Greenray Industries v. Unemployment Compensation Board of Review ( 2016 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Greenray Industries, :
Petitioner :
:
v. :
:
Unemployment Compensation :
Board of Review, : No. 1895 C.D. 2014
Respondent :
Greenray Industries, :
Petitioner :
:
v. :
:
Unemployment Compensation :
Board of Review, : No. 1896 C.D. 2014
Respondent : Submitted: May 22, 2015
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE ROBERT SIMPSON, Judge
HONORABLE ANNE E. COVEY, Judge
OPINION BY
JUDGE COVEY FILED: March 17, 2016
Greenray Industries (Employer) petitions this Court for review of the
Unemployment Compensation (UC) Board of Review’s (UCBR) November 22, 2014
orders affirming the Referee’s decisions finding John C. Esterline (Esterline) and
Terry L. Hitt (Hitt) (collectively, Claimants) eligible for UC benefits under Section
402(e) of the UC Law (Law).1 Employer presents two issues for this Court’s review:
(1) whether the UCBR failed to properly analyze this matter under Section 402(b) of
1
Act of December 5, 1936, Second Ex.Sess., P.L. (1937) 2897, as amended, 43 P.S. §
802(e) (relating to willful misconduct).
the Law;2 and (2) whether the UCBR erred by granting Claimants UC benefits under
Section 402(e) of the Law. After review, we reverse.
Employer employed Esterline as a full-time senior design engineer and
Hitt as a full-time systems engineer/information technology manager until April 30,
2014. In September 2012, Employer asked all of its employees to sign a non-
disclosure agreement (Agreement). All of Employer’s employees, except Claimants
and one other employee,3 signed the Agreement. See Reproduced Record (R.R.) at
41a. Thereafter, Employer and Claimants negotiated the Agreement’s wording over
an 18-month period. Employer notified Claimants on April 25, 2014 that it would not
negotiate further and, if employees refused to sign the Agreement by April 30, 2014,
they would be discharged. The final version of the Agreement contained four
paragraphs. R.R. at 153a-154a. Claimants refused to sign the Agreement because
Claimants and one other employee were designing testing equipment as a private
business venture4 and they were concerned about the potential for Employer to have
ownership of Claimants’ personal intellectual property. Employer discharged
Claimants on April 30, 2014 because they would not sign the Agreement.
Claimants applied for UC benefits. On May 27 and 29, 2014, the
Altoona UC Service Center issued Notices of Determination finding Claimants
ineligible for UC benefits under Section 402(b) of the Law. Claimants appealed and
a Referee hearing was held for each Claimant. On July 1, 2014, in separate
decisions,5 the Referee reversed the UC Service Center’s determinations finding
2
43 P.S. § 802(b) (relating to voluntary employment termination).
3
Alan W. Snavely (Snavely) was also discharged for not signing the Agreement. Snavely
applied for and was granted UC benefits. Employer appealed to this Court. See Greenray
Industries v. Unemployment Comp. Bd. of Review, A.3d (Pa. Cmwlth. No. 2234 C.D. 2014,
filed March 17, 2016).
4
According to Hitt’s Initial Internet UC Claim, Claimants had a sideline business, “Esterline
Research and Design, LLC,” since “February 15, 2013.” R.R. at 140 a. Hitt worked 35 hours per
week at this business. Id.
5
The Referee’s decisions contained identical findings of fact and conclusions of law.
2
Claimants eligible for UC benefits under Section 402(e) of the Law. Employer
appealed to the UCBR which in two separate but identical decisions, adopted and
incorporated the Referee’s findings of fact and conclusions of law, and affirmed the
Referee’s decisions. Employer appealed to this Court.6
Employer first argues that the UCBR failed to properly analyze this
matter under Section 402(b) of the Law. Specifically, Employer contends that
Claimants voluntarily resigned from their employment without a necessitous and
compelling reason. We agree.
Whether a claimant’s separation from employment is the
result of a voluntary action or a discharge is a question of
law subject to review by this Court and must be determined
from a totality of the facts surrounding the cessation of
employment. A claimant seeking unemployment
compensation benefits bears the burden of establishing
either that (1) his separation from employment was
involuntary or (2) his separation was voluntary but he had
cause of a necessitous or compelling nature that led him to
discontinue the relationship. In other words, in order to be
eligible for [UC] benefits, the claimant bears the burden of
proving separation from employment, whether voluntary or
involuntary.
Watkins v. Unemployment Comp. Bd. of Review, 65 A.3d 999, 1004 (Pa. Cmwlth.
2013) (citations and footnote omitted). The Referee opined:
The UC Service Center adjudicated this claim under Section
402(b) of the Law, based upon available information.
Testimony presented at the appeal hearing indicated that
Section 402(e) of the Law is the applicable Section of Law
given the facts of this case. Since both parties gave consent
for Section 402(e) of the Law to be considered, the Referee
will rule accordingly.
6
By December 3, 2014 order, this Court consolidated both cases for purposes of appeal.
“Our scope of review is limited to determining whether constitutional rights were violated,
whether an error of law was committed, or whether the findings of fact were unsupported by
substantial evidence.” Miller v. Unemployment Comp. Bd. of Review, 83 A.3d 484, 486 n.2 (Pa.
Cmwlth. 2014).
3
Referee Dec. at 2.
It is well-established law that “[a]n express resignation is not necessary
to constitute a voluntary termination; conduct which is tantamount to a voluntary
termination of employment is sufficient.” Shrum v. Unemployment Comp. Bd. of
Review, 690 A.2d 796, 799-800 (Pa. Cmwlth. 1997) (quoting Sears, Roebuck & Co.
v. Unemployment Comp. Bd. of Review, 394 A.2d 1329, 1332 (Pa. Cmwlth. 1978)).
This Court has held that “[c]laimants who, while employed, refuse to accept an offer
of continued employment are deemed to have quit their position, and are thus subject
to Section 402(b) of the [Law], which denies compensation to a claimant who
‘voluntarily [leaves] work without cause of a necessitous and compelling nature.’”
Middletown Twp. v. Unemployment Comp. Bd. of Review, 40 A.3d 217, 225 (Pa.
Cmwlth. 2012) (quoting Hosp. Serv. Ass’n of Ne. Pa. v. Unemployment Comp. Bd. of
Review, 476 A.2d 516, 518 (Pa. Cmwlth. 1984)).
In the instant cases, Employer presented Claimants with an Agreement
in 2012. After 18 months of negotiations, Employer presented a final copy of the
Agreement to Claimants along with a memorandum which provided, in relevant part:
Whether you agree or disagree with this document, this
issue is no longer open for debate or discussion. You are
being given until the close of business on April 30, 2014, to
sign both the Patent Assignment document and the
Employee Non-Disclosure and Assignment document, and
return the original of each one to [Employer’s President]
Wayne Bolton.
Should you fail or refuse to sign and return both
documents (without any alterations or edits), your
employment will be terminated. Absent some
extraordinary circumstance (which I do not foresee
happening), this deadline will not be extended.
R.R. at 159a (emphasis added). Claimants refused to sign the Agreement.
4
The record evidence establishes: (1) Claimants were working at the time
they refused to sign the Agreement; (2) Claimants knew that they would lose their
jobs if they refused to sign the Agreement; and, (3) Claimants refused to sign the
Agreement. Because Claimants refused to accept an offer of continued employment
while employed, they are deemed to have quit their positions. Middletown Twp.
Thus, Claimants engaged in conduct that was tantamount to a voluntary termination.
Shrum. Accordingly, the UCBR erred in adopting the Referee’s conclusion that
“Section 402(e) of the Law is the applicable Section of Law given the facts of this
case.”7 Referee Dec. at 2.
Having ruled that Claimants voluntarily resigned from their
employment, we must next determine whether they had a necessitous and compelling
reason for doing so.
Whether a claimant had cause of a necessitous and
compelling nature for leaving work is a question of law
subject to this Court’s review. A claimant who voluntarily
quits his employment bears the burden of proving that
necessitous and compelling reasons motivated that decision.
In order to establish cause of a necessitous and compelling
nature, a claimant must establish that (1) circumstances
existed that produced real and substantial pressure to
terminate employment, (2) like circumstances would
compel a reasonable person to act in the same manner, (3)
the claimant acted with ordinary common sense, and (4) the
7
We acknowledge this Court’s recent opinion in Ackerman v. Unemployment Compensation
Board of Review (Pa. Cmwlth. No. 1156 C.D. 2015, filed March 2, 2016), wherein, the claimant
who failed to sign a confidentiality agreement was found ineligible for unemployment
compensation benefits for engaging in willful misconduct. However, in that case the employer fired
the claimant for insubordination, i.e., failure to sign the agreement and failure to produce back-up
files, and the appeal was based on the claimant’s belief that he had good cause for not following the
employer’s explicit directives. Thus, a willful misconduct analysis was proper in Ackerman. In the
instant case, Claimants’ employment termination was based solely on Claimants’ refusal to sign the
Agreement where Claimants were working at the time; knew that they would lose their jobs if they
refused to sign the Agreement; and, refused to sign the Agreement; and Employer appealed based
on its belief that Claimants voluntarily resigned from their employment without necessitous and
compelling reasons. Therefore, a voluntary termination analysis is appropriate herein.
5
claimant made a reasonable effort to preserve [his]
employment.
Middletown Twp., 40 A.3d at 227-28 (citations omitted). Esterline testified that he
could not sign the Agreement because the definition of “work” in Paragraph 3 was
too broad. Specifically, Paragraph 3 of the Agreement provided:
I hereby acknowledge and agree that as a part of my duties
for [Employer], I may conceive of and/or reduce to
practice inventions, improvements, developments, ideas
or discoveries, whether patentable or not, and I may
create copyrightable subject matter, such as software
programming, artwork, or other written or electronic
materials (collectively the ‘Work’). In having access to
[Employer’s] equipment, supplies, facilities and [Employer]
Confidential Information in connection with my
employment duties for [Employer], I intend that [Employer]
shall have full ownership of the Work, including the right to
develop, exploit, assign, and license the Work in any
manner whatsoever. [Employer] shall own, and I hereby
irrevocably assign to [Employer], its successors and
assigns, any and all worldwide right, title and interest I have
or may obtain in the Work, together with any and all causes
of action accrued in my favor for infringement of any of the
rights in the Work. I agree to and will sign all lawful
papers, execute all applications and make all rightful oaths
and will generally do everything reasonable to aid
[Employer], including its successors and assigns, to obtain
and enforce its rights in the Work, and shall not contest or
dispute [Employer’s] ownership of or right to the same.
R.R. at 153a-154a (emphasis added). Hitt testified that he had a problem with
Paragraph 4 of the Agreement which provided:
Notwithstanding anything in the previous paragraph, I
understand and agree that nothing in this Agreement
requires one to assign to [Employer] any invention,
improvement, development, idea, discovery or
copyrightable subject matter (collectively, the ‘Personal
Creation’) I develop, or have developed, entirely on my
own time, and without using any [Employer] equipment,
supplies, facilities or trade secret information, unless either
(i) the Personal Creation relates directly to the business
6
of [Employer] or to [Employer’s] actual or clearly
anticipated research or development, or (ii) the Personal
Creation results from any work performed by me for
[Employer]. (For sake of clarity and avoidance of doubt, I
understand and agree that if either part (i) or part (ii) of the
previous sentence does apply, I am still required to assign
the Personal Creation to [Employer], even if I developed it
entirely on my own time and without using any [Employer]
equipment, supplies, facilities, or trade secret information.)
R.R. at 154a (emphasis added). Specifically, Hitt was concerned that Claimants did
not “know what [Employer is] anticipating so how . . . can [Claimants] assume what
[they] were making wouldn’t be anticipated by [Employer].” R.R. at 126a.
The UCBR “[found] and conclude[d] that the [A]greement was a
substantial change in the terms and conditions of [C]laimant[s’] employment.”
UCBR Dec. at 1. “An employer’s unilateral imposition of a real and substantial
change in the terms and conditions of employment provides a necessitous and
compelling reason for an employee to leave work.” Phila. Hous. Auth. v.
Unemployment Comp. Bd. of Review, 29 A.3d 99, 101 (Pa. Cmwlth. 2011). With
respect to his knowledge of Employer’s confidential information and trade secrets
before the Agreement, Esterline testified as follows:
E[mployer’s] L[awyer] Your Attorney just asked you about
whether you’ve learned trade secrets while you were
employed at [Employer] and you said you may have. Did
you learn confidential information or trade secrets while
you were employed at [Employer]?
C[laimant] Well I guess…
EL That’s a yes or no. Did you?
C Yes.
EL Okay and did you learn confidential information or
trade secrets before you were asked to sign the
[Agreement]?
7
C Yes.
EL And what was your understanding of how you were
supposed to treat that information prior to being asked to
sign the [Agreement]?
C You keep it confidential.
EL And so at the time that you received the [Agreement]
you already had knowledge of the fact that you were
supposed to keep certain information or trade secrets
confidential, correct?
C Correct.
R.R. at 30a. When Esterline was specifically asked about his understanding of “what
the standard is when you’re working for an employer [-] who owns the work that you
perform while you’re employed[,]” he responded:
My understanding would be like I’ve said a bunch of times
here you know the stuff I do for them obviously is theirs.
And as long as I’m not you know doing the same thing they
do or competing with them what I do on my own time
should be mine. . . .
R.R. at 35a-36a. Similarly, when Hitt was asked whether “during the course of
employment with [Employer] . . . [was he] aware of the fact that [he was] expected to
keep certain information confidential[,]” he replied: “Yes.” R.R. at 121a. Both
Claimants testified that what they did in their private business had nothing to do with
what they did for Employer.8 See R.R. at 35a, 122a.
Neither Esterline’s belief that the Agreement did not contain an
agreeable definition of work, nor Hitt’s confusion regarding what Employer’s
anticipated research and development entailed, establish unilateral changes in their
employment that were so substantial to them that they had cause of a necessitous and
8
Employer maintains Claimants’ website evidences otherwise. See R.R. at 64a (website
excerpt).
8
compelling nature to voluntarily terminate their employment.9 Further, Claimants did
not meet their burden of proving that signing the Agreement, which included terms
they did not fully comprehend, was a real and substantial pressure that would cause a
reasonable person to refuse to sign the Agreement. A person with ordinary common
sense would not believe said language would cause him to turn over any personal
intellectual property that was not created in connection with Employer. This is
especially true here, where Hitt testified that what they did in their private business
“had nothing to do with Employer[;]” and Esterline testified that he never used any
knowledge or experience gained from Employer in their hobby. R.R. at 122a, 35a.
Contrary to the UCBR’s conclusion:
The Agreement that Claimant[s] w[ere] required to sign
was not a substantial unilateral change in the conditions
of [their] employment that would have placed real and
substantial pressures on a reasonable person in her
circumstances to quit. The Agreement did not change
Claimant[s’] rate of pay, nor did it change [their] job
responsibilities. In fact, the Agreement did not propose
much of a change at all. Both the Agreement and the
[Employer’s Handbook] restricted confidential employer
information . . . . The only difference seems to be that the .
. . Agreement was more restrictive in barring the use or
taking of any information from [Employer]. Arguably,
these changes affect only Claimant[s’ side business] rather
than the terms and conditions of [their] employment with
[Employer].
9
Notably, each Claimant contended that different sections of the Agreement imposed a
unilateral change in his employment that was so substantial to him that each had cause of a
necessitous and compelling nature to voluntarily terminate his employment.
9
Shrum, 690 A.2d 800-01 (emphasis added). Thus, Claimants did not have
necessitous and compelling reasons to terminate their employment. Accordingly,
Claimants are not eligible for UC benefits pursuant to Section 402(b) of the Law.10
For all of the above reasons, the UCBR’s order is reversed.
___________________________
ANNE E. COVEY, Judge
10
Having determined that Claimants are not eligible for UC benefits under Section 402(b) of
the Law, we need not address Employer’s claim that Claimants are not eligible for UC benefits
under Section 402(e) of the Law.
10
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Greenray Industries, :
Petitioner :
:
v. :
:
Unemployment Compensation :
Board of Review, : No. 1895 C.D. 2014
Respondent :
Greenray Industries, :
Petitioner :
:
v. :
:
Unemployment Compensation :
Board of Review, : No. 1896 C.D. 2014
Respondent :
ORDER
AND NOW, this 17th day of March, 2016, the Unemployment
Compensation Board of Review’s November 22, 2014 orders are reversed.
___________________________
ANNE E. COVEY, Judge