Boro of South Coatesville v. UCBR (Majority Opinion)

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IN THE COMMONWEALTH COURT OF PENNSYLVANIA Borough of South Coatesville, Petitioner v. Unemployment Compensation Board of Review, Respondent BEFORE: : : : : : : : : No. 1708 C.D. 2007 Submitted: February 15, 2008 HONORABLE BERNARD L. McGINLEY, Judge HONORABLE ROCHELLE S. FRIEDMAN, Judge HONORABLE JOSEPH F. McCLOSKEY, Senior Judge OPINION NOT REPORTED MEMORANDUM OPINION BY JUDGE FRIEDMAN FILED: April 18, 2008 The Borough of South Coatesville (Employer) petitions for review of the August 9, 2007, order of the Unemployment Compensation Board of Review (UCBR), which reversed the decision of a referee to deny Kermit C. Jones (Claimant) unemployment compensation benefits pursuant to section 402(b) of the Unemployment Compensation Law (Law).1 We affirm. From April 14, 2005, until January 4, 2007, Claimant worked for Employer as the full-time Borough Manager. Claimant, who was fifty-eight years old when he applied for the position, had worked in municipal administration in 1 Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. §802(b). Section 402(b) of the Law provides that a claimant is ineligible for compensation if his unemployment is due to his voluntarily leaving employment without cause of a necessitous and compelling nature. the State of New York for many years and had experienced success in controlling municipal finances there. Employer initially offered Claimant an annual salary of $52,500 but indicated that it had budgeted $60,000 for that position. During negotiations, the parties verbally agreed that once Claimant demonstrated success in cutting costs and improving Employer s finances, similar to the level of success that Claimant had enjoyed in New York, Employer would increase Claimant s annual salary by $7,500 to the $60,000 budgeted. The parties further agreed that if Claimant chose not to participate in Employer s pension plan, Employer would pay Claimant an amount equivalent to ten percent of his salary (Pension Payment), representing Employer s pension plan contribution, which Claimant would then place into his existing IRA. Claimant memorialized both of these verbal agreements in a memorandum of understanding (MOU), which Employer s representative signed. (UCBR s Findings of Fact, Nos. 1-13.) Within six months of accepting Employer s job offer, Claimant successfully implemented various cost-saving measures and obtained grant monies and, ultimately, was able to surpass the financial successes he had while working in New York. monthly reports. Claimant kept Employer informed of these successes through In October 2005, Claimant, having successfully improved Employer s financial situation, requested that Employer honor its promise and increase his pay to the full $60,000 budgeted for his position. Claimant also notified Employer that he did not want to participate in Employer s pension plan and requested the Pension Payment. Employer did not act on either request. (UCBR s Findings of Fact, Nos. 14-18.) 2 On February 3, 2006, Employer informed Claimant that Employer did not have the authority to enter into the MOU and that the MOU was void.2 Despite repeated communications between Employer and Claimant over the next two months, Employer refused to increase Claimant s salary to $60,000 or make the Pension Payment to Claimant.3 Claimant hired an attorney, who sent letters, dated October 9, 2006, and December 5, 2006, to Employer setting forth Claimant s position, offering alternative resolutions to the pension issue and requesting that the matter be resolved as soon as possible. Employer never formally responded to either letter and never contacted Claimant or his attorney to discuss the matter after the December 5, 2006, letter. When the year ended without any response from Employer, Claimant resigned from his position as Borough Manager because of Employer s continued refusal to honor the promises it made to Claimant when he was hired in April 2005. (UCBR s Findings of Fact, Nos. 19-25.) Subsequently, Claimant applied for unemployment compensation benefits, which the local service center denied pursuant to section 402(b) of the 2 In Pennsylvania, employment contracts entered into by municipal entities are valid only when the municipality s right to do so is expressly set forth in enabling legislation and, absent such legislative authority, the employment contract is invalid and unenforceable in its entirety. Scott v. Philadelphia Parking Authority, 402 Pa. 151, 166 A.2d 278 (1960). 3 Claimant responded to Employer s February 3, 2006, communication with a letter, dated March 24, 2006, in which Claimant outlined his understanding of the parties compensation agreement, described the fiscal improvements that Claimant had made for Employer and informed Employer that Claimant was working overtime without compensation. In response, Employer disavowed all of the terms Claimant outlined as a part of his agreed-to compensation package. Employer also informed Claimant that it was considering changing his position from a full-time position to a part-time position with no benefits. (R.R. 30-32.) 3 Law. Claimant appealed, and, after a hearing at which only Claimant testified, a referee affirmed the denial of benefits. Claimant then appealed to the UCBR. Crediting Claimant s testimony and evidence,4 the UCBR held that Employer s refusal to honor its commitments to Claimant with regard to the salary increase and Pension Payment constituted necessitous and compelling reason for Claimant to quit his employment. Moreover, the UCBR held that Claimant made a good faith effort to resolve these issues over a fourteen-month period before he finally decided to resign. Accordingly, the UCBR concluded that Claimant was not ineligible for benefits under section 402(b) of the Law and reversed the referee s decision. Employer now appeals to this court.5 Employer first argues that the UCBR s Findings of Fact, Nos. 7 and 23 are not supported by substantial evidence,6 and, therefore, the UCBR erred in granting Claimant benefits based on these findings. These findings state: 4 In an unemployment compensation case, the UCBR is the ultimate fact finder and is empowered to make credibility determinations, and these credibility determinations are not subject to re-evaluation on appeal. Peak v. Unemployment Compensation Board of Review, 509 Pa. 267, 501 A.2d 1383 (1985). 5 Our scope of review is limited to determining whether constitutional rights were violated, whether the adjudication is in accordance with the law and whether necessary findings of fact are supported by substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa. C.S. §704. 6 Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Peak. The evidence should be examined in the light most favorable to the party in whose favor the UCBR found, giving that party the benefit of all inferences that logically and reasonably can be drawn from the testimony to see if substantial evidence for the UCBR s conclusion exists. Hostovich v. Unemployment Compensation Board of Review, 414 A.2d 733 (Pa. Cmwlth. 1980). 4 7. The parties verbally agreed that once [Claimant] was able to show a level of success in cutting costs and improving [Employer s] finances, similar to the success he enjoyed in New York, [Claimant s] annual salary would be increased $7500.00 to $60,000.00. *** 23. [Employer] never formally responded to either letter, and never even contacted [Claimant] or his attorney to discuss the matter after the December 5, 2006, letter. (Findings of Fact, Nos. 7, 23) (emphasis added). In challenging Findings of Fact, No. 7, Employer contends that the record clearly demonstrates that Employer never made any such verbal agreement and that the MOU, which is void as a matter of law, did not contain any such promise.7 We disagree. Here, Claimant testified concerning the pre-employment negotiations between Claimant and Employer; specifically, Claimant explained that: (1) Employer was hesitant to pay Claimant the full $60,000 budgeted for the Borough Manager position until he could demonstrate that the ideas and financial savings practices he successfully implemented in New York were transportable to Pennsylvania; and (2) Employer promised to increase Claimant s salary to $60,000 as soon as he demonstrated the level of savings for Employer that he previously 7 Employer also asserts that Claimant was not entitled to benefits because he was not unemployed as defined by the Law. See Section 4(u) of the Law, 43 P.S. §753(u). However, Employer did not raise this issue before the UCBR, and, therefore, it is waived. Section 703(a) of the Administrative Agency Law, 2 Pa. C.S. §703(a). 5 had in New York.8 (R.R. at 63, 71, 82-84.) This testimony, found credible by the UCBR, fully supports the UCBR s Findings of Fact, No. 7.9 With respect to Findings of Fact, No. 23, Employer argues that that finding is contradicted by Claimant s own testimony that [Employer], through counsel, did in fact respond and negotiate with [Claimant]. (Employer s brief at 13.) However, contrary to Employer s assertions, this finding is amply supported by Claimant s credible testimony that: (1) Employer, through counsel, discussed the situation with Claimant s counsel before the December 5, 2006, letter;10 (2) the December 5, 2006, letter was the result of these prior conversations; (3) there was no contact between Employer and Claimant or Claimant s counsel after the December 5, 2006, letter; and (4) Employer did not respond at all to the December 5, 2006, letter by December 31, 2006, the deadline set forth in the letter. (R.R. at 76, 78.) 8 Claimant testified that he accepted the initial salary of $52,500 for a short period of time with the understanding that as soon he demonstrated his ability to improve Employer s finances, which Claimant expected to take less than six months, Employer would increase his salary to the full $60,000 budgeted. (R.R. at 70-71, 82-83.) 9 The UCBR did not base its decision on the MOU but, rather, on Claimant s credible testimony concerning his understanding of the agreed to terms and conditions of his employment during the pre-employment negotiations between himself and Employer. Although the MOU is not a valid employment contract, it does act to corroborate Claimant s testimony as to his salary and pension benefit expectations. 10 Claimant did not characterize the pre-December 5, 2006, discussions as negotiations. (R.R. at 78.) 6 Employer next argues that the UCBR erred in concluding that Claimant satisfied his burden of proving that he had cause of a necessitous and compelling nature for resigning his position.11 According to Employer, Claimant left work merely because he was dissatisfied with his compensation, a reason that does not constitute necessitous and compelling reason for voluntarily terminating employment.12 World s Finest Chocolate, Inc. v. Unemployment Compensation Board of Review, 616 A.2d 1114 (Pa. Cmwlth. 1992). However, the UCBR specifically found that Claimant voluntarily resigned his position because of 11 In a voluntary termination case, the claimant has the burden of proving that he left the employment for cause of a necessitous and compelling nature. A-Positive Electric v. Unemployment Compensation Board of Review, 654 A.2d 299 (Pa. Cmwlth. 1995). Cause of a necessitous and compelling nature has been defined as circumstances that produce real and substantial pressure to terminate one s employment and that would compel a reasonable person to do the same. Id. Whether one had a necessitous and compelling reason for quitting one s job is a legal conclusion and is fully reviewable by this court. Id. A claimant also must establish that he acted with ordinary common sense and made a reasonable effort to preserve the employment. Mauro v. Unemployment Compensation Board of Review, 751 A.2d 276 (Pa. Cmwlth. 2000). However, in that regard, the court has never required a claimant to perform a futile act. Id. Here, Claimant began requesting that Employer honor its promises in October 2005 and continued those requests through October 2006 to no avail. Thereafter, Claimant hired an attorney, who contacted Employer with alternative resolutions to these issues, again to no avail. Accordingly, as determined by the UCBR, Claimant made reasonable efforts to preserve his employment. 12 Employer also asserts that because Claimant accepted the position with the initial salary of $52,500, that amount is presumably suitable for the position of Borough Manager. However, Claimant testified that he accepted the position with the initial salary based on the understanding that this salary only would be in effect for a short period of time, (R.R. at 70-71, 82-83), and the UCBR credited this testimony. 7 Employer s continued refusal to honor the promises it made to Claimant when he was hired.13 (UCBR s Findings of Fact, No. 25.) The facts here are similar to those in A-Positive Electric v. Unemployment Compensation Board of Review, 654 A.2d 299 (Pa. Cmwlth. 1995). In that case, the employer agreed to increase the claimant s salary and to pay for child care but subsequently refused to carry out the agreement, prompting the claimant to quit her job. We held that the claimant was entitled to benefits, reasoning that the employer s failure to carry out its part in the agreement resulted in a 33.8% reduction in the claimant s wages, giving her necessitous and compelling cause for terminating her employment.14 As in A-Positive, Employer s refusal to fulfill its promise to increase Claimant s salary and make the Pension Payment resulted in a 20.5% reduction in Claimant s compensation.15 13 Employer has not challenged this finding; thus, it is conclusive on appeal. Steinberg Vision Associates v. Unemployment Compensation Board of Review, 624 A.2d 237 (Pa. Cmwlth. 1993). 14 There is no talismanic percentage that separates a substantial from a non-substantial wage reduction; rather, each case must be examined under its own attendant circumstances with the focus of the inquiry being the impact on the employee. A-Positive. 15 As shown by the following calculations, Employer s refusal to increase Claimant s salary or to pay Claimant the ten-percent Pension Payment resulted in a difference in Claimant s salary of $1,125 per month or 20.5 percent of his wages. While Claimant s salary was $52,500, Claimant earned $4,375 per month. However, if Employer would have carried out its agreement to increase Claimant s salary to $60,000, Claimant s monthly salary would be $5,000 ($60,000/12 = $5,000). Also, had Employer paid Claimant the ten-percent Pension Payment from November 2005, as agreed, Claimant would have received an additional $500 per month ($6,000/12 = $500). Thus, if Employer had honored its agreement with Claimant, he would have been earning $5,500 per month, rather than $4,375 per month, a difference of $1,125 or 20.5 percent ($1,125/$5,500 = 20.4545%). 8 In addition, Claimant testified that: (1) the negotiated increase in salary was important because the starting amount was less than he received when he worked in New York; and (2) the Pension Payment was important due to his age, i.e., that these terms had special significance and intrinsic value to Claimant. (R.R. at 63-64, 66, 70-71, 74-75.) Where a benefit has special significance and intrinsic value to the employee an employer s unilateral alteration of that benefit and corresponding reduction in compensation gives the employee necessitous and compelling cause for terminating her employment. Id. Under these circumstances, the UCBR properly determined that Claimant had cause of a necessitous and compelling nature to resign from his employment.16 A-Positive. Accordingly, we affirm. _____________________________ ROCHELLE S. FRIEDMAN, Judge 16 Employer also requests attorneys fees and costs; however, it cites no authority for its request and we find none. 9 IN THE COMMONWEALTH COURT OF PENNSYLVANIA Borough of South Coatesville, Petitioner v. Unemployment Compensation Board of Review, Respondent : : : : : : : : No. 1708 C.D. 2007 ORDER AND NOW, this 18th day of April, 2008, the order of the Unemployment Compensation Board of Review, dated August 9, 2007, is hereby affirmed. _____________________________ ROCHELLE S. FRIEDMAN, Judge

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