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New Jersey’s Unemployment Compensation Act Definition Of “Simple Misconduct” Deemed Arbitrary And Capricious

New Jersey’s Unemployment Compensation Act (the “Act”) provides for three different levels of misconduct that will result in disqualification for benefits.  “Simple misconduct” disqualifies employees for benefits for the week in which they were discharged and seven additional weeks.  “Severe misconduct” disqualifies employees for benefits until they are reemployed for at least four weeks and earn at least six times their weekly unemployment benefit rate.  Finally, employees who engage in gross misconduct receive no benefits from the employer against whom the gross misconduct occurred, must be reemployed for at least eight weeks, and must earn at least ten times the weekly benefit rate before they can collect unemployment.

The definitions of the three levels of misconduct have always been confusing.  Simple misconduct and gross misconduct have been standards under the Act since its inception in 1936.  In 2010, the Legislature added the intermediate category of “severe misconduct,” but little was done to explain the distinctions between the three levels of misconduct under the Act.

In 2015, however, in response to the Appellate Division’s decision in Silver v. Board of Review, 430 N.J. Super. 44 (App. Div. 2013), the Department of Labor and Workforce Development promulgated regulations intended to define and clarify the three levels of misconduct.  The definition of “simple misconduct” was recently challenged and on May 1, 2017 the Appellate Division, in In re N.J.A.C. 12:17-2.1, No. A-4636-14T3 N.J. Super. (App.Div. May 1, 2017), set aside the Department’s definition as arbitrary and capricious.

In reaching this decision, the Court provided a detailed analysis of how the term “misconduct” has been construed by New Jersey’s courts and how it has developed in the Act and its regulations.  The analysis confirmed that regardless of the level, misconduct under the Act always involves some degree of deliberate or intentional conduct.  The analysis also confirmed the longstanding principle that unemployment benefits are not to be denied for claimants who engage in “actions or inactions that amount to nothing more than simple negligence.”

The Department’s definition of “simple misconduct” failed to make the distinction between simple negligence and intentional, deliberate, or malicious misconduct.  As the Court noted, the definition “confusingly blends concepts of negligence with intentional wrongdoing that cannot be sensibly understood or harmonized.”

While the Court seemed tempted to rewrite the definition of simple misconduct, it decided to send the matter back to the Department with instructions to come up with a new definition within 180 days.

This issue is of critical importance to both employees and employers who are required to address and administer claims for benefits under the Act.  As the Court noted:

The public is entitled to be guided by regulations that are clear, understandable and reasonably predictable in uniform application.

That objective is particularly essential in the sphere of unemployment compensation cases, which… are most commonly pursued by self-represented laypersons who have been denied benefits by an unemployment claims Deputy or Tribunal.

Hopefully, the Department’s new definition of “simple misconduct” will fully meet this important objective.

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