Coronavirus Update 4-9-2021: Income tax season has exacerbated the ongoing Covid plague of unemployment fraud

One of the lasting lessons of the Covid-19 pandemic for businesses is our broken state unemployment systems. State governments have paid out tens of billions of dollars in bogus unemployment claims. And with claims paid comes tax forms reporting the income related to those claims.

Consider the story of just one taxpayer, as relayed by the Wall Street Journal.

Michael Baird, a 33-year-old marketing manager in Chicago, hasn't lived in Texas for several years. And yet there was a tax form from the state of Texas sitting at his parents' house in Houston, showing that the state had paid him $1,014 in unemployment benefits.

Coronavirus Update 1-25-2021: President Biden calls for unemployment benefits to employees who refuse to work because of Covid

Late last week, President Biden signaled that part of his overall plan to provide economic relief for American families and businesses amid the COVID-19 crisis is to broaden the availability of unemployment benefits to employees who quit their jobs related to Covid.

Specifically, the president is "asking the U.S. Department of Labor to consider clarifying that workers who refuse unsafe working conditions can still receive unemployment insurance." 

I’m not in Kansas anymore … or ever (an unemployment fraud story)

What's wrong with this photo?

Ohio amends its employment laws to limit joint employment for franchisors

As the debate over the meaning of "joint employer" continues to rage at both the NLRB and in the federal courts, Ohio has jumped into the debate by passing legislation to limit this definition under various Ohio employment laws.

Effective yesterday, franchisors will not be deemed joint employers with their franchisees unless:

• the franchisor agrees to assume that role in writing or a court of competent; or
• a court of competent jurisdiction determines that the franchisor exercises a type or degree of control over the franchisee or the franchisee's employees that is not customarily exercised by a franchisor for the purpose of protecting the franchisor's trademark, brand.

Should we require drug testing as a condition for unemployment benefits?

This is the question posed by Ohio House Bill 704.

Let's be clear. This law, if enacted, would not require drug testing as a condition for all applicants for unemployment benefits. Only those—

1. for whom there exists reasonable cause to suspect the unlawful use of a controlled substance; and 
2. whose most recent employer fired because of the unlawful use of a controlled substance.

R-E-S-P-E-C-T (just a little bit)

I ain’t gonna do you wrong while you’re gone
Ain’t gonna do you wrong ‘cause I don’t wanna
All I’m askin’
Is for a little respect

– Aretha Franklin, “Respect”

Yesterday, my friend and fellow blogger (with whom I tend to agree most of the time), Suzanne Lucas (aka Evil HR Lady), posted an article about which I could not agree more, Why You Should Rarely Fight an Unemployment Claim.

No, you can’t make offensive videos about your co-workers, even with Legos

Since we’ve gone serious the last two days, I thought we’d go with the less-serious today. Watch this video, and then let’s talk.

Unemployment (or prior lawsuits) as a protected class? Not so fast says the 6th Circuit

Last week, in Berrington v. Wal-Mart, the 6th Circuit considered the issue of whether a company could be liable for refusing to hire someone because he filed an unemployment claim. William Berrington claimed that a Kalamazoo, Michigan, Wal-Mart’s refusal to rehire him after he filed a unemployment claim related to a prior termination wrongfully violated the state’s public policy. The 6th Circuit disagreed. It ignored (more or less) the issue of the public policy at issue, and instead focused on the nature of the employment decision at-issue — a refusal to hire.

Berrington’s appeal presents us with the question of whether Michigan law recognizes a public policy cause of action for an employer’s wrongful refusal to rehire because an individual claimed unemployment benefits…. The common denominator in all the recognized public policy exceptions to at-will employment is the existence of an employment relationship. An employee’s right to be hired or rehired by an employer, on the other hand, has never been recognized as actionable, under common law on public policy grounds…. In fact, neither party has been able to provide a single decision from any jurisdiction enforcing a retaliatory failure to rehire claim in state common law or public policy, absent some other statutory basis.

While this case was decided under Michigan law, it has implications beyond that state. As the opinion points out, there exist no cases from any jurisdiction (Ohio included) recognizing a failure to hire claim under state common law or public policy.

While you might not be presented with the issue of refusing to rehire an ex-employee who filed an unemployment claim, you may have other reasons not to hire someone. For example, you might decide that a potential employee is tainted because he or she filed a lawsuit against a previous employer. If the lawsuit raised issues protected by the employment discrimination statutes, for example, those same statutes’ anti-retaliation provisions likely protect the employee from failure to hire on that basis. What if, however, the prior lawsuit involved something other than protected activity in its own right (e.g., a common law tort such as invasion of privacy, defamation, or intentional infliction of emotional distress)? If a prospective employer locates the old lawsuit on the Internet and refuses to hire someone it perceives as a potential problem down the road, Berrington suggests that the employer might be off the hook for any potential liability stemming from the refusal to hire. If state common law does not recognize a failure to hire claim, as Berrington suggests, then lawsuits against prior employers should be acceptable fodder for hiring decisions (the civil rights statutes notwithstanding).

I (usually) hate unemployment challenges

As an advocate for businesses, you might assume that I stand behind an employer’s decision to challenge an ex-employee’s claim for unemployment compensation. You’d be wrong. In fact, I believe that employers are better served not challenging the unemployment compensation claims of most ex-employees. Just because an employer can win an unemployment challenge doesn’t mean it should file the challenge in the first place. In most cases, employers should simply chalk unemployment up to the cost of doing business, and having to hire (and fire) employees.

Of course, for every rule there exists the exception. Some employees lose their jobs for misconduct that cannot be tolerated and must be challenged. Case in point: Clucas v. Rt. 80 Express, Inc. (Ohio Ct. App. 3/26/12) [pdf]. Rt. 80 fired Clucas, a truck driver, after he tested positive for marijuana following a minor accident. Needless to say, the court of appeals upheld the denial of his unemployment.

Clucas is a great example of when an employer should challenge an employee’s unemployment claim. A business cannot have truck drivers under the influence while on duty. Other examples of when it’s appropriate to challenge unemployment are egregious intentional misconduct such as theft, harassment or other discriminatory conduct, or assault. Unemployment is another example of the maxim I discussed a few weeks ago—just because you have a legal right to do something doesn’t mean it’s the right business or HR decision. The legality of an action is one factor in the decision-making calculus, but not the only one.

Progressive discipline might not be mandatory, but it makes sense

In Fulton v. ODJFS (11/3/11) [pdf], the employee argued that he was entitled to recover unemployment compensation because his employer failed to follow its own progressive discipline policy when terminating him. The court disagreed, noting that the employer’s policy granted discretion to impose any level of disciplinary action—ranging from verbal warning, written warning,
suspension, or immediate termination of employment—depending on the seriousness of the offense.

Reading this, one might conclude that because progressive discipline policies are unnecessary they should be avoided. In fact, the contrary is true. Progressive discipline (with sufficient discretion built in) provides an early warning system to employees. While I have no empirical data to back me up, I would bet that employers who use progressive discipline systems face fewer lawsuits from terminated employees. Those that perceive fair treatment should be less likely to sue than those who perceive that they had the rug pulled out from under them.

Betting on a lawsuit

There have been a lot of bad bets made over time. For example, two years ago I bet on the World Series and, after the Phillies lost, had to painfully write a blog post praising the Yankees. On The Office last week, newly-appointed regional manager Andy Bernard bet his staff a butt tattoo that they couldn’t reach an unheard of sales quota. Perhaps the most famous pop culture example of a bet is Seinfeld’s contest, where the four bet on who would be the “master of their domain.”

Then, there’s this gem, courtesy of the Des Moines Register:

A Bettendorf businessman, branded as the “boss from hell” by some of his employees, offered prizes to workers who could predict which of them would next be fired…. William Ernst, the owner of a Bettendorf-based chain of convenience stores called QC Mart, sent all of his employees a memo in March, outlining a contest in which the workers were encouraged to participate. The memo read: “New Contest – Guess The Next Cashier Who Will Be Fired!!! … To win our game, write on a piece of paper the name of the next cashier you believe will be fired. If the name in your envelope has the right answer, you will win $10 CASH.”

An administrative law judge sided with an ex-employee in her unemployment hearing, writing about the “egregious and deplorable” contest: “The employer’s actions have clearly created a hostile work environment by suggesting its employees turn on each other for a minimal monetary prize…. This was an intolerable and detrimental work environment.”

To be fair, in my career I’ve seen a lot worse work environments. For example, I vividly recall a cake in likeness of a vagina, iced with homophobic epithets, presented to an employee as a challenge to his perceived lack of manliness. Notwithstanding, I’m not sure I’d ever recommend a firing contest as a form of employee motivation.

When you care enough to send the very best ... to the unemployed

Hallmark—the purveyor of greeting cards for occasions such as miscarriages and cancer—has tapped into a new market with a line of cards for the unemployed. Some of the gems include:

• When things are looking kinda gloomy, do as I do. Stare into the heavens, breathe deeply, and say … Give Me a %#!@$!! Break!!!
• It’s hard to know what to say at a sensitive time like this. … How about, “I’m buying!”
• One day, you’ll look back on all this with the wisdom that distance bestows, and you’ll say … “Wow, that sucked.”
• Don’t think of it as losing your job. … Think of it as a time-out between stupid bosses.

According to the Department of Labor, our national unemployment rate is holding steady at 9.1%, representing 14 million people out of work. I’m guessing business is booming for Hallmark.

[Hat tip: Eve Tahmincioglu]

Today's schadenfreude moment

Schadenfreude is a German word meaning, "happiness in the misfortune of others." I'm certain a feeling of schadenfreude has settled in all over Wall Street this morning, given yesterday's news about the Governor of New York.

Today's question: What do the Governor of New York and an Iowa casino worker have in common? Apparently, love for paid companionship. From the Des Moines Register comes this story of a casino employee terminated for attempting to buy a prostitute on his employer's dime.

Neil Jorgensen, 62, of Kalona worked at the Riverside Casino and Gold Resort south of Iowa City until last November. He was fired after he was given a $100 Riverside gift certificate and a free night's stay at the casino hotel in recognition of a year's employment with the company. He used the gift certificate and free night's stay on the night of Nov. 28.

"I went to Ruthie's, the nice steakhouse within the casino, and I had a cosmopolitan or two and a bottle of wine and a really good dinner," Jorgensen testified at a recent state hearing dealing with his request for unemployment benefits.

He said he went to his hotel room about midnight and called hotel managers for help in figuring out how to order an adult movie. An hour later, he said, he called the managers again "and asked for a hooker." After the managers refused to help procure a prostitute for him, Jorgensen called someone at the adjacent resort and made the same request.

The casino's human resources director, Tim Donovan, testified that hotel workers were then sent to Jorgensen's room to insist that he stop calling for prostitutes.

"When the hotel supervisor knocked on the door, Mr. Jorgensen answered the door in the nude," Donovan testified. Jorgensen was fired the next day.

Undeterred by his termination, Jorgensen filed for unemployment. At his hearing, he offered 6 different defenses for his misconduct, ranging from pedestrian to hilarious:

• "The advertisement is that it's just like Las Vegas, so I thought I was in Las Vegas."
• The casino employs a dual standard because "gamblers have been allowed to continue gambling after they've urinated on the blackjack table standing in full public view."
• That his actions had no detrimental effect on the casino.
• That just prior to his termination, he had received an "excellent" performance review.
• That the casino "overserved" him, which caused him to be "absolutely plowed."
• Finally, Jorgensen claimed that his requests for a prostitute were part of "an off-the-wall surveillance" test.

I could draw some great moral lessons here, or tell you that an employee who tries to hire a hooker on the company's dime should be fired ASAP, no questions asked. The reality, though, is that this story just made me laugh, especially in light of what happened in New York yesterday.

[Hat tip: Manpower Employment Blawg]

Bullying boss justifies unemployment award

It has long been accepted that our discriminations laws do not set forth "a general civility code for the American workplace." (Oncale v. Sundowner Offshore Services). Certain fringe groups hope to change this by passing anti-bullying legislation (see Sticks and stones may break my bones...). Nevertheless, as it stands now, employees cannot sue their employers for bullying or being abusive unless the harassment is because of sex or some other protected class.

This week the Summit County Court of Appeals, in Ro-Mai Industries, Inc. v. Weinberg, awarded unemployment compensation to an employee who quit his job because he could not deal with his admittedly abusive boss.

According to the opinion:

Weinberg accepted a position at Ro-Mai after interviewing with Maier. Weinberg, who had extensive experience in sales, was told that his position at Ro-Mai would involve sales work and would require him to be at the office from approximately 8:00 a.m. to 5:00 p.m. After a few days of work, however, it became clear that Weinberg's actual duties differed from the job description that he received. He was not given any sales work and he often worked well over the nine hour shift that he was promised. Moreover, Weinberg discovered that Maier had a habit of yelling at the employees. Although Weinberg told Maier that he did not appreciate being treated in such a manner, Maier continued to yell.

On November 3, 2005, Weinberg informed Ro-Mai's head of human resources that he intended to quit. However, before Weinberg left the office Maier sought him out, promised to stop yelling at him, and convinced him to stay. Weinberg returned to work the next day, and Maier resumed his habit of yelling at him. Accordingly, Weinberg quit the following day….

Maier admitted that he often yelled at his employees. During the hearing, he stated: "When I hired [Weinberg], I told him I'm probably the worst employer to ever work for[.] I'm difficult. I expect a lot. And I warned him in advance that I'm very difficult…. [W]hen it comes to the business, I – I can yell. I did yell." Weinberg testified that when he complained to human resources about Maier’s yelling, he was told: "[O]h, it[] gets worse. That’s the way he is."

Maier’s yelling was not a single, isolated incident…. It was a repetitive problem that Weinberg unsuccessfully tried to address with Ro-Mai’s human resources department prior to quitting. Weinberg even agreed to resume work the first time that he intended to quit because Maier asked him to stay and promised to stop yelling. He did not abandon his employment without warning, or leave with utter disregard for the good of the business.

Thus, the Court concluded that Weinberg was justified in quitting his job because of his abusive boss and upheld his award of unemployment.

I've always subscribed to the law and economics model on the issue of bad bosses. Bad bosses beget transitory workforces and ultimately cannot succeed as bosses because of their revolving door. Good bosses create loyalty, retain good employees, and succeed accordingly. Imposing liability (even for unemployment comp) merely for being subjected to a bad boss sets a dangerous precedent that has the real potential to eliminate the "at will" from all such employment relationships.

Mandatory maternity leave does not qualify flight attendant for unemployment

Unemployment cases do not usually grab my attention. Continental Airlines v. Peters, however, did. April Peters was a flight attendant for Continental Airlines, a union employer. Continental's collective bargaining agreement has a provision under which a pregnant flight attendant is placed on mandatory maternity leave at the end of her 27th week of pregnancy. Apparently, that provision is consistent with FAA regulations forbidding flight attendants from flying past their 27th week of pregnancy. During that maternity leave, the flight attendant accrues all seniority, is eligible to use accumulated sick leave. The contract also permits the flight attendant to elect a one-time 12-month maternity leave following the birth. Peters became pregnant, and Continental, consistent with the collective bargaining agreement, placed her on maternity leave at the end of her 27th week of pregnancy. Once on the mandatory leave, Peters filed a claim for unemployment compensation benefits. Along with her application she submitted a doctor's note stating that she was able to work full-time and that she had not been advised to quit her job.

The unemployment commission awarded Peters benefits. The court of appeals, however, affirmed the trial court's reversal of that decision. The issue before the appellate court was whether Peters was "involuntarily" unemployed and whether she could waiver her right to unemployment benefits through the collective bargaining agreement. Peters argued that she was involuntarily unemployed because she was willing and able to continue her job beyond the 27th week and that she could have performed some other task for the remainder of her pregnancy. Continental, on the other hand, argued that Peters' union membership voluntarily subjected her to the terms of the collective bargaining agreement, including the maternity leave policy.

The court was unpersuaded by Peters' argument that her willingness and ability to work rendered her separation involuntary:

Peters' physical ability to continue working after her 27th week of pregnancy is immaterial to the question of whether she waived the right to unemployment benefits by virtue of a collective bargaining agreement. The terms of the maternity leave policy are clear.... Although Peters might have been physically capable of performing, and willing to perform, her duties as a flight attendant after the 27th week of pregnancy, her voluntary agreement, via the collective bargaining agreement, to the terms of the maternity leave policy makes these facts irrelevant.

Instead, the court believed that Peters', through her union, waiver her right to unemployment benefits:

As a union represented worker, Peters is a party to the collective bargaining agreement. As such, she agreed to stop flying after the 27th week of pregnancy in exchange for the accrual of seniority while on maternity leave, continued coverage under Continental's health insurance plan for the duration of the leave, the option of using sick time during the maternity leave, and full reinstatement at the end of the maternity leave..... These contract terms were reached as a result of arms-length negotiations between Continental and Peters' union, so Peters validly waived the right to unemployment compensation benefits.

The court distinguished between an arms-length, bargained for collective bargaining agreement and a unilaterally imposed policy, such as a retirement plan. The latter, the court reasoned, might render the separation involuntary.

What I find most interesting in the opinion, however, is the following throwaway line by the majority: "While is is not an issue in this case, we share the dissent's concern that there may be legal questions relating to the interplay of the collective bargaining agreement and the Pregnancy Discrimination Act ... and other potentially applicable federal or state laws." While I appreciate the court's concern that a paternalistic maternity leave policy might violate the pregnancy discrimination laws, the issue has long been settled that employers can implement leave of absence policies for legitimate safety reasons. Moreover, it does not appear that the airline harbored any discriminatory intent -- it allowed the accrual of seniority during maternity leave, provided continued health insurance coverage, gave an option for the use of sick time, guaranteed full reinstatement, and offered a 12-month postpartum leave of absence. Any claim for pregnancy discrimination would have to test the veracity of the airline's lack of available light duty. Provided, though, that there genuinely was no light duty available for Peters, I do not see any viable discrimination claim based on the mandatory, bargained-for leave of absence.