Limiting Legal Representation for Claimants in Unemployment Appeal Hearings

January 30, 2014 was, in most ways, a day like any other for the employees of the mail room at the Division of Employment Security.   They were packaging and inserting unemployment appeal hearing notices into the designated mail slots for the fifteen or so law firms that received copies of hearing notices.   These notices are printed primarily for the benefit of claimants and employers, to let them know the date and time of upcoming contested hearings.   The hearings are court-like proceedings where evidence is taken, witnesses are cross-examined, and rulings made which determine whether a claimant can receive unemployment benefits.   Extra copies of the notices were also printed each day for law firms that made public records requests.

Similar to a speeding ticket practice, the law firms would use direct mail to advertise their services to the parties involved in the appeal hearings.   Many of the lawyers practiced exclusively on the “employee side” and offered competitive rates for legal representation.   The recently unemployed people of the state learned from these mailings that they were allowed to have counsel and learned that counsel was affordable.   At the very least, several of the law firms offered free consultations, so claimants could pick a lawyer’s brain for free before jumping into a court-like proceeding against their former boss.

Several of the attorneys picked up their own notices from the mail room each morning.   They would press a buzzer, and would be allowed inside after being visually identified by mail room staff, and then would sign in at a designated spot near the entrance while staff retrieved the notices for the attorneys.   The transaction took only a few seconds.

This particular morning was different in at least one way.   The head of the DES, Assistant Secretary of Commerce Dale Folwell, a former Republican law maker and 2012 candidate for Lt. Governor, made an appearance.   According to one attorney, Folwell questioned her about what she does with the hearing notices, what types of contact she makes, and what type of return she sees from her mailings.   Another non-attorney representative indicated that he was asked by Mr. Folwell specific questions about his firm’s practice, such as which party received letters, how many were sent out, and what sort of return was received.

Less than one month later, a letter authored by Folwell was provided to all of the law firms, indicating that the cost of the public records were doubling, that they would be batched and sent out periodically rather than each day, and that they would have to be mailed out to the attorneys rather than picked up from the DES.  The changes would be effective the next day.   There was immediate cause for concern, as the doubling of prices without explanation seemed arbitrary, waiting to send out the notices would cause a large quantity of them to be useless as the hearings would be over before recipients would ever read a law firm’s letter, and Folwell, in a recorded phone call, seemed unwilling to consider alternate ideas for addressing alleged security concerns so that attorneys could continue to pick up the public records.

According to a complaint filed in Wake County Superior Court by one attorney, Monica Wilson, these actions would “lead one to the conclusion that this change in policy is a deliberate and cynical effort to deprive claimants of their ability to hire counsel.”   She further alleged that the changes were made to “cripple the businesses of attorneys who represent claimants.”   Ms. Wilson was successful, initially, in obtaining a preliminary injunction prohibiting the DES from changing their policies, but the injunction was later lifted by the Court of Appeals.   Her case is still pending.

Legislation went into effect July 1, 2013 which reduced the amount and length of time a claimant can receive benefits.   It also took the measure of eliminating many provisions that allow for qualification of benefits and eliminated the ability for claimants to receive federal extended benefits, as the federal government required states to not make such reductions in order to be eligible for extended benefits.   Future extended benefit legislation would likely need to include a provision forgiving North Carolina in order to allow claimants to participate.   The legislation was designed to allow NC to pay off its debt to the federal government faster – a debt which accrued during the recession.   While it has been a subject of great debate as to whether the law change was a smart move and whether the harm it caused to NC’s unemployed workers was worth it, by all accounts the debt is being paid off quickly and certainly faster than expected.   Ms. Wilson’s conclusion is certainly logical.   If claimants are not sent letters from attorneys, more claimants are unrepresented, more cases could be lost by claimants, fewer claims are paid, and the debt is paid off even faster.   The changes by the DES, whether intended or not, could have the impact of furthering their mission of quickly recovering from the debt incurred during the recession.

The Federal Government also made their position known on this issue.     Gay Gilbert, Administrator of the Office of Unemployment Insurance at the U.S. Department of Labor, provided through sworn affidavit that it is the USDOL’s position that releasing the appeal hearing notices as public records has been a violation of federal law all along.   It should be noted that these records have been considered public record by North Carolina for over a decade.   According to Ms. Gilbert, the unemployment office has essentially been out of compliance with federal law for roughly ten years.   Ms. Gilbert warned that if NC does not come into compliance, North Carolina employers could be at risk of losing their credits against the Federal unemployment tax.   However, former DES official Thomas Whitaker provided a sworn statement indicating that during his tenure at the DES, he had multiple discussions with officials at the Department of Labor, those officials were aware of the practice, and until Ms. Gilbert, he is unaware of anyone at the DOL ever expressing an opinion that it was unlawful or that the practice needed to cease.

In response to the Federal Government’s position and threat, the legislature sought to make it clear in NC law that such documents are not public records.   The ultimate result was SL 2014-117, effectively amending the law to make hearing notices confidential, a law which Monica Wilson alleges is unconstitutional.

Considering the actions of the court system, the U.S. Department of Labor, and the state legislature, it appears unlikely that appeal hearing notices will be accessible to attorneys wishing to represent parties in unemployment appeal hearings.       The impact on the attorneys has varied, but the impact on claimants seems to be most apparent.

Peter Hanna, a solo practitioner in the Triangle who primarily represents companies in unemployment appeal hearings statewide, reported that since the prohibition on releasing appeal hearing notices, he has observed a “dramatic reduction” in the number of claimants represented by counsel.   Of those represented by counsel, Hanna reports “an increase in representation from random law firms” that have “little or no experience in these tribunals.”   Furthermore, Hanna indicates that this causes “long drawn out hearings which must be adjourned one or more times.”   The effect of an adjourned hearing, which is sometimes scheduled multiple weeks later, can be devastating for a claimant, who must wait even longer (often after already waiting several months) for a determination as to whether they are qualified to receive benefits.

Furthermore, John Keller, Supervising Attorney with Legal Aid of North Carolina, reported that “following the prohibition on releasing these records, Legal Aid had approximately 60% more applications on average per month from individuals seeking help with unemployment issues processed through their centralized intake line.”   According to Keller, “Legal Aid can only respond to a small fraction of claimants who would otherwise have received at least notice of access to representation through private attorney solicitations.”

The Division has a legitimate interest in paying off debt and responsibly administering the unemployment insurance system.   The Division also has a responsibility to lighten the burden which “so often falls with crushing force upon the unemployed worker and his family.” N.C. Gen. Stat. 96-2.   The recent actions by the highest ranking DES official and the federal government could be well-meaning, but are, at the very least, cause for concern for the many unemployed workers who have to face their former employers in an adversarial proceeding.   It is also concerning that our legislature has responded through new legislation to address threats from the federal government, especially where credible sources differ on whether such threats are legally sound.     North Carolina’s unemployed workers are facing enough hardship through losing their jobs, remaining unemployed longer, and receiving fewer benefits.   Should the government be limiting accessibility and information about available help for these people?

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Christopher Wilms is a practitioner in the field of Unemployment Benefits where he represents Employers and Claimants in contested Unemployment Appeals.

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