Greenray Industries v. Unemployment Compensation Board of Review

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Greenray Industries, :
Petitioner :
:
v. :
:
Unemployment Compensation :
Board of Review, : No. 2234 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 20, 2014
order reversing the Referee’s decision and finding Alan W. Snavely (Claimant)
eligible for UC benefits under Section 402(b) of the UC Law (Law). 1 Employer
presents two issues for this Court’s review: (1) whether the UCBR erred in finding
Claimant eligible for UC benefits under Section 402(b) of the Law; and (2) whether
the UCBR erred in finding Claimant eligible for benefits under Section 402(e) of the
Law.2 After review, we reverse.
Claimant was employed by Employer as a senior design engineer until
April 30, 2014. In September 2012, Employer asked all employees to sign a non-
disclosure agreement (Agreement). All of Employer’s employees, except Claimant
1
Act of December 5, 1936, Second Ex.Sess., P.L. (1937) 2897, as amended, 43 P.S. §
802(b) (relating to voluntary employment termination).
2
43 P.S. § 802(e) (relating to willful misconduct).
and two other employees,3 signed the Agreement. See Reproduced Record (R.R.) at
41a. Thereafter, Employer and Claimant negotiated the Agreement’s wording over
an 18-month period. Employer notified Claimant on April 25, 2014, that it would not
negotiate further and, if Claimant refused to sign the Agreement by April 30, 2014,
he would be discharged. The final version of the Agreement was four paragraphs.
See R.R. at 69a-70a. Claimant refused to sign the Agreement because Claimant and
two other employees are designing testing equipment as a private business venture 4
and he was concerned about the potential for Employer to have ownership of
Claimant’s personal intellectual property. Employer discharged Claimant on April
30, 2014 because he would not sign the Agreement.
Claimant applied for UC benefits. On June 5, 2014, the Altoona UC
Service Center issued a Notice of Determination finding Claimant ineligible for UC
benefits under Section 402(b) of the Law. Claimant appealed and a Referee hearing
was held. On August 12, 2014, the Referee affirmed the UC Service Center’s
determination. Claimant appealed to the UCBR. On November 20, 2014, the UCBR
reversed the Referee’s decision. Employer appealed to this Court.5
Employer first argues that the UCBR erred in finding Claimant eligible
for UC benefits under Section 402(b) of the Law. Specifically, Employer contends
3
John C. Esterline and Terry L. Hitt were also discharged for not signing the Agreement.
They applied for and were granted UC benefits. Employer appealed to this Court. Their cases were
consolidated. See Greenray Industries v. Unemployment Comp. Bd. of Review, A.3d (Pa.
Cmwlth. Nos. 1895, 1896 C.D. 2014, filed March 17, 2016).
4
In Claimant’s Initial Internet UC Claim, Claimant stated that he was engaged in a sideline
business, “Esterline Research and Design, LLC,” since “February 15, 2013.” R.R. at 59a. Claimant
worked 24 hours per week at this business. Id.
5
“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).
2
that Claimant voluntarily resigned from his 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). In the instant case, the UCBR’s discussion on
this issue consisted of one sentence: “Since [C]laimant did not quit, he cannot be
denied benefits under Section 402(b) of the Law.” UCBR Dec. at 2; R.R. at 100a.
Clearly, this statement is erroneous.
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.
3
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 case, Employer presented Claimant with an Agreement in
2012. After 18 months of negotiations Employer presented a final copy of the
Agreement to Claimant 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 75a-76a (emphasis added). Claimant refused to sign the Agreement.
The record evidence establishes: (1) Claimant was working at the time
he refused to sign the Agreement; (2) Claimant knew that he would lose his job if he
refused to sign the Agreement; and, (3) Claimant refused to sign the Agreement.
Because Claimant refused to accept an offer of continued employment while
employed, he is deemed to have quit his position. Middletown Twp. Thus, Claimant
engaged in conduct that was tantamount to a voluntary termination. 6 Shrum.
6
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, Claimant’s employment termination was based solely on Claimant’s refusal to sign the
Agreement where Claimant was working at the time; knew that he would lose his job if he refused
to sign the Agreement; and, refused to sign the Agreement; and Employer appealed based on its
4
Accordingly, the UCBR erred in concluding therefrom that “[C]laimant did not quit.”
R.R. at 100a.
Having ruled that Claimant voluntarily resigned from his employment,
we must next determine whether he 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
claimant made a reasonable effort to preserve [his]
employment.
Middletown Twp., 40 A.3d at 227-28 (citations omitted). Claimant testified at the
Referee hearing that he refused to sign the Agreement because:
Well, we were, for a couple of years, we had been working
on a sideline business which was -- and actually, it was a
hobby. There were myself and two other engineers had
been working on ideas that we were considering doing on
the side. And at the time, and even now, we don’t really
have a formal product, portfolio, or anything to really offer.
But the -- what we had presented was a concern that
anything we might develop, might be, you know, taken by
this particular document that we were signing. It would
allow [Employer] to have ownership of that. And while we
were assured that that was never the case, that they had no
intention of doing that, our concern was that they refused to
alter the document, to clearly say that. The document
contained language which was gray and could be
belief that Claimant voluntarily resigned from his employment without necessitous and compelling
reasons. Therefore, a voluntary termination analysis is appropriate herein.
5
interpreted to embody non-compete language, as well as,
infer the right of [Employer] to have ownership of any ideas
that we might contemplate in our own time, using our own
equipment. And we didn’t think really that was fair. So we
tried to negotiate with them. We presented several of these
documents to them to try and address what we thought was
fair to both parties, acknowledging [Employer’s] rights and
ownership of the ideas and our obligations as employees.
R.R. at 19a-20a.
The UCBR maintains in its brief that Claimant had good cause to quit
because Employer made a substantial unilateral change to Claimant’s employment.
“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). When asked by his attorney if the assignment
portion of the Agreement was “a new condition of employment?” Claimant
answered: “Yes.” R.R. 35a. However, when questioned by Employer’s lawyer
regarding whether he knew that confidential and trade secret information had to be
protected, Claimant responded that he understood that. Claimant explained that he
did not want the Agreement to be used against him, i.e., “[t]o allow any things that
[Claimant] would produce on [his] own time to be taken by someone else [-] either
the current employer, [his] current employer or some future employer that would
possibly buy [Employer].” R.R. at 35a.
The alleged objectionable portion of the Agreement 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 70a (emphasis added). When asked his understanding of what Employer was
trying to protect in the above paragraph, Claimant responded:
I have no idea. It’s pretty clear what [Employer’s] entitled
to in terms of trade secrets and confidential information that
are already protected intellectual property with the patents
that they have. So I’m really not sure why it’s necessary to
say, we’ll give you everything you do on your own time,
unless we think you did it with our stuff or unless we think
we want to do it in the future. I don’t think that’s necessary
language to have in there.
R.R. at 29a. Claimant’s belief that the Agreement contained language that was not
necessary does not establish a unilateral change in his employment that was so
substantial to him that he had cause of a necessitous and compelling nature to
voluntarily terminate his employment. Further, Claimant did not meet his burden of
proving that his concern that the Agreement may be used against him at some future
time7 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,
7
“Any speculative concern of Claimant that [signing the Agreement] might have an adverse
effect in the future is not cause of a necessitous and compelling nature to support the award of
benefits under [S]ection 402(b) [of the Law].” Middletown Twp., 40 A.3d at 235 (McCullough, J.,
concurring and dissenting). Here, Claimant was concerned about the future possibility of
“[Employer] chang[ing] hands” and the new owners misinterpreting the Agreement. R.R. at 22a.
7
where Claimant testified that his sideline business “had nothing to do with
[Employer.]”8 R.R. at 20a (emphasis added).
The Agreement that Claimant was required to sign was
not a substantial unilateral change in the conditions of
[his] employment that would have placed real and
substantial pressures on a reasonable person in [his]
circumstances to quit. The Agreement did not change
Claimant’s rate of pay, nor did it change [his] 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 [his] employment with
[Employer].
Shrum, 690 A.2d 800-801 (emphasis added). Thus, Claimant did not have a
necessitous and compelling reason to terminate his employment. Accordingly,
Claimant is not eligible for UC benefits pursuant to Section 402(b) of the Law.9
For all of the above reasons, the UCBR’s order is reversed.
___________________________
ANNE E. COVEY, Judge
8
Employer maintains Claimant’s website evidences otherwise. See R.R. at 71a (website
excerpt).
9
Having determined that Claimant is not eligible for UC benefits under Section 402(b) of
the Law, we need not address Employer’s claim that Claimant is not eligible for UC benefits under
Section 402(e) of the Law.
8
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Greenray Industries, :
Petitioner :
:
v. :
:
Unemployment Compensation :
Board of Review, : No. 2234 C.D. 2014
Respondent :
ORDER
AND NOW, this 17th day of March, 2016, the Unemployment
Compensation Board of Review’s November 20, 2014 order is reversed.
___________________________
ANNE E. COVEY, Judge