Risk Grows for Firms Disputing Jobless Pay
Until recently, many employers who fired someone for “just cause,” such as excessive absenteeism, would not hesitate in trying to prevent the discharged worker from drawing unemployment benefits.
That didn’t necessarily mean the employer was being vindictive, although that happens, too. The usual reason for the employer attempting to block the discharged worker’s jobless benefits is to try to save the company money, even though it means the worker is left with no income at all.
The possible saving to the company, while probably small, comes from the fact that, if a worker is fired for just cause, the law doesn’t allow him or her to collect jobless benefits. And, since the employer pays the premium costs for unemployment insurance, the premiums can go up if there is a significant increase in the number of workers drawing jobless benefits.
Now, however, it might cost the company a small fortune--not just the possibility of a slight boost in its jobless insurance premium--if it tries, and fails, to block a worker from getting unemployment benefits. This unexpected development stems from a new wrinkle in the unemployment insurance system called, in legal jargon, “collateral estoppel.” That means a decision in one case can be used to bolster the arguments in another.
Behind all of this is an earlier--but still relatively new--development that has sharply curtailed the once unfettered right of employers to fire non-union workers for any reason at all, justified or not.
Unionized workers are protected from being fired without good cause by union contracts that almost always require a neutral arbitrator to decide the merits of the discharge. On the other hand, an employers’ right to fire non-union workers “at will,” without explanation, has been limited by court decisions that allow unjustly fired workers to sue the company for reinstatement, back pay and punitive damages, which in some cases have totaled millions of dollars.
Thousands of such cases have already been filed by workers who accused their employers of having fired them unjustly, although almost all of those cases involved relatively high-salaried supervisory employees or executives. The “average worker” has rarely used the process.
So it seems that employers must now rethink their once almost automatic challenge to the jobless benefits of non-union workers allegedly fired for just cause. And, the new “collateral estoppel” gambit only intensifies the pressure.
Also, if a worker wins his or her appeal for jobless benefits through the state unemployment insurance system, that relatively minor victory can be turned into a major one if the worker then goes to court to sue the company for substantial punitive damages because of a “wrongful discharge.”
A still-pending case involving a Santa Monica drapery company is probably the best current example of the latest twist in the system:
Emanuel Lewis, who worked for several years for Louver Drape Inc., was fired because company executives said Lewis had not returned to work promptly enough after a leave of absence. He applied to the state unemployment insurance system for benefits that could have paid him up to $166 a week for 26 weeks if he did not find another job.
The company challenged his right to the benefits, saying he was justifiably fired and so not entitled to any benefits. The state agency decided in favor of Lewis.
The collateral estoppel twist came in when Lewis won the benefits from the state agency.
Lewis was so angry about the company’s futile attempt to stop him from getting his jobless benefits that he sued the company for reinstatement, back pay and a whopping $5 million in punitive damages for having wrongfully discharged him.
Now the company has been forced to hire a prominent law firm to defend itself, which could be expensive because the case could drag on for a year or more, and that fairly insignificant decision by the state awarding him jobless benefits could prove to be a major assist in Lewis’ multimillion-dollar lawsuit against the company.
The company’s defeat in that one case doesn’t mean that it would have to pay higher premiums for unemployment insurance overall. It takes a large increase in the number of workers drawing jobless benefits from a company to boost the firm’s premiums.
So now, instead of facing the fairly remote possibility of paying a few bucks more for jobless insurance premiums, the company could be ordered by the courts to pay Lewis up to $5 million.
Aggie James, an unemployment insurance expert for the Merchants and Manufacturers Assn. here, says that, from now on, companies had better be certain that they are going to win when they challenge the right of a worker to get jobless benefits.
And, aside from the money that they might save, employers could raise the standard of decency in the workplace by not so readily challenging workers’ rights to jobless benefits.
Unjust Discharges Bill
Employers and unions are in the middle of some heated debates over the best way to get the state Legislature to deal with the increasing problem of unjust discharges.
They are trying to come up with a compromise, but there is such a vast difference between their points of view that they may not agree on the language of a law that they can support together.
Unions have far less cause now to want legislation to deal with the issue than employers. It is the employer who, if found guilty of having fired a worker without just cause, can face millions of dollars in punitive damages.
But, for differing reasons, both the unions and employers want a law that will deal at least in part with the way the courts are handling the once unrestrained “right” of bosses to fire their non-union workers.
Unionized workers rarely need help from the courts to prevent them from being fired without good cause. And even a few union workers have been told by the courts that, in addition to the protection that they get from their union contracts, they, too, may be able to get some punitive damages from their employers by going to court.
But, for at least two reasons, unions want to get into the act even though few of their members are directly affected:
- Unions want new ways to improve their public image by helping non-union workers, just as they have in the past by, for instance, fighting for minimum wage increases even though few union workers get the minimum.
- They hope to attract a new category of workers who are not covered by a union contract but who, for a small fee, would become “associate members” entitled to such benefits as low-cost insurance and now, perhaps, help in filing wrongful discharge cases against their bosses.
In fact, while management has had innumerable conferences on the hotly debated wrongful discharge issue, the first union conference on the subject will be held today at the Sheraton-Town House, sponsored by the AFL-CIO Los Angeles County Labor Federation, the American Civil Liberties Union and the UCLA Institute of Industrial Relations.
Legislation proposed to deal with the issue will be discussed by, among others, a prominent management attorney, Paul Grossman, and by Paul Schrade of the ACLU’s Worker Rights Committee.
The legislation proposed by several California employer associations not unexpectedly differs sharply from a union-backed measure. The employer proposal has some provisions so patently pro-employer that the Legislature almost certainly will never accept them. And certainly the unions will not agree to co-sponsor the employer measure.
But one employer attorney told a union representative that labor might do well to go along with the employer plan because of the changing political scene. He predicted that the wrongful discharge cases now being won by workers in the courts will be overturned in management’s favor as more and more conservative judges are appointed to the bench by California’s Republican Gov. George Deukmejian and at the national level by President Reagan.
But the employers aren’t waiting for that conservative change in the judiciary; instead, they want a law that would, among other things:
- Put the entire burden of proving that the worker has been wrongfully discharged on the worker.
- Allow employers to fire workers for “good cause” and “in good faith.” Those catchy phrases sound vague enough to be harmless to workers, but, according to the employers’ definition, they would mean that management has the right to fire workers for a “legitimate business reason (if the firm also) . . . exercised subjective managerial judgment with a belief that the action (was) taken for good cause.”
- Not allow the court, or an arbitrator, to interfere with the “legitimate exercise of managerial discretion and shall allow substantial scope for the exercise of management’s subjective judgment.”
Since the cost of such cases could be expensive and lengthy, and since the employers’ proposal is stacked in favor of the employer, it is unlikely that the average worker would be any more interested in filing wrongful discharge cases than they are now, even with the help of unions.
And the employer proposal contains other language that would apparently sharply reduce, if not eliminate, the possibility of those multimillion-dollar damage awards that some workers have been winning in the courts.
The unions’ legislative proposal is, of course, clearly slanted to help the worker. The unions want wrongful discharge cases filed by non-union workers to go almost exclusively to arbitration, not the courts. Arbitration by a neutral expert is the system now used to help union workers who claim they have been unfairly fired.
The unions would also:
- Set up a state fund to help workers and employers pay for the cost of arbitration, since often a major reason that non-union workers don’t go to court is that their cases can drag on for years and cost far more than they can afford to pay if management wins.
- Set the tone for the arbitrator’s decision by saying that the law is “intended to provide justice and dignity to all employees and to reduce the ill effects caused by unjust discharges. “
- Offer the opportunity for a quick settlement of an alleged wrongful discharge--a move that wouldn’t stop the worker from using the courts instead of arbitration to try to collect substantial punitive damages from his or her employer.
The unions do agree that, if an arbitrator decides that the worker’s appeal of the discharge was “frivolous or vexatious,” the worker could be required to pay the employer’s costs and attorney’s fees but not the cost of the arbitrator.
Relatively well-off non-union workers are now getting some protection from arbitrary actions against them by their employers. But, if that protection is to be truly meaningful for the 70% of Americans who have no union contracts, some legislation is needed to make sure that it is extended to them as well.
