IN THE COMMONWEALTH COURT OF PENNSYLVANIA
David Nowakowski, :
:
Petitioner :
:
v. : No. 1167 C.D. 2016
: Submitted: November 10, 2016
Unemployment Compensation :
Board of Review, :
:
Respondent :
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE JAMES GARDNER COLINS, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY
SENIOR JUDGE COLINS FILED: April 21, 2017
David Nowakowski (Claimant) petitions, pro se, for review of an
order of the Unemployment Compensation Board of Review (Board) finding him
ineligible for unemployment compensation benefits under Section 401(a)(2) of the
Unemployment Compensation Law (Law)1 because less than 49.5% of Claimant’s
1
Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. §
801(a)(2). Section 401(a)(2) was recently amended by the Act of November 3, 2016, P.L. 1100,
and now requires that a claimant show that 37% or more of his base year wages were paid
outside of the highest earning quarter. This amendment, however, applies only to benefit years
that begin after December 31, 2016. Id., § 14(1)(i). Claimant applied for benefits in April 2016
and therefore his benefit year would have begun in that month. See Section 4(b) of the Law, 43
P.S. § 753(b). Consequently, the amended version of Section 401 is inapplicable to Claimant,
and we rely on the provision in effect from January 1, 2013 to November 2, 2016.
total base year wages were paid outside of his highest earning quarter. For the
reasons set forth below, we affirm.
Claimant began working at E. E. Austin & Son (Employer) as a
Project Engineer in July 2015 and his last day of employment was on January 22,
2016. Claimant filed his initial claim for unemployment compensation benefits on
April 7, 2016. (Record Item (R. Item) 1, Claim Record.) On April 11, 2016, the
Unemployment Compensation Service Center issued a Notice of Financial
Determination finding Claimant ineligible for benefits pursuant to Section
401(a)(2). (R. Item 2, Notice of Financial Determination.) Claimant appealed the
determination and a hearing was held before the Referee on May 5, 2016 at which
Claimant and a manager for Employer testified.
Following the hearing, the Referee issued a decision and order on
May 9, 2016 affirming the Service Center’s determination that Claimant was
ineligible for unemployment compensation benefits. (R. Item 8, Referee Decision
and Order.) In the decision, the Referee found that Claimant’s base year of
employment included the four quarters of 2015 and that Claimant had no wages in
the first and second quarters, $12,740 in the third quarter and $19,471 in the fourth
quarter, with a total base year wages of $32,211. (Id., Findings of Fact ¶¶2-6.) On
the basis of the fact that $19,471 of wages were paid in his highest quarter and only
$12,740 in the other three quarters, the Referee concluded that Claimant did not
satisfy the requirement that 49.5% or more of his qualifying wages were paid
outside of the quarter in which he had the highest wages and he therefore was
ineligible for unemployment compensation benefits under the Law. (Id.,
Reasoning at 3, Order.)
Claimant appealed to the Board, and, on June 21, 2016, the Board
issued an order affirming the Referee’s decision and order. (R. Item 11, Board
2
Order.) The Board adopted the Referee’s findings of fact and conclusions and
concluded the Referee’s determination was proper under the relevant provisions,
further stating that it had no discretion in determining if a claimant meets the
financial qualifications for benefits set forth in the Law and its implementing
regulations. (Id.) Claimant thereafter petitioned this Court for review of the
Board’s decision and order.2
On appeal, Claimant does not challenge the Referee’s findings of fact
adopted by the Board regarding his base year wages or the Referee’s and Board’s
determination that his earnings from the three quarters of his base year aside from
his highest earning quarter were less than 49.5% of his total base year earnings.
Claimant does not dispute that the Referee and Board properly applied the version
of Section 401(a)(2) in effect at the time of Claimant’s application for benefits to
determine that he was ineligible for benefits. Claimant also does not argue that the
49.5% figure of total base year wages that has to paid outside of the highest
earning quarter, which was lowered to 37% in the 2016 amendment of Section
401(a)(2), is too high of a percentage. Instead, Claimant argues that the
determination by the Board violated the equal protection clause of the Fourteenth
Amendment of the United States Constitution because, while the state has a
legitimate state interest in ensuring that individuals who apply for unemployment
compensation benefits are genuinely attached to the labor force, the computation of
eligibility based on a comparison of wages earned in calendar quarters
discriminates among claimants based on the days of the week that they receive
2
Our scope of review of the Board’s decision is limited to determining whether errors of law
were committed, constitutional rights or agency procedures were violated, and necessary
findings of fact are supported by substantial evidence. 2 Pa. C.S. § 704; Pagliei v.
Unemployment Compensation Board of Review, 37 A.3d 24, 25 n.7 (Pa. Cmwlth. 2012).
3
payment, which are not always consistently distributed among the quarters of a
year. We reject this argument.
In unemployment compensation matters, the claimant bears the
burden of proving financial eligibility for unemployment benefits. Pagliei v.
Unemployment Compensation Board of Review, 37 A.3d 24, 26 (Pa. Cmwlth.
2012); Jackson v. Unemployment Compensation Board of Review, 933 A.2d 155,
157 (Pa. Cmwlth. 2007). The financial eligibility requirements are set forth in
Section 401(a) and Section 404 of the Law, 43 P.S. §§ 801(a), 804, and are
calculated based upon the wages earned during the claimant’s “base year,” which
is defined as “the first four of the last five completed calendar quarters
immediately preceding the first day of an individual’s benefit year.” Section 4(a)
of the Law, 43 P.S. § 753(a). The “calendar quarter” used to determine the base
year is the “period of three consecutive calendar months ending on March thirty-
first, June thirtieth, September thirtieth or December thirty-first, or the equivalent
thereof.” Section 4(d) of the Law, 43 P.S. § 753(d). For the purpose of computing
base year wages, wages are allocated to the quarter in which they are paid to the
claimant by the employer, rather than to the quarter in which the work was
performed. Section 4(x) of the Law, 43 P.S. § 753(x) (“‘Wages’ means all
remuneration...paid by an employer to an individual with respect to his
employment...”); 34 Pa. Code § 61.3(a)(1) (“Wages are considered paid on the date
when the employer actually pays them.”); Wooley v. Unemployment Compensation
Board of Review, 454 A.2d 224, 225 (Pa. Cmwlth. 1983).3
3
An exception to this rule exists where the employer delays or moves forward payment from the
regular payday. 34 Pa. Code § 61.3(a)(2); Gibson v. Unemployment Compensation Board of
Review, 682 A.2d 422, 424 (Pa. Cmwlth. 1996).
4
Section 404 establishes the manner in which unemployment
compensation benefits shall be calculated for an eligible employee and sets forth
the rates of compensation benefits. 43 P.S. § 804. The version of Section 401(a)
in effect at the time of Claimant’s application for benefits provided:
Compensation shall be payable to any employe who is or
becomes unemployed, and who—
(a) Satisfies both of the following requirements:
(1) Has, within his base year, been paid wages for
employment as required by section 404(c) of this act.
(2) Except as provided in section 404(a)(3), not less than
forty-nine and one-half per centum (49.5%) of the
employe’s total base year wages have been paid in one or
more quarters, other than the highest quarter in such
employe’s base year.
Former 43 P.S. § 801(a).4
The Equal Protection clause of the Fourteenth Amendment requires
that state officials treat all similarly situated individuals alike. Kramer v. Workers’
Compensation Appeal Board (Rite Aid Corp.), 883 A.2d 518, 532 (Pa. 2005);
Curtis v. Kline, 666 A.2d 265, 267 (Pa. 1995). The right to equal protection,
however, “does not absolutely prohibit the Commonwealth from classifying
individuals for the purpose of receiving different treatment and does not require
equal treatment of people having different needs.” Kramer, 883 A.2d at 532
(quoting Curtis, 666 A.2d at 267). “The prohibition against treating people
4
Claimant does not argue that the exception of Section 404(a)(3) of the Law – which in certain
circumstances allows claimants whose base year wages are insufficient to qualify for the weekly
benefit rate determined by the highest qualifying wages set forth in the table in Section 404(e)(1)
to step down to the two lower weekly benefit rates on the table – is applicable to him.
5
differently under the law does not preclude the Commonwealth from resorting to
legislative classifications provided that those classifications are reasonable rather
than arbitrary and bear a relationship to the object of the legislation.” Kramer, 883
A.2d at 532 (quoting Curtis, 666 A.2d at 268).
To determine whether a classification is justified, we must first
determine the appropriate standard of review, which depends on the type of
classification at issue in the case. Caputo v. Workers’ Compensation Appeal
Board (Commonwealth), 34 A.3d 908, 915 (Pa. Cmwlth. 2012) (en banc); Larsen
v. State Employees’ Retirement System, 22 A.3d 316, 325 (Pa. Cmwlth. 2011). As
our Supreme Court has explained:
Generally speaking, there are three different types of
classifications calling for three different standards of
review: (1) classifications which implicate a suspect class
or a fundamental right are strictly construed in light of a
compelling governmental purpose; (2) classifications
which implicate an important though not a fundamental
right or a sensitive classification are assessed under a
heightened standard of scrutiny which seeks an important
governmental purpose; and (3) classifications which
involve none of these classes or rights are upheld if there
is any rational basis for the classification.
Kramer, 883 A.2d at 533. Classifications of claimants related to financial
eligibility for unemployment compensation benefits have traditionally been
determined to require only the minimal, rational basis level of scrutiny. Martin v.
Unemployment Compensation Board of Review, 466 A.2d 107, 113-14 (Pa. 1983);
Devine v. Unemployment Compensation Board of Review, 101 A.3d 1235, 1238
(Pa. Cmwlth. 2014).
A legislative classification subjected to a rational basis scrutiny begins
with a strong presumption of validity. Kramer, 883 A.2d at 534; Caputo, 34 A.3d
6
at 916. Pennsylvania courts employ a two-step analysis when applying the rational
basis test: first, the court must determine whether the challenged provision seeks
to promote any legitimate state interest or public value; if so, the court must then
determine whether the classification is reasonably related to accomplishing that
articulated state interest or interests. Curtis, 666 A.2d at 269; Caputo, 34 A.3d at
916. A legislative classification subject to rational basis scrutiny will not be
adjudged to violate equal protection merely because the classification that is drawn
is imperfect. Kramer, 883 A.2d at 534; Caputo, 34 A.3d at 916; see also Clements
v. Fashing, 457 U.S. 957, 962-63 (1982) (“The Equal Protection Clause allows the
States considerable leeway to enact legislation that may appear to affect similarly
situated people differently.”).
Our Supreme Court rejected a similar equal protection challenge to
the financial eligibility requirements of the Law in Martin. In Martin, the claimant
challenged the different treatment given to employees with a highest quarterly
earnings over $3,738, who only had to earn 20% of their wages in the other three
quarters of their base year outside their highest quarter, from employees, like the
claimant in Martin, with highest quarterly earnings less than $3,738, who had to
earn 35 to 38% of their wages outside the highest quarter. 466 A.2d at 108.
Noting U.S. Supreme Court precedent applying the minimum level of scrutiny in
cases related to unemployment compensation benefit qualification statutes, the
Court first determined that the financial eligibility at issue, even if based on an
applicant’s wealth as argued by the claimant, did not involve a suspect or sensitive
qualification and therefore the rational basis scrutiny applied. Id. at 113-14 (citing
Ohio Bureau of Unemployment v. Hodory, 431 U.S. 471 (1977)).
The Court in Martin concluded that the “general purpose” behind the
requirement that a claimant earn a percentage of the base year earnings outside the
7
highest quarter as a criterion for eligibility is that it acts as a “statistical surrogate
for direct evidence of time worked.” 466 A.2d at 114. According to the Court,
this evidence of time worked serves three functions: excluding new entrants to the
work force who do not suffer loss upon discharge, ensuring that the right to
benefits vests and contributions were made on the worker’s behalf after a certain
period of time and demonstrating recent work history that shows that the claimant
will continue to be attached to the workforce. Id. The Court explained:
[v]arious methods have been adopted in the numerous
jurisdictions which require claimants to earn a percentage
of qualifying wages outside their highest quarter as an
alternative measure for actual time worked because of the
difficulty of obtaining accurate statistics for the latter.
All such methods are only rough measures of time
actually worked, since the amount of a claimant’s
earnings in any period is a function of both time and rate
of compensation. They have, nevertheless, survived
constitutional challenge. Thus, the rational relationship
between the requirement that a claimant earn a
percentage of income outside the highest quarter to a
legitimate government interest is not disputed.
Id. at 114-115 (citation omitted). The Martin Court held that while the “statutory
scheme results in some unequal treatment between similarly situated claimants,”
this did not amount in an equal protection violation. Id. at 118. As the Court
stated:
inequities in the distribution of benefits are an
unfortunate concomitant of complex economic-social
welfare legislation which must ultimately reflect a
balance between legislative efforts to eliminate an evil,
e.g., the debilitating effects of unemployment,
administrative realities and the problem of allocating
scarce financial resources in a complex society. The
resolution of such conflicting interests is peculiarly
adapted to the legislative process.
8
Id. at 119.
This Court also rejected an equal protection challenge to the financial
eligibility requirements of the Law in Devine. In that case, the claimant, whose
primary income was derived from work in catering and food services at a minor
league baseball stadium, was denied benefits under Section 401(a)(2) because less
than 49.5% of her base year earnings were not from outside her highest earning
quarter. 101 A.3d at 1236. The claimant argued that, while her wages were
primarily earned during the baseball season, she was a year-round employee who
worked other events throughout the year and she was therefore not within the
seasonal employee class that the General Assembly was attempting to exclude
when it adopted the 49.5% requirement of Section 401(a)(2). Id. at 1237-38.
Invoking the equal protection clause, the claimant argued that Section 401(a)(2)
was arbitrary and unfair when applied to her and she was entitled to have her
financial eligibility determined before the 2012 amendments to Section 401(a)(2)
that raised the non-highest earning quarter requirement to 49.5% or a
determination of her benefits level based on an average of the 52 weeks of base
year earnings. Id. at 1238. After reviewing Martin, we rejected the argument that
the financial eligibility requirements of the Law as applied to the claimant are
unconstitutional, noting that “Sections 401 and 404 of the Law are explicit and
leave no room for a more flexible, compassionate interpretation.” Id. at 1238-39.
Though Claimant’s equal protection challenge to the financial
eligibility requirements of the Law is not identical to the challenges in Martin and
Devine, we find the challenge here to be equally defective as in those cases.
Claimant’s equal protection argument is premised on the comparison of wages by
calendar quarters to determine financial eligibility under Section 401(a)(2), which
Claimant asserts irrationally classify applicants for benefits based upon the day of
9
the week that they receive their pay, as the number of weekdays varies among
quarters. Claimant illustrates this argument with the example of an applicant for
benefits who worked an equal amount of days at an equal rate of pay over the first
two quarters of 2015 with all payment received during those two quarters. If the
applicant was paid weekly on Fridays, he would have 13 paydays in each of these
two quarters and would receive 50% of his qualifying wages in the highest earning
quarter and 50% outside of the highest earning quarter. The applicant would thus
be eligible for benefits under Section 401(a)(2) because he would have at least
49.5% of his pay among the three base year quarters when he did not receive the
most qualifying wages. If the applicant was paid weekly on Wednesdays,
however, he would have 12 paydays during the first quarter of 2015 and 13 during
the second quarter, which would result in an unbalanced distribution of wages
among the two quarters and would lead to the applicant being disqualified under
Section 401(a)(2) for not having 49.5% or more of wages outside the highest
earning quarter. Claimant asserts that this imbalance in receipt of wages can be
even greater for recipients of bi-weekly pay checks depending on the day of the
week they receive payment. Claimant contends that by not taking into
consideration the variations created by the payday schedules when comparing
wages paid between quarters to determine financial eligibility for benefits, the
General Assembly created a classification system based on paydays with no
rational relationship to the state interest of ensuring employment throughout the
year.
Claimant’s argument does not show an unconstitutional infirmity in
the Law. It is well-established that the financial eligibility requirements of the
Law serve the legitimate legislative purpose as a means to demonstrate a
claimant’s genuine attachment to the labor force. Poola v. Unemployment
10
Compensation Board of Review, 555 A.2d 97, 99 (Pa. 1989); Lopata v.
Unemployment Compensation Board of Review, 493 A.2d 657, 661 (Pa. 1985);
Martin, 466 A.2d at 114-15; Devine, 101 A.3d at 1238. The Court explained in
Martin that the requirement of Section 401(a)(2) that a certain amount of wages
must be paid outside the highest earning quarter of the base year is rationally
related to this legislative goal because it demonstrates a history of work stretching
beyond one quarter, a durable attachment to the labor market and a history of
contributions to the unemployment compensation system. 466 A.2d at 114-15.
While Claimant has demonstrated that some potential claimants could be unfairly
affected by the different numbers of days of the week during calendar quarters, he
has not shown that his eligibility for benefits was personally affected by the use of
calendar quarters to determine financial eligibility under Section 401(a)(2). More
importantly, though, the fact that the calendar quarter system of Section 401(a)(2)
is only a “rough measure[] of time actually worked” does not mean that it violates
the equal protection clause. Id. at 115; see also Kramer, 883 A.2d at 534; Caputo,
34 A.3d at 916. “[A] legislative scheme designed to achieve a legitimate public
purpose should not be found unconstitutional because it falls short of perfect
justice.” Martin, 466 A.2d at 119.
Accordingly, the order of the Board is affirmed.
__________ ___________________________
JAMES GARDNER COLINS, Senior Judge
11
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
David Nowakowski, :
:
Petitioner :
:
v. : No. 1167 C.D. 2016
:
Unemployment Compensation :
Board of Review, :
:
Respondent :
ORDER
AND NOW, this 21st day of April, 2017, the Order of the
Unemployment Compensation Board of Review in the above-captioned matter is
hereby AFFIRMED.
__________ ___________________________
JAMES GARDNER COLINS, Senior Judge