Alas, it is not to be, because after the District Court issued its ruling, Plaintiff’s counsel remembered, almost too late, that there was a provision of the Unemployment Compensation Law that might change things.  Specifically, 43 Pa. C.S. § 829 states:
No finding of fact or law, judgment, conclusion or final order made with respect to a claim for unemployment compensation under this act may be deemed to be conclusive or binding in any separate or subsequent action or proceeding in another forum.
Darn, Christian Plumbing was heard to say, as the District Court reconsidered its ruling and denied the motion to dismiss, allowing Mr. Mathis to proceed with his claims unfettered by the adverse rulings of the Board of Review and the Commonwealth Court. This leaves Mr. Mathis free to argue that he was terminated, for example, which could change the case significantly.

Interestingly, Mr. Mathis did not ask for complete reconsideration of the District Court’s dismissal of the accommodation claim, but only for reconsideration of the Court’s finding that he was estopped from asserting that he was terminated with regard to the retaliation claim.  The District Court nevertheless denied the Motion to Dismiss in its entirety based on the language of Section 829.

Of course, the unemployment proceedings may still continue to haunt the parties in this case.  The unemployment proceedings are often a convenient way to get a “free shot” at discovery, to test the credibility of witnesses, and to preview any documents or arguments the either side might rely upon in later wrongful termination proceedings.  This decision does not bar those strategic activities; however, Section 829, and the District Court’s decision in this case, will provide an argument where an opponent seeks to bind the other party to favorable testimony in the unemployment compensation proceeding. 

The decision in Mathis v. Christian Heating and Cooling highlights that the unemployment compensation hearing is sometimes nothing more than a low-stakes credibility test prior to filing (or defending) a wrongful termination claim.  Neither party will be bound in a way that amounts to collateral estoppel by any testimony in an unemployment compensation hearing.  Indeed, Section 829 and the finding in this case may serve as a basis to go further - to defeat the admissibility of “bad” evidence from those proceedings in a later case if it is asserted for reasons other than credibility. 

Last modified on Monday, 11 May 2015 16:40
Patricia Collins

Patricia Collins

Patty has been practicing law since 1996 in the areas of Employment Law, Health Care and Litigation, with extensive experience in advising employers and health care providers as well as complex litigation in federal and state courts. Patty’s knowledge of employment law includes the Employee Retirement Income Security Act; federal and state employment discrimination laws, and employment contracts and wage claims.

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