MARLENE E. SMITH v. BOARD OF REVIEW, DEPARTMENT OF LABOR et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1269-05T51269-05T5

MARLENE E. SMITH,

Appellant,

v.

BOARD OF REVIEW,

DEPARTMENT OF LABOR

and THE FIRST OCCUPATIONAL

CENTER OF NEW JERSEY, INC.,

Respondents.

_______________________________________

 

Submitted October 11, 2006 - Decided December 7, 2006

Before Judges Lisa and Grall.

On appeal from the Board of Review, Department of Labor, 83,071.

David Rostan, attorney for appellant.

Stuart Rabner, Attorney General, attorney

for respondent (Michael J. Haas, Assistant

Attorney General, of counsel; John C. Turi,

Deputy Attorney General, on the brief).

Respondent The First Occupational Center of

New Jersey, Inc. did not file a brief.

PER CURIAM

Marlene E. Smith, formerly an employee of The First Occupational Center of New Jersey, appeals from an order of the Board of Review of the Department of Labor. The Board concluded that Smith left work voluntarily without good cause attributable to the work, N.J.S.A. 43:21-5(a), and affirmed the Appeal Tribunal's denial of her claim for benefits under the unemployment compensation law, N.J.S.A. 43:21-1 to -71. Because the Board did not address adequately Smith's evidence about reductions in her compensation, we reverse and remand. Smith filed a claim for unemployment benefits on July 3, 2005. On July 21, 2005, a deputy to the Director of the Division of Unemployment Compensation approved benefits on the ground that a reduction in Smith's compensation created a hardship that gave her good cause to resign. On August 1, 2005, the employer challenged that determination. A hearing was conducted by telephone on August 26, 2005, and on September 9, 2005, the Appeal Tribunal reversed the award of benefits on the ground that Smith left her work because she moved. Smith petitioned the Board, which approved the decision of the Appeal Tribunal. Smith then filed this appeal.

The testimony presented during the telephonic hearing conducted by the appeals examiner established that Smith was employed as an office manager for The First Occupational Center of New Jersey from May 30, 2000 through July 1, 2005. She was a salaried employee and earned $38,785 per year. Her employer decreased her compensation in three ways during the eight-month period preceding her resignation. All employees, even those who were salaried, were required to take three unpaid vacation days between October and December 2004.

The employer further reduced compensation by decreasing its contribution to the employees' health insurance premium from seventy-five percent to fifty percent of the cost. The dollar amount of the increase in the employees' share of the premium, which was deducted from their paychecks, was not established.

In addition, each employee's earnings were cut by five percent for the two-month period from May 9 until July 5, 2005. In her letter of resignation dated June 2, 2005, Smith advised that due to circumstances beyond her control, she was "forced to move" and would resign effective July 1, 2005. After Smith resigned, the employer returned earnings to prior levels as scheduled.

The employees were also told that the employer would reimburse them for the lost earnings if and when the company became sufficiently profitable to permit repayment. By the date of the hearing, the company had not taken any action to refund the lost earnings.

Smith explained her reasons for resignation. The decreases in compensation and increase in the cost of benefits left her without the means to pay her rent, which had been raised by forty dollars per month. To Smith, things at work seemed "shaky." The possibility of eliminating the section in which she worked had been discussed, and Smith had been asked to work additional hours without additional compensation. In light of all these circumstances, she did not know what to expect next. For that reason, Smith applied for and was offered subsidized housing that she and her disabled husband could afford. Travel time between the available housing and her workplace was forty-five to fifty minutes.

The appeals examiner concluded that Smith "left the job because of relocation to another area due to increased cost of living and acceptance into subsidized housing." The examiner recognized that Smith "had a problem with a temporary 5% pay cut which covered the period" between May 9 and July 5, 2005, but found that she "left before her salary would have been restored." The examiner also found that "[t]he employer had informed [its] workers that when they became financially able, the decrease in their salaries would have been paid back." The examiner did not address Smith's testimony about the increase in her share of the cost of health benefits or its impact on her earnings. Nor did the examiner address the three days of mandatory, unpaid leave.

The Appeal Tribunal provides the following reasons for its determination of Smith's ineligibility:

The claimant's leaving to relocate is a personal reason. Therefore, the claimant is disqualified for benefits . . . under N.J.S.A. 43:21-5(a), as the claimant left work voluntarily without good cause attributable to such work. Moreover, the claimant's complaint about the salary decrease is weak given the fact that she left a couple of days before her salary would have been restored and also any loss would have been recouped at a future date.

The Board summarily approved the decision of the Appeal Tribunal. The Board stated that it had carefully examined the "Findings of Fact and Opinion as developed by the Appeal Tribunal and [Smith's] allegations," and concluded, "we agree with the decision reached."

The question before the Board was whether Smith "left work voluntarily without good cause attributable to such work." N.J.S.A. 43:21-5(a); see Brady v. Bd. of Review, 152 N.J. 197, 203, 212-13 (1997). The purposes and policies of the unemployment compensation law are served "as well when benefits are denied in improper cases as when they are allowed in proper cases." Brady, supra, 152 N.J. at 212 (internal quotation omitted). Proper application of N.J.S.A. 43:21-5(a) requires the Board to "differentiate between (1) a voluntary quit with good cause attributable to the work and (2) a voluntary quit without good cause attributable to the work." Id. at 213-14 (quoting Self v. Bd. of Review, 91 N.J. 453, 457 (1982)).

In the past, the Board has held that a "substantial" reduction in compensation "constitutes good cause for leaving work" within the meaning of N.J.S.A. 43:21-5(a). See Johns-Manville Products Corp. v. Bd. of Review, 122 N.J. Super. 366, 370 (App. Div. 1973). In Johns-Manville, we affirmed the Board's determination that an employee left work for good cause attributable to the work when he resigned after his compensation had been reduced by twenty-five percent and there was no reasonable prospect for an increase in his earnings. Id. at 369-70. We found that the Board's determination was "fully supported by substantial evidence in the record and [was] entitled to particular weight because of the administrative tribunal's familiarity with and expertise in employment matters." Ibid.

The Supreme Court, relying on this court's decision in Johns-Manville, also has recognized that "the threat of significant economic loss, based upon objective facts, could amount to cause sufficient to justify leaving the ranks of the employed." Brady, supra, 152 N.J. at 220. The Court cited with approval decisions of the intermediate appellate courts of Illinois and Minnesota which recognize that decreases in wages and benefits, including health insurance benefits, could amount to good cause for leaving work and grounds for an award of unemployment compensation benefits. Ibid. (citing Mangan v. Bernardi, 477 N.E.2d 13, 16 (Ill. App. Ct. 1985) (wages and medical insurance); Cook v. Playworks, 541 N.W.2d 366, 368 (Minn. Ct. App. 1996) (substantial reduction in wages)). In Brady, however, the Court deferred to the Board's denial of benefits because there was substantial credible evidence to support the Board's finding that the "claimants [who accepted the early retirement] would not incur a substantial economic loss or loss of medical benefits." Id. at 221.

Brady and Johns-Manville make it clear that the Board was required to consider whether the cumulative decreases in Smith's compensation were sufficiently substantial to amount to good cause for her to leave work, and the cases demonstrate that we must defer to the Board's expertise in employment matters. Those principles inform our review. Giving deference to the agency's expertise, the question for this court is whether the Board's determination that Smith left work voluntarily and without good cause "could reasonably have been reached on sufficient credible evidence in the whole record" or "'went so far wide of the mark that a mistake must have been made.'" New Jersey State Parole Bd. v. Cestari, 224 N.J. Super. 534, 547-48 (App. Div.) (quoting 613 Corp. v. State of N.J., Div. of State Lottery, 210 N.J. Super. 485, 495 (App. Div. 1986)), certif. denied, 111 N.J. 649 (1988); see Brady, supra, 152 N.J. at 210 (noting that reviewing courts do not reverse an agency decision unless it is arbitrary, capricious or unsupported by substantial credible evidence). Where an agency "overlook[s] or undervalu[es] crucial evidence," or relies on selective portions of the record without addressing conflicting evidence, its decision appears to be mistaken and arbitrary. Cestari, supra, 224 N.J. Super. at 547-48; see Trantino v. New Jersey State Parole Bd., 166 N.J. 113, 189-92 (2001).

In this case, the agency's factual findings are inadequate to permit us to determine whether it considered and rejected or simply overlooked evidence relevant to the question of the substantiality of the reductions in Smith's compensation. See Bailey v. Bd. of Review, 339 N.J. Super. 29, 33 (App. Div. 2001). Neither the Appeal Tribunal nor the Board, which relied upon the decision of the Tribunal, provided findings that addressed the cumulative impact of the reduction in Smith's compensation.

Smith raised three factual claims: she was compelled to take three unpaid vacation days; her salary was reduced by five percent for a two-month period; and the employer doubled the amount it deducted from her pay as contribution to her health insurance benefit. The agency decision addresses only one of these three factual claims, the five percent reduction in pay.

In addition to ignoring Smith's claims about mandatory, unpaid holidays and health insurance costs, the Board undervalued the evidence about the five percent salary reduction by assuming facts not supported by the evidence. The appeals examiner found and the Board agreed that "any loss [of earnings] would have been recouped at a future date." The evidence was that the employer stated that it would reimburse its employees if and when it deemed its business sufficiently profitable. That vague assertion of intent does not support the conclusion the Board drew.

Additionally, the Board and the Appeal Tribunal either overlooked or arbitrarily disregarded Smith's claim that she was concerned about future modifications of the conditions of her employment. In Johns-Manville, supra, 122 N.J. Super. at 369-70, the Board considered whether there were reasonable prospects for restoration of wages. In Brady, supra, 152 N.J. at 220, the Court recognized that a "threat of significant economic loss, based upon objective facts, could amount to cause sufficient to justify leaving the ranks of the employed." Thus, Smith's concern about the prospects of additional and repeated modifications of her employment was relevant if reasonably based on objective facts.

Although, neither Smith nor her employer stated the dollar amount Smith lost as a result of the employer shifting an additional share of the cost of health insurance to her, the record demonstrates that the quality of the telephonic connection through which this hearing was conducted was poor. The transcript reflects the difficulty the participants experienced in communicating with one another. Several times during the brief hearing, the appeals examiner mentioned that she and Smith would be or were required to "scream" in order to be heard.

When asked about the cost of her health benefits, Smith responded by describing the cost of benefits available to her from another source following her resignation, which was based on a formula related to her subsidized housing. Her response apparently distracted the examiner from inquiring further about the increase in the amount deducted from her pay to cover health benefits. Instead of inquiring further about the cost of the relevant benefits, the examiner turned the line of questioning to focus on the cost and location of Smith's subsidized housing.

The decision of the Appeal Tribunal and the Board's decision adopting it focuses primarily and improperly on Smith's decision to move. It is clear that an employee who moves for personal reasons is not entitled to benefits when he or she quits because of the distance of his or her new commute.

N.J.A.C. 12:17-9.1(e)(6). A move, however, does not disqualify an employee who has resigned for reasons related to work. N.J.A.C. 12:17-9.1(d) provides: "[A]n individual who leaves work for several reasons, one of which constitutes good cause attributable to such work, shall not be disqualified for benefits." Smith's claim was that she moved and left work because of the combined effect of salary reductions and a decrease in her employer's contribution to her health benefits.

That claim was not adequately resolved by the Board's decision, which does not address the relevant evidence and is based in part on a finding about restoration of wages that is not supported by the record.

Because the issue of Smith's cumulative reduction in compensation presents questions that should be resolved by the Board, we reverse and remand. Because the participants in the telephonic hearing encountered communication problems, a new hearing should be provided in the interest of justice. See Texter v. Dept. of Human Servs., 88 N.J. 376, 383 (1982). We express no view on the merits of Smith's claim, which should be addressed by the Board in the first instance. See Morgan v. Bd. of Review, 77 N.J. Super. 209, 213 (App. Div. 1962).

Reversed and remanded for a new hearing. We do not retain jurisdiction.

 

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A-1269-05T5

December 7, 2006