Know the Risks of Fighting Unemployment Claims in Kentucky

Kentucky employers that don't hire a lawyer to contest unemployment compensation claims will need to review their policies and practices in light of a recent state appellate court decision.

In Nichols v. Kentucky Unemployment Insurance Commission, the Commonwealth of Kentucky Court of Appeals vacated an employer-friendly finding because the business wasn't represented by legal counsel at the unemployment hearing. "[R]epresentation of a corporate or non-natural entity by a non-attorney implicates the unauthorized practice of law," the court held.

The immediate impact of this decision is that any employer that contests an administrative claim for worker benefits in Kentucky must be represented by counsel at any administrative proceedings before the Kentucky Unemployment Insurance Commission.

"If an employer appears at an unemployment proceeding with an unauthorized non-lawyer representative, the agency may consider the employer to have made no appearance at all and, therefore, be in default," said Jacob Crouse, an attorney with Smith & Smith Attorneys in Louisville, Ky. "A non-lawyer attempting to represent an employer at such proceedings could also be accused of the unauthorized practice of law."

The Nichols decision may set a precedent affecting other administrative proceedings. "Given the increasing number of administrative proceedings relative to any number of topics such as wage claims, unemployment compensation, workers' compensation and state [workplace safety] investigations, HR professionals in Kentucky will have to closely monitor the situation relative to representation of their employer in various state administrative proceedings," said Ed Bergmann, an attorney with Seyfarth Shaw in Chicago.

Another issue to consider is the extent to which this decision may be followed outside of Kentucky. "I think this topic is one of considerable interest," Bergmann said, noting that the case may represent a growing trend in state courts based on state bar pronouncements to broadly construe the definition of the practice of law. "It bears watching to see whether this decision will be followed elsewhere and, if so, to what extent."

[SHRM members-only HR Q&A: What impact will unemployment claims have on our business?]

Kentucky employers will have to weigh the pros and cons of challenging an employee's unemployment claim.

The Kentucky Supreme Court has held that employers can be sued for making false statements during an unemployment hearing. "That's a mistake Kentucky employers cannot afford to make," said Katharine Weber, an attorney with Jackson Lewis in Cincinnati.

"Before deciding to fight a claim for unemployment benefits, make sure it's worth it," she said. "Sometimes, it makes sense. But oftentimes, the thing that drives a former employee into the office of a plaintiffs' attorney is the fact that the employer is challenging the claim for unemployment benefits."

The employee's lawyer may initially offer advice on how to handle the unemployment claim but may also ask the former employee questions to uncover any potential wrongful discharge, discrimination, retaliation, family and medical leave, or wage and hour claims, she said. "You have to factor that reality into your decision-making mix."