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Unemployment Compensation Ruling Cannot be the Basis for Collateral Estoppel

Many cases sounding in employment law involve other related parallel matters like unemployment compensation. Applicants for unemployment compensation, and their employers, engage in a legal administrative process wherein they make allegations and, fairly frequently, have to testify on the record at a hearing before a referee which can be reviewed by the Unemployment Compensation Board of Review and Commonwealth Court of Pennsylvania. Based on the evidence presented, findings of facts and law are made during the unemployment compensation process relative to the applicant’s eligibility for unemployment compensation benefits.

The legal doctrine of collateral estoppel, sometimes called “issue preclusion,” serves to prevent a litigant from re-litigating issues which have been the subject of a finding of fact and/or law in a prior litigation. The recent case of Mathis v. Christian Heating and Air Conditioning, Inc. 91 F.Supp.3d 651 (U.S.E.D.PA 2015) addresses whether findings of fact and/or law during unemployment compensation litigation can serve as the basis for collateral estoppel in court.

In Mathis, the District Court finds itself ruling upon what is, in effect if not in name, a motion to reconsider its ruling granting a motion to dismiss. The Plaintiff in Mathis is a self-described atheist, while the Defendant, Christian Heating and Air Conditioning (“CHAC”), is a company owned and operated explicitly as a Christian company.

As part of its work rules, all employees of CHAC are obliged to wear an identification badge with CHAC’s mission statement which reads as follows: “This company is not only a business, it is a ministry. It is set on standards that are higher than man’s own. Our goal is to run this company in a way most pleasing to the lord [sic].” Plaintiff alleges that people from CHAC would regularly make comments to him about his lack of religious belief and insist he attend church. Further, as it conflicted with his atheistic beliefs, he covered the above-quoted mission statement on his identification badge with a piece of tape. According to Plaintiff, his superior at CHAC informed him that the mission statement cannot be covered and refusing to remove the tape would result in his termination. Plaintiff refused to remove the tape and was promptly terminated.

Plaintiff, upon termination, filed for unemployment compensation benefits. An employee who voluntarily quits his employment is ineligible for unemployment compensation benefits. During the unemployment compensation process, a finding of fact was made by Unemployment Compensation that CHAC told Plaintiff that he could remove the tape on his badge and continue his employment, or leave and terminate his employment relationship with CHAC. Plaintiff then chose to leave instead of removing the tape. As a result, it was found that, for purposes of unemployment compensation, Plaintiff’s termination from CHAC was the result of Plaintiff’s voluntary decision to quit his employment with CHAC.

Plaintiff also filed charges against CHAC with the Equal Employment Opportunity Commission and Pennsylvania Human Relations Commission on the basis of employment discrimination based on religion which resulted in Plaintiff receiving his right to file suit against CHAC in federal court, which he did, giving rise to the Mathis matter.

CHAC argued that Plaintiff’s discrimination claims were all barred by collateral estoppel as these same allegations were made in the context of the unemployment compensation litigation which made specific findings of fact upon which a ruling was entered against Defendant. Specifically, CHAC filed a motion to dismiss Plaintiff’s claims on the basis that the unemployment litigation found he was not terminated due to religious discrimination but, rather, he voluntarily quit his job with CHAC. Based on the collateral estoppel argument, the Court granted CHAC’s Motion to Dismiss in part, ruling that Plaintiff was barred by collateral estoppel from re-litigating issues essential to his failure to accommodate his atheism claim. Plaintiff also made a retaliation claim (which is a separate issue from that described herein) against CHAC which survived the motion to dismiss.

After the Court’s ruling on the aforesaid motion to dismiss, Plaintiff discovered a Pennsylvania law which directly applied to his case as described above. As a result, Plaintiff filed what was, in essence (though not in name), a motion for reconsideration in light of the newly discovered law.

Plaintiff uncovered 43 P.S. Section 829 which reads as follows: “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.”

To put it simply, the above-quoted law specifically states that any findings of fact or law in unemployment compensation litigation simply cannot be used as the basis for a collateral estoppel argument and/or defense.

In light of the clear terms of 43 P.S. Section 829, the Court reconsidered its granting of CHAC’s motion to dismiss by reversing its decision and denied it in toto to allow all of Plaintiff’s claims against CHAC to move forward.

Originally published on February 24, 2016 in Upon Further Review and can be found here.

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