Based on a recent court ruling, what you say in unemployment proceedings can now lead to a lawsuit.  In Hickey v. General Electric Company, 2017-SC-000135-CL, the Kentucky Supreme Court held in a unanimous opinion that employers may be sued for making false statements during unemployment proceedings.  This ruling means that employers may have to face a claim for punitive damages if they are found to have made a false statement during an unemployment proceeding.

The dispute arose over whether Logan Hickey voluntarily quit his employment or was fired.  Hickey was hired to work the first shift on the production line at General Electric Company (“GE”) in May 2015.  At the time he applied, Hickey stated that he was capable of and available for work on any shift.  In August 2015, Hickey was reassigned to a second-shift position.  After working several days, Hickey claimed that the medication he took for Attention Deficit/Hyperactivity Disorder (“ADHD”) caused side effects that interfered with his ability to work in the afternoon.  Hickey then presented a note from his doctor and asked to return to first shift.

GE advised Hickey that there were no first-shift positions available under the terms of the collective bargaining agreement.  Because Hickey did not return to his second-shift job, GE placed him on an unpaid leave of absence and said that it would notify him if a position opened on first shift.  In October, Hickey was advised that his employment was terminated because according to the collective bargaining agreement, employees in his position had to be available to work any shift and rotate positions.  Hickey claimed that GE told him either to stop his medication and stay on second shift or resign.

Hickey applied for unemployment benefits, which GE opposed, claiming that Hickey had voluntarily quit.  When his claim for benefits was denied, Hickey appealed and an administrative hearing was held.  At the hearing, GE characterized Hickey’s departure as a discharge because Hickey had refused to return to his second-shift position.  Hickey claimed he was terminated.  He was again denied benefits after the hearing.  On appeal, the Commission held that Hickey had resigned from his employment but had good cause to do so and was therefore eligible for benefits.  Hickey was awarded all the unemployment benefits to which he was entitled.

KRS 341.990(6)(a) prohibits witnesses from making false statements in the context of an unemployment insurance proceeding:

Any person who knowingly makes a false statement or representation, or who knowingly fails to disclose a material fact to prevent or reduce the payment of benefits to any worker entitled thereto, or to avoid becoming or remaining subject to this chapter, or to avoid or reduce any payment required of an employing unit under this chapter shall be guilty of a Class A misdemeanor unless the liability avoided or attempted to be avoided is one hundred dollars ($100) or more, in which case he shall be guilty of a Class D felony.

KRS 446.070 provides: “A person injured by the violation of any statute may recover from the offender such damages as he sustained by reason of the violation, although a penalty or forfeiture is imposed for such violation.”

Hickey sued GE seeking damages under KRS 446.070 for the temporary deprivation of his unemployment benefits and punitive damages, among other things.

The court found that Hickey could pursue his claim under KRS 446.070.  KRS 446.070 creates a private right of action for violation of a statute when (1) the statute is penal in nature or provides no inclusive civil remedy; (2) the party is within the class of persons the statute is intended to protect; and (3) the injury is of the type that the statute was designed to prevent.  Here, Hickey met those three requirements.  Because Hickey was protected by the unemployment statutes, was allegedly injured due to a false statement, and he had no remedy under the statute, the court allowed him to pursue a claim under KRS 446.070.

Allowing a claim under KRS 446.070 for alleged false statements creates additional hazards for employers.  Employees may see this as an opportunity to relitigate a denial of unemployment benefits.  Even if they successfully obtain unemployment benefits, they may choose to pursue a claim for punitive damages and damages for the temporary deprivation of benefits.

More concerning is that unemployment proceedings often involve disputes of fact, particularly where the issue is whether an employee quit or was terminated.  The lesson for employers is to be cautious in filling out the employer’s statement and in giving testimony in an unemployment hearing.  Stick to the facts in describing what occurred and avoid simply characterizing an employee’s actions as a voluntary quit.  If an employee has quit their employment, try to document the fact with a resignation letter, an offer of a position that was turned down by the employee, or an exit interview.

Alternatively, some employers may decide that contesting the claim for benefits is not worth the potential liability.  If an employer does not respond to a request for information or has a pattern of not responding to requests for information, an employer’s reserve account will be charged even if the benefits are later found to be improperly paid.  In addition, ignoring a subpoena for testimony in an unemployment hearing is a class B misdemeanor.